Business Wire | Nov 5, 2020 06:04AM EST

WESCO International, Inc. Reports Third Quarter 2020 Results

Nov. 05, 2020

PITTSBURGH--(BUSINESS WIRE)--Nov. 05, 2020--WESCO International, Inc. (NYSE: WCC), a leading provider of business-to-business distribution, logistics services and supply chain solutions, announces its results for the third quarter of 2020.

Mr. John J. Engel, WESCO's Chairman, President and CEO, commented, "We delivered very strong results in the third quarter and exceeded our sales, margin, profit and cash generation expectations. This was our first full quarter of results after completing the merger with Anixter and clearly highlights the value creation potential of this transformational combination. Business momentum improved through the quarter as we took market share and built an all-time record third quarter backlog. We aggressively managed our business and executed significant cost reduction, margin improvement and cash management actions, which enabled us to deliver profit growth in the third quarter. Free cash flow generation was exceptional at over 300% of net income and demonstrates our resilient business model and strength through the cycle. Notably, net debt was reduced by $280 million thereby reducing our financial leverage consistent with our capital allocation priorities. Again this quarter, I would like to recognize and thank all of our associates for their inspirational dedication, commitment and hard work in effectively managing in this COVID-19 driven environment."

Mr. Engel continued, "We accelerated our integration planning, execution and synergy realization efforts, and made outstanding progress in the third quarter. The strong cultural alignment between WESCO and Anixter is proving to be a key driver of our initial success. We realized $15 million of cost synergies in the third quarter, and have already initiated actions to deliver 100% of our year one cost synergy target of $68 million after just four months since closing the acquisition. I could not be more pleased with the integration team's execution of our plan. As a result, we are raising our year 1, 2 and 3 cost synergy targets to $100 million, $180 million, and $250 million, respectively. Our initial integration progress gives us confidence that we will revisit our synergy targets as we build success upon success. We are also realizing initial sales synergies through leveraging our expanded global footprint and cross-selling our broader product and services portfolio. We believe our sales synergy efforts will support incremental revenue growth in the years ahead. As a result, we are building on these early successes and are increasingly confident in our ability to achieve significant upside potential and exceed our three year cost savings, sales growth, margin expansion, and cash generation synergy targets."

Mr. Engel added, "WESCO's new era is off to an exceptional start. As the premier electrical, communications and utility distribution and supply chain solutions company in the world, we are very well positioned to capitalize on the accelerating secular trends of electrification, increased bandwidth demand driven by higher voice, data, video and mobile usage, and the digitization of our B2B value chain. Building on our positive momentum, we are looking forward to entering 2021 with accelerating results. As we look to the future, we are more bullish than ever in the substantial value creation that this transformational combination will create for our customers, supplier partners, employees, investors, and the communities in which we operate."

The following are results for the three months ended September 30, 2020 compared to the three months ended September 30, 2019:

* Net sales were $4.1 billion for the third quarter of 2020 compared to $2.1 billion for the third quarter of 2019, an increase of 92.8% due to the merger with Anixter that was completed on June 22, 2020, partially offset by the weakened demand impact from the COVID-19 pandemic.

* Cost of goods sold for the third quarter of 2020 was $3.4 billion compared to $1.7 billion for the third quarter of 2019, and gross profit was $785.5 million and $400.2 million, respectively. As a percentage of net sales, gross profit was 19.0% and 18.6% for the third quarter of 2020 and 2019, respectively. Gross profit as a percentage of net sales for the third quarter of 2020 was 19.6% excluding the effect of merger-related fair value adjustments of $28.0 million.

* Selling, general and administrative expenses were $562.0 million, or 13.6% of net sales, for the third quarter of 2020, compared to $290.9 million, or 13.5% of net sales, for the third quarter of 2019. SG&A expenses for the third quarter of 2020 include merger-related costs of $14.2 million, as well as a gain on the sale of an operating branch in the U.S. of $19.8 million. Adjusted for these amounts, SG&A expenses were $567.6 million, or 13.7% of net sales, for the third quarter of 2020, reflecting the favorable impact of cost reduction actions taken in response to the COVID-19 pandemic.

* Operating profit was $178.1 million for the third quarter of 2020, compared to $93.7 million for the third quarter of 2019. Operating profit as a percentage of net sales was 4.3% for the current quarter, compared to 4.4% for the third quarter of the prior year. As adjusted for the merger-related costs and gain on the sale of a U.S. operating branch, operating profit was $200.5 million for the third quarter of 2020, or 4.8% of net sales.

* Net interest expense for the third quarter of 2020 was $74.5 million, compared to $14.3 million for the third quarter of 2019. The increase in interest expense was driven by financing activity related to the Anixter merger.

* The effective tax rate for the third quarter of 2020 was 23.3%, compared to 19.8% for the third quarter of 2019. The higher effective tax rate in the current quarter is primarily due to costs incurred to complete the merger with Anixter.

* Net income attributable to common stockholders was $66.2 million for the third quarter of 2020, compared to $64.5 million for the third quarter of 2019. As adjusted, net income attributable to common stockholders was $83.6 million for the third quarter of 2020.

* Earnings per diluted share for the third quarter of 2020 was $1.31, based on 50.5 million diluted shares, compared to $1.52 for the third quarter of 2019, based on 42.4 million diluted shares. As adjusted, earnings per diluted share for the third quarter of 2020 was $1.66.

