John Engel Chairman, President and CEO EPG Conference May 19, 2014
Safe Harbor Statement Note: All statements made herein that are not historical facts should be considered as forwardlooking 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 EECOL; 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, 2013 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 obtained via WESCO s website, www.wesco.com. 2 EPG Conference 5/19/2014
WESCO International WESCO is a leading provider of electrical, industrial, and communications MRO and OEM products, construction materials, and advanced supply chain management and logistics services. Vision Global Leader of Supply Chain Solutions that consistently delivers superior customer value and shareholder returns ----------------- Known for the best customer service and the best people Value Proposition Providing customers the products and supply chain services they need for MRO, OEM, and Capital Projects an industry leader 3 EPG Conference 5/19/2014
Global Reach Headquartered in Pittsburgh, PA 9,200+ employees 475+ locations in 19 countries WESCO locations Delivery locations beyond our footprint Over $400M annual sales outside U.S. and Canada delivering solutions far beyond our physical locations 4 EPG Conference 5/19/2014
WESCO Profile Markets & Customers Products & Services Geography 13% 13% 43% 9% 10% 12% 39% 24% 6% 70% 31% 16% 14% Industrial Global Accounts Integrated Supply OEM General Industrial Construction Non-Residential Residential Utility Investor Owned Public Power Utility Contractors CIG Commercial Institutional Government General Supplies Data & Broadband Communications Wire, Cable & Conduit Distribution Equipment Lighting & Controls Controls & Motors Canada 5 Note: Pie charts reflect TTM Q1 2014 consolidated sales. EPG Conference 5/19/2014 U.S. ROW Sales 1994 $1.6B at LBO 2003 $3.3B 2012 $6.6B Q1 TTM $7.5B portfolio diversified and strengthened over last decade
Market Opportunity Large Fragmented Market Value of Distribution Needs Sales Marketing Delivery Service Needs Procurement Warehousing Logistics Supply Chain Management Thousands of manufacturers Over 10,000 distributors Top 50 distributors have less than 30% share in North America Majority of products get to market through distribution Market Trends Benefit WESCO Industry consolidation Outsourcing Global sourcing Supply chain integrity Growing interdependence Financial strength and liquidity large fragmented market with trends favorable to WESCO 6 EPG Conference 5/19/2014
Growth Strategy Build Scale + Strengthen Portfolio + Operational Excellence through Lean and One WESCO Growth strategy launched 5 years ago Strong results delivered Market position Global capabilities Value creation Significant organization changes in 2014 Accelerate One WESCO Increase investments Leverage talent playing offense, and execution is producing strong results 7 EPG Conference 5/19/2014
Strategic Initiatives Integrating all of our efforts around the customer Selling our complete portfolio of products and services Providing electrical and industrial supply chain solutions for: MRO indirect materials and services OEM direct materials and products Capital projects, new construction and retrofit/renovation/upgrades Supply Chain Management and Solutions Company Pull system for continuous improvement to drive business results by engaging employees at all levels to be customer focused, process minded, relentless in waste reduction, and empowered to lead positive change. WESCO Lean Journey Enterprise-wide application and results Focus on sales, operations and transactional processes Industry-leading value creation program for customers LEAN leadership, culture and certification programs Dedicated field resources driving increase in kaizens A distinct, competitive differentiator Accelerating Lean inside and outside the company integrating our multi-company heritage into one operating company 8 EPG Conference 5/19/2014
