Webcast Presentation October 22, 2015 Q3 2015 Earnings
2 Q3 2015 Earnings Webcast, 10/22/2015 Safe Harbor Statement Note: All statements made herein that are not historical facts should be considered as “forward- looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to: adverse economic conditions; increase in competition; debt levels, terms, financial market conditions or interest rate fluctuations; risks related to acquisitions, including the integration of acquired businesses; disruptions in operations or information technology systems; expansion of business activities; litigation, contingencies or claims; product, labor or other cost fluctuations; exchange rate fluctuations; and other factors described in detail in the Form 10-K for WESCO International, Inc. for the year ended December 31, 2014 and any subsequent filings with the Securities & Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such. The following presentation includes a discussion of certain non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be found in the appendix and obtained via WESCO’s website, www.wesco.com.
3 Q3 2015 Earnings Webcast, 10/22/2015 (1.8) (1.2) 1.6 1.5 1.6 6.0 6.7 8.1 3.2 (3.0) (5.3) Q1 Q2 Q3 Q4 2013 2014 2015 Q3 2015 Highlights Organic Growth (%) …challenging quarter, driven by industrial, Canada & foreign exchange • Organic sales were down 4% in the U.S. and down 10% in Canada • Oil and gas sales down approximately 30% • Month-to-date October sales down approximately 6% consolidated and 4% organic • Cost controls partially mitigated sales and margin declines; additional cost reduction actions underway • Solid free cash flow and financial leverage within target range • Approximately 1.4 million shares repurchased; 2.5 million YTD • Robust acquisition pipeline July (5)% Aug (3)% Sept (8)% Note: Workday adjusted; see appendix for non-GAAP reconciliations. Q1 Q2 Q3 Q4 Q1 Q2 Q3
4 Q3 2015 Earnings Webcast, 10/22/2015 2.1% 5.0% 7.0% 5.8% (4.1)% (10.2)% (14.2)% Industrial End Market • Q3 2015 Sales − Down 14% versus prior year − Down 4% sequentially − Sales declines driven by oil and gas, metals and mining, and OEM customers • Reduced demand outlook, weak commodity prices and strong U.S. dollar weighing on manufacturing sector causing deferred maintenance and project spending. • Global Accounts and Integrated Supply bidding activity levels remain strong. • Customer trends include higher expectations for supply chain process improvements, cost reductions, and supplier consolidation. Industrial Core Sales Growth versus Prior Year 40% Industrial • Global Accounts • Integrated Supply • OEM • General Industrial Note: Excludes acquisitions during the first year of ownership. Workday adjusted. 2014 5.0% Awarded a multi-year contract to supply electrical and safety MRO products across multiple plants for a global food ingredient manufacturer. Q2 2014 Q1 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
5 Q3 2015 Earnings Webcast, 10/22/2015 • Q3 2015 Sales − Down 10% versus prior year (down 5% in both U.S. and Canada in local currency) − Up 4% sequentially − Sales declines driven by weakness with contractors serving industrial market partially offset by growth with commercial construction contractors • Backlog grew sequentially in Q3 and is up 3% versus year end and down 1% from prior year. • Expecting modest uptrend in U.S. non- residential construction outside of oil and gas, metals and mining. • Non-residential construction market still well below its prior peak in 2008. (5.9%) 2.3% 3.8% 5.2% 3.9% (7.7%) (10.5%) Construction • Non- Residential • Residential 32% Core Sales Growth versus Prior Year Construction End Market Construction Note: Excludes acquisitions during the first year of ownership. Workday adjusted. Q2 2014 Q1 2014 Awarded a contract to provide upgraded electrical equipment for four hydropower plants in the U.S. Q3 2014 Q4 2014 Q1 2015 2014 1.5% Q2 2015 Q3 2015