* Operating cash flow for the third quarter of 2020 was $286.3 million, compared to $125.4 million for the third quarter of 2019. Free cash flow for the third quarter of 2020 was $307.4 million, or 315% of adjusted net income, compared to $116.5 million, or 181% of net income, for the third quarter of 2019.

The following are results for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019:

* Net sales were $8.2 billion for the first nine months of 2020 compared to $6.3 billion for the first nine months of 2019, an increase of 31.0% due to the merger with Anixter that was completed on June 22, 2020, partially offset by the weakened demand impact from the COVID-19 pandemic.

* Cost of goods sold for the first nine months of 2020 was $6.6 billion and gross profit was $1.6 billion, compared to $5.1 billion and $1.2 billion, respectively, for the first nine months of 2019. As a percentage of net sales, gross profit was 19.0% for the first nine months of 2020 and 2019. Gross profit as a percentage of net sales for the first nine months of 2020 was 19.3% excluding the effect of merger-related fair value adjustments of $28.0 million.

* Selling, general and administrative expenses were $1.2 billion, or 14.9% of net sales, for the first nine months of 2020, compared to $883.2 million, or 14.1% of net sales, for the first nine months of 2019. SG&A expenses for the first nine months of 2020 include merger-related costs of $92.1 million, as well as a gain on the sale of an operating branch in the U.S. of $19.8 million. Adjusted for these amounts, SG&A expenses were $1.1 billion, or 14.0% of net sales, for the first nine months of 2020, reflecting the favorable impact of cost reduction actions taken in response to the COVID-19 pandemic.

* Operating profit was $254.3 million for the first nine months of 2020, compared to $262.4 million for the first nine months of 2019. Operating profit as a percentage of net sales was 3.1% for the current nine month period, compared to 4.2% for the prior nine month period. As adjusted for the merger-related costs and gain on the sale of a U.S. operating branch, operating profit was $354.6 million for the first nine months of 2020, or 4.3% of net sales.

* Net interest expense for the first nine months of 2020 was $152.3 million, compared to $49.3 million for the first nine months of 2019. The increase in interest expense was driven by financing activity related to the Anixter merger.

* The effective tax rate for the first nine months of 2020 was 22.9%, compared to 21.0% for the first nine months of 2019. The higher effective tax rate in the current nine month period is primarily due to costs incurred to complete the merger with Anixter.

* Net income attributable to common stockholders was $64.8 million for the first nine months of 2020, compared to $170.3 million for the first nine months of 2019. As adjusted, net income attributable to common stockholders was $143.0 million for the nine months ended September 30, 2020.

* Earnings per diluted share for the first nine months of 2020 was $1.44, based on 45.1 million diluted shares, compared to $3.88 for the first nine months of 2019, based on 43.9 million diluted shares. As adjusted, earnings per diluted share for the current nine month period was $3.17.

* Operating cash flow for the first nine months of 2020 was $418.9 million, compared to $116.7 million for the first nine months of 2019. Free cash flow for the first nine months of 2020 was $462.1 million, or 292% of adjusted net income, compared to $86.3 million, or 51% of net income, for the first nine months of 2019.

Segment Results

In the third quarter of 2020, in connection with the acquisition of Anixter, the Company identified new segments, which have been organized around three strategic business units consisting of Electrical & Electronic Solutions ("EES"), Communications & Security Solutions ("CSS") and Utility & Broadband Solutions ("UBS").

Corporate expenses are incurred to obtain and coordinate financing, tax, information technology, legal and other related services. Segment results include depreciation expense or other allocations related to various corporate assets. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis. Corporate expenses are not directly identifiable with our reportable segments and are reported in the tables below to reconcile the reportable segments to the consolidated financial statements.

The following are results by segment for the three months ended September 30, 2020 compared to the three months ended September 30, 2019:

* EES reported net sales of $1.7 billion for the third quarter of 2020, compared to $1.3 billion for the third quarter of 2019, an increase of 32.3%. Operating profit was $105.5 million for the third quarter of 2020, compared to $72.0 million for the third quarter of 2019. Adjusted EBITDA was $107.9 million for the third quarter of 2020, or 6.5% of net sales, compared to $78.7 million for the third quarter of 2019, or 6.3% of net sales. * CSS reported net sales of $1.4 billion for the third quarter of 2020, compared to $235.9 million for the third quarter of 2019, an increase of 488.7%. Operating profit was $89.6 million for the third quarter of 2020, compared to $10.6 million for the third quarter of 2019. Adjusted EBITDA was $120.5 million for the third quarter of 2020, or 8.7% of net sales, compared to $12.4 million for the third quarter of 2019, or 5.2% of net sales. * UBS reported net sales of $1.1 billion for the third quarter of 2020, compared to $662.1 million for the third quarter of 2019, an increase of 66.0%. Operating profit was $74.1 million for the third quarter of 2020, compared to $43.8 million for the third quarter of 2019. Adjusted EBITDA was $85.7 million for the third quarter of 2020, or 7.8% of net sales, compared to $47.3 million for the third quarter of 2019, or 7.1% of net sales.

