Ingenuity delivered.
2021 Annual Report
Utilizing our broad portfolio of products and services,
global reach, and technical expertise, Wesco creates
solutions for customers that reduce operating and
supply chain costs, increase energy efficiency, eliminate
waste, accelerate project schedules, and make it easier
to do business overall. With a dedicated team of 18,000
associates, we have cultivated long-term relationships
with customers who regard Wesco as a critical supply
chain partner and with suppliers who depend on Wesco
as one of their largest customers. We are investing in
digital capabilities that will transform our business,
and lead the evolution of our industry. Combined
with favorable secular trends, Wesco’s opportunity to
grow, increase profitability, and create more value is
greater than ever before.
geography
Global Reach
Wesco provides an in-country and regional support structure that meets
customers’ needs for rapid deployment, scalability, global sourcing,
multi-currency transactions, and local inventory in the Americas, EMEA,
and Asia-Pacific.
and sales offices
with operations in more than
800 branches, warehouses
50 countries around the
world.
2021 SALES
United States
Canada
Other International
72%
15%
13%
strategic business units
2021 Sales
ELECTRICAL AND ELECTRONIC
SOLUTIONS (EES)
$7.6 billion in
2021 sales
2021 Annual Report
1
Construction
Industrial/MRO
COMMUNICATIONS AND
SECURITY SOLUTIONS (CSS)
$5.7 billion in
2021 sales
Other
Security
Solutions
OEM/Commercial,
Institution &
Government
Network
Infrastructure
EES
CSS
UBS
42%
31%
27%
UTILITY AND BROADBAND
SOLUTIONS (UBS)
$4.9 billion in
2021 sales
Broadband
Utility
Integrated
Supply
by the numbers
Financial Highlights
(Dollars in millions except per share data and percentages)
Net sales
Adjusted EBITDA1, 2
Adjusted net income attributable to common stockholders2
Adjusted diluted EPS2
Diluted share count2
Free cash flow2
Free cash flow as a % of adjusted net income2
1 Adjusted earnings before interest, taxes, depreciation, and amortization.
2 Non-GAAP financial measures are reconciled on page 98.
2017
$7,679
2018
$8,177
2019
$8,359
2020
$12,326
398
190
3.93
48.4
128
67%
432
227
4.82
47.2
261
116%
431
226
5.20
43.5
180
81%
660
204
4.37
46.6
586
251%
2021
$18,218
1,176
519
9.98
52.0
94
16%
Corporate Profile
Wesco International (NYSE: WCC) builds, connects, powers and protects the world. Headquartered in Pittsburgh, Pennsylvania, Wesco is a FORTUNE 500®
company with more than $18 billion in annual sales and a leading provider of business-to-business distribution, logistics services and supply chain solutions.
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 approximately 18,000 people, partners with the industry’s premier suppliers, and serves thousands of
customers around the world, including more than 90% of FORTUNE 100® companies. With nearly 1,500,000 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 approximately 800 branches, warehouses and sales offices in
more than 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.
2
Wesco International
To Our Shareholders,
Employees, and
Business Partners
A year ago, I reported that 2020 would be remembered as Wesco’s watershed year with the
acquisition of Anixter International doubling our size and changing our trajectory forever. Scale is
critical in distribution and we made great progress combining two powerhouses into an industry
leader to create substantial value for our customers, supplier partners, employees, investors, and
the communities in which we operate. Now more than 18 months post-merger, the power of this
transformational combination is even more clear and compelling.
Wesco’s performance in 2021 was exceptional and laid the foundation for the extraordinary value
creation opportunity that lies before us. We achieved record sales and profitability last year,
significantly growing above pre-pandemic levels, and delivered a 68% stock price return to our
stockholders. Since completing the merger in June 2020 through the end of 2021, our stock price is
up an even more impressive 250%.
We have been executing a complex integration plan with speed, agility and discipline, while
growing our business and winning in the marketplace. Our newfound scale, comprehensive
product and value-added service offerings, broad and deep supplier relationships, and technical
expertise are critical differentiators that benefit our customers. When combined with our
integration plan and digital transformation, they become key catalysts for our continued market
outperformance and lasting value creation for all our stakeholders.
We have been executing a complex integration plan with speed,
agility and discipline, while growing our business and
winning in the marketplace.
In 2021, we generated double-digit sales growth and expanded profit margins, capturing both sales
and cost synergies well ahead of expectations and across all three of our businesses: Electrical
and Electronic Solutions, Communications and Security Solutions, and Utility and Broadband
Solutions. This profit strength enabled us to rapidly de-lever ahead of schedule and strengthen our
balance sheet while investing in our digital transformation. All of this has been accomplished under
the cloud of the pandemic and global supply chain challenges.
I am truly proud of our team’s commitment to our vision of the new Wesco, and for their focus on
providing our customers with the products, services, and supply chain solutions that they need.
Our 18,000 associates did an outstanding job of activating our global resources and capabilities,
developing innovative solutions, and maintaining a relentless focus on execution, while providing
exceptional customer service.
2021 Annual Report
3
We are still in the early days of beginning to realize our vision of becoming the best tech-enabled
supply chain solutions provider in the world, and we remain laser-focused on the continued
effective execution of our strategies:
•
Integrating the business and building world-class capabilities
• Strengthening the organization and our culture of excellence
• Digitalizing and transforming the business
An Award-
Winning
Company
Integrating the Business and Building
World-Class Capabilities
We are only at the midpoint of our integration plan, but our progress is accelerating, as the
new Wesco utilizes its leading position, expanded portfolio, integration execution, and digital
transformation investments to build a growth engine that is both resilient and sustainable.
Effective execution of our integration plan has consistently delivered results above expectations
over the last 18+ months. Our cost synergy target has been increased three times since the
merger close, and now is tracking over 50% above our original target. Our pipeline of cross-sell
opportunities also continues to build, such that our sales synergy target has been increased
twice, and is now tracking to nearly 4X our original target. The dramatic changes resulting from
our integration program are repositioning the new Wesco as a growth company with structurally
higher margins.
Our company branding strategy has also been developed and is being deployed this year. It is
expected that our stakeholders will recognize our new brand as modern and progressive, and one
that will drive value for years to come. It is emblematic of the start of a new era of superior growth
and value creation for our company.
Strengthening the Organization and Our Culture
of Excellence
Our culture has also entered a new era. Our new mission, vision and values are in place, and our
teams are embracing our more dynamic culture of speed, agility and innovation, as well as our
increased focus on inclusion and diversity.
We were recognized by Fortune as one of the World’s Most Admired Companies in our industry, and
by Forbes as one of the World’s Best Employers and one of America’s Best Employers for Women,
again in 2021 and 2022. For the last four years, we have been included in Bloomberg’s Gender
Equality Index. And, our Business Resource Groups, created to better leverage our diversity and
further our culture of inclusivity, had a strong first year. These highly engaged teams of associates
developed programs and provided opportunities for every employee to be heard and supported
within our organization.
To further advance our commitment to diversity, we joined the National Minority Supplier
Development Council last year to work with diverse businesses that bring unique ideas and
capabilities to help us meet our customers’ needs.
Finally, we published our first, combined-company sustainability report in 2021. We achieved
our previous company targets for greenhouse gas emissions, waste reduction, and best-in-class
safety metrics ahead of schedule. More importantly, we set improvement goals for 2030 designed
to drive a better, more sustainable future for our stakeholders. As an integrated B2B distributor
and supply chain solutions company, we don’t have the significant environmental exposure of a
manufacturing company. We do, however, assist our customers in meeting their environmental and
sustainability goals, through the products we sell and the services we provide.
4
Wesco International
Digitalizing and Transforming the Business
We are digitally transforming our business to propel growth into the next decade and beyond.
Our digital transformation is designed to enable new ways of working, create new business models,
and put Wesco at the center of the global supply chain technology ecosystem.
Offering industry-leading digital solutions is a breakout opportunity for us and where we expect
to create substantial value for our stakeholders. Unlocking the power of our big data using artificial
intelligence and machine learning will be a critical differentiator. New business models based
on digital products and experiences, a cloud-agnostic architecture, and best-of-the-best digital
platform features are expected to give us deeper insights so that we can better anticipate customer
needs and respond even faster to trends and developments in the market.
Our digital transformation is designed to enable new ways of
working, create new business models, and put Wesco at the center
of the global supply chain technology ecosystem.
As we digitally transform our company, we will also accelerate the digital transformation of our
industry and value chain.
Capitalizing on Secular Trends for Long-Term Growth
Our key catalysts for growth are further amplified by attractive secular trends that are foundational
for the global economy in the years ahead.
We are exceptionally well-positioned to take advantage of these emerging trends and deliver
above-market returns. Key focus areas of opportunity include electrification, automation and IoT,
green energy and grid modernization, 24/7 connectivity and security, and the push for moving
more production and manufacturing operations back to North America. Along with digitalization,
these secular trends provide outstanding future long-term growth opportunities for the new Wesco.
Continuing Positive Momentum Into 2022 and Beyond
As a result of the transformational combination of Wesco and Anixter, we have built strong
positive momentum over the last 18+ months, and that has carried into 2022.
We are still in the early stages of unlocking the power and performance of the new Wesco.
These are exciting times for our company, and our future has never been brighter.
Thank you to our shareholders for your continued confidence and investment in Wesco.
Thank you to our supplier partners and customers for your continued support and trust.
And, thanks to every member of our Wesco team for all that you do to serve customers and
communities every day around the world.
John J. Engel
Chairman, President and Chief Executive Officer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2021
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 001-14989
WESCO International, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
225 West Station Square Drive
Suite 700
Pittsburgh, Pennsylvania
(Address of principal executive offices)
25-1723342
(I.R.S. Employer
Identification No.)
15219
(Zip Code)
(412) 454-2200
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Class
Trading Symbol(s)
Name of Exchange on which registered
Common Stock, par value $.01 per share
Depositary Shares, each representing a 1/100th interest
in a share of Series A Fixed-Rate Reset Cumulative
Perpetual Preferred Stock
WCC
WCC PR A
New York Stock Exchange
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for at least the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such file). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-accelerated Filer
☑
☐
Accelerated Filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assertion of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ
The registrant estimates that the aggregate market value of the voting shares held by non-affiliates of the registrant was approximately $5.1
billion as of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price on
the New York Stock Exchange for such stock.
As of February 24, 2022, 50,703,285 shares of Common Stock, par value $.01 per share, of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III of this Form 10-K incorporates by reference portions of the registrant’s Proxy Statement for its 2022 Annual Meeting of Stockholders.
TABLE OF CONTENTS
Table of Contents
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedule
Item 16. Form 10-K Summary
Signatures
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18
18
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19
20
20
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40
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Table of Contents
Item 1. Business.
PART I
In this Annual Report on Form 10-K, “Wesco” refers to WESCO International, Inc., and its subsidiaries and its
predecessors unless the context otherwise requires. References to “we,” “us,” “our” and the “Company” refer to Wesco and
its subsidiaries.
The Company
WESCO International, Inc. ("Wesco International") and its subsidiaries (collectively, “Wesco” or the "Company"),
headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and
supply chain solutions.
On June 22, 2020, Wesco completed its acquisition of Anixter International Inc. ("Anixter"), a Delaware corporation.
Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020 (the “Merger Agreement”), by and among
Anixter, Wesco and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Wesco (“Merger
Sub”), Merger Sub was merged with and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a
wholly owned subsidiary of Wesco. On June 23, 2020, Anixter merged with and into Anixter Inc., with Anixter Inc. surviving
to become a wholly owned subsidiary of Wesco.
We employ approximately 18,000 people, maintain relationships with approximately 45,000 suppliers, and serve
approximately 140,000 customers worldwide. With nearly 1,500,000 products, end-to-end supply chain services, and extensive
digital capabilities, Wesco provides innovative solutions to meet customer needs across commercial and industrial businesses,
contractors, government agencies, institutions, telecommunications providers, and utilities. Our innovative value-added
solutions include supply chain management, logistics and transportation, procurement, warehousing and inventory
management, as well as kitting and labeling, limited assembly of products and installation enhancement. Wesco has
approximately 800 branches, warehouses and sales offices with operations in more than 50 countries, providing a local presence
for customers and a global network to serve multi-location businesses and multi-national corporations. With nearly 100 years of
excellence, we have the expertise to understand customer needs, the broad product and services portfolio to meet them and a
customer-first approach to ensure their long-term success.
Business Segments and Industry Overview
The Company has operating segments that are organized around three strategic business units consisting of Electrical &
Electronic Solutions ("EES"), Communications & Security Solutions ("CSS") and Utility & Broadband Solutions ("UBS").
The following is a description of each of the Company's business segments and the industries in which they operate.
Electrical & Electronic Solutions
The EES segment, with over 6,400 employees supporting customers in over 50 countries, supplies a broad range of products
and solutions primarily to the construction, industrial and original equipment manufacturer ("OEM") markets. Construction and
industrial customers include a wide array of contractors, and engineering, procurement and construction firms for industrial,
infrastructure, commercial, and data and broadband communications projects. Specific applications include projects for
refineries, railways, wastewater treatment facilities, data centers, security installations, offices, and modular and mobile homes.
OEM customers require products used in the manufacturing of automotive, industrial, medical, transportation, marine, military
and communications equipment. The product portfolio in this business includes a broad range of electrical equipment and
supplies, automation and connected devices (the "Internet of Things" or "IoT"), security, lighting, wire and cable, safety, and
maintenance, repair and operating ("MRO") products from industry-leading manufacturing partners. The EES service portfolio
includes contractor solutions to improve project execution, direct and indirect manufacturing supply chain optimization
programs, lighting and renewables advisory services, and digital and automation solutions to improve safety and productivity.
The EES segment operates in highly fragmented markets that include thousands of small regional and locally based, privately
owned competitors as well as several large, multi-national companies.
1
Table of Contents
Communications & Security Solutions
The CSS segment, with over 3,300 employees supporting customers in over 50 countries, is a global leader in the network
infrastructure and security markets. The network infrastructure market is comprised of cabling and connectivity, racks and
cabinets, power, wireless, and associated products that enable network connectivity and communications in commercial
buildings, and hyperscale, cloud-based and multi-tenant data centers. The security market includes video surveillance, fire and
intrusion detection, access control, door locking and other solutions that create safe and smart environments for customers. Both
the network infrastructure and security businesses are large, fragmented and diverse markets that include various industry
groups such as technology, finance, telecommunications service providers, transportation, education, government, healthcare
and retail. CSS sells products directly to end-users or through various channels including data communications contractors,
security, network, professional audio/visual and systems integrators. In addition to the core network infrastructure and security
portfolio, CSS has a broad offering of safety and energy management solutions. CSS products are often combined with supply
chain services to increase efficiency and productivity, including installation enhancement, project deployment, advisory, and
IoT and digital services.
Utility & Broadband Solutions
The UBS segment, with over 2,400 employees supporting customers primarily in the U.S. and Canada, provides products
and services to investor-owned utilities, public power companies, including municipalities, as well as global service providers,
wireless providers, broadband operators and the contractors that service these customers. Investor-owned utility companies
provide a combination of electric generation, transmission and/or distribution and are owned by investors or shareholders while
public power entities are generally non-profit entities owned by their members or governed by local, state and municipal
governments. These two markets comprise the vast majority of utility customers in the U.S. and Canada. The UBS segment also
includes Wesco's integrated supply business, which provides products and services to large industrial and commercial end-users
to support their MRO spend. The products sold into the utility and broadband markets include wire and cable, transformers,
transmission and distribution hardware, switches, protective devices, connectors, lighting, conduit, fiber and copper cable,
connectivity products, pole line hardware, racks, cabinets, safety and MRO products, and point-to-point wireless devices. We
also offer a complete set of service solutions including fiber project management, high and medium voltage project design and
support, pre-wired meters and capacitor banks, meter testing and advanced metering infrastructure installation, personal
protective equipment dielectric testing, tool repair, emergency response management, storage yard management, materials
management, and logistics management to improve customer supply chain efficiencies.
For information concerning the financial results of our business segments, as well as our domestic and foreign operations,
see Note 17, "Business Segments" to the Notes to Consolidated Financial Statements.
Business Strategy
Wesco’s vision is to be the best tech-enabled supply chain solutions provider in the world. We believe that accomplishing
this vision depends on the successful execution of our strategy, which is comprised of three elements:
Integrate the Business and Build World-Class Capabilities: Wesco completed the transformative acquisition of Anixter
International, another leading supplier of business-to-business distribution, logistics services and supply chain solutions on June
2
Table of Contents
22, 2020. The Merger combined two comparable-sized businesses and created an industry leader of electrical, communications,
and utility supply chain solutions. A central component of our current strategy is to ensure that we capture all of the potential
value of the combination of the two businesses.
Strengthen the Organization and our Culture of Excellence: A commitment to continuous improvement has always been
a hallmark of our business, and we deploy Lean business practices and Agile methodologies. The merger with Anixter has
enabled us to continue building our Culture of Excellence, including selecting the best-of-the-best Wesco and Anixter leaders
for the combined organization, enhancing our commitment to Environmental, Social, and Governance (ESG) issues, expanding
our Inclusion and Diversity program, and establishing systems to recognize outstanding employees and demonstration of
Wesco’s five core values: Our People are Our Greatest Asset, One Team, Always Strive to Be the Best, Innovation, and
Winning With Customers and Suppliers.
Digitalize and Transform the Business: The role of digital business models in our industry has accelerated over the past
several years. Wesco offers significant digital capabilities today and intends to lead the further digitalization of our industry in
the years to come. The larger size and scale of the combined business enables Wesco to invest in the deployment of digital and
service capabilities significantly faster than it could previously. We are implementing digital tools across every aspect of our
business to improve the efficiency of our operations as well as those of our business partners, make it easier to do business with
Wesco, and increase the value of our big data by providing unique insight into end-market use of the products and services we
offer.
The three elements of our strategy touch every aspect of our business – from how we go-to-market within our three strategic
business units to how we drive efficiency and build our culture across the organization. We believe that the successful
execution of these strategies, combined with our comprehensive product and service offerings, will provide cost-effective and
innovative end-to-end supply chain solutions for a diverse set of customers across our end markets. Our operating cash flow is
deployed to fund organic growth opportunities, acquire businesses that provide new capabilities for growth, and manage our
capital structure. Due to our leadership position, scale, global reach, complete portfolio of products, extensive services and
insights from big data, we expect to grow our sales over the long term at a faster rate than the overall industry.
As a distribution and supply chain services company, our approach to sustainability is to minimize the environmental
impacts of our own operations and assist our customers and suppliers with attaining their sustainability goals through the
products and services we can provide. We do this by designing and providing solutions that enable them to reduce greenhouse
gas (“GHG”) emissions at their facilities and in their supply chains; improve productivity through automation; increase output
more efficiently and effectively through digital tools and applications. We build on our own internal strategies for sustainability,
while reinforcing our corporate responsibility. Our sustainability efforts are an integral part of our operations and core values.
Customers
We have a large base of approximately 140,000 active customers across commercial and industrial businesses, contractors,
government agencies, institutions, telecommunications providers, and utilities. Our top ten customers accounted for
approximately 11% of our sales in 2021. No one customer accounted for more than 2% of our sales in 2021.
Products
Our global network of branches, warehouses and sales offices provide customers with access to nearly 1,500,000 different
products. Each location tailors its inventory to meet the needs of its customers, providing a local presence and a global network
to service multi-location businesses and multi-national corporations.
We purchase products from a diverse group of approximately 45,000 suppliers who are located predominantly in North
America, but manufacture products around the world. The main product categories we source are general supplies,
communications and security, wire, cable and conduit, lighting and sustainability, electrical distribution and controls, and
automation and motors. In 2021, our ten largest suppliers accounted for approximately 31% of our purchases. No one supplier
accounted for more than 5% of our total purchases.
Our supplier relationships are important to us, providing access to a wide range of products, services, technical training, and
sales and marketing support. We have approximately 700 commercial agreements with more than 375 preferred suppliers and
purchase nearly 65% of our products pursuant to these arrangements.
We offer a wide range of sustainable products from the world’s leading manufacturers and can help our customers determine
the best solution to meet their sustainability goals. Key categories include energy-efficient products, energy-management
solutions, renewable energy products, sustainable MRO products, and workplace safety products.
3
Table of Contents
Services
Our customers' challenges are constantly evolving and require comprehensive, yet practical solutions. As part of our overall
offerings, we provide a comprehensive portfolio of value-added solutions, as outlined below, designed to address our
customers' business needs, help save time, improve productivity, increase profitability, and mitigate risk.
•
•
•
•
•
Installation enhancement services to adapt products and packaging to streamline processes and reduce the total cost
of installation;
Advisory services to help customers implement lean practices, optimize their supply chains, and digitally transform
their workplaces with the latest technologies and infrastructure solutions;
Project deployment services to help secure job site materials, improve efficiency, reduce job site waste, and improve
scalability across multifaceted deployments;
Digital services and e-business integrations to transform how our customers consume, deploy, and procure materials
and technologies, supporting data-driven decisions and increased operational efficiency; and
Supply chain programs to improve productivity, reduce operating costs and increase operational efficiencies.
We are also a provider of services focused on energy efficiency and renewable power that reduce our consumption and that
of our customers. Our energy solutions business offers turnkey and retrofit solutions designed to reduce energy and optimize
building efficiency. We also have a team of renewables experts that focus on providing technical support to installers and end-
users of solar products and solutions.
Business Strengths
Wesco’s mission is to help our customers build, connect, power and protect the world. We believe that our business
possesses several strengths that will enable us to achieve this mission. The environment in which we operate is highly
fragmented and there is significant competition within each end market and geographic area that we serve. Customers look to
product line breadth, product availability, service capabilities, geographic proximity and price. We believe that our scale, broad
portfolio of products, technical expertise, global reach with local relationships, comprehensive value-added services, and smart,
digital solutions all provide distinct advantages that benefit our customers.
Broad Portfolio of Products from Top Brands. Our broad product portfolio enables us to offer comprehensive, end-to-end
solutions in each of our three businesses. We partner with the industries’ leading suppliers to deliver the most trusted brands
across every product category including automation, broadband, communications, electrical, electronics, energy, lighting,
MRO, networking, renewables, safety, security, utility and wire and cable.
Customized Solutions. Our customers have unique business models, challenges and priorities. Our dedicated technical
experts have extensive experience and product knowledge that enable them to provide solutions tailored to the various needs of
our customers. With specialized industry knowledge and a focus on the latest technologies, we help design and deploy solutions
that address critical business priorities.
Ingenuity and Expertise. Since closing the merger with Anixter, we have focused our teams and empowered them with
access to real-time information and tools that enable better decision-making and facilitate easier interaction with customers. Our
sales, service and operational specialists bring a depth of industry experience spanning construction, manufacturing, electrical,
renewables, lighting, communications, security, professional A/V, utility, broadband and more.
Innovative Digital Roadmap. We are investing in digital tools and platforms to enable a new level of collaboration, agility
and productivity. From adaptable omni-channel e-commerce tools and platforms, to connected buildings and process
management, we are a supply chain partner that strives to match our customers’ digital needs and drive operational excellence.
Global Reach with Local Expertise. Our international operations and global sourcing capabilities enable us to service our
customers around the world. Wesco has approximately 800 branches, warehouses and sales offices with operations in more than
50 countries. Our global distribution network includes 43 facilities that operate as regional distribution centers or large branch
locations in key geographic areas in North America, Europe and South America. These facilities add value for our customers
and suppliers through the combination of inventory selection, online ordering, shipment capabilities, and order handling and
fulfillment. Our global network allows us to enhance local customer service by tailoring individual branch products and
services to local customer needs.