6 Q3 2015 Earnings Webcast, 10/22/2015 Utility End Market Core Sales Growth versus Prior Year 15% Utility • Investor Owned • Public Power • Utility Contractors • Q3 2015 Sales − Up 2% versus prior year (up 6% in U.S. and down 12% in Canada in local currency) − Flat sequentially • Eighteenth consecutive quarter of year-over-year sales growth. • Scope expansion and value creation with IOU, public power, and generation customers providing utility sales growth. • Secular improvement in housing market expected to be positive catalyst for future spending. • Increased capital spending is underway and planned for certain investor owned utilities. • Continued interest for Integrated Supply solution offerings. Utility Note: Excludes acquisitions during the first year of ownership. Workday adjusted. 1.5% 6.1% 10.6% 7.9% 6.5% 5.7% 1.7% Awarded contract for substation materials and supply management for a new utility scale wind farm project. 2014 6.6% Q2 2014 Q1 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
7 Q3 2015 Earnings Webcast, 10/22/2015 CIG End Market • Q3 2015 Sales − Down 3% versus prior year − Down 1% sequentially • Solid growth with government customers and bidding activity levels remain high. • Customer focus remains on energy efficiency (lighting, automation, metering) and security. • Opportunities exist to support data center construction and retrofits and cloud technology projects. Government Core Sales Growth versus Prior Year CIG • Commercial • Institutional • Government 13% Note: Excludes acquisitions during the first year of ownership. Workday adjusted. Renewed a large multi-year contract to supply electrical and safety MRO products to government agencies for one of the states in U.S. 3.3% 5.2% 2.3% 7.4% 4.3% (0.5)% (3.0)% 2014 4.5% Q2 2014 Q1 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
8 Q3 2015 Earnings Webcast, 10/22/2015 Q3 2015 Results Outlook Actual YOY Sales (3)% growth to flat $1.92B (7.4)% growth (5.3)% organic Gross Margin 19.8% Down 50 bps SG&A $258M, 13.4% Down 5%, Up 30 bps Operating Profit $106M Down 20% Operating Margin 5.7% to 5.9% 5.5% Down 90 bps Effective Tax Rate 29% to 30% 27.4% Down 70 bps 200 bps (4.0)% Growth 230 bps 290 bps $1.92B $2.08B Q3 2015 Sales Acquisitions Foreign Exchange Rest of World Canada U.S. Q3 2014 Sales 410 bps 10 bps (9.9)% Growth (0.9)% Growth (5.3)% Organic Growth (7.4)% Growth
9 Q3 2015 Earnings Webcast, 10/22/2015 EPS Walk Q3 2014 $1.52 Core Operations ~(0.26) Acquisitions 0.02 Foreign Exchange Impact (0.09) Tax Rate 0.01 Share Count 0.08 Q3 2015 $1.28
10 Q3 2015 Earnings Webcast, 10/22/2015 1.5 2 2.5 3 3.5 4 4.5 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 123.8 159.8 YTD Q3 2014 YTD Q3 2015 Cash Generation Free Cash Flow ($ Millions) See appendix for non-GAAP reconciliations. 100% of net income 61% of net income ~ $1B of free cash flow over last 5 years 2013 2014 Target Leverage 2.0x – 3.5x 3.5X Leverage (Total Par Debt to TTM EBITDA) 2015
11 Q3 2015 Earnings Webcast, 10/22/2015 2015 Outlook Q4 FY Sales (5)% to (8)% (4)% to (5)% Operating Margin 5.0% to 5.2% ~ 5.0% Effective Tax Rate 29% to 30% ~ 29% EPS $4.15 to $4.30 Free Cash Flow ~100% of net income Notes: Excludes unannounced acquisitions. Assumes a CAD/USD exchange rate of 0.75 in Q4.
12 Q3 2015 Earnings Webcast, 10/22/2015 Appendix
13 Q3 2015 Earnings Webcast, 10/22/2015 WESCO Profile 2015 40% 32% 15% 13% 40% 15% 15% 11% 10% 9% Controls & Motors Lighting & Controls General Supplies Data & Broadband Communications Wire, Cable & Conduit Distribution Equipment Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public Power Utility Contractors Commercial | Institutional | Government Global Accounts | Integrated Supply OEM | General Industrial Non-Residential | Contractors
14 Q3 2015 Earnings Webcast, 10/22/2015 Sales Growth 2013 2014 2015 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Consolidated 12.6 13.2 16.6 14.3 14.2 0.2 5.9 7.6 6.1 5.0 0.3 (4.4) (7.4) Acquisition Impact 16.0 14.6 14.1 13.8 14.6 0.5 1.6 1.8 1.6 1.4 1.2 1.6 2.0 Core (3.4) (1.4) 2.5 0.5 (0.4) (0.3) 4.3 5.8 4.5 3.6 (0.9) (6.0) (9.4) FX Impact 0.0 (0.2) (0.7) (1.0) (0.4) (1.9) (1.7) (0.9) (2.0) (1.6) (2.5) (3.0) (4.1) Organic (3.4) (1.2) 3.2 1.5 0.0 1.6 6.0 6.7 6.5 5.2 1.6 (3.0) (5.3) WD Impact (1.6) 1.6 (1.6) (0.4) (1.6) Normalized Organic (1.8) (1.2) 1.6 1.5 0.0 1.6 6.0 6.7 8.1 5.6 3.2 (3.0) (5.3) Estimated Price Impact 1.0 0.0 0.0 0.0 0.2 0.5 0.5 0.5 0.5 0.5 0.0 0.0 0.0 (%)