The following are results by segment for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019:

* EES reported net sales of $3.8 billion for the first nine months of 2020, compared to $3.6 billion for the first nine months of 2019, an increase of 5.1%. Operating profit was $194.6 million for the first nine months of 2020, compared to $198.8 million for the first nine months of 2019. Adjusted EBITDA was $212.0 million for the first nine months of 2020, or 5.6% of net sales, compared to $219.6 million for the first nine months of 2019, or 6.1% of net sales. * CSS reported net sales of $2.0 billion for the first nine months of 2020, compared to $681.1 million for the first nine months of 2019, an increase of 186.9%. Operating profit was $127.5 million for the first nine months of 2020, compared to $32.5 million for the first nine months of 2019. Adjusted EBITDA was $164.3 million for the first nine months of 2020, or 8.4% of net sales, compared to $38.0 million for the first nine months of 2019, or 5.6% of net sales. * UBS reported net sales of $2.4 billion for the first nine months of 2020, compared to $2.0 billion for the first nine months of 2019, an increase of 24.6%. Operating profit was $167.7 million for the first nine months of 2020, compared to $134.4 million for the first nine months of 2019. Adjusted EBITDA was $187.0 million for the first nine months of 2020, or 7.7% of net sales, compared to $144.7 million for the first nine months of 2019, or 7.4% of net sales.

Webcast and Teleconference Access

WESCO will conduct a webcast and teleconference to discuss the third quarter of 2020 earnings as described in this News Release on Thursday, November 5, 2020, at 10:00 a.m. E.T. The call will be broadcast live over the internet and can be accessed from the Investor Relations page of the Company's website at www.wesco.investorroom.com. The call will be archived on this internet site for seven days.

WESCO International, Inc. (NYSE: WCC), a publicly traded FORTUNE 500(r) company headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and supply chain solutions. Pro forma 2019 annual sales were over $17 billion, including Anixter International Inc., which it acquired in June 2020. WESCO offers a best-in-class product and services portfolio of Electrical and Electronic Solutions, Communications and Security Solutions, and Utility and Broadband Solutions. The Company employs over 18,000 people, maintains relationships with over 30,000 suppliers, and serves more than 150,000 customers worldwide. With nearly 1.5 million products, end-to-end supply chain services, and leading digital capabilities, WESCO provides innovative solutions to meet customer needs across commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. WESCO operates nearly 800 branch and warehouse locations in over 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.

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 process to divest the legacy WESCO Utility and Datacom businesses in Canada, including the expected length of the process, the expected benefits and costs of the transaction between WESCO and Anixter International Inc., including anticipated future financial and operating results, synergies, accretion and growth rates, and the combined company's plans, objectives, expectations and intentions, statements that address the combined company's expected future business and financial performance, and other statements identified by words such as "anticipate," "plan," "believe," "estimate," "intend," "expect," "project," "will" and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of WESCO's management, as well as assumptions made by, and information currently available to, WESCO's management, current market trends and market conditions and involve risks and uncertainties, many of which are outside of WESCO's and WESCO's management's control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Those risks, uncertainties and assumptions include the risk of any unexpected costs or expenses resulting from the transaction, the risk of any litigation or post-closing regulatory action relating to the transaction, the risk that the transaction could have an adverse effect on the ability of the combined company to retain customers and retain and hire key personnel and maintain relationships with its suppliers, customers and other business relationships and on its operating results and business generally, the risk that problems may arise in successfully integrating the businesses of the companies or that the combined company could be required to divest one or more businesses, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the proposed transaction or it may take longer than expected to achieve those synergies or benefits, the risk that the leverage of the company may be higher than anticipated, the impact of natural disasters, health epidemics and other outbreaks, especially the outbreak of COVID-19 since December 2019, which may have a material adverse effect on the combined company's business, results of operations and financial conditions, the risk that the divesture of the legacy WESCO Utility and Datacom businesses in Canada may take longer than expected and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond each company's control. Additional factors that could cause results to differ materially from those described above can be found in WESCO's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and WESCO's other reports filed with the U.S. Securities and Exchange Commission ("SEC").

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollar amounts in thousands, except per share amounts)

(Unaudited)

Three Months Ended

September 30, September 30, 2020 2019

Net sales $ 4,141,801 $ 2,148,110

Cost of goods sold (excluding 3,356,259 81.0 % 1,747,913 81.4 %

depreciation and amortization)

Selling, general and 561,971 13.6 % 290,852 13.5 %administrative expenses

Depreciation and amortization 45,476 15,612

Income from operations 178,095 4.3 % 93,733 4.4 %

Interest expense, net 74,540 14,306

Other, net (777) (798)

Income before income taxes 104,332 2.5 % 80,225 3.7 %

Income tax expense 24,294 15,886

Net income 80,038 1.9 % 64,339 3.0 %

Net loss attributable to (640) (156) noncontrolling interests

Net income attributable to 80,678 1.9 % 64,495 3.0 %WESCO International, Inc.