Comprehensive Value-Added Services. We provide a wide range of value-added services, which draw on our product
knowledge and logistics expertise, to help our customers save time, improve productivity, mitigate risk and increase
profitability. Our broad service offering includes installation enhancement, materials management, kitting and labeling,
extensive MRO solutions, onsite job trailer solutions, end-to-end supply chain management and project management/execution
across the project lifecycle.
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Smart, Digital Solutions. Our work with technology companies brings capabilities in digital and information-based
solutions. These solutions include global e-commerce platforms, vendor managed inventory, point of use systems, last mile
optimization, supply chain engineering and intelligent automation. From enterprise-wide connectivity to real-time analytics and
reporting, our digital ecosystem supports our customers’ business needs.
Uniquely Positioned to Benefit from Secular Trends. Each of our business units is positioned to benefit from six secular
trends that are driving growth. These include increasing electrification, growth of automation and connected devices (the
"Internet of Things" or "IoT"), green energy and electric grid modernization, 24/7 connectivity and security, supply chain
consolidation and relocation to North America, and digitalization.
Geography
We sell to global customers through our network of branches, warehouses and sales offices consisting of 485 locations in
the U.S., 147 in Canada, 55 in Europe and the Middle East, 54 in Central America, the Caribbean and South America, and 40 in
the Asia Pacific region, which includes Australia. This includes 43 facilities that operate as regional distribution centers or large
branch locations, of which 34 are located in the U.S., six are in Canada, two are in Europe and one is in South America.
Human Capital
At Wesco, our people and our high-performance culture are our greatest assets. We are committed to continuous
improvement and leveraging our diverse and talented workforce in pursuing Wesco’s vision to be the best tech-enabled supply
chain solutions provider in the world. We also believe that our employees should be treated with dignity and respect. Our
Human Rights Policy promotes diversity, safety in the workplace, freedom of association and collective bargaining, and
training. It prohibits discrimination, harassment, and child and forced labor. It also provides guidance on appropriate working
hours, wages and benefits, and workplace conditions.
The merger of Wesco and Anixter doubled the Company’s revenue, and significantly increased our employee headcount and
global footprint, including the number of countries in which we operate. As of December 31, 2021, the Company had
approximately 18,000 full-time employees worldwide, with approximately 12,000 in the U.S. and the remaining 6,000 in
international locations.
Compensation and Benefits Program. Wesco provides competitive compensation and benefits packages in each of our
locations around the globe. In the U.S., we provide a comprehensive benefits program that offers choices to fit our employees’
diverse needs including health and disability benefits, paid time-off, life insurance, retirement programs, and access to other
services that support health and wellness. To further improve the health of our employees, we offer a variety of activities and
programs that assist our employees and their family members to better manage or overcome major well-being challenges,
including an employee assistance program, wellness coaching, case/disease management and wellness discounts.
Inclusion and Diversity. WESCO's commitment to inclusion and diversity starts at the top. The Company’s Board of
Directors has four of its nine members (44%) who are diverse in terms of gender, race or ethnicity, and the Board has a goal to
be 50% or more diverse.
As part of Wesco's integration with Anixter, we conducted “pulse” surveys in 2020 to give all employees a voice in actively
shaping the values that will define the combined organization, one of which is inclusion and diversity. We continued these
surveys in 2021 to help provide a lens into the organization for senior management to monitor how employees are managing
through changes as we continue to integrate systems and processes and to provide a roadmap for us to support employee
success.
The goals of Wesco’s Inclusion and Diversity program are to 1) leverage the unique experiences and perspectives of our
talented workforce to support Wesco’s mission, 2) further engage employees and build an inclusive culture, 3) recruit and
develop talent that bring new perspectives and thought processes to Wesco, 4) increase representation of suppliers that are
owned and operated by teams with diverse backgrounds and 5) support the communities in which we operate.
Wesco has established an Inclusion & Diversity Council comprised of members of our senior management, including the
Vice President of Inclusion & Diversity, to lead the formation of four Business Resource Groups (“BRGs”) that will support
four groups – women, BLIPOC (Black, Latino, Indigenous, and People of Color), LGBTQ+, and veterans of the armed forces.
These BRGs foster a sense of community and inclusion, provide opportunities to network, support advancement opportunities
within the organization, and assist with recruiting. The BRGs are global and open to all employees regardless of any aspect of
their personal identity. As of May 1, 2021, approximately 1,800 employees from around the globe had joined one or more of
the BRGs. Comprising employees from every level of the organization, the BRGs: play a critical role in supporting our business
initiatives; help create a more inclusive work environment; provide opportunities for employee development, education,
training, recruitment, retention, and business outreach; and support innovation by providing insights on new markets, product
development, and multicultural marketing.
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Wesco has established relationships with several charitable organizations and encourages employees to volunteer in the
community by providing one day of paid volunteer time per year. By connecting with and contributing to local charitable
organizations, Wesco supports the development of strong, vibrant and diverse communities.
Safety. Safety is a core value of Wesco and we do not tolerate violations of established safety protocol. We are committed to
reducing or eliminating health and safety risks through dedicated programs, leadership commitment, and employee
involvement. We seek to achieve continuous improvement in the safety of our facilities and injury-leading injury rates.
We have exceeded our goal of a 40% reduction in our total recordable injury rate (“TRIR”) from a 2017 baseline – two
years ahead of the 2022 target. We have also set a long-term goal to achieve a 15% reduction in the TRIR by 2030 from a 2020
baseline of 0.47 incidents per 100 employees.
Training and Development. Wesco offers several certification and training programs, some of which are required for all
employees while others are voluntary or based on job role. We offer a tuition reimbursement program to eligible employees to
encourage the pursuit of undergraduate and graduate education to prepare employees for expanded roles in the business.
We have had a sales development training program in place for over ten years. The program is designed to systematically
train and develop new college graduates through on-the-job rotations and cohort learning and development during the first year
of employment. Graduates of the program move into various sales and operations roles after completing the one-year program.
We also sponsor a summer internship program to provide college students with real work experience and give them the
opportunity to evaluate different career fields. Additionally, we have a finance development program for recent college
graduates seeking a career in finance that provides members with eligibility for roles with increasing responsibilities
commensurate with their career development goals.
Environmental Management
Environmental sustainability is a priority for Wesco. We are progressing toward and achieving our goals, learning as we go,
and making sustainability practices accessible to our employees and customers. The foundation of our environmental
management is our Environmental Sustainability Policy, which aligns with key provisions of the ISO 14001 environmental
management standards. The policy includes clear management accountability for environmental sustainability, direct program
responsibilities, and key performance indicators and other metrics to track progress.
We are working to reduce our environmental impact in the following areas:
Energy. The vast majority of the energy we use is for lighting, heating, and cooling our approximately 800 branches,
warehouses, and sales offices around the world. Adding to our energy consumption is a fleet of approximately 950 trucks and
1,400 cars for our distribution and sales activities. Wherever possible, we engage with the owners and agents of the buildings
we lease to improve energy efficiency by providing landlords with specifications that include the installation of LED lighting
and programmable thermostats, and recommendations for heating, ventilation and air conditioning. Our Fleet Efficiency Policy
includes the use of fuel-efficient vehicles, determining the most efficient routes, and idling restrictions.
Emissions. Our main source of greenhouse gas (GHG) emissions is the power used by our facilities, which accounts for
nearly 70 percent of our total emissions. As such, the energy efficiency of our buildings is a key focus of our emissions-
reduction activities. Our secondary source of GHG emissions is our truck and car fleet, and a small percentage of our emissions
is due to corporate travel and the lifecycle impact of our landfilled waste. We continue to look for new opportunities to reduce
our fleet emissions through routing and consolidation, and we are also researching the use of electric vehicles as technology and
infrastructure improve.
Waste. Our top three waste streams are cardboard, wood pallets, and plastic. To manage this waste, we first find
opportunities to minimize the amount that we generate by applying lean principles. We then identify reuse and recycling
opportunities.
Water. As a distributor and services provider, we are not a major consumer of water. Our facilities primarily use water for
sanitation, cleaning, and irrigation purposes. We track water usage at each of our locations and use the data to identify unusual
consumption patterns that could indicate undetected leaks or excessive usage that requires intervention.
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Cyber Security
Cyber security and protection of our data is a top priority across the entire organization. To that end, we take a holistic
approach to securing our data and business systems from attack, compromise or loss. This includes the combination of leading
technologies, policies and procedures, and a 7x24 Cyber Security Operations team monitoring our environment for signs of
attack and responding in real-time.
The implementation of a multi-layer and multi-provider portfolio of technologies is designed to deliver overlapping
coverage against today’s modern attack vectors with a strong defensive and offensive security posture. We continually evaluate
risks, threats, intelligence feeds and vulnerabilities to adapt, mitigate or respond as necessary to preserve a secure state.
Combining technology, processes and threat intelligence we deliver specific and timely education and training to the
organization, including mandatory training for all employees.
While we focus heavily on prevention and detection, response and recovery plans, service agreements and partner
engagements are in place should there be a need for us to respond to an attack. We also maintain cyber liability insurance
coverage. We did not experience any material data breaches in 2021.
Intellectual Property
We protect our intellectual property through a combination of trademarks, patents and trade secrets, foreign intellectual
property laws, confidentiality procedures and contractual provisions. We currently have trademarks, patents and service marks
registered with the U.S. Patent and Trademark Office and in various other countries. The trademarks and service marks filed in
the U.S. include, among others: “Wesco®” and our corporate logo. The Company's "Anixter" trademarks and service marks are
registered in the U.S. and various foreign jurisdictions and its "EECOL" service mark is registered in Canada. We have also
applied to register international trademarks, patents, and service mark applications in various foreign jurisdictions. While our
patents have value, none is so essential that its loss would materially affect our business.
Environmental Matters
Our facilities and operations are subject to federal, state and local laws and regulations relating to environmental protection
and human health and safety. Some of these laws and regulations may impose strict, joint and several liabilities on certain
persons for the cost of investigation or remediation of contaminated properties. These persons may include former, current or
future owners or operators of properties and persons who arranged for the disposal of hazardous substances. Our owned and
leased real property may give rise to such investigation, remediation and monitoring liabilities under environmental laws. In
addition, anyone disposing of certain products we distribute, such as ballasts, fluorescent lighting and batteries, must comply
with environmental laws that regulate certain materials in these products.
We believe that we are in compliance, in all material respects, with applicable environmental laws. As a result, we do not
anticipate making significant capital expenditures for environmental control matters either in the current year or in the near
future.
Seasonality
Our operating results are not significantly affected by seasonal factors. Sales during the first and fourth quarters are usually
affected by a reduced level of activity due to the impact of weather on projects. Sales typically increase beginning in March,
with slight fluctuations per month through October. During periods of economic expansion or contraction, our sales by quarter
have varied significantly from this pattern.
Website Access
Our Internet address is www.wesco.com. Information contained on our website is not part of, and should not be construed as
being incorporated by reference into, this Annual Report on Form 10-K. We make available free of charge under the
“Investors” heading on our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), as well as our Proxy Statements, as soon as reasonably practicable after such
documents are electronically filed or furnished, as applicable, with the U.S. Securities and Exchange Commission (the “SEC”).
In addition, our charters for our Executive Committee, Nominating and Governance Committee, Audit Committee and
Compensation Committee, as well as our Corporate Governance Guidelines, Code of Principles for Senior Executives,
Independence Policy, Global Anti-Corruption Policy, and Code of Business Ethics and Conduct for our Directors, officers and
employees, are all available on our website in the “Corporate Governance” link under the “Investors” heading.
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Forward-Looking Information
This Annual Report on Form 10-K contains various “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements involve certain unknown risks and uncertainties, including, among
others, those contained in Item 1, “Business,” Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.” When used in this Annual Report on Form 10-K, the words “anticipates,”
“plans,” “believes,” “estimates,” “intends,” “expects,” “projects,” “will” and similar expressions may identify forward-looking
statements, although not all forward-looking statements contain such words. Such statements, including, but not limited to, our
statements regarding business strategy, growth strategy, competitive strengths, productivity and profitability enhancement,
competition, new product and service introductions and liquidity and capital resources, are based on management’s current
expectations and beliefs, as well as on assumptions made by and information currently available to management, current market
trends and market conditions and involve various risks and uncertainties, some of which are beyond our control and which may
cause actual results to differ materially from those contained in the forward-looking statements. In addition, forward-looking
statements in this document include information and statements regarding the expected benefits and costs of the transaction
between Wesco and Anixter, 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 similar statements. Our actual results could differ materially from
those expressed in any forward-looking statement made by us or on our behalf. In light of these risks and uncertainties, there
can be no assurance that the forward-looking information will in fact prove to be accurate. We have undertaken no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Executive Officers
Our executive officers and their respective ages and positions as of February 25, 2022 are set forth below.
Name
John J. Engel
David S. Schulz
James F. Cameron
Theodore A. Dosch
William C. Geary, II
Akash Khurana
Diane E. Lazzaris
Hemant Porwal
Nelson J. Squires III
Christine A. Wolf
Age
60
Position
Chairman, President and Chief Executive Officer
56
56
62
51
48
55
48
60
61
Executive Vice President and Chief Financial Officer
Executive Vice President and General Manager, Utility and
Broadband Solutions
Executive Vice President and Strategy and Chief Transformation
Officer
Executive Vice President and General Manager, Communications and
Security Solutions
Executive Vice President and Chief Information and Digital Officer
Executive Vice President, General Counsel and Corporate Secretary
Executive Vice President Supply Chain and Operations
Executive Vice President and General Manager, Electrical and
Electronic Solutions
Executive Vice President and Chief Human Resources Officer
Set forth below is biographical information for our executive officers listed above.
John J. Engel has served as Chairman of the Board of Directors since May 2011 and as our President and Chief Executive
Officer since 2009. Previously, Mr. Engel served as our Senior Vice President and Chief Operating Officer from 2004 to 2009.
Before joining Wesco in 2004, Mr. Engel served as Senior Vice President and General Manager of Gateway, Inc., Executive
Vice President and Senior Vice President of Perkin Elmer, Inc., Vice President and General Manager of Allied Signal, Inc., and
also held various engineering, manufacturing and general management positions at General Electric Company.
David S. Schulz has served as our Executive Vice President and Chief Financial Officer since June 2020, and from October
2016 to June 2020, he served as Senior Vice President and Chief Financial Officer. Prior to joining Wesco, Mr. Schulz served
as Senior Vice President and Chief Operating Officer of Armstrong Flooring, Inc. from April 2016 to October 2016 and from
November 2013 to March 2016, he served as Senior Vice President and Chief Financial Officer of Armstrong World Industries,
Inc., and as Vice President, Finance of the Armstrong Building Products division from 2011 to November 2013. Prior to joining
Armstrong World Industries in 2011, he held various financial leadership roles with Procter & Gamble and The J.M. Smucker
Company. Mr. Schulz began his career as an officer in the U.S. Marine Corps.
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James F. Cameron has served as our Executive Vice President and General Manager of the Utility and Broadband
Solutions division since June 2020 and from January 2014 to June 2020 as Vice President and General Manager, Utility and
Broadband Group and as Regional Vice President of the utility business from 2011 to 2013. Prior to joining Wesco in 2011, Mr.
Cameron served as Senior Vice President of the Utility Group, and Vice President of Marketing & Operations with Irby, a
Sonepar Company. Earlier in his career, Mr. Cameron held various positions with Hubbell Power Systems, Thomas & Betts and
the ABB Power T&D Company.
Theodore A. Dosch has served as our Executive Vice President of Strategy and Chief Transformation Officer since June
2020. Prior to the merger with Anixter in 2020, Mr. Dosch served as the Executive Vice President - Finance and Chief
Financial Officer of Anixter International Inc. from July 2011 to June 2020 after serving as its Senior Vice President - Global
Finance from January 2009 to July 2011. Previously, Mr. Dosch served as CFO - North America and Vice President - Maytag
Integration at Whirlpool Corporation from 2006 to 2008; and held a variety of financial related roles at Whirlpool since 1986.
William C. Geary, II has served as our Executive Vice President and General Manager of the Communications and Security
Solutions division since June 2020. Prior to the merger with Anixter in 2020, Mr. Geary served as Executive Vice President -
Network & Security Solutions of Anixter International Inc. from July 2017 to June 2020 and Senior Vice President - Global
Markets - Network & Security Solutions from January 2017 to June 2017. Previously, Mr. Geary served 22 years and held a
variety of senior management roles at Accu-Tech Corporation, a wholly owned subsidiary of Anixter.
Akash Khurana has served as our Executive Vice President and Chief Information and Digital Officer since joining the
Company in November 2020. Before joining Wesco, Mr. Khurana served as Chief Information Officer and Chief Data Officer
of Global information at McDermott from March 2015 to November 2020, Senior Director of Global Product Lines and
Regional P&Ls at Baker Hughes, and a variety of leadership roles at GE Healthcare and Power & Water Divisions.
Diane E. Lazzaris has served as our Executive Vice President and General Counsel since June 2020 and also as Corporate
Secretary since February 2021. From 2014 to June 2020 she served as Senior Vice President and General Counsel, and from
2010 to December 2013 she served as our Vice President, Legal Affairs. From 2008 to 2010, Ms. Lazzaris served as Senior
Vice President - Legal, General Counsel and Corporate Secretary of Dick’s Sporting Goods, Inc. From 1994 to 2008, she held
various corporate counsel positions at Alcoa Inc., including Group Counsel to a group of global businesses.
Hemant Porwal has served as our Executive Vice President Supply Chain and Operations division since June 2020, and
from January 2015 to June 2020 as Vice President of Global Supply Chain and Operations. Before joining Wesco, Mr. Porwal
served as Vice President at Sears Holding Corporation, leading their global procurement function since 2011, and PepsiCo
where he held roles with increasing responsibilities in Operations, Supply Chain, Procurement and Finance.
Nelson J. Squires III has served as our Executive Vice President and General Manager of the Electrical and Electronic
Solutions division since June 2020, and from October 2019 to June 2020 he served as our Senior Vice President and Chief
Operating Officer. From January 2018 to September 2019, he served as Group Vice President and General Manager of Wesco
Canada/International/WIS and as Group Vice President and General Manager of Wesco Canada from August 2015 to January
2018. From 2010 to July 2015, he was Vice President and General Manager, North America Merchant Gases and President,
Air Products Canada of Air Products and Chemicals, Inc. He has also served in regional and general management positions, as
director of investor relations, and in various sales positions at Air Products. Earlier in his career, he was a Captain in the U.S.
Army.
Christine A. Wolf has served as our Executive Vice President and Chief Human Resources Officer since June 2020, and
from June 2018 to June 2020 she served as Senior Vice President and Chief Human Resources Officer. Before joining Wesco
from 2011 to June 2018, Ms. Wolf served as the Chief Human Resources Officer of Orbital ATK, Inc. until its acquisition by
Northrop Grumman. From 2008 to 2011, she served as the Chief Human Resources Officer of Fannie Mae and from 2004 to
2008 she served as Chief Human Resources Officer of E*Trade Financial Corporation. Prior to that, she held various positions
in human resources with companies in a variety of industries.
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Item 1A. Risk Factors.
The following factors, among others, could cause our actual results to differ materially from the forward-looking statements
we make. All forward-looking statements attributable to us or persons working on our behalf are expressly qualified by the
following factors. This information should be read in conjunction with Item 7, "Management’s Discussion and Analysis of
Financial Condition and Results of Operations", Item 7A, "Quantitative and Qualitative Disclosures about Market Risks" and
the consolidated financial statements and related notes included in this Form 10-K.
Risks Related to the Global Macroeconomic Environment and Our International Operations
Our global operations expose us to political, economic, legal, currency and other risks.
We operate a network of approximately 800 branches, warehouses and sales offices with operations in more than 50
countries. Approximately one-third of our employee population are non-U.S. employees. We derive approximately 28% of our
revenues from sales outside of the U.S. As a result, we are subject to additional risks associated with owning and operating
businesses in these foreign markets and jurisdictions.
Operating in the global marketplace exposes us to a number of risks including:
•
•
•
•
•
•
•
•
•
•
•
•
•
geopolitical and security issues, such as armed conflict and civil or military unrest, political instability, terrorist
activity and human rights concerns;
natural disasters (including as a result of climate change) and public health crises (including pandemics such as
COVID-19), and other catastrophic events;
global supply chain disruptions and large-scale outages or inefficient provision of services from utilities,
transportation, data hosting, or telecommunications providers;
abrupt changes in government policies, laws, regulations or treaties, including imposition of export, import, or doing-
business regulations, trade sanctions, embargoes or other trade restrictions;
tax or tariff increases;
government restrictions on, or nationalization of, our operations in any country;
changes in labor conditions and difficulties in staffing and managing international operations, including logistical and
communication challenges;
restrictions on currency movement;
challenges in protecting our IP rights in certain countries;
local business and cultural factors that differ from our current standards and practices;
continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad;
currency exchange rate fluctuations; and
other social, political and economic instability, including recessions and other economic crises in other regions.
Adverse conditions in the global economy and disruptions of financial and commodities markets could negatively impact
us and our customers.
Our results of operations are affected by the level of business activity of our customers, which in turn is affected by global
economic conditions and market factors impacting the industries and markets that they serve. Certain global economies and the
financial and commodities markets continue to experience significant uncertainty and volatility. Adverse economic conditions
or lack of liquidity in these markets, particularly in North America, may adversely affect our revenues and operating results.
Economic and financial market conditions may also affect the availability of financing for projects and for our customers'
capital or other expenditures, which can result in project delays or cancellations and thus affect demand for our products. There
can be no assurance that any governmental responses to economic conditions or disruptions in the financial markets ultimately
will stabilize the markets or increase our customers' liquidity or the availability of credit to our customers. Although no single
customer accounts for more than 2% of our sales, a payment default by one of our larger customers could have a negative short-
term impact on earnings or liquidity. A financial or industry downturn could have an adverse effect on the collectability of our
accounts receivable, which could result in longer payment cycles, increased collection costs and defaults, and limit our ability to
borrow additional funds. Should one or more of our larger customers declare bankruptcy, it could adversely affect the
collectability of our accounts receivable, along with credit loss reserves and net income. In addition, our ability to access the
capital markets may be restricted at a time when we would like, or need, to do so. The economic, political and financial
environment may also affect our business and financial condition in ways that we currently cannot predict, and there can be no
assurance that economic and political instability, both domestically and internationally (for example, resulting from changes to
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trade policies, tariffs or participation in trade agreements or economic and political unions) will not adversely affect our results
of operations, cash flows or financial position in the future.
Our business and operations have been and will continue to be adversely affected by the COVID-19 pandemic, and the
duration and extent to which it will affect our business, financial condition, results of operations, cash flows, liquidity,
and stock price remains uncertain.
The global COVID-19 pandemic has created significant disruption to the broader economies, financial markets, workforces,
business environment and supply chains, as well as to our suppliers and customers. Beginning in 2020, and continuing through
2021, the pandemic had a significant impact on our business and adversely impacted our results of operations. The pandemic
has caused significant disruptions to our business due to, among other things, reduced transportation, restrictions on travel,
disruptions to our suppliers and global supply chain, labor shortages, the impact on our customers and their demand for our
products and services and ability to pay for them, as well as temporary closures of facilities. Some of the actions we have taken
in response to the COVID-19 pandemic, such as implementing remote working arrangements, may also create increased
vulnerability to cybersecurity incidents and other risks. The duration and severity of the COVID-19 pandemic remains
uncertain and cannot be predicted. The full extent to which the pandemic will continue to impact our business, results of
operations, and financial condition depends on many evolving factors and future developments for which there remains
significant uncertainty, such as possible resurgences of the virus, including new variants; the availability, effectiveness and
public acceptance of treatment or vaccines (including boosters); the impact of the imposition of any vaccine mandates or other
governmental actions; and the impact of the pandemic on the global supply chain and the broader economy and capital markets,
as well as the matters noted above. In addition, the COVID-19 pandemic may continue to adversely affect many of our
suppliers’ and customers' businesses and operations, including the ability of our suppliers to manufacture or obtain the products
we sell or to meet delivery requirements and commitments, and our customers’ demand for our products and services and the
ability to pay for them, all of which could adversely affect our sales and results of operations.