New Global Sales & Marketing Organization New Organization Established January 2014 One sales and marketing leader across entire enterprise Strengthened functions Global Accounts Marketing Supplier Relations Established new functions End market sales leaders Product category managers Call centers e-commerce Supply chain services Strategic Priorities 1. Marketing Leadership Demand creation programs Lead generation and qualification Dedicated specialists Digital marketing Brand management 2. Sales Management Sales force effectiveness Targeted selling and specialist resources New WESCO CRM platform Sales training and solution selling Customer account management and checkerboard execution 3. Product Category Management Product additions Supplier optimization Pricing and sourcing effectiveness focused on accelerating One WESCO 9 EPG Conference 5/19/2014
New U.S. Organization New Organization Established January 2014 One U.S. leader Restructured regions Strengthened business platforms Sales ($B) 1.3 2.9 5.3 8% CAGR 1994 2003 2013 Strategic Priorities 1. Drive One WESCO growth initiatives 2. Operations integration and branch network optimization 3. Lean enterprise and supply chain applications 4. Increase geographic scale and strengthen core electrical 5. Expand into adjacent industrial categories focused on accelerating One WESCO 10 EPG Conference 5/19/2014
Strengthened Canadian Organization Significant Investments Since 2009 New branches New distribution centers Acquisitions New end markets New supplier lines Strategic Priorities Sales (C$) 0.3 0.5 1.9 10% CAGR 1. Drive WESCO and EECOL growth initiatives 2. Lean enterprise and supply chain applications 3. Integrate acquisitions and build utility business 4. Integrate Hazmasters and expand safety 1994 2003 2013 leverages new market leadership positions 11 EPG Conference 5/19/2014
Growth Engines Business Models End Markets Product Categories 1 2 5 Global Accounts & Integrated Supply Global Accounts Provides comprehensive supply chain solutions to Fortune 1000 and other multi-site companies for their MRO, OEM, and capital expenditure needs Integrated Supply Provides turnkey outsourcing solutions for MRO and OEM procurement and other supply chain needs 3 4 Construction Utility International 6 7 8 Communications & Security Lighting & Sustainability Industrial MRO & Safety Key Capabilities Acquisitions New in 2014 support our profitable growth objectives 12 EPG Conference 5/19/2014
Focus End Markets Industrial Customer supply chain consolidation and outsourcing Construction Contractor expansion and non-resi recovery Utility Customer supply chain consolidation and outsourcing Global Accounts Supply Chain Solutions Capital Projects EPCs and Large Contractors Generation MRO, Outage Support, Construction Projects MRO Outsourcing End Users and EPCs New Construction and Upgrades Integrated Supply Global Accounts Transmission OEM Value Add Parts and Assemblies Branches and DCs Regional and Local Contractors Distribution MRO, Construction Projects, Supply Chain Services Attractive growth and value creation selling opportunities Attractive growth for non-residential Attractive growth across entire power chain drive our One WESCO priorities and execution 13 EPG Conference 5/19/2014
Focus Product Categories Communications & Security $20B Global Market Lighting & Sustainability WESCO Lighting Mix Industrial MRO & Safety New growth engine Anixter Graybar WESCO Utility CIG Industrial Acquired Conney Safety in 2012 and Hazmasters in 2014 ($165 million sales) Construction North American Industrial MRO market exceeds $580 billion ~ $1 billion WESCO sales ~ $750 million WESCO sales support our One WESCO initiatives 14 EPG Conference 5/19/2014
Global Accounts Value Proposition Standardizing products, pricing, terms, and service across multiple customer facilities Industrial & Electrical Distribution Direct Material Solutions Global Capital Project Management Integrated Supply address key customer needs and applications 15 EPG Conference 5/19/2014
One WESCO Checkerboard Application An example Global Accounts customer PRODUCT CATEGORY PENETRATION % Sales Penetration >80% ~ 50% < 20% BALLASTS BOXES METALLIC & NON-METALLIC CIRCUIT BREAKERS CONDUIT & CABLE FITTINGS CONDUIT-METAL CONDUIT-NON METALLIC CONTROL - OPEN & CLOSED CUTOUT, ARRESTOR, CAPACITORS & H.V. SWITCHES DATA COMMUNICATIONS ELECTRICAL SUPPLIES ENCLOSURES ENGINEER SERVICES & (W) RENEWAL PARTS FACTORY PRODUCTS FANS,HEATERS,VENTING EQUIP. FUSES, FUSE BLOCKS & FUSE HOLDERS INDUSTRIAL MAINTENANCE LAMPS LIGHTING LOADCENTERS/BREAKERS/METER CENTER METERING/INSTRUMENT TRANSFORMERS MISC ELECTRICAL MOTOR CONTROL CENTERS MOTORS & DRIVES PANELBOARDS/SWITCHGEAR/BUSDUCT PROGRAMMABLE CONTROLLERS RACEWAYS, WIREWAYS,STRUT,CABLE TRAY SAFETY SWITCHES T&D UTILITY PRODUCTS TAPE,INSULATING MATERIAL,HEAT SHRINK TUBING,SEALANTS & ADHESIVES TERMINATIONS,LUGS,CONNECTORS & ACCESSORIES TOOLS TRANSFORMERS TRANSFORMERS:DISTRIBUTION TRANSFORMERS:POWER WATERCOOLERS WIRE DATA COMMUNICATIONS WIRE, POWER, CORDS & BUILDING WIRING DEVICES LOCATION 1 LOCATION 2 LOCATION 3 LOCATIONS LOCATION 4 LOCATION 5 LOCATION 6 LOCATION 7 LOCATION 8 LOCATION 9 LOCATION 10 LOCATION 11 LOCATION 12 significant opportunity for increased customer share capture 16 EPG Conference 5/19/2014