Preferred stock dividends 14,511 -

Net income attributable to $ 66,167 1.6 % $ 64,495 3.0 %common stockholders



Earnings per share attributable $ 1.31 $ 1.52 to common stockholders

Weighted-average common shares outstanding and common

share equivalents used in computing earnings

per diluted common share (in 50,487 42,378 thousands)



Reportable Segments

Net sales:

Electrical & Electronic $ 1,653,726 $ 1,250,079 Solutions

Communications & Security 1,388,791 235,921 Solutions

Utility & Broadband Solutions 1,099,284 662,110

$ 4,141,801 $ 2,148,110

Income from operations:

Electrical & Electronic $ 105,508 $ 72,007 Solutions

Communications & Security 89,634 10,555 Solutions

Utility & Broadband Solutions 74,092 43,811

Corporate (91,139) (32,640)

$ 178,095 $ 93,733

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollar amounts in thousands, except per share amounts)

(Unaudited)

Nine Months Ended

September 30, 2020

September 30, 2019

Net sales

$

8,197,154

$

6,259,465

Cost of goods sold (excluding

6,641,438

81.0

%

5,067,799

81.0

%

depreciation and amortization)

Selling, general and administrative expenses

1,221,114

14.9

%

883,222

14.1

%

Depreciation and amortization

80,324

46,035

Income from operations

254,278

3.1

%

262,409

4.2

%

Interest expense, net

152,281

49,293

Other, net

(1,463)

(1,359)

Income before income taxes

103,460

1.3

%

214,475

3.4

%

Income tax expense

23,707

44,970

Net income

79,753

1.0

%

169,505

2.7

%

Net loss attributable to noncontrolling interests

(825)

(824)

Net income attributable to WESCO International, Inc.

80,578

1.0

%

170,329

2.7

%

Preferred stock dividends

15,787

-

Net income attributable to common stockholders

$

64,791

0.8

%

$

170,329

2.7

%

Earnings per share attributable to common stockholders

$

1.44

$

3.88

Weighted-average common shares outstanding and common

share equivalents used in computing earnings

per diluted common share (in thousands)

45,104

43,901

Reportable Segments

Net sales:

Electrical & Electronic Solutions

$

3,811,498

$

3,626,423

Communications & Security Solutions

1,953,967

681,087

Utility & Broadband Solutions

2,431,689

1,951,955

$

8,197,154

$

6,259,465

Income from operations:

Electrical & Electronic Solutions

$

194,643

$

198,774

Communications & Security Solutions

127,502

32,501

Utility & Broadband Solutions

167,651

134,431

Corporate

(235,518)

(103,297)

$

254,278

$

262,409

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollar amounts in thousands, except per share amounts)

(Unaudited)

Nine Months Ended

September 30, September 30, 2020 2019

Net sales $ 8,197,154 $ 6,259,465

Cost of goods sold (excluding 6,641,438 81.0 % 5,067,799 81.0 %

depreciation and amortization)

Selling, general and 1,221,114 14.9 % 883,222 14.1 %administrative expenses

Depreciation and amortization 80,324 46,035

Income from operations 254,278 3.1 % 262,409 4.2 %

Interest expense, net 152,281 49,293

Other, net (1,463) (1,359)

Income before income taxes 103,460 1.3 % 214,475 3.4 %

Income tax expense 23,707 44,970

Net income 79,753 1.0 % 169,505 2.7 %

Net loss attributable to (825) (824) noncontrolling interests

Net income attributable to 80,578 1.0 % 170,329 2.7 %WESCO International, Inc.

Preferred stock dividends 15,787 -

Net income attributable to $ 64,791 0.8 % $ 170,329 2.7 %common stockholders



Earnings per share attributable $ 1.44 $ 3.88 to common stockholders

Weighted-average common shares outstanding and common

share equivalents used in computing earnings

per diluted common share (in 45,104 43,901 thousands)



Reportable Segments

Net sales:

Electrical & Electronic $ 3,811,498 $ 3,626,423 Solutions

Communications & Security 1,953,967 681,087 Solutions

Utility & Broadband Solutions 2,431,689 1,951,955

$ 8,197,154 $ 6,259,465

Income from operations:

Electrical & Electronic $ 194,643 $ 198,774 Solutions

Communications & Security 127,502 32,501 Solutions

Utility & Broadband Solutions 167,651 134,431

Corporate (235,518) (103,297)

$ 254,278 $ 262,409

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands)

(Unaudited)

September 30,2020

December 31,2019

Assets

Current Assets

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

Other current assets

395,319

190,476

Total current assets

5,597,450

2,540,411

Other assets

6,270,889

2,477,224

Total assets

$

11,868,339

$

5,017,635

Liabilities and Stockholders' Equity

Current Liabilities

Accounts payable

$

1,830,877

$

830,478

Short-term borrowings and current portion of long-term debt

28,844

26,685

Other current liabilities

681,214

226,896

Total current liabilities

2,540,935

1,084,059

Long-term debt, net

4,878,124

1,257,067

Other noncurrent liabilities

1,236,056

417,838

Total liabilities

8,655,115

2,758,964

Stockholders' Equity

Total stockholders' equity

3,213,224

2,258,671

Total liabilities and stockholders' equity

$

11,868,339

$

5,017,635

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands)

(Unaudited)

September 30, December 31, 2020 2019

Assets

Current Assets

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

Other current assets 395,319 190,476

Total current assets 5,597,450 2,540,411



Other assets 6,270,889 2,477,224

Total assets $ 11,868,339 $ 5,017,635





Liabilities and Stockholders' Equity

Current Liabilities

Accounts payable $ 1,830,877 $ 830,478

Short-term borrowings and current portion of 28,844 26,685 long-term debt

Other current liabilities 681,214 226,896

Total current liabilities 2,540,935 1,084,059



Long-term debt, net 4,878,124 1,257,067

Other noncurrent liabilities 1,236,056 417,838

Total liabilities 8,655,115 2,758,964



Stockholders' Equity

Total stockholders' equity 3,213,224 2,258,671

Total liabilities and stockholders' equity $ 11,868,339 $ 5,017,635

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(Unaudited)