Due to the uncertainty of COVID-19, we will continue to assess the situation, including the impact of governmental
regulations or restrictions that might be imposed or re-imposed in response to the pandemic. If we are unable to appropriately
respond to or manage the impact of these events, our business and results of operations may be adversely affected.
In addition, the impact of COVID-19 on macroeconomic conditions has adversely affected and may continue to affect the
functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, and interest rates.
The long-term financial and economic impacts of the COVID-19 pandemic may continue for a significant period and cannot be
reliably quantified or estimated at this time due to the uncertainty of these future developments.
Any of these events could materially adversely affect our business, financial condition, results of operations, cash flows,
liquidity and stock price.
We are subject to various laws and regulations globally and any failure to comply could adversely affect our business.
We are subject to a broad range of laws and regulations in the jurisdictions where we operate globally, including, among
others, those relating to data privacy and protection, cyber security, import and export requirements, anti-bribery and
corruption, product compliance, supplier regulations regarding the sources of supplies or products, environmental protection,
health and safety requirements, intellectual property, foreign exchange controls and cash repatriation restrictions, labor and
employment, e-commerce, advertising and marketing, anti-competition and tax. Compliance with these domestic and foreign
laws, regulations and requirements may be burdensome, increasing our cost of compliance and doing business. In addition, as a
supplier to federal, state, and local government agencies, we must comply with certain laws and regulations relating specifically
to our governmental contracts. Although we have implemented policies and procedures designed to facilitate compliance with
these laws, we cannot assure you that our employees, contractors, or agents will not violate such laws and regulations, or our
policies and procedures. Any such violations could result in the imposition of fines and penalties, damage to our reputation,
and, in the case of laws and regulations relating to governmental contracts, the loss of those contracts.
Fluctuations in foreign currency have an effect on our results from operations.
The results of certain of our foreign operations are reported in the local currency and then translated into U.S. dollars at the
applicable exchange rates for inclusion in our consolidated financial statements. The exchange rates between some of these
currencies and the U.S. dollar have fluctuated significantly in recent years, and may continue to do so in the future. We may
incur losses related to foreign currency fluctuations, and foreign exchange controls may prevent us from repatriating cash in
countries outside the U.S. In addition, because our financial statements are stated in U.S. dollars, such fluctuations may also
affect the comparability of our results between financial periods.
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Risks Related to Our Acquisitions, Divestitures and Strategic Initiatives
We may not be able to fully realize the anticipated benefits and cost savings of our merger with Anixter.
On June 22, 2020, we completed our merger with Anixter. The success of the Merger, including anticipated benefits and
cost savings, depends on the successful combination and integration of the companies’ businesses. It is possible that the
integration process could result in the loss of key employees, higher than expected costs, diversion of management attention,
the disruption of either company’s ongoing legacy businesses or inconsistencies in standards, controls, procedures and policies
that adversely affect the combined company’s ability to maintain relationships with customers, suppliers and employees or to
achieve the anticipated benefits and cost savings of the Merger.
We have incurred, and expect to continue to incur, a number of non-recurring costs associated with the Merger and
combining the operations of the two companies. This includes transaction fees and expenses related to formulating and
implementing integration plans, including facilities, systems consolidation and employment-related costs. We continue to
assess the magnitude of these costs, and additional unanticipated costs may be incurred in the integration of the two companies’
businesses. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related
to the integration of the businesses, should allow us to offset integration-related costs over time, this net benefit may not be
achieved in the near term, or at all.
If we experience difficulties with the integration process, the anticipated benefits of the Merger may not be realized or may
take longer to realize than expected. These integration matters could have an adverse effect on us for an undetermined period.
In addition, the actual cost savings of the Merger could be less than anticipated.
Expansion into new business activities, industries, product lines or geographic areas could subject the company to
increased costs and risks and may not achieve the intended results.
We have invested significantly in expanding our digitalization initiatives, including but not limited to, e-commerce
capabilities and online customer experience. If our efforts to expand our digital and service capabilities are not successful, we
may not realize the return on our investments as anticipated, or our operating results could be adversely affected by slower than
expected sales growth or additional costs. Furthermore, engaging in or significantly expanding business activities in product
sourcing, sales and services could subject the company to unexpected costs and risks. Such activities could subject us to
increased operating costs, product liability, regulatory requirements and reputational risks. Our expansion into new and existing
markets, including manufacturing related or regulated businesses, may present competitive distribution and regulatory
challenges that differ from current ones. We may be less familiar with the target customers and may face different or additional
risks, as well as increased or unexpected costs, compared to existing operations. Growth into new markets may also bring us
into direct competition with companies with whom we have little or no past experience as competitors. To the extent we are
reliant upon expansion into new geographic, industry and product markets for growth and do not meet the new challenges posed
by such expansion, our future sales growth could be negatively impacted, our operating costs could increase, and our business
operations and financial results could be negatively affected.
Our strategic and operational initiatives are subject to various risks and uncertainties, and we may be unable to
implement the initiatives successfully.
We are engaged in a number of strategic and operational initiatives designed to optimize costs and improve operational
efficiency. Our ability to successfully execute these initiatives is subject to various risks and uncertainties and there can be no
assurance regarding the timing of or extent to which we will realize the anticipated benefits, if at all.
Any future acquisitions that we may undertake will involve a number of inherent risks, any of which could cause us not
to realize the anticipated benefits.
We have expanded our operations through organic growth and selected acquisitions of businesses and assets, and may seek
to do so in the future. Acquisitions involve various inherent risks, including: problems that could arise from the integration of
the acquired business; uncertainties in assessing the value, strengths, weaknesses, contingent and other liabilities and potential
profitability of acquisition candidates; the potential loss of key employees of an acquired business; the ability to achieve
identified operating and financial synergies anticipated to result from an acquisition or other transaction; unanticipated changes
in business, industry or general economic conditions that affect the assumptions underlying the acquisition or other transaction
rationale; and expansion into new countries or geographic markets where we may be less familiar with operating requirements,
target customers and regulatory compliance. Any one or more of these factors could increase our costs or cause us not to realize
the benefits anticipated to result from the acquisition of a business or assets.
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Risks Related to Our Information Systems and Technology
Any significant disruption or failure of our information systems, could lead to interruptions in our operations, which
may materially adversely affect our business operations, financial condition, and results of operations.
We operate a number of facilities and we coordinate company activities, including information technology systems and
administrative services and the like, through our headquarters operations. We rely on the proper functioning and availability of
our information systems to successfully operate our business, including managing inventory, processing customer orders,
shipping products and providing service to customers, and compiling financial results. Our operations depend on our ability to
maintain existing systems and implement new technology, which includes allocating sufficient resources to periodically
upgrade our information technology systems, and to protect our equipment and the information stored in our databases against
both manmade and natural disasters (including those as a result of climate change), as well as power losses, computer and
telecommunications failures, technological breakdowns, unauthorized intrusions, cyber-attacks, and other events. Any
significant or prolonged unavailability or failure of our critical information systems could materially impair our ability to
maintain proper levels of inventories, process orders, meet the demands of our customers in a timely manner, and other harmful
effects.
We seek to continually enhance our information systems, and such changes could potentially create a disruption or failure of
our existing information technology. Conversions to new information technology systems may result in cost overruns, delays or
business interruptions. Additionally, efforts to align portions of our business on common platforms, systems and processes
could result in unforeseen interruptions, increased costs or liability, and other negative effects. If our information technology
systems are disrupted, become obsolete or do not adequately support our strategic, operational or compliance needs, it could
result in a competitive disadvantage or adversely affect our business operations and financial condition, including our ability to
process orders, receive and ship products, maintain inventories, collect accounts receivable and pay expenses, therefore
impacting our results of operations.
We may experience a failure in or breach of our information security systems, or those of our third-party product
suppliers or service providers, as a result of cyber-attacks or information security breaches.
Because we rely heavily on information technology both in serving our customers and in our enterprise infrastructure in
order to achieve our objectives, we may be vulnerable to damage or intrusion from a variety of cyber-attacks, including
computer viruses, worms or other malicious software programs that seek to gain to access our systems and networks, or those of
our third-party service providers. Additionally, third parties may fraudulently attempt to induce employees or customers into
disclosing sensitive information such as user names, passwords and other information in order to gain access to our customers’
data or our data, including our intellectual property and other confidential business information, or our information technology
systems. Information technology security threats to our systems, networks and data have dramatically increased in recent years
due the proliferation of new technologies and the increased sophistication and activities of perpetrators. We have seen, and will
continue to see, industry-wide vulnerabilities, such as the Log4j vulnerability reported in December 2021, which could cause
widespread disruptions to our or other parties' systems. These threats and vulnerabilities pose a risk to the security of our
systems and networks and the confidentiality, availability and integrity of our proprietary and confidential information.
Although we actively manage information technology security risks within our control and continually seek to enhance our
controls and processes designed to protect our systems, computers, networks and data, there can be no assurance that such
actions will be sufficient to mitigate all potential risks. As cyber threats continue to evolve, we may be required to expend
additional resources to continue to enhance our information security measures and remediate any information security
vulnerabilities. Despite the precautions we take to mitigate the risks of such events, an attack on our enterprise information
technology system, or those of third parties with which we do business, could result in theft or unauthorized disclosure of our
proprietary or confidential information or a breach of confidential customer, supplier or employee information. Such events
could impair our ability to conduct our operations or cause disruptions to our supply chain, which could have an adverse impact
on revenue and harm our reputation. Additionally, such an event could expose us to regulatory sanctions or penalties, lawsuits
or other legal action or cause us to incur legal liabilities and costs, which could be significant, in order to address and remediate
the effects of an attack and related security concerns. The insurance coverage we maintain may be inadequate to cover claims or
liabilities relating to a cybersecurity attack.
In addition, the legal and regulatory environment surrounding information security and privacy in the U.S. and international
jurisdictions is constantly evolving. Violation or non-compliance with any of these laws or regulations, contractual
requirements relating to data security and privacy, or our own privacy and security policies, either intentionally or
unintentionally, or through the acts of intermediaries could have a material adverse effect on our brand, reputation, business,
financial condition and results of operations, as well as subject us to significant fines, litigation losses, third-party damages and
other liabilities.
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Risks Related to Our Industry, Markets and Business Operations
Loss of key suppliers could decrease sales, profit margins and earnings.
Most of our agreements with suppliers are terminable by either party on 60 days' notice or less for any reason. We currently
source products from thousands of suppliers. However, our 10 largest suppliers in 2021 accounted for approximately 31% of
our purchases by annual dollar volume for the period. The loss of, or a substantial decrease in the availability of, products from
any of these suppliers, a supplier's change in sales strategy to reduce its reliance on distribution channels, the loss of key
preferred supplier agreements, or disruptions in a key supplier's operations could have a material adverse effect on our business.
Although we believe our relationships with our key suppliers are good, they could change their strategies as a result of a change
in control, expansion of their direct sales force, changes in the marketplace or other factors beyond our control, including a key
supplier becoming financially distressed.
We have been and may continue to be adversely affected by supply chain challenges, including product shortages, delays
and price increases, which could decrease sales, profit margins and earnings.
Supply interruptions could arise from shortages of raw materials, effects of economic, political or financial market
conditions on a supplier's operations, labor disputes or weather conditions affecting products or shipments, transportation
disruptions, natural disasters, outbreaks of disease, information system disruptions or other reasons beyond our control. The
effects of global climate change could also result in natural disasters or extreme weather conditions occurring more frequently
or with more intense effects, which could cause or exacerbate supply chain interruptions.
In 2021, our industry and the broader economy have experienced supply chain challenges, including shortages in raw
materials and components, labor shortages and transportation constraints, leading to product delays, backlogged orders and
longer lead times. While we continue to aggressively and proactively manage these supply chain issues, we have experienced,
and may continue to experience, some delays in receiving products from our suppliers. We cannot be certain that particular
products will be available to us, or available in quantities sufficient to meet customer demand. Continued product shortages and
delays could impair our ability to make scheduled deliveries to our customers in a timely manner and cause us to be at a
competitive disadvantage.
The product shortages and delays in deliveries, along with other factors such as price inflation and higher transportation
costs, have resulted in price increases from our suppliers. We may be unable to pass these price increases on to our customers,
which could erode our profit margins. These supply chain constraints, increased product costs and inflationary pressures could
continue or escalate in the future, which would have an adverse impact on our business and results of operations.
The profitability of our business is also dependent upon the efficiency of our supply chain. An inefficient or ineffective
supply chain strategy or operations could increase operational costs, decrease sales, profit margins and earnings, which could
adversely affect our business.
Product cost fluctuations could decrease sales, profit margins and earnings.
Some of our products, such as wire and conduit, are commodity price based products and may be subject to significant price
fluctuations which are beyond our control. Recently, we have experienced increases in commodity costs, as well as in the costs
of raw materials and components generally, as a result of global shortages and other macroeconomic trends. Continued
increases in these costs could erode our profit margin and negatively impact our results of operations to the extent we are unable
to successfully mitigate and offset the impact of these costs.
While increases in the cost of energy or products could have adverse effects, decreases in those costs, particularly if severe,
could also adversely impact us by creating deflation in selling prices, which could cause our profit margin to deteriorate.
Fluctuations in energy or raw materials costs can also adversely affect our customers.
A decline in project volume could adversely affect our sales and earnings.
While much of our sales and earnings are generated by comparatively smaller and more frequent orders, the fulfillment of
large orders for large capital projects generates significant sales and earnings. Accordingly, our results of operations can
fluctuate depending on whether and when large project awards occur and the commencement and progress of work under large
contracts already awarded.
The awarding and timing of projects is unpredictable and depends on many factors outside of our control. Project awards
often involve complex and lengthy negotiations and competitive bidding processes. These processes can be impacted by a wide
range of factors including a customer’s decision to not proceed with a project or its inability to obtain necessary governmental
approvals or financing, commodity prices, and overall market and economic conditions. Slow macro-economic growth rates,
difficult credit market conditions for our customers, weak demand for our customers’ products or other customer spending
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constraints can result in project delays or cancellations. In addition, some our competitors may also be more willing to take
greater or unusual risks or include terms and conditions in a contract that we might not deem acceptable.
We have risks associated with the sale of nonconforming products and services.
Historically, we have experienced a small number of cases in which our vendors supplied us with products that did not
conform to the agreed upon specifications without our knowledge. Additionally, we may inadvertently sell a product not
suitable for a customer’s application. We address this risk through our quality control processes, by seeking to limit liability and
our warranty in our customer contracts, by obtaining indemnification rights from vendors and by maintaining insurance
responsive to these risks. However, there can be no assurance that we will be able to include protective provisions in all of our
contracts, that vendors will have the financial capability to fulfill their indemnification obligations to us, or that insurance can
be obtained with sufficiently broad coverage or in amounts sufficient to fully protect us.
Disruptions to our logistics capability may have an adverse impact on our operations.
Our global logistics services are operated through distribution centers around the world. An interruption of operations at any
of our distribution centers could have a material adverse effect on the operations of branches served by the affected distribution
center. Such disaster related risks and effects are not predictable with certainty and, although they typically can be mitigated,
they cannot be eliminated. We seek to mitigate our exposures to disaster events in a number of ways. For example, where
feasible, we design the configuration of our facilities to reduce the consequences of disasters. We also maintain insurance for
our facilities against casualties, and we evaluate our risks and develop contingency plans for dealing with them. Although we
have reviewed and analyzed a broad range of risks applicable to our business, the ones that actually affect us may not be those
that we have concluded are most likely to occur. Furthermore, although our reviews have led to more systematic contingency
planning, our plans are in varying stages of development and execution, such that they may not be adequate at the time of
occurrence for the magnitude of any particular disaster event that we may encounter.
We also depend on transportation service providers for the delivery of products to our customers. Any significant
interruption or disruption in service at one or more of our distribution centers due to severe weather or natural disasters
(including as a result of climate change), information technology upgrades, operating issues, disruptions to our transportation
network, public heath crises, pandemics or other unanticipated events, could impair our ability to obtain or deliver inventory in
a timely manner, cause cancellations or delays in shipments to customers or otherwise disrupt our normal business operations.
The COVID-19 pandemic and responses to it have significantly limited or reduced the transportation of goods globally. Our
industry and the broader global economy have been impacted by logistical and transportation constraints, due to reduced
workforce, including at ports and warehouses, as well as driver shortages around the world. This has resulted in higher
transportation costs and longer delivery times for our suppliers and for our products.
An increase in competition could decrease sales, profit margins, and earnings.
We operate in a highly competitive industry and compete directly with global, national, regional and local providers of like
products and services. Some of our existing competitors have, and new market entrants may have, greater resources than us.
Competition is generally based on product line breadth, product availability, service capabilities and price. Other sources of
competition are buying groups formed by smaller distributors to increase purchasing power and provide some cooperative
marketing capability, as well as e-commerce companies. There may be new market entrants with non-traditional business and
customer service models, resulting in increased competition and changing industry dynamics.
Existing or future competitors may seek to gain or retain market share by reducing prices, and we may be required to lower
our prices or may lose business, which could adversely affect our financial results. We may be subject to supplier price
increases while not being able to increase prices to customers. Also, to the extent that we do not meet changing customer
preferences or demands, or to the extent that one or more of our competitors becomes more successful with private label
products, on-line offerings or otherwise, our ability to attract and retain customers could be materially adversely affected.
Existing or future competitors also may seek to compete with us for acquisitions, which could have the effect of increasing the
price and reducing the number of suitable acquisitions. These factors, in addition to competitive pressures resulting from the
fragmented nature of our industry, could affect our sales, profit margins and earnings.
Risks Related to Tax Matters
Changes in tax laws or challenges to the Company's tax positions by taxing authorities could adversely impact the
Company's results of operations and financial condition.
We are subject to taxes in jurisdictions in which we do business, including but not limited to taxes imposed on our income,
receipts, stockholders' equity, property, sales, purchases and payroll. As a result, the tax expense we incur can be adversely
affected by changes in tax law. We frequently cannot anticipate these changes in tax law, which can cause unexpected volatility
in our results of operations. Changes in the tax law at the federal and state/provincial levels, in particular in the U.S. and
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Canada, which accounted for approximately 85% of income before taxes in 2021, can have a material adverse effect on our
results of operations.
On April 19, 2021, Canada Finance introduced its 2021 budget (the “2021 Budget”), which includes proposals to end hybrid
mismatch arrangements, effective in two phases – the first on July 1, 2022, and the second no earlier than January 1, 2023. The
2021 Budget also includes proposals to impose an EBITDA-based limitation on the deductibility of interest expense. Canada
Finance expected to issue certain aspects of the draft legislation implementing these proposals in 2021, but did not. When the
legislation is issued and becomes effective, the tax benefit associated with intercompany financing arrangements disclosed in
the reconciliation between the federal statutory income tax rate and the effective tax rate disclosed in Note 12, "Income Taxes"
of our Notes to Consolidated Financial Statements, could be lost prospectively.
Additionally, the Organization for Economic Cooperation and Development (the “OECD”) is developing proposed rules to
address the tax challenges arising from the digitalization of the global economy. The so-called two-pillar solution is intended to
implement rules addressing 1) nexus and profit allocation in cases where businesses profit from markets in other countries
while paying little to no tax in those countries under the current physical presence-based global tax system (so-called “Amount
A” of “Pillar One”), 2) standardized intercompany pricing for routine marketing and distribution activities (so-called “Amount
B” of “Pillar One”), and 3) a global minimum tax as a catch-all to address residual base erosion and profit shifting (“BEPS”)
not addressed by the OECD’s other anti-BEPS measures (so-called “Pillar Two”). Each of the OECD’s member states must
enact domestic legislation implementing the OECD’s proposed rules for them to become law. The Company does not expect
Amount A of Pillar One to apply to Wesco as it expects to fall below the thresholds required to be within scope of Amount A.
The impact of Amount B of Pillar One on the Company’s foreign distribution activities is unclear pending the OECD’s issuance
of detailed rules in 2022. The impact of Pillar Two on the Company will depend upon commentary the OECD expects to issue
in 2022 related to how the Pillar Two global minimum tax system will coexist with the U.S. Global Intangible Low-Taxed
Income (“GILTI”) rules.
Finally, the tax laws to which the Company is subject are inherently complex and ambiguous. Therefore, we must interpret
the applicable laws and make subjective judgments about the expected outcome upon challenge by the applicable taxing
authorities. As a result, the impact on our results from operations of the application of enacted tax laws to our facts and
circumstances is sometimes uncertain. If a tax authority successfully challenges our interpretation and application of the tax law
to our facts and circumstances, there can be no assurance that we can accurately predict the outcome and the taxes ultimately
owed upon effective settlement, which may differ from the tax expense recognized in our consolidated statements of income
and comprehensive income (loss) and accrued in our consolidated balance sheets. Additionally, if we cannot meet liquidity
requirements in the U.S., we may have to repatriate funds from overseas, which would result in additional income taxes being
incurred on the amount repatriated.
Risks Related to Our Indebtedness and Capital Structure
Our outstanding indebtedness requires debt service commitments that could adversely affect our ability to fulfill our
obligations and could limit our growth and impose restrictions on our business, and fluctuations in interest rates could
affect the cost of our indebtedness.
In 2020, we incurred significant additional indebtedness to finance the merger with Anixter, which increased our interest
expense from historical levels. As a result, a substantial portion of our cash flow from operations must be dedicated to the
payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes. As of
December 31, 2021, excluding debt discount and debt issuance costs, we had $4.8 billion of consolidated indebtedness. We and
our subsidiaries may also undertake additional borrowings in the future, subject to certain limitations contained in the debt
instruments governing our indebtedness.
Over the next three years, we will be required to repay or refinance approximately $1.3 billion of our currently outstanding
indebtedness.
Our debt service obligations impact our ability to operate and grow our business. Our payments of principal and interest on
our indebtedness reduce the amount of funds available to us to invest in operations, future business opportunities, acquisitions,
and other potentially beneficial activities. Our debt service obligations also reduce our flexibility to adjust to changing market
conditions and may increase our vulnerability to adverse economic, financial market and industry conditions. A portion of our
indebtedness, including amounts outstanding under our accounts receivable securitization and revolving credit facilities, bears
interest at variable rates. In the future, we may also incur additional indebtedness that bears interest at variable rates. In a rising
interest rate environment, the interest expense on our variable rate borrowings will increase. Our ability to service and refinance
our indebtedness, make scheduled payments on our operating leases and fund capital expenditures, acquisitions or other
business opportunities, will depend in large part on both our future performance and the availability of additional financing in
the future, as well as prevailing interest rates and other market conditions and other factors beyond our control. We cannot
assure you that we will be able to obtain additional financing on terms acceptable to us or at all.
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There can be no assurance that our business will continue to generate sufficient cash flows from operations in the future to
service our debt, make necessary capital expenditures, or meet other cash needs. If we do not achieve the expected benefits and
cost savings from the merger with Anixter, or if the financial performance of the combined company does not meet current
expectations, then our ability to service or repay our indebtedness may be adversely impacted. If unable to do so, we may be
required to refinance all or a portion of our existing debt, sell assets, or obtain additional financing. If we are unable to repay
indebtedness, lenders having secured obligations could proceed against the collateral securing these obligations.
Our debt agreements contain restrictive covenants that may limit our ability to operate our business.