Cumulative Acquisitions Since 2010 Acquisition Strategy Framework Markets & Customers Geographies Acquired Sales ($ Millions) 1,500 1,600 325 400 # 2010 2 2011 2 2012 4 2014 2 Core Products & Suppliers Acquired Sales by End Market since 2010 Acquisition Priorities Consistent with WESCO strategy Rate of return greater than WESCO risk-adjusted average cost of capital Accretive in first year of operation Margins higher than WESCO CIG Industrial Utility Construction driving strategic growth and shareholder value 17 EPG Conference 5/19/2014
Long-Term Financial Objectives 1 Grow sales faster than the market and strengthen business through acquisitions CORE GROWTH ACQ GROWTH (%) (%) 14 14 7 4 Flat 3 2 Maintain industry-leading cost structure SG&A% 14.2 14.0 13.7 2012 SG&A% COMP. 16.1 18.9 18.8 14.0% WCC Graybar Rexel NAED EBIT ($M) EBIT% 3 Expand operating profit and margins 333 371 445 5.4 5.7 5.9 4 Generate strong operating cash flow through the cycle FCF ($M) 308 265 134 FCF% OF NI 68 115 117 5 Provide superior investor returns All periods are 2011, 2012 and 2013 unless otherwise noted. 2012 and 2013 exclude the impact of externally disclosed non-recurring items. focused on shareholder value creation 18 EPG Conference 5/19/2014 237 TSR (1/1/2010 to 12/31/2013) 66 WCC S&P 500 Russell 2000 86 181 151 129 GWW FAST AXE
Long-Term Focus on Profitable Growth EBIT 2.5x TOTAL SALES 1.6x HEADCOUNT 1.5x 2009 2010 2011 2012 2013 operating profit pull through delivering results 19 EPG Conference 5/19/2014
Cash Generation Free Cash Flow ($M) Net Income ($M) ~$800M of Free Cash Flow 308 5 Leverage (Total Par Debt to TTM EBITDA) 265 4.5 264 4 112 196 134 230 3.5 3 Target Leverage 2.0x 3.5x 3.3X 115 2.5 2 2010 2011 2012 2013 1.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Reconciliation of these non-gaap financial measures is included in the Appendix to this presentation. 2012 2013 2014 strong free cash flow through economic cycle 20 EPG Conference 5/19/2014
Total Shareholder Return 6.0 5.0 TSR CAGR % year 1 year 3 year 5 year 10 year WESCO 35 20 36 26 Russell 2000 39 16 20 9 GICS Capital Goods Group 43 17 22 12 WCC 12% CAGR Indexed Cumulative TSR% 4.0 3.0 2.0 R-2000 8% CAGR 1.0 0.0 May 99 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 consistent above market returns 21 EPG Conference 5/19/2014
$0.0 Evolution of WESCO Sales ($B) 8%+ CAGR 7.5 EPS ($) 14%+ CAGR 5.02 Enterprise Value ($B) 11%+ CAGR 5.5 3.3 1.6 0.75 0.65 1.2 1.0 1994 LBO 2003 2013 1999 IPO 2003 2013 1999 IPO 2003 2013 1994 2003 1 st 10 years 2004 2013 2 nd 10 years 2014 2023 Next 10 years 175 branches in U.S. and Canada 25 acquisitions IPO in 1999 From breakeven in 1994 to 3% EBIT in 2003 Launched Lean Diversified portfolio (added Datacom, OEM, Safety) 15 acquisitions 475 branches in 18 countries Built industry-leading positions Launched One WESCO 2X sales, 5X enterprise value Leading market positions Expanding global mix Customer and supplier loyalty Employer of choice Self-initiated Lean IT and e-commerce competitive differentiators Continued significant value creation track record of value creation 22 Financial results throughout this presentation reference non-gaap adjusted results. See Appendix for reconciliation. EPG Conference 5/19/2014
Invest in WESCO Industry leader with deep domain expertise in electrical, industrial, construction, and utility Proven business model and well positioned in large, fragmented markets Blue chip customer and supplier base Proven acquirer and integrator in a consolidating industry Extensive global supply chain capability Operational excellence culture founded on LEAN Margin expansion results and future potential Strong free cash flow generation through economic cycle strong company with proven and effective supply chain solutions 23 EPG Conference 5/19/2014