Nine Months Ended

September 30,2020

September 30,2019

Operating Activities:

Net income

$

79,753

$

169,505

Add back (deduct):

Depreciation and amortization

80,324

46,035

Deferred income taxes

(8,261)

4,621

Change in trade receivables, net

3,584

(122,903)

Change in inventories

77,681

(1,500)

Change in accounts payable

80,489

46,902

Other

105,368

(25,996)

Net cash provided by operating activities

418,938

116,664

Investing Activities:

Capital expenditures

(42,562)

(30,323)

Other(1)

(3,681,335)

(23,167)

Net cash used in investing activities

(3,723,897)

(53,490)

Financing Activities:

Debt borrowings, net(2)

3,606,339

148,387

Equity activity, net

(2,565)

(152,735)

Other(3)

(96,454)

(13,734)

Net cash provided by (used in) financing activities

3,507,320

(18,082)

Effect of exchange rate changes on cash and cash equivalents

(1,014)

(3,275)

Net change in cash and cash equivalents

201,347

41,817

Cash and cash equivalents at the beginning of the period

150,902

96,343

Cash and cash equivalents at the end of the period

$

352,249

$

138,160

WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollar amounts in thousands)

(Unaudited)

Nine Months Ended

September 30, September 2020 30, 2019

Operating Activities:

Net income $ 79,753 $ 169,505

Add back (deduct):

Depreciation and amortization 80,324 46,035

Deferred income taxes (8,261) 4,621

Change in trade receivables, net 3,584 (122,903)

Change in inventories 77,681 (1,500)

Change in accounts payable 80,489 46,902

Other 105,368 (25,996)

Net cash provided by operating activities 418,938 116,664



Investing Activities:

Capital expenditures (42,562) (30,323)

Other^(1) (3,681,335) (23,167)

Net cash used in investing activities (3,723,897) (53,490)



Financing Activities:

Debt borrowings, net^(2) 3,606,339 148,387

Equity activity, net (2,565) (152,735)

Other^(3) (96,454) (13,734)

Net cash provided by (used in) financing 3,507,320 (18,082) activities



Effect of exchange rate changes on cash and cash (1,014) (3,275) equivalents



Net change in cash and cash equivalents 201,347 41,817

Cash and cash equivalents at the beginning of the 150,902 96,343 period

Cash and cash equivalents at the end of the period $ 352,249 $ 138,160

(1)

Includes payments to acquire Anixter of $3,707.6 million, net of cash acquired of $103.4 million.

(2)

Primarily includes the net proceeds from the issuance of senior unsecured notes of $2,815.0 million, as well as borrowings under the Company's asset-based revolving credit facility and accounts receivable securitization facility. These cash inflows were used to fund the merger with Anixter.

(3)

Includes approximately $79.9 million of costs associated with the debt financing used to fund a portion of the merger with Anixter, and $15.8 million of dividends paid to holders of Series A preferred stock.

NON-GAAP FINANCIAL MEASURES

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") above, this earnings release includes certain non-GAAP financial measures. These financial measures include gross profit, adjusted gross profit gross margin, adjusted gross margin, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, pro forma adjusted EBITDA, financial leverage, pro forma financial leverage, free cash flow, adjusted income from operations, adjusted operating margin, adjusted provision for income taxes, adjusted net income, adjusted net income attributable to WESCO International, Inc., adjusted net income attributable to common stockholders, and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of sales performance, and the use of debt and liquidity on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude transactions impacting comparability of results, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

^ Includes payments to acquire Anixter of $3,707.6 million, net of cash(1) acquired of $103.4 million.

Primarily includes the net proceeds from the issuance of senior unsecured^ notes of $2,815.0 million, as well as borrowings under the Company's(2) asset-based revolving credit facility and accounts receivable securitization facility. These cash inflows were used to fund the merger with Anixter.

^ Includes approximately $79.9 million of costs associated with the debt(3) financing used to fund a portion of the merger with Anixter, and $15.8 million of dividends paid to holders of Series A preferred stock.

NON-GAAP FINANCIAL MEASURES

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") above, this earnings release includes certain non-GAAP financial measures. These financial measures include gross profit, adjusted gross profit gross margin, adjusted gross margin, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, pro forma adjusted EBITDA, financial leverage, pro forma financial leverage, free cash flow, adjusted income from operations, adjusted operating margin, adjusted provision for income taxes, adjusted net income, adjusted net income attributable to WESCO International, Inc., adjusted net income attributable to common stockholders, and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of sales performance, and the use of debt and liquidity on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude transactions impacting comparability of results, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months Ended

Gross Profit: September 30, September 30, September 30, September 30, 2020 2019 2020 2019



Net sales $ 4,141,801 $ 2,148,110 $ 8,197,154 $ 6,259,465

Cost of goodssold (excluding 3,356,259 1,747,913 6,641,438 5,067,799 depreciation andamortization)

Gross profit $ 785,542 $ 400,197 $ 1,555,716 $ 1,191,666

Adjusted gross $ 813,561 $ 400,197 $ 1,583,735 $ 1,191,666 profit^(1)

Gross margin 19.0 % 18.6 % 19.0 % 19.0 %

Adjusted gross 19.6 % 18.6 % 19.3 % 19.0 %margin^(1)

Note: Gross profit is a financial measure commonly used within the distribution industry. Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. Gross margin is calculated by dividing gross profit by net sales.