Our credit facilities and our other debt agreements, including those governing the debt financings incurred in connection
with the recent merger with Anixter, contain various covenants that restrict or limit our ability to, among other things:
incur additional indebtedness or create liens on assets
engage in mergers, acquisitions or consolidations,
•
•
• make loans or other investments,
•
•
transfer, lease or dispose of assets outside the ordinary course of business,
pay dividends, repurchase equity interests, make other payments with respect to equity interests, repay or repurchase
subordinated debt, and
engage in affiliate transactions.
•
In addition, certain of these debt agreements contain financial covenants that may require us to maintain certain financial
ratios and other requirements in certain circumstances. As a result of these covenants, our ability to respond to changes in
business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be
prevented from engaging in transactions or taking advantage of new business opportunities that might otherwise be beneficial to
us. Our ability to comply with these covenants and restrictions may be affected by economic, financial and industry conditions
or regulatory changes beyond our control. Failure to comply with these covenants or restrictions could result in an event of
default, under our revolving lines of credit or the indentures governing certain of our outstanding notes which, if not cured or
waived, could accelerate our repayment obligations. See the liquidity section in "Item 7. Management's Discussion and
Analysis" for further details.
General Risk Factors
We are subject to costs and risks associated with global laws and regulations affecting our business, as well as litigation
for product liability or other matters affecting our business.
The global legal and regulatory environment is complex and exposes us to compliance costs and risks, as well as litigation
and other legal proceedings, which could materially affect our operations and financial results. These laws and regulations may
change, sometimes significantly, as a result of political or economic events, and some changes are anticipated to occur in the
coming year. They include laws and regulations covering taxation, trade, import and export, labor and employment (including
wage and hour), product safety, product labeling, occupational safety and health, data privacy, data protection, and
environmental matters (including those relating to global climate change and its impact). We are also subject to securities and
exchange laws and regulations and other laws applicable to publicly-traded companies such as the Foreign Corrupt Practices
Act. Furthermore, as a government contractor selling to federal, state and local government entities, we are also subject to a
wide variety of additional laws and regulations. Proposed laws and regulations in these and other areas could affect the cost of
our business operations.
From time to time we are involved in legal proceedings, audits or investigations which may relate to, for example, product
liability, labor and employment (including wage and hour), tax, escheat, import and export compliance, government contracts,
worker health and safety, and general commercial and securities matters. While we believe the outcome of any pending matter
is unlikely to have a material adverse effect on our financial condition or liquidity, additional legal proceedings may arise in the
future and the outcome of these as well as other contingencies could require us to take actions, which could adversely affect our
operations or could require us to pay substantial amounts of money.
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We must attract, retain and motivate our employees, and the failure to do so may adversely affect our business.
Our success depends on hiring, retaining and motivating our employees, including executive, managerial, sales, technical,
operations, marketing and support personnel. We may have difficulty locating and hiring qualified personnel. In addition, we
may have difficulty retaining such personnel once hired, and key people may leave and compete against us. The loss of key
personnel or our failure to attract and retain other qualified and experienced personnel could disrupt or adversely affect our
business, its sales and operating results. In addition, our operating results could be adversely affected by increased costs due to
increased competition for employees, higher employee turnover, which may also result in loss of significant customer business,
or increased employee benefit costs.
There is a risk that the market value of our common stock may decline.
Stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies in our
industry have been volatile. For some issuers, the markets have exerted downward pressure on stock prices and credit capacity.
It is impossible to predict whether the price of our common stock will rise or fall. Trading prices of our common stock will be
influenced by our operating results and prospects and by economic, political, financial, and other factors.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We operate a network of nearly 700 branches and warehouse locations that hold inventory, and over 100 sales offices, with
operations in more than 50 countries throughout the world. This includes 43 facilities with square footage between 100,000 and
500,000 that operate as regional distribution centers or large branch locations, of which 34 are located in the U.S., six are in
Canada, two are in Europe and one is in South America. Approximately 8% of our facilities are owned, and the remainder are
leased.
We also lease our 118,000 square-foot headquarters in Pittsburgh, Pennsylvania. We do not regard the real property
associated with any single facility as material to our operations. We believe our facilities are in good operating condition and
are adequate for their respective uses.
Item 3. Legal Proceedings.
From time to time, a number of lawsuits and claims have been or may be asserted against us relating to the conduct of our
business, including litigation relating to commercial, product and employment matters (including wage and hour). The outcome
of any litigation cannot be predicted with certainty, and some lawsuits may be determined adversely to us. However,
management does not believe that the ultimate outcome of any such pending matters is likely to have a material adverse effect
on our financial condition or liquidity, although the resolution in any fiscal period of one or more of these matters may have a
material adverse effect on our results of operations for that period.
Information relating to legal proceedings is disclosed in Note 16, "Commitments and Contingencies" of the Notes to
Consolidated Financial Statements and is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Market, Stockholder and Dividend Information. Our common stock is listed on the New York Stock Exchange under the
symbol “WCC”. As of February 24, 2022, there were 50,703,285 shares of common stock outstanding held by approximately
850 holders of record. We have not paid dividends on our common stock and do not currently plan to pay common
dividends. We do, however, evaluate the possibility from time to time. In addition, the terms of the Revolving Credit Facility,
as well as the indentures governing the 7.125% Senior Notes due 2025 and 7.250% Senior Notes due 2028 limit our ability to
pay dividends and repurchase our common stock. See Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Liquidity and Capital Resources.”
Issuer Purchases of Equity Securities.
The following table sets forth all issuer purchases of common stock during the three months ended December 31, 2021:
Period
Total Number
of Shares
Purchased(1)
Average
Price Paid
Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar Value
of Shares That May Yet be
Purchased Under the Plans
or Programs
October 1, 2021 – October 31, 2021
422 $
125.64
November 1, 2021 – November 30, 2021
44,002 $
134.43
December 1, 2021 – December 31, 2021
3,107 $
130.48
Total
47,531 $
134.09
— $
— $
— $
—
—
—
—
(1) These shares were surrendered by stock-based compensation plan participants to satisfy tax withholding obligations arising from the
exercise of stock-settled stock appreciation rights and vesting of restricted stock units.
Company Performance. The following stock price performance graph illustrates the cumulative total return on an
investment in Wesco International, a 2021 Performance Peer Group, and the Russell 2000 Index. The graph covers the period
from December 31, 2016 to December 31, 2021, and assumes that the value for each investment was $100 on December 31,
2016, and that all dividends were reinvested.
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2021 Performance Peer Group:
Applied Industrial Technologies, Inc.
Fastenal Company
Rexel SA
Arrow Electronics, Inc.
Genuine Parts Company
Rockwell Automation, Inc.
Avnet, Inc.
Barnes Group
Hubbell, Inc.
MRC Global, Inc.
Eaton Corporation Plc
MSC Industrial Direct Co., Inc.
W.W. Grainger, Inc.
Note: HD Supply Holdings, Inc. was acquired in December 2020 and removed from the performance peer group for 2021.
Item 6. [Reserved]
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto
included in Item 8 of this Annual Report on Form 10-K. The matters discussed herein may contain forward-looking statements
that are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. Certain
of these risks are set forth in Item 1A of this Annual Report on Form 10-K.
In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), our
discussion and analysis of financial condition and results of operations includes certain non-GAAP financial measures, which
are defined further below. These financial measures include earnings before interest, taxes, depreciation and amortization
("EBITDA"), adjusted EBITDA, adjusted EBITDA margin, financial leverage, free cash flow, adjusted income from
operations, adjusted other non-operating expenses (income), adjusted provision for income taxes, adjusted income before
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. We believe 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 items impacting comparability of
results, and the related income tax effect of such items, allowing investors to more easily compare our financial performance
from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons
stated above.
Company Overview
WESCO International, Inc. (“Wesco International”) and its subsidiaries (collectively, “Wesco” or the "Company"),
headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and
supply chain solutions.
On June 22, 2020, we completed our acquisition of Anixter International Inc. ("Anixter"), a Delaware corporation. Pursuant
to the terms of the Agreement and Plan of Merger, dated January 10, 2020, by and among Anixter, Wesco and Warrior Merger
Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Wesco (“Merger Sub”), Merger Sub was merged with and
into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a wholly owned subsidiary of Wesco. On
June 23, 2020, Anixter merged with and into Anixter Inc., with Anixter Inc. surviving to become a wholly owned subsidiary of
Wesco.
We employ approximately 18,000 people, maintain relationships with approximately 45,000 suppliers, and serve
approximately 140,000 customers worldwide. With nearly 1,500,000 products, end-to-end supply chain services, and extensive
digital capabilities, we provide innovative solutions to meet customer needs across commercial and industrial businesses,
contractors, government agencies, institutions, telecommunications providers, and utilities. Our innovative value-added
solutions include supply chain management, logistics and transportation, procurement, warehousing and inventory
management, as well as kitting and labeling, limited assembly of products and installation enhancement. We have
approximately 800 branches, warehouses and sales offices with operations in more than 50 countries, providing a local presence
for customers and a global network to serve multi-location businesses and multi-national corporations.
In 2021, we established a new corporate brand strategy to adopt a single, master brand architecture. This initiative reflects
our corporate integration strategy and simplifies engagement for our customers and suppliers. As a result, we will begin
migrating certain legacy sub-brands to the master brand architecture over the course of the next twelve to eighteen months. Due
to the strength of its recognition with customers and suppliers, we will continue to use the Anixter brand name as part of the
master brand strategy for the foreseeable future.
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We have operating segments that are organized around three strategic business units consisting of Electrical & Electronic
Solutions ("EES"), Communications & Security Solutions ("CSS") and Utility & Broadband Solutions ("UBS"). These
operating segments are equivalent to our reportable segments. See Item 1, “Business” in this Annual Report on Form 10-K for a
description of each of our reportable segments and their business activities.
The comparability of the financial performance of our reportable segments for 2021 relative to the prior year is impacted by
the fact that 2020 includes the results of operations of Anixter for only the second half of 2020.
Overall Financial Performance
Our financial results for 2021 compared to 2020 reflect the merger with Anixter on June 22, 2020, double-digit sales
growth, margin expansion, as well as the realization of integration cost synergies and structural cost takeout actions, partially
offset by higher volume-related costs, and selling, general and administrative ("SG&A") payroll and payroll-related expenses
consisting of salaries, variable compensation expense and benefit costs. Our 2020 financial results reflected the half year impact
of the merger with Anixter, partially offset by unfavorable business conditions caused by the COVID-19 pandemic.
Net sales for 2021 increased $5.9 billion, or 47.8%, over the prior year. In addition to the impact from the Merger, the
increase reflects improved economic conditions and strong demand. Cost of goods sold as a percentage of net sales was 79.2%
and 81.1% for 2021 and 2020, respectively. The decrease of 190 basis points reflects strong execution on supplier price
increases and cost initiatives to offset inflation, along with higher supplier volume rebate income, partially offset by higher
expense related to excess and obsolete inventories, including a 14 basis point impact from the write-down to the carrying value
of certain personal protective equipment products. Cost of goods sold for 2020 includes merger-related fair value adjustments
of $43.7 million, as well as an out-of-period adjustment of $18.9 million related to inventory cost absorption accounting.
Adjusted for these amounts, cost of goods sold as a percentage of net sales for 2020 was 80.6%.
Income from operations was $801.9 million for 2021, compared to $347.0 million for 2020. Income from operations as a
percentage of net sales was 4.4% for the current year, compared to 2.8% for the prior year. Income from operations for 2021
includes merger-related and integration costs of $158.5 million and a net gain of $8.9 million resulting from the sale of Wesco's
legacy utility and data communications businesses in Canada during the first quarter of 2021, which were divested in
connection with the Merger. Additionally, we recognized $32.0 million of amortization expense resulting from changes in the
estimated useful lives of certain legacy trademarks that are migrating to our master brand architecture, as described in Note 2,
"Accounting Policies" of our Notes to Consolidated Financial Statements. Adjusted for these items, income from operations
was $983.5 million, or 5.4% of net sales. For 2020, income from operations adjusted for merger-related and integration costs,
and merger-related fair value adjustments totaling $175.9 million, an out-of-period adjustment related to inventory cost
absorption accounting of $18.9 million, as well as a gain on sale of a U.S. operating branch of $19.8 million was $522.0
million, or 4.2% of net sales. For 2021, income from operations improved compared to the prior year across all segments and
reflects sales growth and lower cost of goods sold as a percentage of net sales, as well as the realization of integration cost
synergies and structural cost takeout actions. Income from operations for 2021 was negatively impacted by higher volume-
related costs, and SG&A payroll and payroll-related expenses consisting of salaries, variable compensation expense and benefit
costs, including the impact of reinstating salaries and certain benefits of legacy Wesco employees that had been reduced or
suspended in the prior year in response to the COVID-19 pandemic.
Earnings per diluted share for 2021 was $7.84, based on 52.0 million diluted shares, compared to $1.51 for 2020, based on
46.6 million diluted shares. Adjusted for merger-related and integration costs, accelerated trademark amortization expense, net
gain on Canadian divestitures, a $36.6 million curtailment gain resulting from the remeasurement of our pension obligations in
the U.S. and Canada due to amending certain terms of such defined benefit plans, and the related income tax effects, earnings
per diluted share was $9.98 for 2021. Adjusted for merger-related and integration costs, merger-related fair value adjustments,
an out-of-period adjustment related to inventory absorption accounting, gain on sale of a U.S. operating branch, and the related
income tax effects, earnings per diluted share was $4.37 for 2020. Adjusted earnings per diluted share increased 128% year-
over-year.
We experienced a resurgence in demand from many of our customers during 2021. We also experienced some delays in
receiving products from our suppliers. We aggressively managed these supply chain issues, which included increasing
inventory levels to service our customers. We believe that these issues unfavorably impacted our net sales by approximately 1%
in 2021. Our industry and the broader economy are experiencing supply chain challenges, including product delays and
backlogged orders, shortages in raw materials and components, labor shortages, transportation challenges, and higher costs. We
anticipate that these supply chain challenges, as well as inflationary pressures, will extend into 2022. We intend to continue to
actively manage the impact of inflation on our results of operations. We cannot reasonably estimate possible future impacts at
this time.
Beginning in 2020, and continuing through 2021, the COVID-19 pandemic had a significant impact on our business, and
there continues to be ongoing uncertainties associated with the COVID-19 pandemic, including with respect to the economic
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conditions and possible resurgence of COVID-19, potential new variants of the virus, and the availability, effectiveness and
public acceptance of treatments and vaccines. As the duration and severity of the COVID-19 pandemic remain uncertain and
cannot be predicted, there is significant uncertainty as to the ultimate impact it will have on our business and our results of
operations and financial condition. Events and factors relating to the COVID-19 pandemic include limitations on the ability of
our suppliers to manufacture or procure the products we sell or to meet delivery requirements and commitments; disruptions to
our global supply chains; limitations on the ability of our employees to perform their work due to travel or other restrictions;
limitations on the ability of carriers to deliver our products to our customers; limitations on the ability of our customers to
conduct their business and purchase our products and services, or pay us on a timely basis; and disruptions to our customers’
purchasing patterns. In response to the COVID-19 pandemic, we have taken actions focused on protecting the health and safety
of our employees, which is our top priority.
The products and services that we provide are integral to the daily operations of our customers and accordingly, we have
taken actions to maintain the continuity of our operations in response to the pandemic. We have experienced, and may continue
to experience, fluctuations in customer demand for certain of our products and services, including changes in project plans or
timing due to circumstances affecting our customers, suppliers and other third parties. The full extent to which the COVID-19
pandemic will continue to impact our business and financial results going forward remains uncertain and will depend on many
factors outside of our control, including the duration and scope of the pandemic, the emergence and effects of potential new
variants, the availability of effective treatments and vaccines (including vaccine boosters), rates of vaccination, imposition of
protective public safety measures, the impact of vaccine mandates or other governmental actions, and the overall impact of the
COVID-19 pandemic on the global economy and capital markets.
Cash Flow
We generated $67.1 million of operating cash flow during 2021. Net cash provided by operating activities included net
income of $466.4 million and adjustments to net income totaling $132.2 million, which were primarily comprised of
depreciation and amortization of $198.6 million, deferred income taxes of $78.3 million, a gain on curtailment of defined
benefit pension plans of $36.6 million, as described in Note 14, "Employee Benefit Plans" of our Notes to Consolidated
Financial Statements, stock-based compensation expense of $30.8 million, amortization of debt discount and debt issuance
costs of $19.2 million, and a net gain of $8.9 million resulting from the divestiture of Wesco's legacy utility and data
communications businesses in Canada, as described in Note 6, "Acquisitions and Disposals" of our Notes to Consolidated
Financial Statements. Operating cash flow also included changes in assets and liabilities of $531.5 million, which were
primarily comprised of an increase in trade accounts receivable of $531.8 million resulting from significant sales growth and an
increase in inventories of $530.7 million to support increased customer demand while maintaining high service levels against
global supply chain challenges due to the pandemic, partially offset by an increase in accounts payable of $449.6 million due to
higher purchases of inventory.
Investing activities primarily included $56.0 million of net proceeds from the Canadian divestitures and $54.7 million of
capital expenditures mostly consisting of internal-use computer software and information technology hardware to support our
digital transformation initiatives, as well as equipment to support of the Company's global network of branches, warehouses and
sales offices.
Financing activities were primarily comprised of the redemption of our $500.0 million aggregate principal amount of
5.375% Senior Notes due 2021 (the "2021 Notes") and $354.7 million aggregate principal amount of our 5.375% Senior Notes
due 2024 (the "2024 Notes"), borrowings and repayments of $2,353.4 million and $2,006.4 million, respectively, related to our
revolving credit facility (the "Revolving Credit Facility"), and borrowings and repayments of $878.0 million and $558.0
million, respectively, related to our accounts receivable securitization facility (the "Receivables Facility"). Financing activities
for 2021 also included $57.4 million of dividends paid to holders of our Series A Preferred Stock, net repayments related to our
various international lines of credit of approximately $20.3 million, and $27.2 million of payments for taxes related to the
exercise and vesting of stock-based awards.
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Free cash flow for the years ended December 31, 2021 and 2020 was $93.5 million and $586.1 million, respectively.
The following table sets forth the components of free cash flow:
(In millions)
Cash flow provided by operations
Less: Capital expenditures
Add: Merger-related cash costs
Free cash flow
Twelve Months Ended
December 31,
2021
2020
$
$
67.1 $
(54.7)
81.2
93.5 $
543.9
(56.7)
98.8
586.1
Note: The table above reconciles cash flow provided by operations to free cash flow. Free cash flow is a non-GAAP financial 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 twelve months ended December 31, 2021 and 2020, we paid certain fees, expenses and other
costs related to Wesco's merger with Anixter. Such expenditures have been added back to operating cash flow to determine free cash flow
for such periods.
Free cash flow for the current year was lower than the prior year primarily due to changes in working capital, including an
increase in trade accounts receivable of $531.8 million resulting from the significant sales growth, an increase in inventories of
$530.7 million to support increased customer demand while maintaining high service levels against global supply chain
challenges due to the pandemic, partially offset by an increase in accounts payable of $449.6 million due to higher purchases of
inventory. Net working capital days improved approximately 6 days from the prior year-end driven by responsively managing
working capital in a high-growth, supply-constrained environment.
Financing Availability
On June 1, 2021, we amended our Receivables Facility to increase its borrowing capacity from $1,200 million to $1,300
million, extend its maturity date from June 22, 2023 to June 21, 2024, decrease its LIBOR floor from 0.50% to 0.00% and
decrease its interest rate spread from 1.20% to 1.15%. Borrowings under the amended accounts receivable securitization facility
and revolving credit facility were used to redeem our $350 million aggregate principal amount of our 2024 Notes, as described
in Note 10, "Debt" of our Notes to Consolidated Financial Statements.
As of December 31, 2021, we had $564.8 million in total available borrowing capacity under our Revolving Credit
Facility. Available borrowing capacity under our Receivables Facility was $30.0 million. The Revolving Credit Facility and the
Receivables Facility mature in June 2025 and June 2024, respectively.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States of
America (U.S. GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On
an ongoing basis, we evaluate our estimates that involve a significant level of estimation uncertainty and have had or are
reasonably likely to have a material impact on the financial condition or results of operations, including those related to
goodwill and indefinite-lived intangible assets, income taxes, and defined benefit pension plans. We base our estimates on
historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates. If actual market conditions are less favorable than those projected
by management, additional adjustments to reserve items may be required. We believe the following accounting estimates are
the most critical to the understanding of our consolidated financial statements as they require subjective or complex judgments
by management.
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Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are tested for impairment annually during the fourth quarter, or more
frequently if triggering events occur, indicating that their carrying values may not be recoverable. We test for goodwill
impairment on a reporting unit level. We first assess qualitative factors, including macroeconomic conditions, industry and
market considerations, cost factors, overall financial performance, other relevant events such as changes in key personnel,
changes in the composition or carrying amount of the net assets of a reporting unit, and changes in in share price, to determine
whether it is more likely than not that the fair value of our reporting units are less than their carrying values. If the qualitative
assessment indicates that the fair values of our reporting units may not exceed their respective carrying values, then we perform
a quantitative test for impairment by comparing the fair value of each reporting unit to its carrying value. We determine the fair
values of our reporting units using a discounted cash flow analysis and consideration of market multiples. The discounted cash
flow analysis uses certain assumptions, including expected operating margins supported by a combination of historical results,
current forecasts, market data and recent economic events, which are categorized within Level 3 of the fair value hierarchy. We
use a discount rate that reflects market participants' cost of capital. We evaluate the recoverability of indefinite-lived intangible
assets using the relief-from-royalty method based on projected financial information. Significant inputs used in the relief-from-
royalty method include projected revenues, discount rates, royalty rates, and applicable income tax rates.
We performed our annual impairment tests of goodwill and indefinite-lived intangible assets during the fourth quarter of
2021 by assessing qualitative factors to determine whether it was more likely than not that the fair values of our reporting units
and indefinite-lived intangible assets were less than their respective carrying amounts. As a result of this assessment, we
determined that it was more likely than not that the fair values of our reporting units and indefinite-lived intangible assets
continued to exceed their respective carrying amounts and, therefore, a quantitative impairment test was unnecessary.
The determination of fair value involves significant management judgment, particularly as it relates to the underlying
assumptions and factors around expected operating margins and discount rate. Management applies its best judgment when
assessing the reasonableness of financial projections. Fair values are sensitive to changes in underlying assumptions and factors.
As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and
indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results.
See Note 5, "Goodwill and Intangible Assets" of our Notes to Consolidated Financial Statements for additional disclosure
regarding goodwill and indefinite-lived intangible assets.
Defined Benefit Pension Plan
Liabilities and expenses for defined benefit pension plans are determined using actuarial methodologies and incorporate
significant assumptions, including the interest rate used to discount the future estimated cash flows, the expected long-term rate
of return on plan assets, and several assumptions relating to the employee workforce (salary increases, retirement age, and
mortality).
Liabilities for defined benefit pension plans are particularly sensitive to changes in the discount rate. At the end of each
fiscal year, we determine the discount rate to measure our defined benefit pension plan liabilities at their present value. The
discount rate reflects the current rate at which the defined benefit pension plan liabilities could be effectively settled at the end
of the year. This rate is estimated using a yield curve based on corporate bond data, which we believe is consistent with
observable market conditions and industry standards for developing spot rate curves. The consolidated weighted-average
discount rate used to measure the projected benefit obligation of all plans was 2.6% and 2.2% at December 31, 2021 and 2020,
respectively. As a sensitivity measure, the effect of a 50-basis-point decline in the assumed discount rate would result in a
negligible change in the expense for 2022, and an increase in our projected benefit obligations at December 31, 2021 of $69.0
million. The impact of a 50-basis-point increase in the assumed discount rate would result in a decrease in the expense for 2022
of approximately $4.0 million, and a decrease in our projected benefit obligations at December 31, 2021 of $61.0 million.