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Appendix 25 EPG Conference 5/19/2014
WESCO International, Inc. Definitions Appendix Financial leverage ratio is calculated by dividing total debt, including debt discount, by adjusted EBITDA. Adjusted EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation, and amortization excluding the ArcelorMittal litigation recovery. Free cash flow is calculated by deducting capital expenditures from, and adding non-recurring pension contribution to, cash flow provided by operations. Total Shareholder Return (TSR) is the total return of a stock to an investor during a period of time, including capital gains and dividends, assuming reinvestment of dividends. 26 EPG Conference 5/19/2014
NON-GAAP Financial Measures This presentation includes certain non-gaap financial measures. These financial measures include adjusted EBIT, adjusted net income, adjusted diluted EPS, financial leverage ratio, free cash flow, and liquidity. The Company believes that these non- GAAP measures are useful to investors in order to provide a better understanding of the Company's capital structure position and liquidity on a comparable basis. Additionally, certain non-gaap measures either focus on or exclude transactions of an unusual nature, 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. 27 EPG Conference 5/19/2014
Sales Growth 2011 2012 2013 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Organic Sales Growth (%) 16.5 12.7 11.3 13.2 13.4 9.8 8.2 1.4 (1.3) 4.4 (3.4) (1.2) 3.2 1.5 0.0 Acquisitions (%) 7.0 7.4 6.9 6.2 6.8 2.6 2.2 4.0 4.3 3.3 16.0 14.6 14.1 13.8 14.6 FX (%) 1.1 1.0 1.1 0.0 0.8 (0.2) (0.7) (0.6) 0.5 (0.3) 0.0 (0.2) (0.7) (1.0) (0.4) Consolidated Sales Growth (%) 24.6 21.1 19.3 19.4 21.0 12.2 9.7 4.8 3.5 7.4 12.6 13.2 16.6 14.3 14.2 Workdays 63 64 64 63 254 64 64 63 63 254 63 64 64 63 254 Organic Growth Impact (%) - - - (1.6) (0.4) 1.6 - (1.6) - - (1.6) - 1.6 - - Normalized Organic Growth (%) 16.5 12.7 11.3 14.8 13.8 8.2 8.2 3.0 (1.3) 4.4 (1.8) (1.2) 1.6 1.5 0.0 Estimated Price Impact (%) 3.5 3.0 3.5 2.0 3.0 1.5 1.0 0.5 1.0 1.0 1.0 0.0 0.0 0.0 0.2 28 EPG Conference 5/19/2014
Non-GAAP Reconciliations (Dollars in millions except for Diluted EPS) FY 2012 FY 2013 Adjusted Income from operations (Adjusted EBIT): Income from operations (EBIT) 333 481 ArcelorMittal litigation charge (recovery) included in SG&A 36 (36) Non-recurring acquisition charges and EECOL Electric results 2 - Adjusted income from operations (Adjusted EBIT) 371 445 Percent of adjusted sales 5.7% 5.9% Adjusted net income attributable to WESCO International, Inc.: Net income attributable to WESCO International, Inc. 202 276 ArcelorMittal litigation charge (recovery) 36 (36) Loss on sale of Argentina business - 2 Loss on debt extinguishment 3 13 Non-recurring acquisition charges and EECOL Electric results 5 - Tax effect of non-recurring items (16) 9 Adjusted net income attributable to WESCO International, Inc. 230 264 Adjusted Diluted EPS: Diluted share count 51.1 52.7 Adjusted Diluted EPS 4.49 5.02 Free Cash Flow: Cash provided by operations 288 315 Less: capital expenditures (23) (28) Add: non-recurring pension contribution - 21 Free cash flow 265 308 Free cash flow as a % of adjusted net income 115% 117% 29 EPG Conference 5/19/2014
Non-GAAP Reconciliations (Dollars in millions) FY 2012 FY 2013 Adjusted Selling, General and Administrative Expenses: Selling, general and administrative expenses 961 997 Arcelor/Mittal litigation charge (recovery) included in SG&A (36) 36 Non-recurring acquisition charges and EECOL Electric results (9) - Adjusted selling, general and administrative expenses 916 1,033 Percent of adjusted sales 14.0% 13.7% Twelve Months Ended March 31, 2014 Financial leverage ratio: Income from operations $ 437 Depreciation and amortization 67 Adjusted EBITDA $ 504 March 31, 2014 Current debt $ 45 Long-term debt 1,458 Debt discount related to convertible debentures (1) 174 Total debt including debt discount $ 1,677 Financial leverage ratio 3.3X (1) The convertible debentures and term loan are presented in the consolidated balance sheets in long-term debt net of the unamortized discount. 30 EPG Conference 5/19/2014