(1)

Adjusted gross profit and adjusted gross margin exclude the effect of merger-related fair value adjustments to inventory of $28.0 million for the three and nine months ended September 30, 2020.

Note: Gross profit is a financial measure commonly used within the distributionindustry. Gross profit is calculated by deducting cost of goods sold, excludingdepreciation and amortization, from net sales. Gross margin is calculated bydividing gross profit by net sales.

^ Adjusted gross profit and adjusted gross margin exclude the effect of(1) merger-related fair value adjustments to inventory of $28.0 million for the three and nine months ended September 30, 2020.

Three Months Ended

Nine Months Ended

Adjusted Income from Operations:

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Income from operations

$

178,095

$

93,733

$

254,278

$

262,409

Merger-related costs

14,175

-

92,127

-

Merger-related fair value adjustments

28,019

-

28,019

-

Gain on sale of asset

(19,816)

-

(19,816)

-

Adjusted income from operations

$

200,473

$

93,733

$

354,608

$

262,409

Three Months Ended Nine Months Ended

Adjusted Income from September September September SeptemberOperations: 30, 30, 30, 30, 2020 2019 2020 2019



Income from operations $ 178,095 $ 93,733 $ 254,278 $ 262,409

Merger-related costs 14,175 - 92,127 -

Merger-related fair value 28,019 - 28,019 - adjustments

Gain on sale of asset (19,816) - (19,816) -

Adjusted income from $ 200,473 $ 93,733 $ 354,608 $ 262,409 operations

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

Adjusted Provision for Income Taxes:

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Provision for income taxes

$

24,294

$

15,886

$

23,707

$

44,970

Income tax effect of adjustments to income from operations(1)

4,923

-

22,073

-

Adjusted provision for income taxes

$

29,217

$

15,886

$

45,780

$

44,970

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months Ended

Adjusted Provision for September September September SeptemberIncome Taxes: 30, 30, 30, 30, 2020 2019 2020 2019



Provision for income taxes $ 24,294 $ 15,886 $ 23,707 $ 44,970

Income tax effect ofadjustments to income from 4,923 - 22,073 - operations^(1)

Adjusted provision for $ 29,217 $ 15,886 $ 45,780 $ 44,970 income taxes

(1) The adjustments to income from operations have been tax effected at a rate of 22%.^(1) The adjustments to income from operations have been tax effected at a rateof 22%.Three Months Ended

Nine Months Ended

Adjusted Earnings per Diluted Share:

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Adjusted income from operations

$

200,473

$

93,733

$

354,608

$

262,409

Interest expense, net

74,540

14,306

152,281

49,293

Other, net

(777)

(798)

(1,463)

(1,359)

Adjusted income before income taxes

126,710

80,225

203,790

214,475

Adjusted provision for income taxes

29,217

15,886

45,780

44,970

Adjusted net income

97,493

64,339

158,010

169,505

Net loss attributable to noncontrolling interests

(640)

(156)

(825)

(824)

Adjusted net income attributable to WESCO International, Inc.

98,133

64,495

158,835

170,329

Preferred stock dividends

14,511

-

15,787

-

Adjusted net income attributable to common stockholders

$

83,622

$

64,495

$

143,048

$

170,329

Diluted shares

50,487

42,378

45,104

43,901

Adjusted earnings per diluted share

$

1.66

$

1.52

$

3.17

$

3.88

Note: Income from operations, the provision for income taxes and earnings per diluted share for the three and nine months ended September 30, 2020 have been adjusted to exclude merger-related costs and fair value adjustments, gain on sale of an operating branch in the U.S. and the related income tax effects. These non-GAAP financial measures provide a better understanding of the Company's financial results on a comparable basis.

Three Months Ended Nine Months Ended

Adjusted Earnings per September September September SeptemberDiluted Share: 30, 30, 30, 30, 2020 2019 2020 2019



Adjusted income from $ 200,473 $ 93,733 $ 354,608 $ 262,409 operations

Interest expense, net 74,540 14,306 152,281 49,293

Other, net (777) (798) (1,463) (1,359)

Adjusted income before 126,710 80,225 203,790 214,475 income taxes

Adjusted provision for 29,217 15,886 45,780 44,970 income taxes

Adjusted net income 97,493 64,339 158,010 169,505

Net loss attributable to (640) (156) (825) (824) noncontrolling interests

Adjusted net incomeattributable to WESCO 98,133 64,495 158,835 170,329 International, Inc.

Preferred stock dividends 14,511 - 15,787 -

Adjusted net incomeattributable to common $ 83,622 $ 64,495 $ 143,048 $ 170,329 stockholders



Diluted shares 50,487 42,378 45,104 43,901

Adjusted earnings per $ 1.66 $ 1.52 $ 3.17 $ 3.88 diluted share

Note: Income from operations, the provision for income taxes and earnings per diluted share for the three and nine months ended September 30, 2020 have been adjusted to exclude merger-related costs and fair value adjustments, gain on sale of an operating branch in the U.S. and the related income tax effects. These non-GAAP financial measures provide a better understanding of the Company's financial results on a comparable basis.