Changes in the expected long-term rate of return on plan assets and assumptions relating to the employee workforce are less
likely to have a material impact on the measurement of defined benefit pension plan liabilities.
See Note 14, "Employee Benefit Plans" of our Notes to Consolidated Financial Statements for additional disclosure
regarding defined benefit pension plans.
Income Taxes
We recognize deferred tax assets at amounts that are expected to be realized. To make such determination, management
evaluates all positive and negative evidence, including but not limited to, prior, current and future taxable income, tax planning
strategies and future reversals of existing taxable temporary differences. A valuation allowance is recognized if it is “more-
likely-than-not” that some or all of a deferred tax asset will not be realized. We regularly assess the realizability of deferred tax
assets.
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We account for uncertainty in income taxes using a "more-likely-than-not" recognition threshold. Due to the subjectivity
inherent in the evaluation of uncertain tax positions, the tax benefit ultimately recognized may materially differ from the
estimate recognized in the consolidated financial statements. We recognize interest and penalties related to uncertain tax
benefits as part of interest expense and income tax expense, respectively.
See Note 12, "Income Taxes" of our Notes to Consolidated Financial Statements for additional disclosure regarding income
taxes.
Results of Operations
The following table sets forth the percentage relationship to net sales of certain items in our Consolidated Statements of
Income and Comprehensive Income for the periods presented:
Net sales
Cost of goods sold (excluding depreciation and amortization)
Selling, general and administrative expenses
Depreciation and amortization
Income from operations
Interest expense, net
Other income, net
Income before income taxes
Provision for income taxes
Net income attributable to WESCO International, Inc.
Preferred stock dividends
Year Ended December 31,
2020
2019
2021
100.0 %
100.0 %
100.0 %
79.2
15.3
1.1
4.4
1.5
(0.3)
3.2
0.6
2.6
0.4
81.1
15.1
1.0
2.8
1.8
—
1.0
0.2
0.8
0.2
81.1
14.0
0.8
4.1
0.8
(0.1)
3.4
0.7
2.7
—
Net income attributable to common stockholders
2.2 %
0.6 %
2.7 %
2021 Compared to 2020
Net Sales
The following table sets forth net sales by segment for the periods presented:
(In thousands)
EES
CSS
UBS
Total net sales
Year Ended December 31,
2021
2020
$
$
7,621,263 $
5,715,238
4,881,011
18,217,512 $
5,479,760
3,323,264
3,522,971
12,325,995
Net sales were $18.2 billion for 2021 compared with $12.3 billion for 2020, an increase of 47.8%. The increase primarily
reflects the merger with Anixter, along with double-digit growth across all segments, as described below. For the year ended
December 31, 2021, pricing related to inflation favorably impacted our net sales by approximately 3%.
EES reported net sales of $7.6 billion for 2021, compared to $5.5 billion for 2020, an increase of 39.1%. In addition to the
impact from the Merger, the increase reflects improved economic conditions and strong demand.
CSS reported net sales of $5.7 billion for 2021, compared to $3.3 billion for 2020, an increase of 72.0%. The increase
reflects the impact of the Merger and broad-based growth in our security solutions and network infrastructure businesses.
UBS reported net sales of $4.9 billion for 2021, compared to $3.5 billion for 2020, an increase of 38.5%. Along with the
impact of the Merger, the increase reflects broad-based growth in our utility business and continued strong demand in our
broadband business.
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Cost of Goods Sold
Cost of goods sold for 2021 was $14.4 billion compared to $10.0 billion for 2020, an increase of $4.4 billion, reflecting the
merger with Anixter. Cost of goods sold as a percentage of net sales was 79.2% and 81.1% for 2021 and 2020, respectively.
The decrease of 190 basis points reflects strong execution on supplier price increases and cost initiatives to offset inflation,
along with higher supplier volume rebate income, partially offset by higher expense related to excess and obsolete inventories,
including write-downs totaling $26.2 million to the carrying value of certain personal protective equipment products. These
write-downs of inventory impacted cost of goods sold as a percentage of net sales for 2021 by 14 basis points. Cost of goods
sold as a percentage of net sales for 2020 was 80.6% excluding the effect of merger-related fair value adjustments of $43.7
million and an out-of-period adjustment related to inventory cost absorption accounting of $18.9 million.
Selling, General and Administrative Expenses
SG&A expenses primarily include payroll and payroll-related costs, shipping and handling, travel and entertainment,
facilities, utilities, information technology expenses, professional and consulting fees, credit losses, gains (losses) on the sale of
property and equipment, as well as real estate and personal property taxes. SG&A expenses for 2021 totaled $2.8 billion versus
$1.9 billion for 2020. As a percentage of net sales, SG&A expenses were 15.3% and 15.1%, respectively. The increase in
SG&A expenses of $932.6 million, or 50.2%, primarily reflects the impact of the merger with Anixter. SG&A expenses for
2021 were favorably impacted by the realization of integration synergies and structural cost takeout actions. SG&A expenses
for 2021 include merger-related and integration costs of $158.5 million, as well as a net gain of $8.9 million resulting from the
sale of Wesco's legacy utility and data communications businesses in Canada, which were divested during the first quarter of
2021 in connection with the Merger. Adjusted for these amounts, SG&A expenses were 14.5% of net sales for 2021. SG&A
expenses for 2020 include $132.2 million of merger-related and integration costs, 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 14.2% of net sales for 2020, reflecting
lower sales and the merger with Anixter, partially offset by cost reduction actions taken in response to the COVID-19 pandemic
that lowered SG&A expenses as a percentage of net sales by approximately 40 basis points.
SG&A payroll and payroll-related expenses for 2021 of $1.8 billion increased by $589.5 million compared to 2020
primarily due to the merger with Anixter. Excluding the impact of the Merger, SG&A payroll and payroll-related expenses in
the current year were negatively impacted by higher salaries, variable compensation expense and benefit costs, including the
impact of reinstating salaries and certain benefits for legacy Wesco employees that had been reduced or suspended in the prior
year in response to the COVID-19 pandemic.
SG&A expenses not related to payroll and payroll-related costs for 2021 were $991.1 million, an increase of $343.1 million
compared to 2020 primarily due to the merger with Anixter. Excluding the impact of the Merger, these SG&A expenses for the
current year were negatively impacted by higher professional and consulting fees, and information technology expenses
resulting from integration activities and digital transformation initiatives. Shipping and handling costs also increased in 2021
due to sales volume growth. The gain on the sale of an operating branch in the U.S., as described above, positively impacted
SG&A expenses in 2020.
Depreciation and Amortization
Depreciation and amortization increased $77.0 million to $198.6 million for 2021, compared to $121.6 million for 2020.
The current period includes $63.3 million attributable to the amortization of identifiable intangible assets acquired in the merger
with Anixter, as well as $32.0 million resulting from changes in the estimated useful lives of certain legacy trademarks that are
migrating to our master brand architecture, as described in Note 2, "Accounting Policies" of our Notes to Consolidated
Financial Statements. We expect to recognize approximately $10.0 million of amortization expense for trademarks migrating to
our master brand architecture in 2022 and $5.3 million thereafter.
Income from Operations
The following tables set forth income from operations by segment for the periods presented:
(In thousands)
Income from operations
(In thousands)
Income from operations
Year Ended December 31, 2021
EES
CSS
UBS
Corporate
Total
$ 542,059 $ 395,343 $ 412,740 $ (548,269) $ 801,873
Year Ended December 31, 2020
EES
CSS
UBS
Corporate
Total
$ 260,207 $ 217,163 $ 231,702 $ (362,034) $ 347,038
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Income from operations was $801.9 million for 2021, compared to $347.0 million for 2020. The increase of $454.8 million,
or 131.1%, primarily reflects the merger with Anixter. For 2021, income from operations improved compared to the prior year
across all segments and reflects sales growth and lower cost of goods sold as a percentage of net sales, as well as the realization
of integration cost synergies and structural cost takeout actions. Income from operations for 2021 was negatively impacted by
higher volume-related costs, and SG&A payroll and payroll-related expenses, as described above. Income from operations for
2021 was not materially effected by higher pricing related to inflation given the offsetting effect of higher costs for certain
products.
EES reported income from operations of $542.1 million for 2021, compared to $260.2 million for 2020. The increase of
$281.9 million primarily reflects the factors impacting the overall business, as described above. Additionally, income from
operations for 2021 was negatively impacted by $4.4 million from the inventory write-down described above, as well as
accelerated trademark amortization expense of $13.3 million associated with migrating to our master brand architecture.
CSS reported income from operations of $395.3 million for 2021, compared to $217.2 million for 2020. The increase of
$178.1 million primarily reflects the factors impacting the overall business, as described above. Additionally, income from
operations for 2021 was negatively impacted by $21.1 million from the inventory write-down described above, as well as
accelerated trademark amortization expense of $17.4 million associated with migrating to our master brand architecture.
UBS reported income from operations of $412.7 million for 2021, compared to $231.7 million for 2020. The increase of
$181.0 million primarily reflects the factors impacting the overall business, as described above, combined with the benefit from
the net gain on the Canadian divestitures.
Corporate, which primarily incurs costs related to treasury, tax, information technology, legal and other centralized
functions, had a loss from operations of $548.3 million for 2021, compared to $362.0 million for 2020. The increase of $186.3
million primarily reflects the merger with Anixter, as well as merger-related and integration costs, higher SG&A payroll and
payroll-related expenses, professional and consulting fees, and information technology expenses, as described above.
Interest Expense, net
Net interest expense totaled $268.1 million for 2021, compared to $226.6 million for 2020. The increase of $41.5 million, or
18.3%, was driven by financing activity related to the merger with Anixter. As a result of the redemption of our 2024 Notes and
amendment to the Receivables Facility, as described in Note 10, "Debt" of our Notes to Consolidated Financial Statements,
total interest expense was reduced by approximately $2.0 million in 2021, and is expected to be reduced by $18.0 million per
year thereafter based on current interest rates.
Other Income, net
Other non-operating income ("other income, net") totaled $48.1 million for 2021, compared to $2.4 million for 2020, an
increase of $45.7 million. As disclosed in Note 14, "Employee Benefit Plans" of our Notes to Consolidated Financial
Statements, we recognized net benefits of $53.2 million and $8.2 million associated with the non-service cost components of
net periodic pension (benefit) cost for 2021 and 2020, respectively. The non-service cost components of net periodic pension
(benefit) cost for 2021 includes a $36.6 million curtailment gain resulting from the remeasurement of our pension obligations in
the U.S. and Canada due to amending certain terms of such defined benefit plans. Due to fluctuations in the U.S. dollar against
certain foreign currencies, we recorded foreign currency exchange losses of $2.8 million and $4.9 million in 2021 and 2020,
respectively.
Income Taxes
The provision for income taxes was $115.5 million for 2021, compared to $22.8 million for 2020, resulting in an effective
tax rate of 19.9% and 18.6%, respectively. The effective tax rate for the current year was favorably impacted by a change in the
mix of domestic and foreign earnings, tax benefits related to certain foreign derived intangible income, and a reduction in the
valuation allowance recorded against certain foreign tax credit carryforwards. The effective tax rate in the prior year was
impacted by one-time items associated with the Anixter merger.
Net Income and Earnings per Share
Net income for 2021 was $466.4 million, compared to $100.0 million for 2020.
Net income attributable to noncontrolling interests was $1.0 million for 2021, compared to a net loss of $0.5 million for
2020.
Preferred stock dividends expense, which relates to the fixed-rate reset cumulative perpetual preferred stock, Series A, that
was issued in connection with the Merger, was $57.4 million for 2021 compared to $30.1 million for 2020.
Net income and earnings per diluted share attributable to common stockholders were $408.0 million and $7.84, respectively,
for 2021, compared with $70.4 million and $1.51, respectively, for 2020. Adjusted for merger-related and integration costs,
27
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accelerated trademark amortization expense, net gain on Canadian divestitures, gain on curtailment of defined benefit pension
plans, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were
$519.3 million and $9.98, respectively, for the year ended December 31, 2021. Adjusted for merger-related and integration
costs, merger-related fair value adjustments, an out-of-period adjustment related to inventory cost absorption accounting, gain
on sale of a U.S. operating branch, and the related income tax effects, net income and earnings per diluted share attributable to
common stockholders were $203.6 million and $4.37, respectively, for the year ended December 31, 2020.
The following tables reconcile income from operations, other non-operating income, provision for income taxes and
earnings per diluted share to adjusted income from operations, adjusted other non-operating income, adjusted provision for
income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:
Adjusted Income from Operations:
Income from operations
Merger-related and integration costs
Accelerated trademark amortization
Merger-related fair value adjustments
Out-of-period adjustment
Net gain on sale of assets and divestitures
Adjusted income from operations
Adjusted Other Income, net:
Other income, net
Curtailment gain
Adjusted other income, net
Adjusted Provision for Income Taxes:
Provision for income taxes
Income tax effect of adjustments to income from operations and other income, net(1)
Adjusted provision for income taxes
Year Ended December 31,
2021
2020
(In thousands)
$
801,873 $
158,484
32,021
—
—
347,038
132,236
—
43,693
18,852
(8,927)
(19,816)
$
983,451 $
522,003
Year Ended December 31,
2021
2020
(In thousands)
(48,112) $
(2,395)
36,580
—
(11,532) $
(2,395)
Year Ended December 31,
2021
2020
(In thousands)
115,510 $
33,672
149,182 $
22,803
41,817
64,620
$
$
$
$
(1) The adjustments to income from operations for the years ended December 31, 2021 and 2020 have been tax effected at rates of 23.5% and
23.9%, respectively. The adjustment to other-non operating income for the year ended December 31, 2021 has been tax effected at a rate
of 24.6% as the majority of the curtailment gain relates to our Canadian defined benefit pension plans.
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Adjusted Earnings Per Diluted Share:
(In thousands, except per share data)
Adjusted income from operations
Interest expense, net
Adjusted other income, net
Adjusted income before income taxes
Adjusted provision for income taxes
Adjusted net income
Year Ended December 31,
2021
2020
$
983,451 $
268,073
(11,532)
726,910
149,182
577,728
1,020
576,708
57,408
519,300 $
522,003
226,591
(2,395)
297,807
64,620
233,187
(521)
233,708
30,139
203,569
52,030
9.98 $
46,625
4.37
Net income (loss) attributable to noncontrolling interests
Adjusted net income attributable to WESCO International, Inc.
Preferred stock dividends
Adjusted net income attributable to common stockholders
Diluted shares
Adjusted earnings per diluted share
$
$
Note: For the year ended December 31, 2021, income from operations, other non-operating income, the provision for income taxes and
earnings per diluted share have been adjusted to exclude merger-related and integration costs, a net gain on the sale of Wesco's legacy utility
and data communications businesses in Canada, accelerated trademark amortization expense associated with migrating to our master brand
architecture, a curtailment gain resulting from the remeasurement of our pension obligations in the U.S. and Canada due to amending certain
terms of such defined benefit plans, and the related income tax effects. For the year ended December 31, 2020, income from operations, the
provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related and integration costs, merger-related
fair value adjustments, an out-of-period adjustment related to inventory cost absorption accounting, a 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 our financial results on a
comparable basis.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin %
The following tables reconcile net income attributable to common stockholders to EBITDA, adjusted EBITDA and adjusted
EBITDA margin % by segment, which are non-GAAP financial measures, for the periods presented:
(In thousands)
Net income attributable to common stockholders
Net income attributable to noncontrolling
interests
Preferred stock dividends
Provision for income taxes
Interest expense, net
Year Ended December 31, 2021
EES
CSS
UBS
Corporate
Total
$ 543,633 $ 394,031 $ 412,698 $ (942,388) $ 407,974
298
—
—
—
—
—
—
—
—
—
—
—
722
57,408
115,510
268,073
37,239
1,020
57,408
115,510
268,073
198,554
Depreciation and amortization
55,998
82,870
22,447
EBITDA
$ 599,929 $ 476,901 $ 435,145 $ (463,436) $ 1,048,539
Other (income) expense, net(1)
Stock-based compensation expense(2)
Merger-related and integration costs
Net gain on Canadian divestitures
(1,872)
6,404
—
—
1,312
2,607
—
—
42
2,107
—
(8,927)
(47,594)
(48,112)
14,581
25,699
158,484
158,484
—
(8,927)
Adjusted EBITDA
$ 604,461 $ 480,820 $ 428,367 $ (337,965) $ 1,175,683
Adjusted EBITDA margin %
6.5 %
7.9 %
(1) Corporate other non-operating income in the calculation of adjusted EBITDA for the year ended December 31, 2021 includes a
$36.6 million curtailment gain resulting from the remeasurement of our pension obligations in the U.S. and Canada due to amending
certain terms of such defined benefit plans.
8.4 %
8.8 %
(2) Stock-based compensation expense in the calculation of adjusted EBITDA for the year ended December 31, 2021 excludes
$5.1 million as such amount is included in merger-related and integration costs.
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Year Ended December 31, 2020
(In thousands)
EES
CSS
UBS
Corporate
Total
Net income attributable to common stockholders
$ 262,829 $ 217,211 $ 231,678 $ (641,297) $
70,421
Net loss attributable to noncontrolling interests
(842)
Preferred stock dividends
Provision for income taxes
Interest expense, net
—
—
—
—
—
—
—
—
—
—
—
Depreciation and amortization
35,811
37,765
22,380
321
30,139
22,803
226,591
25,644
(521)
30,139
22,803
226,591
121,600
EBITDA
$ 297,798 $ 254,976 $ 254,058 $ (335,799) $ 471,033
Other (income) expense, net
Stock-based compensation expense(3)(4)
Merger-related and integration costs
Merger-related fair value adjustments
Out-of-period adjustment(3)
Gain on sale of asset
(1,780)
4,080
—
15,411
12,634
(19,816)
(48)
1,403
—
22,000
2,325
—
24
1,336
—
6,282
3,893
—
(591)
(2,395)
9,895
16,714
132,236
132,236
—
—
—
43,693
18,852
(19,816)
Adjusted EBITDA
$ 308,327 $ 280,656 $ 265,593 $ (194,259) $ 660,317
Adjusted EBITDA margin %
5.4 %
5.6 %
(3) Stock-based compensation and the out-of-period adjustment by reportable segment for the year ended December 31, 2020, as
previously reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, have been reallocated to
conform to the current period's presentation.
7.5 %
8.4 %
(4) Stock-based compensation expense in the calculation of adjusted EBITDA for the year ended December 31, 2020 excludes
$2.6 million as such amount is included in merger-related and integration costs.
Note: EBITDA, Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of our
performance and our ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and other non-operating expenses (income), non-cash stock-
based compensation, costs and fair value adjustments associated with the merger with Anixter, an out-of-period adjustment related to
inventory cost absorption accounting, and net gains on the divestiture of Wesco's legacy utility and data communications businesses in
Canada and sale of an operating branch in the U.S. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.
2020 Compared to 2019
Net Sales
The following table sets forth net sales by segment for the periods presented:
(In thousands)
EES
CSS
UBS
Total net sales
Year Ended December 31,
2020
2019
$
$
5,479,760 $
3,323,264
3,522,971
12,325,995 $
4,860,541
909,496
2,588,880
8,358,917
Net sales were $12.3 billion in 2020 compared with $8.4 billion in 2019, an increase of 47.5% due to the merger with
Anixter that was completed on June 22, 2020, partially offset by the impact of weakened demand from the COVID-19
pandemic.
EES reported net sales of $5.5 billion in 2020, compared to $4.9 billion in 2019, an increase of 12.7%. The increase reflects
the impact of the merger with Anixter, partially offset by weakened global demand in construction and industrial markets due to
local and government shutdowns associated with the COVID-19 pandemic, as well as related disruptions to our suppliers and
customers that have caused delays to projects.
CSS reported net sales of $3.3 billion in 2020, compared to $0.9 billion in 2019, an increase of 265.4%. The increase
reflects the impact of the merger with Anixter. The COVID-19 pandemic had an overall negative impact on CSS sales, although
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certain customers and end users are considered essential businesses that saw higher demand such as telecommunications service
providers stemming from an increased need for bandwidth products.
UBS reported net sales of $3.5 billion in 2020, compared to $2.6 billion in 2019, an increase of 36.1%. The increase reflects
the impact of the merger with Anixter. The COVID-19 pandemic had a limited impact on UBS sales as the primary customers
in this segment are public power and investor owned utilities, which are considered essential business and have maintained
normal operations.
Cost of Goods Sold
Cost of goods sold for 2020 was $10.0 billion, compared to $6.8 billion for 2019. Cost of goods sold as a percentage of net
sales was 81.1% in both 2020 and 2019. Cost of goods sold for 2020 includes merger-related fair value adjustments of
$43.7 million, as well as an out-of-period adjustment of $18.9 million related to inventory absorption accounting. Adjusted for
these amounts, cost of goods sold as a percentage of net sales for 2020 was 80.6%.
Selling, General and Administrative Expenses
SG&A expenses primarily include costs associated with personnel, shipping and handling, travel, advertising, facilities,
utilities and credit losses. SG&A expenses for 2020 were $1.9 billion, an increase of $685.9 million, or 58.5%, from 2019.
SG&A expenses as a percentage of net sales increased to 15.1% in 2020 from 14.0% in 2019. SG&A expenses for 2020 include
merger-related costs of $132.2 million, as well as a gain on the sale of a U.S. operating branch of $19.8 million. Adjusted for
these amounts, SG&A expenses for 2020 were $1.7 billion, or 14.2% of net sales, reflecting the merger with Anixter and lower
sales, partially offset by cost reduction actions taken in response to the COVID-19 pandemic. SG&A expenses for 2019 include
$3.1 million of merger-related costs.
SG&A payroll expenses for 2020 of $1.2 billion increased by $398.1 million compared to 2019 primarily due to the merger
with Anixter. Excluding the impact of the Merger, SG&A payroll expenses were down $35.0 million due to lower salaries and
wages, variable compensation expense and benefit costs resulting from the reduction or suspension of salaries and certain
benefits for legacy Wesco employees in response to the COVID-19 pandemic.
The remaining SG&A expenses for 2020 of $648.0 million increased by $287.8 million compared to 2019. The increase in
the remaining SG&A expenses was primarily due to the impact of the merger with Anixter.
Depreciation and Amortization
Depreciation and amortization increased $59.5 million to $121.6 million in 2020, compared with $62.1 million in 2019.
Depreciation and amortization for 2020 includes $33.0 million of amortization attributable to identifiable intangible assets
acquired in the merger with Anixter.
Income from Operations
The following tables set forth income from operations by segment for the periods presented:
(In thousands)
Income from operations
(In thousands)
Income from operations
Year Ended December 31, 2020
EES
CSS
UBS
Corporate
Total
$ 260,207 $ 217,163 $ 231,702 $ (362,034) $ 347,038
Year Ended December 31, 2019
EES
CSS
UBS
Corporate
Total
$ 261,788 $
43,835 $ 184,931 $ (144,337) $ 346,217
EES reported income from operations of $260.2 million in 2020, compared to $261.8 million in 2019. The decrease reflects
lower demand caused by the COVID-19 pandemic, offset by the merger with Anixter and cost reduction actions taken in
response to the lower demand.
CSS reported income from operations of $217.2 million in 2020, compared to $43.8 million in 2019. The increase reflects
the impact of the merger with Anixter. The benefits of cost reduction actions taken in response to the COVID-19 pandemic, as
well as operating synergies resulting from the business combination, had a favorable impact on income from operations.