15 Q3 2015 Earnings Webcast, 10/22/2015 Q3 2015 Sales Growth – Geography U.S. Canada International Total Change in net sales (1.2) (24.4) (9.7) (7.4) Impact from acquisitions 2.8 - - 2.0 Impact from foreign exchange rates - (14.5) (8.8) (4.1) Impact from number of workdays - - - - Normalized organic sales growth (4.0) (9.9) (0.9) (5.3) (%)
16 Q3 2015 Earnings Webcast, 10/22/2015 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth – End Markets Q3 2015 vs. Q3 2014 Q3 2015 vs. Q2 2015 Q30 Q30 Q30 Q20 2015 2014 %00 Growth 2015 2015 %00 Growth Industrial Core 726 846 (14.2)% 726 755 (3.8)% Construction Core 608 680 (10.5)% 608 583 4.3% Utility Core 297 292 1.7% 297 298 (0.3)% CIG Core 259 267 (3.0)% 259 261 (0.9)% Total Core Gross Sales 1,890 2,085 (9.3)% 1,890 1,897 (0.4)% Total Gross Sales from Acquisitions 41 - - 41 27 51.9% Total Gross Sales 1,931 2,085 (7.4)% 1,931 1,924 0.4% Gross Sales Reductions/Discounts (7) (7) - (7) (7) - Total Net Sales 1,924 2,078 (7.4)% 1,924 1,917 0.4%
17 Q3 2015 Earnings Webcast, 10/22/2015 Outstanding at December 31, 2014 Outstanding at September 30, 2015 Debt Maturity Schedule AR Revolver (V) 430 530 2018 Inventory Revolver (V) 8 56 2020 Senior Notes (F) 500 500 2021 2019 Term Loans (V) 252 189 2019 2029 Convertible Bonds (F) 345 345 2029 (1) Other (V) 51 47 N/A Total Par Debt 1,586 1,667 Capital Structure Key Financial Metrics Q3 2014 YE 2014 Q3 2015 Cash 110 128 133 Capital Expenditures (YTD) 16 21 16 Free Cash Flow (YTD) 124 231 160 Liquidity (2) 539 638 520 ($ Millions) V = Variable Rate Debt 1 = No put; first callable date September 2016. F = Fixed Rate Debt 2 = Asset-backed credit facilities total availability plus invested cash.
18 Q3 2015 Earnings Webcast, 10/22/2015 Financial Leverage Twelve Months Ended September 30, 2015 Financial leverage ratio: Income from operations $ 408 Depreciation and amortization 65 EBITDA $ 473 September 30, 2015 Current debt and short-term borrowings $ 46 Long-term debt 1,455 Debt discount related to convertible debentures and term loan (1) 166 Total debt including debt discount $ 1,667 Financial leverage ratio 3.5X (1)The convertible debentures and term loan are presented in the condensed consolidated balance sheets in long-term debt net of the unamortized discount. ($ Millions)
19 Q3 2015 Earnings Webcast, 10/22/2015 ($ Millions) Maturity Par Value of Debt Debt Discount Debt per Balance Sheet 2029 344.9 (164.4) 180.5 Convertible Debt At September 30, 2015 Non-Cash Interest Expense ($ Millions) 2013 2014 YTD Q3 2015 Convertible Debt 4.3 4.1 4.4 Amortization of Deferred Financing Fees 4.9 4.4 4.9 FIN 48 0.6 1.0 0.6 Accrued Interest in Excess of Paid 0.4 0.0 1.7 Total 10.2 9.5 11.6 Convertible Debt and Non-Cash Interest
20 Q3 2015 Earnings Webcast, 10/22/2015 EPS Dilution Weighted Average Quarterly Share Count Stock Price Incremental Shares from 2029 Convertible Debt (in millions)3 Incremental Shares from Equity Awards (in millions) Total Diluted Share Count (in millions)4 $30.00 0.45 0.19 43.84 $40.00 3.33 0.34 46.85 $50.00 5.05 0.47 48.71 Q3 2015 Average $57.87 5.99 0.54 49.72 $60.00 6.20 0.55 49.95 $70.00 7.02 0.75 50.96 $80.00 7.64 0.87 51.69 2029 Convertible Debt Details Conversion Price $28.8656 Conversion Rate 34.6433 1 Underlying Shares 11,947,602 2 Footnotes: 2029 Convertible Debenture 1 1000/28.8656 2 $344.9 million/1,000 x 34.6433 3 (Underlying Shares x Avg. Quarterly Stock Price) minus $344.9 million Avg. Quarterly Stock Price 4 Basic Share Count of 43.2 million shares
21 Q3 2015 Earnings Webcast, 10/22/2015 Free Cash Flow Reconciliation Q3 2014 Q3 2015 YTD Q3 2014 YTD Q3 2015 Cash flow provided by operations 89.0 43.3 139.8 176.0 Less: Capital expenditures (4.3) (3.6) (16.0) (16.2) Free Cash Flow 84.7 39.7 123.8 159.8 Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund the Company's financing needs. ($ Millions)
22 Q3 2015 Earnings Webcast, 10/22/2015 Work Days Q1 Q2 Q3 Q4 FY 2014 63 64 64 62 253 2015 62 64 64 63 253 2016 64 64 64 62 254