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands, except per share data)

(Unaudited)

Three Months Ended September 30, 2020

EBITDA andAdjusted EBITDA by EES CSS UBS Corporate TotalSegment:



Net incomeattributable to $ 107,192 $ 90,585 $ 73,924 $ (205,534) $ 66,167commonstockholders

Net lossattributable to (270) - - (370) (640)noncontrollinginterests

Preferred stock - - - 14,511 14,511dividends

Income tax expense - - - 24,294 24,294

Interest expense, - - - 74,540 74,540net

Depreciation and 10,411 18,536 7,550 8,979 45,476amortization

EBITDA $ 117,333 $ 109,121 $ 81,474 $ (83,580) $ 224,348

Other, net (1,414) (951) 168 1,420 (777)

Stock-basedcompensation 141 6 77 5,778 6,002expense

Merger-related - - - 14,175 14,175costs

Merger-relatedfair value 11,695 12,344 3,980 - 28,019adjustments

Gain on sale of (19,816) - - - (19,816)asset

Adjusted EBITDA $ 107,939 $ 120,520 $ 85,699 $ (62,207) $ 251,951

Adjusted EBITDA 6.5 % 8.7 % 7.8 % 6.1 %margin %



Three Months Ended September 30, 2019

EBITDA andAdjusted EBITDA by EES CSS UBS Corporate TotalSegment:



Net incomeattributable to $ 72,163 $ 10,555 $ 43,811 $ (62,034) $ 64,495commonstockholders

Net lossattributable to (156) - - - (156)noncontrollinginterests

Income tax expense - - - 15,886 15,886

Interest expense, - - - 14,306 14,306net

Depreciation and 7,171 1,811 3,396 3,234 15,612amortization

EBITDA $ 79,178 $ 12,366 $ 47,207 $ (28,608) $ 110,143

Other, net (798) - - - (798)

Stock-basedcompensation 279 19 58 4,070 4,426expense

Adjusted EBITDA $ 78,659 $ 12,385 $ 47,265 $ (24,538) $ 113,771

Adjusted EBITDA 6.3 % 5.2 % 7.1 % 5.3 %margin %

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands, except per share data)

(Unaudited)

Nine Months Ended September 30, 2020

EBITDA and Adjusted EBITDA by Segment:

EES

CSS

UBS

Corporate

Total

Net income attributable to common stockholders

$

196,665

$

128,295

$

167,483

$

(427,652)

$

64,791

Net loss attributable to noncontrolling interests

(664)

-

-

(161)

(825)

Preferred stock dividends

-

-

-

15,787

15,787

Income tax expense

-

-

-

23,707

23,707

Interest expense, net

-

-

-

152,281

152,281

Depreciation and amortization

24,638

24,393

15,153

16,140

80,324

EBITDA

$

220,639

$

152,688

$

182,636

$

(219,898)

$

336,065

Other, net

(1,358)

(793)

168

520

(1,463)

Stock-based compensation expense

849

54

221

14,405

15,529

Merger-related costs

-

-

-

92,127

92,127

Merger-related fair value adjustments

11,695

12,344

3,980

-

28,019

Gain on sale of asset

(19,816)

-

-

-

(19,816)

Adjusted EBITDA

$

212,009

$

164,293

$

187,005

$

(112,846)

$

450,461

Adjusted EBITDA margin %

5.6 %

8.4 %

7.7 %

5.5 %

Nine Months Ended September 30, 2019

EBITDA and Adjusted EBITDA by Segment:

EES

CSS

UBS

Corporate

Total

Net income attributable to common stockholders

$

199,598

$

32,501

$

134,431

$

(196,201)

$

170,329

Net loss attributable to noncontrolling interests

(824)

-

-

-

(824)

Income tax expense

-

-

-

44,970

44,970

Interest expense, net

-

-

-

49,293

49,293

Depreciation and amortization

21,343

5,453

10,118

9,121

46,035

EBITDA

$

220,117

$

37,954

$

144,549

$

(92,817)

$

309,803

Other, net

(1,359)

-

-

-

(1,359)

Stock-based compensation expense

837

57

173

13,174

14,241

Adjusted EBITDA

$

219,595

$

38,011

$

144,722

$

(79,643)

$

322,685

Adjusted EBITDA margin %

6.1 %

5.6 %

7.4 %

5.2 %

Note: EBITDA and Adjusted EBITDA are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before other, net, non-cash stock-based compensation, costs and fair value adjustments associated with the merger with Anixter, and gain on sale of an operating branch in the U.S.