UBS reported income from operations of $231.7 million in 2020, compared to $184.9 million in 2019. The increase reflects
the impact of the merger with Anixter. The impact of the COVID-19 pandemic on the UBS segment was limited as many of its
primary customers are public power and investor owned utilities that are considered essential businesses and have maintained
normal operations.
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Corporate, which primarily incurs costs related to treasury, tax, information technology, legal and other centralized
functions, had a loss from operations of $362.0 million in 2020, compared to $144.3 million in 2019. The increase reflects the
merger with Anixter and merger-related costs, as described above, partially offset by lower SG&A payroll expenses resulting
from the reduction or suspension of salaries and certain benefits for legacy Wesco employees in response to the COVID-19
pandemic.
Interest Expense, net
Interest expense, net totaled $226.6 million in 2020, compared with $65.7 million in 2019, an increase of 244.8%. The
increase in interest expense was driven by financing activity related to the merger with Anixter.
Other, net
Other non-operating income ("other, net") totaled $2.4 million in 2020, compared to $1.6 million in 2019.
Income Taxes
Our effective tax rate was 18.6% in 2020 compared to 21.2% in 2019. The lower effective tax rate in 2020 as compared to
2019 was primarily due to one-time impacts from the merger with Anixter.
Net Income and Earnings per Share
Net income for 2020 was $100.0 million, compared to $222.2 million in 2019.
Net loss attributable to noncontrolling interests in 2020 and 2019 was $0.5 million and $1.2 million, respectively.
Preferred stock dividends expense of $30.1 million in 2020 relates to the fixed-rate reset cumulative perpetual preferred
stock, Series A, that was issued in connection with the Merger.
Net income and earnings per diluted share attributable to common stockholders were $70.4 million and $1.51 per diluted
share, respectively, in 2020, compared with $223.4 million and $5.14 per diluted share, respectively, in 2019. Adjusted for the
items mentioned above, net income and earnings per diluted share attributable to common stockholders were $203.6 million
and $4.37 per diluted share, respectively, for the year ended December 31, 2020. Adjusted net income and adjusted earnings per
diluted share attributable to common stockholders were $225.9 million and $5.20 per share, respectively, for the year ended
December 31, 2019.
The following tables reconcile income from operations, provision for income taxes and earnings per diluted share to
adjusted income from operations, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-
GAAP financial measures, for the periods presented:
Adjusted Income from Operations:
Income from operations
Merger-related and integration costs
Merger-related fair value adjustments
Out-of-period adjustment
Gain on sale of asset
Adjusted income from operations
Adjusted Provision for Income Taxes:
Provision for income taxes
Income tax effect of adjustments to income from operations(1)
Adjusted provision for income taxes
Year Ended December 31,
2020
2019
(In thousands)
$
347,038 $
346,217
132,236
43,693
18,852
(19,816)
3,130
—
—
—
$
522,003 $
349,347
Year Ended December 31,
2020
2019
(In thousands)
22,803 $
59,863
41,817
664
64,620 $
60,527
$
$
(1) The adjustments to income from operations have been tax effected at rates of 23.9% and 21.2% for the years ended December 31, 2020
and 2019, respectively.
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Adjusted Earnings Per Diluted Share:
(In thousands, except per share data)
Adjusted income from operations
Interest expense, net
Other, net
Adjusted income before income taxes
Adjusted provision for income taxes
Adjusted net income
Net loss attributable to noncontrolling interests
Adjusted net income attributable to WESCO International, Inc.
Preferred stock dividends
Year Ended December 31,
2020
2019
$
522,003 $
349,347
226,591
(2,395)
297,807
64,620
233,187
(521)
233,708
30,139
65,710
(1,554)
285,191
60,527
224,664
(1,228)
225,892
—
Adjusted net income attributable to common stockholders
$
203,569 $
225,892
Diluted shares
Adjusted earnings per diluted share
46,625
$
4.37 $
43,487
5.20
Note: For the twelve months ended December 31, 2020, income from operations, the provision for income taxes and earnings per diluted
share have been adjusted to exclude merger-related and integration costs, merger-related fair value adjustments, an out-of-period adjustment
related to inventory absorption accounting, gain on sale of a U.S. operating branch, and the related income tax effects. For the twelve months
ended December 31, 2019, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to
exclude merger-related costs, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our
financial results on a comparable basis.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin %
The following tables reconcile net income attributable to common stockholders to EBITDA, adjusted EBITDA and adjusted
EBITDA margin % by segment, which are non-GAAP financial measures, for the periods presented:
Year Ended December 31, 2020
(In thousands)
EES
CSS
UBS
Corporate
Total
Net income attributable to common stockholders
$ 262,829 $ 217,211 $ 231,678 $ (641,297) $
70,421
Net loss attributable to noncontrolling interests
(842)
Preferred stock dividends
Provision for income taxes
Interest expense, net
—
—
—
—
—
—
—
—
—
—
—
Depreciation and amortization
35,811
37,765
22,380
321
30,139
22,803
226,591
25,644
(521)
30,139
22,803
226,591
121,600
EBITDA
$ 297,798 $ 254,976 $ 254,058 $ (335,799) $ 471,033
Other (income) expense, net
Stock-based compensation expense(1)(2)
Merger-related and integration costs
Merger-related fair value adjustments
Out-of-period adjustment(1)
Gain on sale of asset
(1,780)
4,080
—
15,411
12,634
(19,816)
(48)
1,403
—
22,000
2,325
—
24
1,336
—
6,282
3,893
—
(591)
(2,395)
9,895
16,714
132,236
132,236
—
—
—
43,693
18,852
(19,816)
Adjusted EBITDA
$ 308,327 $ 280,656 $ 265,593 $ (194,259) $ 660,317
Adjusted EBITDA margin %
5.4 %
5.6 %
(1) Stock-based compensation and the out-of-period adjustment by reportable segment for the year ended December 31, 2020, as previously
reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, have been reallocated to conform to the
current period's presentation.
8.4 %
7.5 %
(2) Stock-based compensation expense in the calculation of adjusted EBITDA for the year ended December 31, 2020 excludes $2.6 million
as such amount is included in merger-related and integration costs.
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Year Ended December 31, 2019
(In thousands)
EES
CSS
UBS
Corporate
Total
Net income attributable to common stockholders
$ 264,570 $
43,835 $ 184,931 $ (269,910) $ 223,426
Net loss attributable to noncontrolling interests
(1,228)
Provision for income taxes
Interest expense, net
—
—
—
—
—
—
—
—
Depreciation and amortization
28,569
7,155
13,583
—
(1,228)
59,863
65,710
12,800
59,863
65,710
62,107
EBITDA
Other income, net
Stock-based compensation expense
Merger-related costs
Adjusted EBITDA
$ 291,911 $
50,990 $ 198,514 $ (131,537) $ 409,878
(1,554)
1,116
—
—
77
—
—
231
—
—
17,638
3,130
(1,554)
19,062
3,130
$ 291,473 $
51,067 $ 198,745 $ (110,769) $ 430,516
Adjusted EBITDA margin %
6.0 %
5.6 %
7.7 %
5.2 %
Note: EBITDA, Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of our
performance and our ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and other non-operating expenses (income), non-cash stock-
based compensation, merger-related and integration costs, merger-related fair value adjustments, an out-of-period adjustment related to
inventory absorption accounting, and gain on sale of a U.S. operating branch. Adjusted EBITDA margin % is calculated by dividing Adjusted
EBITDA by net sales.
Liquidity and Capital Resources
Our liquidity needs generally arise from fluctuations in our working capital requirements, information technology
investments, capital expenditures, acquisitions and debt service obligations. As of December 31, 2021, we had $564.8 million
in available borrowing capacity under our Revolving Credit Facility, after giving effect to outstanding letters of credit and
certain borrowings under the Company's international lines of credit, and $30.0 million in available borrowing capacity under
our Receivables Facility, which combined with available cash of $69.6 million, provided liquidity of $664.4 million. Cash
included in our determination of liquidity represents cash in certain deposit and interest bearing investment accounts. We
monitor the depository institutions that hold our cash and cash equivalents on a regular basis, and we believe that we have
placed our deposits with creditworthy financial institutions.
We regularly review our mix of fixed versus variable rate debt, and we may, from time to time, issue or retire borrowings
and/or refinance existing debt in an effort to mitigate the impact of interest rate and foreign exchange rate fluctuations, and to
maintain a cost-effective capital structure consistent with our anticipated capital requirements. At December 31, 2021,
approximately 60% of our debt portfolio was comprised of fixed rate debt.
Since the merger with Anixter, we have used cash and the net proceeds from the divestiture of Wesco's legacy utility and
data communications businesses in Canada to reduce our debt, net of cash, by approximately $357.2 million. Over the next
several quarters, it is expected that excess liquidity will be directed primarily at debt reduction, merger-related integration
activities and potential acquisitions, and we expect to maintain sufficient liquidity through our credit facilities and cash
balances. We believe cash provided by operations and financing activities will be adequate to cover our operational and
business needs for at least the next twelve months.
We communicate on a regular basis with our lenders regarding our financial and working capital performance, and liquidity
position. We were in compliance with all financial covenants and restrictions contained in our debt agreements as of
December 31, 2021.
We also measure our ability to meet our debt obligations based on our financial leverage ratio, which was 3.9 as of
December 31, 2021 and, on a pro forma basis, 5.3 as of December 31, 2020.
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The following table sets forth our financial leverage ratio, which is a non-GAAP financial measure, for the periods
presented:
Twelve months ended
December 31, 2021 December 31, 2020
Reported
Pro Forma(1)
(In millions of dollars, except ratios)
Net income attributable to common stockholders
$
408.0 $
Net income (loss) attributable to noncontrolling interests
Preferred stock dividends
Provision for income taxes
Interest expense, net
Depreciation and amortization
EBITDA
Other (income) expense, net(2)
Stock-based compensation
Merger-related costs and fair value adjustments
Out-of-period adjustment
Net gain on sale of assets and Canadian divestitures
Adjusted EBITDA(3)
1.0
57.4
115.5
268.1
198.5
1,048.5 $
(48.1)
25.7
158.5
—
(8.9)
1,175.7 $
$
$
115.6
(0.5)
30.1
55.7
255.8
153.5
610.2
4.6
34.7
206.7
18.9
(19.8)
855.3
December 31, 2021
December 31, 2020
Short-term debt and current portion of long-term debt, net
$
Long-term debt, net
Debt discount and debt issuance costs(4)
Fair value adjustments to Anixter Senior Notes due 2023 and 2025(4)
Total debt
Less: Cash and cash equivalents
Total debt, net of cash
9.5 $
4,701.5
70.6
(0.9)
4,780.7
212.6
$
4,568.1 $
528.8
4,370.0
88.2
(1.7)
4,985.3
449.1
4,536.2
Financial leverage ratio
3.9
5.3
(1) EBITDA and adjusted EBITDA for the twelve months ended December 31, 2020 gives effect to the combination of Wesco and
Anixter as if it had occurred at the beginning of the respective trailing twelve month period.
(2) Other non-operating income for the year ended December 31, 2021 includes a $36.6 million curtailment gain resulting from the
remeasurement of our pension obligations in the U.S and Canada due to amending certain terms of such defined benefit plans.
(3) Adjusted EBITDA includes the financial results of Wesco’s legacy utility and data communications businesses in Canada, which were
divested in the first quarter of 2021 under a Consent Agreement with the Competition Bureau of Canada.
(4) Debt is presented in the 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 ratio is a non-GAAP measure of the use of debt. Financial leverage ratio is calculated by dividing total debt,
excluding debt discount, debt issuance costs and fair value adjustments, less cash and cash equivalents, 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 (income), non-cash stock-based
compensation, costs and fair value adjustments related to the merger with Anixter, an out-of-period adjustment related to inventory
absorption accounting, and net gains on the divestiture of Wesco's legacy utility and data communications businesses in Canada and sale
of an operating branch in the U.S.
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The undistributed earnings of our foreign subsidiaries amounted to approximately $1,851.6 million at December 31, 2021.
Most of these earnings have been taxed in the U.S. under either the one-time tax on the deemed repatriation of undistributed
foreign earnings (the "transition tax"), or the GILTI tax regime imposed by the Tax Cuts and Jobs Act of 2017. Future
distributions of previously taxed earnings by our foreign subsidiaries should, therefore, result in minimal U.S. taxation. We
have elected to pay the transition tax in installments over eight years. As of December 31, 2021, our liability for the transition
tax was $60.7 million. We continue to assert that the remaining undistributed earnings of our foreign subsidiaries are
indefinitely reinvested. The distribution of earnings by our foreign subsidiaries in the form of dividends, or otherwise, may be
subject to additional taxation. We estimate that additional taxes of approximately $82.2 million would be payable upon the
remittance of all previously undistributed foreign earnings as of December 31, 2021, based upon the laws in effect on that date.
We believe that we are able to maintain sufficient liquidity for our domestic operations and commitments without repatriating
cash from our foreign subsidiaries.
We finance our operating and investing needs primarily with borrowings under our Revolving Credit Facility, Receivables
Facility, as well as uncommitted lines of credit entered into by certain of our foreign subsidiaries to support local operations,
some of which are overdraft facilities. The Revolving Credit Facility has a borrowing limit of $1,200 million and the purchase
limit under the Receivables Facility is $1,300 million. As of December 31, 2021, we had $597.0 million and $1,270.0 million
outstanding under the Revolving Credit Facility and Receivables Facility, respectively. The maximum borrowing limits of our
international lines of credit vary by facility and range between $0.6 million and $31.0 million. Our international lines of credit
generally are renewable on an annual basis and certain facilities are fully and unconditionally guaranteed by Wesco
Distribution. Accordingly, certain borrowings under these lines directly reduce availability under our Revolving Credit Facility.
As of December 31, 2021, we had $7.4 million outstanding under our international lines of credit.
On June 1, 2021, we amended our Receivables Facility to increase its borrowing capacity from $1,200 million to $1,300
million, extend its maturity date from June 22, 2023 to June 21, 2024, decrease its LIBOR floor from 0.50% to 0.00% and
decrease its interest rate spread from 1.20% to 1.15%. Borrowings under the amended accounts receivable securitization facility
and revolving credit facility were used to redeem the $350 million aggregate principal amount of our 2024 Notes, as described
below.
In an effort to lower our cost of borrowing, on January 14, 2021 and July 2, 2021, we redeemed the $500 million aggregate
principal amount of our 2021 Notes and $350 million aggregate principal amount of our 2024 Notes, respectively. These
redemptions were funded with available cash, as well as borrowings under our Receivables Facility and Revolving Credit
Facility.
On June 12, 2020, we issued $1,500 million aggregate principal amount of 7.125% Senior Notes due 2025 (the “2025
Notes”) and $1,325 million aggregate principal amount of 7.250% Senior Notes due 2028 (the “2028 Notes” and, together with
the 2025 Notes, the “Notes”). We used the net proceeds from the issuance of the Notes, together with borrowings under our
Revolving Credit Facility and Receivables Facility and existing cash on hand, to finance the Merger and the other transactions
contemplated by the Merger Agreement.
On April 30, 2020, in connection with the Merger, we simultaneously entered into tender offers and consent solicitations
with respect to Anixter Inc.’s then outstanding $350.0 million aggregate principal amount of 5.50% Senior Notes due 2023 (the
“Anixter 2023 Senior Notes”), and $250.0 million aggregate principal amount of 6.00% Senior Notes due 2025 (the “Anixter
2025 Senior Notes” and, together with the Anixter 2023 Senior Notes, the "Anixter Senior Notes"). Upon expiration and
settlement of the tender offers and consent solicitations, $62.8 million in aggregate principal amount of the Anixter Senior
Notes remain outstanding.
For additional disclosure regarding our debt instruments, including our outstanding indebtedness as of December 31, 2021,
see Note 10, "Debt" of our Notes to Consolidated Financial Statements.
An analysis of cash flows for 2021 and 2020 follows:
Operating Activities
Net cash provided by operating activities for 2021 totaled $67.1 million, compared with $543.9 million of cash generated in
2020. Net cash provided by operating activities included net income of $466.4 million and adjustments to net income totaling
$132.2 million, which were primarily comprised of depreciation and amortization of $198.6 million, deferred income taxes of
$78.3 million, a gain on curtailment of defined benefit pension plans of $36.6 million, as described in Note 14, "Employee
Benefit Plans" of our Notes to Consolidated Financial Statements, stock-based compensation expense of $30.8 million,
amortization of debt discount and debt issuance costs of $19.2 million, and a net gain of $8.9 million resulting from the
divestiture of Wesco's legacy utility and data communications businesses in Canada, as described in Note 6, "Acquisitions and
Disposals" of our Notes to Consolidated Financial Statements. Other sources of cash in 2021 were generated from an increase
in accounts payable of $449.6 million due to higher purchases of inventory, an increase in other current and noncurrent
liabilities of $190.3 million, and an increase in accrued payroll and benefit costs of $84.2 million due to higher incentive
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compensation accruals. Primary uses of cash in 2021 included an increase in trade accounts receivable of $531.8 million
resulting from significant sales growth, an increase in inventories of $530.7 million to support increased customer demand, an
increase in other receivables of $136.7 million associated with higher supplier volume rebate income accruals and an increase in
other current and noncurrent assets of $56.3 million.
Net cash provided by operating activities for 2020 totaled $543.9 million, compared with $224.4 million of cash generated
in 2019. Cash provided by operating activities included net income of $100.0 million and adjustments to net income totaling
$113.7 million. Other sources of cash in 2020 were generated from a decrease in inventories of $203.8 million, an increase in
other current and noncurrent liabilities of $78.2 million, an increase in accrued payroll and benefit costs of $75.6 million, and a
decrease in trade accounts receivable of $47.9 million. Primary uses of cash in 2020 included a decrease in accounts payable of
$54.1 million and an increase in other current and noncurrent assets of $21.2 million.
Investing Activities
Net cash provided by investing activities in 2021 was $2.5 million, compared to $3,735.1 million of net cash used in 2020.
Included in 2021 was $56.0 million of net proceeds from the Canadian divestitures, as described in Note 6, "Acquisitions and
Disposals" of our Notes to Consolidated Financial Statements. Capital expenditures were $54.7 million in 2021, compared to
$56.7 million in 2020. Proceeds from the sale of assets were $5.2 million and $6.7 million in 2021 and 2020, respectively.
Other investing activities in 2021 included $3.9 million of cash outflows.
Net cash used in investing activities in 2020 was $3,735.1 million, compared with $60.8 million in 2019. Included in 2020
was $3.7 billion to fund a portion of the merger with Anixter, as described in Note 6, "Acquisitions and Disposals" of our Notes
to Consolidated Financial Statements. In 2019, we made payments of $27.6 million to acquire Sylvania Lighting Solutions
("SLS"). Capital expenditures were $56.7 million in 2020, compared to $44.1 million in 2019. Proceeds from the sale of assets
were $6.7 million and $16.8 million in 2020 and 2019, respectively. Other investing activities in 2020 included $22.4 million of
cash inflows.
Financing Activities
Net cash used in financing activities in 2021 was $310.8 million, compared with $3,480.7 million of net cash provided by
financing activities for 2020. During 2021, financing activities primarily consisted of the redemption of the $500.0 million and
$354.7 million aggregate principal amount of our 2021 Notes and 2024 Notes, respectively, borrowings and repayments of
$2,353.4 million and $2,006.4 million, respectively, related to our Revolving Credit Facility, and borrowings and repayments of
$878.0 million and $558.0 million, respectively, related to our Receivables Facility. Financing activities for 2021 also included
$57.4 million of dividends paid to holders of our Series A Preferred Stock, net repayments related to our various international
lines of credit of approximately $20.3 million, and $27.2 million of payments for taxes related to the exercise and vesting of
stock-based award.
Net cash provided by financing activities in 2020 was $3,480.7 million, compared with $109.8 million of net cash used in
financing activities for 2019. During 2020, financing activities consisted of $2,815.0 million of net proceeds from the issuance
of senior unsecured notes to finance a portion of the merger with Anixter, borrowings and repayments of $1.2 billion and
$948.0 million, respectively, related to our prior and new revolving credit facilities, as well as borrowings and repayments of
$1.1 billion and $565.0 million, respectively, related to our prior and amended accounts receivable securitization facilities.
Financing activities for 2020 also included net repayments related to our various international lines of credit of $9.7 million,
$80.2 million of debt issuance costs associated with financing the merger with Anixter, and $30.1 million of dividends paid to
holders of our Series A Preferred Stock.
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The following table summarizes our material cash requirements from known contractual and other obligations at
December 31, 2021, including interest, and the expected effect on our liquidity and cash flow in future periods.
(In millions)
Debt, excluding debt discount and debt issuance costs $
Interest on indebtedness(1)
Non-cancelable operating leases
Transition tax installments
Defined benefit pension plans(2)
Total
2022
2023 to 2024
2025 to 2026
2027 - After
Total
9.5 $
1,337.7 $ 2,107.5 $
1,325.9 $
4,780.6
231.4
152.9
4.4
10.8
409.0 $
$
450.0
220.5
19.7
—
250.4
113.7
36.6
—
2,027.9 $ 2,508.2 $
144.1
136.1
—
—
1,606.1 $
1,075.9
623.2
60.7
10.8
6,551.2
(1) Interest on variable rate debt was calculated using the rates and balances outstanding at December 31, 2021.
(2) As disclosed in Note 14, "Employee Benefit Plans" of our Notes to Consolidated Financial Statements, the majority of our various defined
benefit pension plans are non-contributory and, with the exception of the U.S. and Canada, cover substantially all full-time employees in
their respective countries. Retirement benefits are provided based on compensation as defined in the plans. Our policy is to fund these
plans as required by the Employee Retirement Income Security Act, the Internal Revenue Service and local statutory law. We currently
estimate that we will contribute $10.8 million to our foreign pension plans in 2022. Due to the future impact of various market conditions,
rates of return and changes in plan participants, we cannot provide a meaningful estimate of our future contributions beyond 2022.
In addition to the cash requirements disclosed in the table above, we expect future uses of cash to include working capital
requirements, capital expenditures, investments in our digital capabilities, costs to integrate the operations of Wesco and
Anixter and achieve the anticipated synergies of the Merger, dividend payments to holders of our Series A Preferred Stock,
benefit payments to participants in our deferred compensation plan, and other organic opportunities. Future uses of cash could
also include acquisitions of businesses and the repurchase of common or preferred stock. We expect to spend approximately
$45 million in 2022 on capital expenditures for information technology investments and to support our global network of
branches, warehouses and sales offices.
We expect to fund future uses of cash with a combination of existing cash balances, cash generated from operating
activities, borrowings under our revolving credit and accounts receivable securitization facilities, or new issuances of debt.
Purchase orders for inventory requirements and service contracts are not included in the table above. Generally, our
purchase orders and contracts contain clauses allowing for cancellation. We do not have significant agreements to purchase
material or goods that would specify minimum order quantities.
Liabilities related to unrecognized tax benefits, including interest and penalties, of $118.2 million were excluded from the
table above as we cannot reasonably estimate the timing of these potential cash settlements with taxing authorities. See Note 12,
"Income Taxes" in our Notes to Consolidated Financial Statements for further information related to unrecognized tax benefits.
Seasonality
Our operating results are not significantly affected by seasonal factors. Sales during the first and fourth quarters are usually
affected by a reduced level of activity due to the impact of weather on projects. Sales typically increase beginning in March,
with slight fluctuations per month through October. During periods of economic expansion or contraction, our sales by quarter
have varied significantly from this pattern.
Impact of Recently Issued Accounting Standards
See Note 2, "Accounting Policies" of the Notes to Consolidated Financial Statements for information regarding the effect of
new accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Foreign Currency Risks
Approximately 28% of our sales in 2021 were from our foreign subsidiaries and are denominated in foreign currencies. Our
exposure to currency rate fluctuations primarily relate to Canada (Canadian dollar), certain countries in the European Union
(euro), the United Kingdom (British pound), Sweden (Swedish krona), Switzerland (Swiss franc), and Australia (dollar). We
also have exposure to currency rate fluctuations related to more volatile markets including Argentina (peso), Brazil (real), Chile
(peso), Colombia (peso), Mexico (peso), and Turkey (lira). We may establish additional foreign subsidiaries in the future.
Accordingly, we may derive a larger portion of our sales from international operations, and a portion of these sales may be
denominated in foreign currencies. As a result, our future operating results could be subject to further fluctuations in foreign
exchange rates relative to the U.S. dollar. Furthermore, to the extent that we engage in international sales denominated in U.S.
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dollars, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in
international markets.
We purchase foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated
accounts on our reported earnings. The foreign currency forward contracts are not designated as hedges for accounting
purposes. At December 31, 2021 and 2020, the gross and net notional amounts of foreign currency forward contracts
outstanding were approximately $188.6 million and $111.9 million, respectively. We prepared a sensitivity analysis of our
foreign currency forward contracts assuming a 10% adverse change in the value of foreign currency contracts outstanding. The
hypothetical adverse changes would have resulted in recording a $18.9 million and $11.2 million loss in 2021 and 2020,
respectively. However, since these forward contracts are intended to be effective economic hedges, we would record offsetting
gains as a result of the remeasurement of the underlying foreign currency denominated monetary amounts being hedged.
Interest Rate Risk
Fixed Rate Borrowings: As of December 31, 2021, approximately 60% of our debt portfolio is comprised of fixed rate debt.
As our Anixter 2023 Senior Notes, 2025 Notes, Anixter 2025 Senior Notes and 2028 Notes were issued at fixed rates, interest
expense would not be impacted by interest rate fluctuations. However, the fair value of our fixed rate debt will generally
fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of
increasing rates of interest. The fair value of our debt instruments with fixed interest rates is disclosed in Note 4, "Fair Value of
Financial Instruments" of our Notes to Consolidated Financial Statements.
Floating Rate Borrowings: Our variable rate borrowings are comprised of the Revolving Credit Facility, the Receivables
Facility, and international lines of credit. The fair value of these debt instruments at December 31, 2021 approximated carrying
value. We borrow under our Revolving Credit Facility and Receivables Facility for general corporate purposes, including
working capital requirements and capital expenditures. Borrowings under our Revolving Credit Facility bear interest at the
applicable LIBOR / CDOR (Canadian Dealer Offered Rate) or base rates plus applicable spreads, whereas borrowings under the
Receivables Facility bear interest at the 30-day LIBOR rate, plus applicable spreads. A 100 basis point rise or decline in interest
rates would result in an increase or decrease to interest expense of $18.9 million and $2.2 million, respectively, under our
current capital structure.
In July 2017, the United Kingdom’s Financial Conduct Authority (the authority that regulates LIBOR) announced that it
would no longer persuade, or compel, banks to submit to LIBOR as of the end of 2021. The Alternative Reference Rates
Committee has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative reference rate. The
interest rate terms of our Receivables Facility and Revolving Credit Facility are LIBOR-based. We expect to transition to
SOFR-based interest rate terms for these facilities in 2022, and we do not expect the use of SOFR in place of LIBOR for such
facilities to have a material impact on our results from operations. We will continue to actively assess the related opportunities
and risks involved in this transition.
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Item 8. Financial Statements and Supplementary Data.
The information required by this item is set forth in our Consolidated Financial Statements contained in this Annual Report
on Form 10-K. Specific financial statements can be found at the pages listed below:
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Income and Comprehensive Income for the years ended
December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
PAGE
41
43
44
45
46
47
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of WESCO International, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of WESCO International, Inc. and its subsidiaries (the
“Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income and comprehensive income,
of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the
related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31,
2021 appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the
Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
As described in Note 2 to the consolidated financial statements, the Company’s revenue arrangements generally consist of
single performance obligations to transfer a promised good or service, or combination of goods and services. Revenue is
measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing
services. Revenue is recognized when control has transferred to the customer, which is generally when the product has shipped
from the Company’s facility or directly from a supplier. For the year ended December 31, 2021, the Company’s net sales were
$18,218 million.
The principal consideration for our determination that performing procedures relating to revenue recognition is a critical audit
matter is the significant audit effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition process. These procedures also included, among others, for certain components, evaluating revenue
transactions on a sample basis by inspecting evidence of consideration received in exchange for transferring goods, and for
other components, (i) evaluating revenue transactions by testing the issuance and settlement of invoices and credit memos, (ii)
tracing transactions not settled to a detailed listing of accounts receivable, (iii) confirming a sample of outstanding customer
invoice balances at year end and obtaining and inspecting source documents, including invoices, sales contracts, and subsequent
cash receipts, where applicable, for confirmations not returned, and (iv) testing the completeness and accuracy of data provided
by management.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 25, 2022
We have served as the Company’s auditor since 1994.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Current assets:
Assets
Cash and cash equivalents
Trade accounts receivable, net of allowance for expected credit losses of $41,723 and
$23,909 in 2021 and 2020, respectively
Other receivables
Inventories
Prepaid expenses and other current assets
Total current assets
Property, buildings and equipment, net
Operating lease assets
Intangible assets, net
Goodwill
Deferred income taxes
Other assets
Assets held for sale
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued payroll and benefit costs
Short-term debt and current portion of long-term debt, net of debt issuance costs of $1,039
in 2020
Other current liabilities
Total current liabilities
Long-term debt, net of debt discount and debt issuance costs of $70,572 and $87,142 in
2021 and 2020, respectively
Operating lease liabilities
Deferred income taxes
Other noncurrent liabilities
Liabilities held for sale
Total liabilities
Commitments and contingencies (Note 16)
Stockholders’ Equity:
As of December 31,
2021
2020
(In thousands, except per share data)
$
212,583 $
449,135
2,957,613
375,885
2,666,219
137,811
6,350,111
379,012
530,863
1,944,141
3,208,333
34,191
171,048
—
2,466,903
239,199
2,163,831
187,910
5,506,978
399,157
534,705
2,065,495
3,187,169
37,696
93,941
55,073
$ 12,617,699 $ 11,880,214
$
2,140,251 $
314,962
1,707,329
198,535
9,528
585,067
3,049,808
4,701,542
414,248
437,444
238,446
—
$
8,841,488 $
528,830
552,301
2,986,995
4,369,953
414,889
488,261
278,010
5,717
8,543,825
—
—
676
Preferred stock, $.01 par value; 20,000,000 shares authorized, no shares issued or
outstanding
$
— $
Preferred stock, Series A, $.01 par value; 25,000 shares authorized, 21,612 shares issued
and outstanding in 2021 and 2020, respectively
Common stock, $.01 par value; 210,000,000 shares authorized, 68,162,297 and 67,596,515
shares issued and 50,474,806 and 50,064,985 shares outstanding in 2021 and 2020,
respectively
Class B nonvoting convertible common stock, $.01 par value; 20,000,000 shares
authorized, 4,339,431 issued and no shares outstanding in 2021 and 2020, respectively
Additional capital
Retained earnings
Treasury stock, at cost; 22,026,922 and 21,870,961 shares in 2021 and 2020, respectively
Accumulated other comprehensive loss
Total WESCO International, Inc. stockholders' equity
Noncontrolling interests
Total stockholders’ equity
Total liabilities and stockholders’ equity
—
682
43
1,969,332
3,004,690
(956,188)
(236,035)
3,782,524
43
1,942,810
2,601,662
(938,335)
(263,134)
3,343,722
(7,333)
3,336,389
$ 12,617,699 $ 11,880,214
3,776,211
(6,313)
The accompanying notes are an integral part of the consolidated financial statements.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Net sales
Cost of goods sold (excluding depreciation and amortization)
Selling, general and administrative expenses
Depreciation and amortization
Income from operations
Interest expense, net
Other income, net (Note 14)
Income before income taxes
Provision for income taxes
Net income
Less: Net income (loss) attributable to noncontrolling interests
Net income attributable to WESCO International, Inc.
Less: Preferred stock dividends
Year Ended December 31,
2021
2020
2019
(In thousands, except per share data)
$ 18,217,512 $ 12,325,995 $
8,358,917
14,425,444
2,791,641
198,554
801,873
268,073
9,998,329
1,859,028
121,600
347,038
226,591
(48,112)
(2,395)
581,912
115,510
466,402
1,020
465,382
57,408
122,842
22,803
100,039
(521)
100,560
30,139
6,777,456
1,173,137
62,107
346,217
65,710
(1,554)
282,061
59,863
222,198
(1,228)
223,426
—
Net income attributable to common stockholders
$
407,974 $
70,421 $
223,426
Other comprehensive (loss) income:
Foreign currency translation adjustments
Post-retirement benefit plan adjustments, net of tax
(15,584)
42,683
95,577
9,061
49,306
(8,643)
Comprehensive income attributable to common stockholders
$
435,073 $
175,059 $
264,089
Earnings per share attributable to common stockholders
Basic
Diluted
$
$
8.11 $
7.84 $
1.53 $
1.51 $
5.18
5.14
The accompanying notes are an integral part of the consolidated financial statements.
44
Stock-based compensation expense
Repurchases of common stock
Tax withholding related to vesting of
restricted stock units and
retirement of common stock
Noncontrolling interests
Net income attributable to Wesco
Translation adjustments
Benefit plan adjustments, net of tax
effect of $2,943
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common Stock
Class B
Common Stock
Series A
Preferred Stock
Additional
Retained
Earnings
Treasury Stock
Noncontrolling
Accumulated
Other
Comprehensive
Income
(In thousands)
Amount
Shares
Amount
Shares
Amount
Shares
Capital
(Deficit)
Amount
Shares
Interests
(Loss)
Balance, December 31, 2018
$
592
59,157,696 $
43
4,339,431 $ —
— $
993,666 $ 2,307,462 $ (758,018) (18,391,042) $
(5,584) $
(408,435)
Exercise of stock-based awards
1
198,985
(84)
19,062
28,901
(238)
(3,730)
(178,901)
(3,455,584)
—
(48,663)
(2,198)
(459)
223,426
(1,228)
49,306
(8,643)
Balance, December 31, 2019
$
593
59,308,018 $
43
4,339,431 $ —
— $ 1,039,347 $ 2,530,429 $ (937,157) (21,850,356) $
(6,812) $
(367,772)
Exercise of stock-based awards
1
171,517
Stock-based compensation expense
Tax withholding related to vesting of
restricted stock units and
retirement of common stock
Capital stock issuance
Noncontrolling interests
Net income attributable to Wesco
Preferred stock dividends
Translation adjustments
Benefit plan adjustments, net of tax
effect of $2,891
—
82
(33,248)
8,150,228
—
21,612
(1,178)
(20,605)
(40)
19,279
(2,377)
886,601
812
100,560
(30,139)
(521)
95,577
9,061
Balance, December 31, 2020
$
676
67,596,515 $
43
4,339,431 $ —
21,612 $ 1,942,810 $ 2,601,662 $ (938,335) (21,870,961) $
(7,333) $
(263,134)
Exercise of stock-based awards
7
662,261
(43)
30,821
(17,853)
(155,961)
Stock-based compensation expense
Tax withholding related to vesting of
restricted stock units and
retirement of common stock
Noncontrolling interests
Net income attributable to Wesco
Preferred stock dividends
Translation adjustments
Benefit plan adjustments, net of tax
effect of $13,043
(1)
(96,479)
(4,256) 7
(4,946)
465,382
(57,408)
1,020
(15,584)
42,683
Balance, December 31, 2021
$
682
68,162,297 $
43
4,339,431 $ —
21,612 $ 1,969,332 $ 3,004,690 $ (956,188) (22,026,922) $
(6,313) $
(236,035)
The accompanying notes are an integral part of the consolidated financial statements.
45
Table of Contents
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Amortization of debt discount and debt issuance costs
Gain on curtailment of defined benefit pension plans
Gain on sale of assets and divestitures, net
Other operating activities, net
Deferred income taxes
Changes in assets and liabilities:
Trade accounts receivable, net
Other receivables
Inventories
Other current and noncurrent assets
Accounts payable
Accrued payroll and benefit costs
Other current and noncurrent liabilities
Net cash provided by operating activities
Investing Activities:
Capital expenditures
Acquisition payments, net of cash acquired
Proceeds from sale of assets and divestitures
Proceeds from sale of property, buildings and equipment
Other investing activities, net
Net cash provided by (used in) investing activities
Financing Activities:
Repayments of short-term debt, net
Repayment of 5.375% Senior Notes due 2021
Repayment of 5.375% Senior Notes due 2024
Proceeds from issuance of long-term debt
Repayments of long-term debt
Payments for taxes related to net-share settlement of equity awards
Repurchases of common stock
Debt issuance costs
Payment of dividends
Other financing activities, net
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period
Supplemental disclosures:
Cash paid for interest
Cash paid for taxes
2021
Year Ended December 31,
2020
(In thousands)
2019
$
466,402 $
100,039 $
222,198
198,554
30,821
19,197
(36,580)
(8,927)
7,406
(78,285)
(531,828)
(136,659)
(530,730)
(56,274)
449,564
84,204
190,273
67,138
(54,746)
—
56,010
5,221
(3,948)
2,537
121,600
19,279
10,578
—
(19,816)
15,604
(33,538)
47,879
(23,520)
203,827
2,321
(54,127)
75,556
78,249
543,931
(56,671)
(3,707,575)
19,066
6,721
3,310
(3,735,149)
62,107
19,062
3,578
—
—
(14,753)
13,205
11,453
130
(47,297)
(28,915)
23,505
(39,081)
(825)
224,367
(44,067)
(27,597)
—
16,795
(5,931)
(60,800)
(20,313)
(500,000)
(354,704)
3,231,443
(2,565,142)
(27,158)
—
(2,280)
(57,408)
(15,217)
(310,779)
4,552
(236,552)
449,135
212,583 $
(11,258)
—
—
5,114,210
(1,513,048)
(2,901)
—
(80,231)
(30,139)
4,108
3,480,741
8,710
298,233
150,902
449,135 $
(29,780)
—
—
1,305,421
(1,217,434)
(3,049)
(150,000)
(2,707)
—
(12,217)
(109,766)
758
54,559
96,343
150,902
249,654 $
118,183
169,620 $
56,186
65,275
64,531
$
$
The accompanying notes are an integral part of the consolidated financial statements.
46
Table of Contents
1. ORGANIZATION
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WESCO International, Inc. ("Wesco International") and its subsidiaries (collectively, “Wesco” or the "Company"),
headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and
supply chain solutions.
The Company has operating segments that are organized around three strategic business units consisting of Electrical &
Electronic Solutions ("EES"), Communications & Security Solutions ("CSS") and Utility & Broadband Solutions ("UBS"). The
Company's operating segments are described further in Note 17, "Business Segments".
2. ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Wesco International and all of its subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation.
Out-of-Period Adjustment
In the fourth quarter of 2020, management determined that the Company’s inventories were overstated by $60.3 million
because of a misstatement in inventory cost absorption accounting, which occurred over multiple periods and also impacted
inventories acquired in business combinations during those periods. Accordingly, the Consolidated Balance Sheet at December
31, 2020 reflects a reduction to inventories of $60.3 million, an increase to goodwill of $33.9 million and a decrease to deferred
income tax liabilities of $12.0 million. The resulting effect of the out-of-period adjustment on the Consolidated Statement of
Income and Comprehensive Income for the year ended December 31, 2020 was a $18.9 million increase to cost of goods sold,
which decreased net income for the year by $14.4 million. Management concluded that this misstatement was not material to
the prior year or the financial statements of any previously filed annual or interim periods.
Change in Estimates
During the second quarter of 2021, the Company established a new corporate brand strategy that will result in migrating
certain legacy sub-brands to a master brand architecture. The Company accounts for the trademarks associated with these sub-
brands as intangible assets. As of December 31, 2020, $39.1 million of the trademarks impacted by the master brand strategy
had indefinite lives and $9.5 million had remaining estimated useful lives ranging from 3 to 8 years. As disclosed further below,
the Company continually evaluates whether events or circumstances have occurred that would require a change to the estimated
useful lives of indefinite-lived and definite lived intangible assets. When such a change is warranted, the remaining carrying
amount of the intangible asset is amortized prospectively over the revised remaining useful life. Accordingly, during the second
quarter of 2021, the Company changed the estimated useful lives of the trademarks affected by the new corporate brand strategy
to coincide with the expected period of time to migrate such sub-brands to the master brand architecture. The Company
assigned remaining estimated useful lives to these trademarks, including those that previously had indefinite lives, ranging from
less than one year to 5 years. The Company assessed these intangible assets for impairment prior to amortizing them over their
revised estimated remaining useful lives. No impairment losses were identified as a result of these tests. For the year ended
December 31, 2021, the Company recognized $32.0 million of amortization expense resulting from these changes in estimated
useful lives.
Reclassifications
The Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019, respectively, include certain
reclassifications to previously reported amounts to conform to the current period's presentation. Such reclassifications had no
impact on the totals of operating, investing and financing cash flow activities for those years.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of
America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Although these estimates are based on management’s best knowledge of current events
and actions Wesco may undertake in the future, actual results may ultimately differ from the estimates.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Revenue Recognition
Wesco’s revenue arrangements generally consist of single performance obligations to transfer a promised good or service, or
a combination of goods and services. Revenue is measured as the amount of consideration Wesco expects to receive in
exchange for transferring goods or providing services. Revenue is recognized when control has transferred to the customer,
which is generally when the product has shipped from a Wesco facility or directly from a supplier. However, transfer may occur
at a later date depending on the agreed upon terms, such as delivery at the customer's designated location, or based on
consignment terms. For products that ship directly from suppliers to customers, Wesco acts as the principal in the transaction
and recognizes revenue on a gross basis. When providing services, sales are recognized over time as control transfers to the
customer, which occurs as services are rendered. Wesco generally satisfies its performance obligations within a year or less.
Wesco generally does not have significant financing terms associated with its contractual arrangements; payments are
normally received within 60 days. There are generally no significant costs associated with obtaining customer contracts. Wesco
typically passes through warranties offered by manufacturers or suppliers to its customers. Sales taxes (and value added taxes in
foreign jurisdictions) collected from customers and remitted to governmental authorities are excluded from net sales.
Supplier Volume Rebates
Wesco receives volume rebates from certain suppliers based on contractual arrangements with such suppliers. Volume
rebates are included within other receivables in the Consolidated Balance Sheets, and represent the estimated amounts due to
Wesco based on forecasted purchases and the rebate provisions of the various supplier contracts. The corresponding rebate
income is recorded as a reduction to cost of goods sold. Receivables under the supplier rebate program were $219.1 million at
December 31, 2021 and $136.7 million at December 31, 2020. The supplier volume rebate income as a percentage of net sales
was 1.4% in 2021, 1.1% in 2020 and 1.2% in 2019.
Cash Equivalents
Cash equivalents are defined as highly liquid investments with original maturities of 90 days or less when purchased.
Allowance for Expected Credit Losses
Wesco recognizes expected credit losses resulting from the inability of its customers to make required payments through an
allowance account that is measured each reporting period. Wesco estimates credit losses over the life of its trade accounts
receivable using a combination of historical loss data, current credit conditions, specific customer circumstances, and
reasonable and supportable forecasts of future economic conditions. The allowance for expected credit losses was $41.7 million
at December 31, 2021 and $23.9 million at December 31, 2020. The total amount recorded as selling, general and
administrative expense related to credit losses was $12.9 million, $10.1 million and $7.0 million for 2021, 2020 and 2019,
respectively.
Inventories
Inventories primarily consist of merchandise purchased for resale and are stated at the lower of cost and net realizable value.
Cost is determined principally under the average cost method. Wesco reduces the carrying value of its inventories at the earlier
of identifying an item that is considered to be obsolete or in excess of supply relative to demand, or no movement in a
prescribed number of months. Reserves for excess and obsolete inventories were $50.3 million and $28.7 million at
December 31, 2021 and 2020, respectively. The total expense related to excess and obsolete inventories, which is included in
cost of goods sold, was $37.1 million, $15.7 million and $10.0 million for 2021, 2020 and 2019, respectively.
Property, Buildings and Equipment
Property, buildings and equipment are recorded at cost. Depreciation expense is determined using the straight-line method
over the estimated useful lives of the assets. Leasehold improvements are amortized over either their respective lease terms or
their estimated lives, whichever is shorter. Estimated useful lives range from five to forty years for buildings and leasehold
improvements and two to ten years for furniture, fixtures and equipment.
Costs incurred during the application development stage of internally developed software are capitalized and are reported at
the lower of unamortized cost or net realizable value. Costs incurred during the preliminary project and post-implementation
stages are expensed as incurred. Capitalized costs include external direct costs of materials and services consumed in
developing internal-use computer software, payroll and payroll-related costs for employees who are directly associated with and
who devote time to the internal-use computer software project, as well as interest costs. Internal-use computer software is
amortized using the straight-line method over its estimated useful life, typically three to seven years.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Expenditures for new facilities and improvements that extend the useful life of an asset are capitalized. Ordinary repairs and
maintenance are expensed as incurred. When property is retired or otherwise disposed, the cost and the related accumulated
depreciation are removed from the accounts and any resulting gains or losses are recorded and reported as selling, general and
administrative expenses.
Of Wesco’s $379.0 million net book value of property, buildings and equipment as of December 31, 2021, $133.6 million
consists of land, buildings and leasehold improvements that are geographically dispersed among Wesco’s 800 branches,
warehouses and sales offices, mitigating the risk of impairment. Wesco assesses its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of any such assets may not be fully recoverable. Changes
in circumstances include technological advances, changes in the business model, capital structure, economic conditions or
operating performance. The evaluation is based upon, among other things, utilization, serviceability and assumptions developed
by management, which are categorized as Level 3 of the fair value hierarchy, related to the estimated future undiscounted cash
flows that these assets are expected to generate. When the sum of the undiscounted cash flows is less than the carrying value of
the asset (asset group), an impairment loss is recognized to the extent that carrying value exceeds fair value. Management
applies its best judgment when performing these evaluations.
Leases
The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement.
Classification and initial measurement of the right-of-use asset and lease liability are determined at the lease commencement
date. The Company elected the short-term lease measurement and recognition exemption; therefore, leases with an initial term
of 12 months or less are not recorded on the balance sheet. Operating lease expense is recognized on a straight-line basis over
the lease term.
Operating lease assets and liabilities are recognized at the commencement date based on the present value of the future
minimum lease payments. Certain leases contain rent escalation clauses that are either fixed or adjusted periodically for
inflation or market rates and such clauses are factored into the Company's determination of lease payments. Wesco also has
variable lease payments that do not depend on a rate or index, primarily for items such as common area maintenance and real
estate taxes, which are recorded as variable expense when incurred. The operating lease asset includes advance payments and
excludes incentives and initial direct costs incurred.