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands, except per share data)

(Unaudited)

Nine Months Ended September 30, 2020

EBITDA andAdjusted EBITDA EES CSS UBS Corporate Totalby Segment:



Net incomeattributable to $ 196,665 $ 128,295 $ 167,483 $ (427,652) $ 64,791common stockholders

Net lossattributable to (664) - - (161) (825)noncontrolling interests

Preferred stock - - - 15,787 15,787dividends

Income tax - - - 23,707 23,707expense

Interest expense, - - - 152,281 152,281net

Depreciation and 24,638 24,393 15,153 16,140 80,324amortization

EBITDA $ 220,639 $ 152,688 $ 182,636 $ (219,898) $ 336,065

Other, net (1,358) (793) 168 520 (1,463)

Stock-basedcompensation 849 54 221 14,405 15,529expense

Merger-related - - - 92,127 92,127costs

Merger-relatedfair value 11,695 12,344 3,980 - 28,019adjustments

Gain on sale of (19,816) - - - (19,816)asset

Adjusted EBITDA $ 212,009 $ 164,293 $ 187,005 $ (112,846) $ 450,461

Adjusted EBITDA 5.6 % 8.4 % 7.7 % 5.5 %margin %



Nine Months Ended September 30, 2019

EBITDA andAdjusted EBITDA EES CSS UBS Corporate Totalby Segment:



Net incomeattributable to $ 199,598 $ 32,501 $ 134,431 $ (196,201) $ 170,329common stockholders

Net lossattributable to (824) - - - (824)noncontrolling interests

Income tax - - - 44,970 44,970expense

Interest expense, - - - 49,293 49,293net

Depreciation and 21,343 5,453 10,118 9,121 46,035amortization

EBITDA $ 220,117 $ 37,954 $ 144,549 $ (92,817) $ 309,803

Other, net (1,359) - - - (1,359)

Stock-basedcompensation 837 57 173 13,174 14,241expense

Adjusted EBITDA $ 219,595 $ 38,011 $ 144,722 $ (79,643) $ 322,685

Adjusted EBITDA 6.1 % 5.6 % 7.4 % 5.2 %margin %

Note: EBITDA and Adjusted EBITDA are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before other, net, non-cash stock-based compensation, costs and fair value adjustments associated with the merger with Anixter, and gain on sale of an operating branch in the U.S.

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands, except per share data)

(Unaudited)

Pro Forma Reported

Twelve Months Twelve Months Ended Ended

Financial Leverage: September 30, December 31, 2020 2019



Net income attributable to common stockholders $ 264,116 $ 223,426

Net loss attributable to noncontrolling interests (1,229) (1,228)

Preferred stock dividends 15,787 -

Income tax expense 40,051 59,863

Interest expense, net 216,699 64,156

Depreciation and amortization 145,471 62,107

EBITDA $ 680,895 $ 408,324

Other, net 2,365 614

Stock-based compensation 43,868 19,062

Merger-related costs and fair value adjustments 166,849 3,130

Gain on sale of asset (19,816) -

Adjusted EBITDA $ 874,161 $ 431,130



September 30, December 31, 2020 2019

Short-term borrowings and current portion of $ 28,844 $ 26,685 long-term debt

Long-term debt 4,878,124 1,257,067

Debt discount and debt issuance costs^(1) 92,343 8,876

Fair value adjustments to Anixter Notes due 2023 (1,824) - and 2025^(1)

Total debt 4,997,487 1,292,628

Less: cash and cash equivalents 352,249 150,902

Total debt, net of cash $ 4,645,238 $ 1,141,726



Financial leverage ratio 5.3 2.6

(1)Long-term debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Note: Financial leverage measures the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt discount, debt issuance costs and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the trailing twelve months EBITDA before foreign exchange and other non-operating expenses, non-cash stock-based compensation, costs and fair value adjustments associated with the merger with Anixter, and gain on sale of an operating branch in the U.S. Pro forma financial leverage ratio is calculated by dividing total debt, excluding debt discount and debt issuance costs, net of cash, by pro forma adjusted EBITDA. Pro forma EBITDA and pro forma adjusted EBITDA gives effect to the combination of WESCO and Anixter as if it had occurred at the beginning of the respective trailing twelve month period.

Long-term debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and includes adjustments to(1) record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Note: Financial leverage measures the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt discount, debt issuance costs and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the trailing twelve months EBITDA before foreign exchange and other non-operating expenses, non-cash stock-based compensation, costs and fair value adjustments associated with the merger with Anixter, and gain on sale of an operating branch in the U.S. Pro forma financial leverage ratio is calculated by dividing total debt, excluding debt discount and debt issuance costs, net of cash, by pro forma adjusted EBITDA. Pro forma EBITDA and pro forma adjusted EBITDA gives effect to the combination of WESCO and Anixter as if it had occurred at the beginning of the respective trailing twelve month period.

WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months Ended

September September September SeptemberFree Cash Flow: 30, 30, 30, 30, 2020 2019 2020 2019



Cash flow provided by $ 286,250 $ 125,439 $ 418,938 $ 116,664 operations

Less: Capital (15,399) (8,921) (42,562) (30,323) expenditures

Add: Merger-related 36,591 - 85,674 - expenditures

Free cash flow $ 307,442 $ 116,518 $ 462,050 $ 86,341

Percentage of adjusted 315 % 181 % 292 % 51 %net income

Note: Free cash flow is a measure of liquidity. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund investing and financing activities. For the three and nine months ended September 30, 2020, the Company paid certain fees, expenses and other costs to consummate the merger with Anixter. Such expenditures have been added back to cash flow provided by operations to determine free cash flow for such periods.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105005244/en/

CONTACT: Will Ruthrauff Director, Investor Relations and Corporate Communications (412) 454-4220 http://www.wesco.com