The Company's arrangements include certain non-lease components such as common area and other maintenance for leased
real estate, as well as mileage, fuel and maintenance costs related to leased automobiles and trucks. Wesco accounts for these
non-lease components separately from the associated lease components. The Company does not guarantee any residual value in
its lease agreements, and there are no material restrictions or covenants imposed by lease arrangements. Real estate leases
typically include one or more options to extend the lease, or terminate early. The Company regularly evaluates the renewal
options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. For most
of Wesco’s leases, the discount rate implicit in the lease is not readily determinable. Accordingly, the Company uses its
incremental borrowing rate based on the information available at the lease commencement date to discount lease payments to
the present value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are tested for impairment annually during the fourth quarter, or more
frequently if triggering events occur, indicating that their carrying value may not be recoverable. Wesco tests for goodwill
impairment on a reporting unit level. The Company first assesses qualitative factors, including macroeconomic conditions,
industry and market considerations, cost factors, overall financial performance, other relevant events such as changes in key
personnel, changes in the composition or carrying amount of the net assets of a reporting unit, and changes in in share price, to
determine whether it is more likely than not that the fair value of Wesco's reporting units are less than their carrying values. If
the qualitative assessment indicates that the fair values of the Company's reporting units may not exceed their respective
carrying values, then Wesco performs a quantitative test for impairment by comparing the fair value of each reporting unit to its
carrying value. The Company determines the fair values of its reporting units using a discounted cash flow analysis and
consideration of market multiples. The discounted cash flow analysis uses certain assumptions, including expected operating
margins supported by a combination of historical results, current forecasts, market data and recent economic events, which are
categorized within Level 3 of the fair value hierarchy. The Company uses a discount rate that reflects market participants' cost
of capital. Wesco evaluates the recoverability of indefinite-lived intangible assets using the relief-from-royalty method based on
projected financial information. Significant inputs used in the relief-from-royalty method include projected revenues, discount
rates, royalty rates, and applicable income tax rates. At December 31, 2021 and 2020, goodwill and indefinite-lived trademarks
totaled $4.0 billion.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The determination of fair value involves significant management judgment, particularly as it relates to the underlying
assumptions and factors around expected operating margins and discount rate. Management applies its best judgment when
assessing the reasonableness of financial projections. Fair values are sensitive to changes in underlying assumptions and factors.
As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and
indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results.
Definite Lived Intangible Assets
Definite lived intangible assets are amortized over 1 to 20 years. Certain customer relationships are amortized using an
accelerated method whereas all other definite lived intangible assets subject to amortization use a straight-line method. In either
case, the amortization method reflects the pattern in which the economic benefits of the respective assets are consumed or
otherwise used. Wesco continually evaluates whether events or circumstances have occurred that would indicate the remaining
estimated useful lives of definite lived intangible assets require revision or that the remaining carrying value of such assets may
not be recoverable.
Insurance Programs
Wesco uses commercial insurance for auto, workers’ compensation, casualty and health claims, and information technology
as a risk-reduction strategy to minimize catastrophic losses. The Company’s strategy involves large deductible policies where
Wesco must pay all costs up to the deductible amount. Wesco estimates the reserve for these programs based on historical
incident rates and costs. The assumptions included in developing this accrual include the period of time between the incurrence
and payment of a claim. The total liability related to insurance programs was $30.6 million and $27.9 million at December 31,
2021 and 2020, respectively.
Income Taxes
Wesco accounts for income taxes under the asset and liability method, which requires the recognition of deferred income
taxes for events that have future tax consequences. Under this method, deferred income taxes are recognized (using enacted tax
laws and rates) based on the future income tax effects of differences in the carrying amounts of assets and liabilities for
financial reporting and tax purposes. The effect of a tax rate change on deferred tax assets and liabilities is recognized in
income in the period of change.
Wesco recognizes deferred tax assets at amounts that are expected to be realized. To make such determination, management
evaluates all positive and negative evidence, including but not limited to, prior, current and future taxable income, tax planning
strategies and future reversals of existing taxable temporary differences. A valuation allowance is recognized if it is “more-
likely-than-not” that some or all of a deferred tax asset will not be realized. Wesco regularly assesses the realizability of
deferred tax assets.
Wesco accounts for uncertainty in income taxes using a "more-likely-than-not" recognition threshold. Due to the
subjectivity inherent in the evaluation of uncertain tax positions, the tax benefit ultimately recognized may materially differ
from the estimate recognized in the consolidated financial statements. Wesco recognizes interest and penalties related to
uncertain tax benefits as part of interest expense and income tax expense, respectively.
The Tax Cuts and Jobs Act of 2017 (the “TCJA”) imposed a one-time tax on the deemed repatriation of undistributed
foreign earnings (the “transition tax”). Except for a portion of foreign earnings previously taxed in the U.S. that can effectively
be distributed without further material U.S. or foreign taxation, the Company continues to assert that the undistributed earnings
of its foreign subsidiaries are indefinitely reinvested. To the extent the earnings of the Company's foreign subsidiaries are
distributed in the form of dividends, such earnings may be subject to additional taxes. The Company believes that it is able to
maintain a sufficient level of liquidity for its domestic operations and commitments without incurring any material tax cost to
repatriate cash held by its foreign subsidiaries.
The provisions of the TCJA also introduced U.S. taxation on certain global intangible low-taxed income ("GILTI"). Wesco
has elected to account for GILTI tax as a component of income tax expense.
Foreign Currency
The local currency is the functional currency for most of the Company's operations outside the U.S. Assets and liabilities of
these operations are translated to U.S. dollars at the exchange rate in effect at the end of each period. Income statement accounts
are translated at an exchange rate that approximates the average for the period. Translation adjustments arising from the use of
differing exchange rates from period to period are included as a component of other comprehensive income (loss) within
stockholders’ equity. Gains and losses from foreign currency transactions are included in net income for the period.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Defined Benefit Pension Plan
Liabilities and expenses for defined benefit pension plans are determined using actuarial methodologies and incorporate
significant assumptions, including the interest rate used to discount the future estimated cash flows, the expected long-term rate
of return on plan assets, and several assumptions relating to the employee workforce (salary increases, retirement age, and
mortality). Unrealized gains and losses related to the Company's defined benefit pension obligations are recognized as a
component of other comprehensive income (loss) within stockholders' equity. Gains or losses resulting from plan amendments,
curtailments, and settlements are recognized as a component of other non-operating income and expenses ("other, net") in the
period of the remeasurement.
Fair Value of Financial Instruments
The Company measures the fair value of assets and liabilities on a recurring and nonrecurring basis according to a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs. The three levels of the fair value hierarchy are as
follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at
the measurement date; Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, and
Level 3 inputs are unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own
assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to measurements involving significant unobservable inputs (Level 3).
The Company measures the fair values of goodwill, intangible assets and property, buildings and equipment on a
nonrecurring basis if required by impairment tests applicable to these assets, as described above.
Other, net
Other non-operating income and expenses ("other, net") primarily includes the non-service cost components of net periodic
pension cost (benefit) and foreign exchange gains and losses.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU")
2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the
general principles of Accounting Standards Codification ("ASC") Topic 740, Income Taxes, and simplifies other aspects of
accounting for income taxes. The amendments in this ASU were effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2020. Early adoption was permitted in any interim or annual period, with any
adjustments reflected as of the beginning of the fiscal year of adoption. The Company adopted this ASU in the first quarter of
2021. The adoption of this guidance did not have a material impact on the consolidated financial statements and notes thereto
presented herein.
Recently Issued Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a
business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC Topic
606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. The amendments in this ASU are
effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Management is
currently evaluating the impact that the adoption of this accounting standard will have on its consolidated financial statements
and notes thereto.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden
in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this Update are
effective for all entities as of March 12, 2020 through December 31, 2022. Management does not expect the replacement of
London Interbank Offered Rate (LIBOR) and the related adoption of the optional guidance under this accounting standard to
have a material impact on the Company's consolidated financial statements and notes thereto.
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are
either not applicable or are not expected to be significant to Wesco’s financial position, results of operations or cash flows.
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3. REVENUE
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Wesco distributes products and provides services to customers globally in various end markets within its business segments.
The segments, which consist of EES, CSS, and UBS operate in the United States, Canada and various other international
countries.
The following tables disaggregate Wesco’s net sales by segment and geography for the periods presented:
(In thousands)
2021
2020
2019
Electrical & Electronic Solutions
$
7,621,263 $
5,479,760 $
Communications & Security Solutions
Utility & Broadband Solutions
5,715,238
4,881,011
3,323,264
3,522,971
Total by segment
$
18,217,512 $
12,325,995 $
4,860,541
909,496
2,588,880
8,358,917
Year Ended December 31,
(In thousands)
United States
Canada
Other International(1)
Total by geography(2)
Year Ended December 31,
2021
2020
2019
$
13,157,866 $
9,110,453 $
2,747,187
2,312,459
1,892,321
1,323,221
$
18,217,512 $
12,325,995 $
6,234,119
1,647,066
477,732
8,358,917
(1) No individual country's net sales are greater than 10% of total net sales.
(2) Wesco attributes revenues from external customers to individual countries on the basis of point of sale.
Due to the terms of certain contractual arrangements, Wesco bills or receives payment from its customers in advance of
satisfying the respective performance obligation. Such advance billings or payments are recorded as deferred revenue and
recognized as revenue when the performance obligation has been satisfied and control has transferred to the customer, which is
generally upon shipment. Deferred revenue is usually recognized within a year or less from the date of the advance billing or
payment. At December 31, 2021 and 2020, $35.5 million and $24.3 million, respectively, of deferred revenue was recorded as a
component of other current liabilities in the Consolidated Balance Sheets.
The Company also has certain long-term contractual arrangements where revenue is recognized over time based on the cost-
to-cost input method. As of December 31, 2021 and 2020, the Company had contract assets of $33.4 million and $19.4 million,
respectively, resulting from contracts where the amount of revenue recognized exceeded the amount billed to the customer.
Contract assets are recorded in the Consolidated Balance Sheets as a component of prepaid expenses and other current assets.
Wesco’s revenues are adjusted for variable consideration, which includes customer volume rebates, returns and discounts.
Wesco measures variable consideration by estimating expected outcomes using analysis and inputs based upon historical data,
as well as current and forecasted information. Variable consideration is reviewed by management on a monthly basis and
revenue is adjusted accordingly. Variable consideration reduced revenue for the years ended December 31, 2021, 2020 and
2019 by approximately $433.4 million, $269.5 million and $106.6 million, respectively. As of December 31, 2021 and 2020,
the Company's estimated product return obligation was $38.8 million and $38.9 million, respectively.
Billings to customers for shipping and handling are recognized in net sales. Wesco has elected to recognize shipping and
handling costs as a fulfillment cost. Shipping and handling costs recorded as a component of selling, general and administrative
expenses totaled $248.3 million, $149.3 million and $71.7 million for the years ended December 31, 2021, 2020 and 2019,
respectively.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, accounts payable,
bank overdrafts, outstanding indebtedness, foreign currency forward contracts, and benefit plan assets. The fair value of the
Company's benefit plan assets is disclosed in Note 14, "Employee Benefit Plans" and except for outstanding indebtedness and
foreign currency forward contracts, the carrying value of the Company’s remaining financial instruments approximates fair
value.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The Company uses a market approach to determine the fair value of its debt instruments, utilizing quoted prices in active
markets, interest rates and other relevant information generated by market transactions involving similar instruments. Therefore,
the inputs used to measure the fair value of the Company's debt instruments are classified as Level 2 within the fair value
hierarchy.
The carrying value of Wesco's debt instruments with fixed interest rates was $2,880.7 million and $3,730.1 million as of
December 31, 2021 and 2020, respectively. The estimated fair value of this debt was $3,118.0 million and $4,084.7 million as
of December 31, 2021 and 2020, respectively. The reported carrying values of Wesco's other debt instruments, including those
with variable interest rates, approximated their fair values as of December 31, 2021 and 2020.
The Company purchases foreign currency forward contracts to minimize the effect of fluctuating foreign currency-
denominated accounts on its earnings. The foreign currency forward contracts are not designated as hedges for accounting
purposes. The Company's strategy is to negotiate terms for its derivatives and other financial instruments to be highly effective,
such that the change in the value of the derivative offsets the impact of the underlying hedge. Its counterparties to foreign
currency forward contracts have investment-grade credit ratings. The Company regularly monitors the creditworthiness of its
counterparties to ensure no issues exist that could affect the value of its derivatives.
The Company does not hedge 100% of its foreign currency-denominated accounts. In addition, the results of hedging can
vary significantly based on various factors, such as the timing of executing foreign currency forward contracts versus the
movement of currencies, as well as fluctuations in the account balances throughout each reporting period. The fair value of
foreign currency forward contracts is based on the difference between the contract rate and the current price of a forward
contract with an equivalent remaining term. The fair value of foreign currency forward contracts is measured using observable
market information. These inputs are considered Level 2 in the fair value hierarchy. At December 31, 2021 and 2020, foreign
currency forward contracts were revalued at then-current foreign exchange rates with the changes in valuation reflected directly
in other non-operating expenses (income) in the Consolidated Statements of Income and Comprehensive Income offsetting the
transaction gain (loss) recorded on foreign currency-denominated accounts. At December 31, 2021 and 2020, the gross and net
notional amounts of foreign currency forward contracts outstanding were approximately $188.6 million and $111.9 million,
respectively. While all of the Company's foreign currency forward contracts are subject to master netting arrangements with its
counterparties, assets and liabilities related to these contracts are presented on a gross basis within the Consolidated Balance
Sheets. The gross fair value of assets and liabilities related to foreign currency forward contracts were immaterial.
5. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table sets forth the changes in the carrying value of goodwill by reportable segment for the periods presented:
EES
CSS
UBS
Total
(In thousands)
Balance as of January 1, 2020
Adjustments to goodwill for acquisitions (Note 6)(1) (2) (3)
Foreign currency exchange rate changes
$
573,447 $
264,538
15,471
235,711 $
868,936
10,853
949,882 $ 1,759,040
1,384,027
250,553
44,102
17,778
Balance as of December 31, 2020
$
853,456 $ 1,115,500 $ 1,218,213 $ 3,187,169
Adjustments to goodwill for acquisitions (Note 6)(4)
Foreign currency exchange rate changes and other
1,124
6,378
8,603
(2,391)
4,215
3,235
13,942
7,222
Balance as of December 31, 2021
$
860,958 $ 1,121,712 $ 1,225,663 $ 3,208,333
(1) Adjustments to goodwill include the final allocation of the purchase price paid to acquire SLS, as disclosed in Note 6, "Acquisitions and
Disposals", which is reflected in the EES segment.
(2) Adjustments to goodwill include an increase of $33.9 million resulting from the out-of-period adjustment related to inventory cost
absorption accounting, as described in Note 2, "Accounting Policies", which affected the EES, CSS and UBS segments by $20.2 million,
$2.0 million, and $11.7 million, respectively.
(3) Adjustments to goodwill include $26.1 million that was classified as held for sale on the UBS segment as of December 31, 2020, as
disclosed in Note 7, "Assets and Liabilities Held For Sale". Such amount was disposed in the first quarter of 2021 as part of the Canadian
divestitures disclosed in Note 6, "Acquisitions and Disposals".
(4) Includes the effect on goodwill of the adjustments to the assets acquired and liabilities assumed in the merger with Anixter since their
initial measurement, as described in Note 6, "Acquisitions and Disposals".
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Intangible Assets
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The components of intangible assets are as follows:
December 31, 2021
Accumulated
Amortization
(1)
Gross
Carrying
Amount (1)
Life (in years)
Net
Carrying
Amount
Gross
Carrying
Amount (1)
(In thousands)
December 31, 2020
Accumulated
Amortization
(1)
Net
Carrying
Amount
Indefinite
$ 795,065 $
— $ 795,065 $ 833,793 $
— $ 833,793
10 - 20
15 - 19
1 - 12
2
1,431,251
(308,180) 1,123,071
1,434,554
(227,585) 1,206,969
29,212
38,758
4,300
(22,714)
6,498
(20,058)
18,700
(3,493)
807
29,212
24,898
4,462
(21,040)
8,172
(11,415)
13,483
(1,384)
3,078
$ 2,298,586 $ (354,445) $ 1,944,141 $ 2,326,919 $ (261,424) $ 2,065,495
Intangible assets:
Trademarks(2)
Customer relationships(3)
Distribution agreements(3)
Trademarks(2)(3)
Non-compete agreements
(1) Excludes the original cost and related accumulated amortization of fully-amortized intangible assets.
(2) As disclosed in Note 2, "Accounting Policies", the Company assigned remaining estimated useful lives to certain trademarks, including
those that previously had indefinite lives.
(3) The net carrying amount as of December 31, 2020 excluded $1.0 million of trademarks, $3.3 million of customer relationships and
$1.4 million of distribution agreements that were classified as held for sale and disposed in the first quarter of 2021 as part of the
Canadian divestitures disclosed in Note 7, "Assets and Liabilities Held For Sale".
Amortization expense related to intangible assets totaled $119.6 million, $66.5 million and $35.5 million for the years ended
December 31, 2021, 2020 and 2019, respectively. For the year ended December 31, 2021, amortization expense includes $32.0
million resulting from the changes in estimated useful lives of certain legacy trademarks that are migrating to the Company's
master brand architecture, as described in Note 2, "Accounting Policies".
The following table sets forth the remaining estimated amortization expense for intangible assets for the next five years and
thereafter:
For the year ending December 31,
(In thousands)
2022
2023
2024
2025
2026
Thereafter
$
92,593
83,287
80,827
77,710
60,834
753,825
The Company performed its annual impairment tests of goodwill and indefinite-lived intangible assets during the fourth
quarter of 2021 by assessing qualitative factors to determine whether it was more likely than not that the fair values of its
reporting units and indefinite-lived intangible assets were less than their respective carrying amounts. In performing this
qualitative assessment, the Company assessed relevant events and circumstances, including macroeconomic conditions,
industry and market considerations, cost factors, overall financial performance, other relevant events such as changes in key
personnel, changes in the composition or carrying amount of the net assets of a reporting unit, and changes in share price. As a
result of this assessment, the Company determined that it was more likely than not that the fair values of its reporting units and
indefinite-lived intangible assets continued to exceed their respective carrying amounts and, therefore, a quantitative
impairment test was unnecessary.
The annual impairment tests of goodwill and indefinite-lived intangible assets involve the assessment of factors, events and
circumstances at a point in time that are subject to change. As a result, there can be no assurance that the fair values of the
Company's reporting units and indefinite-lived intangible assets will exceed their carrying values in the future, and that
goodwill and indefinite-lived intangible assets will be fully recoverable.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
6. ACQUISITIONS AND DISPOSALS
Anixter International Inc.
On June 22, 2020, Wesco completed its acquisition of Anixter International Inc. ("Anixter"), a Delaware corporation.
Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020 (the “Merger Agreement”), by and among
Anixter, Wesco and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Wesco (“Merger
Sub”), Merger Sub was merged with and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a
wholly owned subsidiary of Wesco. On June 23, 2020, Anixter merged with and into Anixter Inc., with Anixter Inc. surviving
to become a wholly owned subsidiary of Wesco.
The Company used the net proceeds from the issuance of senior unsecured notes, borrowings under its revolving credit and
accounts receivable securitization facilities (as described further in Note 10, "Debt"), as well as cash on hand, to finance the
acquisition of Anixter and related transaction costs.
At the effective time of the Merger, each outstanding share of common stock of Anixter (subject to limited exceptions) was
converted into the right to receive (i) $72.82 in cash, (ii) 0.2397 shares of common stock of Wesco, par value $0.01 per share
and (iii) 0.6356 depositary shares, each representing a 1/1,000th interest in a share of newly issued fixed-rate reset cumulative
perpetual preferred stock of Wesco, Series A, with a $25,000 stated amount per whole preferred share and an initial dividend
rate equal to 10.625%.
Anixter was a leading distributor of network and security solutions, electrical and electronic solutions, and utility power
solutions with locations in over 300 cities across approximately 50 countries, and 2019 annual sales of more than $8 billion.
The Merger brought together two companies with highly compatible capabilities and characteristics. The combination of Wesco
and Anixter created an enterprise with scale and has afforded the Company the opportunity to digitize its business and expand
its services portfolio and supply chain offerings.
The total fair value of consideration transferred for the Merger consisted of the following:
(In thousands)
$
2,476,010
Cash portion attributable to common stock outstanding
Cash portion attributable to options and restricted stock
units outstanding
Fair value of cash consideration
Common stock consideration
Series A preferred stock consideration
Fair value of equity consideration
Extinguishment of Anixter obligations, including accrued
and unpaid interest
Total purchase consideration
Supplemental cash flow disclosure related to acquisitions:
Cash paid for acquisition
Less: Cash acquired
Cash paid for acquisition, net of cash acquired
$
$
$
87,375
2,563,385
313,512
573,786
887,298
1,247,653
4,698,336
3,811,038
(103,463)
3,707,575
The Merger was accounted for as a business combination with Wesco acquiring Anixter in accordance with ASC 805,
Business Combinations. Under the acquisition method of accounting, the purchase consideration was allocated to the identified
assets acquired and liabilities assumed based on their respective acquisition date fair value, with any excess allocated to
goodwill. The fair value estimates were based on income, market and cost valuation methods using primarily unobservable
inputs developed by management, which are categorized as Level 3 in the fair value hierarchy. Specifically, the fair values of
the identified trademark and customer relationship intangible assets were estimated using the relief-from-royalty and multi-
period excess earnings methods, respectively. Significant inputs used to value these identifiable intangible assets included
projected revenues and expected operating margins, customer attrition rates, discount rates, royalty rates, and applicable income
tax rates. The excess purchase consideration recorded as goodwill is not deductible for income tax purposes, and has been
assigned to the Company's reportable segments based on their relative fair values, as disclosed in Note 5, "Goodwill and
Intangible Assets". The resulting goodwill is primarily attributable to Anixter's workforce, significant cross-selling
opportunities in additional geographies, enhanced scale, and other operational efficiencies.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
During the second quarter of 2021, the Company finalized its allocation of the purchase consideration to the respective fair
values of assets acquired and liabilities assumed in the acquisition of Anixter. As the Company obtained additional information
during the measurement period, it recorded adjustments to its preliminary estimates of fair value, which were as of June 30,
2020. As presented in the table below, the net impact of these measurement period adjustments was an increase to goodwill of
$16.4 million.
The following table sets forth the allocation of the purchase consideration to the respective fair value of assets acquired and
liabilities assumed for the acquisition of Anixter:
Assets
Cash and cash equivalents
Trade accounts receivable
Other receivables
Inventories
Prepaid expenses and other current assets
Property, buildings and equipment
Operating lease assets
Intangible assets
Goodwill
Other assets
Total assets
Liabilities
Accounts payable
Accrued payroll and benefit costs
Short-term debt and current portion of long-term debt
Other current liabilities
Long-term debt
Operating lease liabilities
Deferred income taxes
Other noncurrent liabilities
Total liabilities
Preliminary
Fair Value
Estimates(1)
Measurement
Period
Adjustments
Final Purchase
Price
Allocation(1)
(In thousands)
$
103,463 $
— $
103,463
1,309,894
116,386
1,424,768
53,462
215,513
262,238
1,832,700
1,367,981
114,258
(8,928)
1,300,966
—
116,386
(14,906)
1,409,862
14,202
(3,792)
18,047
5,365
16,356
25,589
67,664
211,721
280,285
1,838,065
1,384,337
139,847
$
6,800,663 $
51,933 $
6,852,596
$
920,163 $
(1,239) $
918,924
69,480
13,225
221,574
77,822
200,286
392,165
207,612
—
—
12,745
(205)
17,017
(15,111)
38,726
69,480
13,225
234,319
77,617
217,303
377,054
246,338
$
2,102,327 $
51,933 $
2,154,260
Fair value of net assets acquired, including goodwill and intangible assets $
4,698,336 $
— $
4,698,336
(1) The preliminary fair value estimates are as of June 30, 2020. As disclosed above, the Company finalized its purchase price allocation
during the measurement period.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following table sets forth the identifiable intangible assets and their estimated weighted-average useful lives:
Identifiable Intangible Assets
Customer relationships
Trademarks
Non-compete agreements
Total identifiable intangible assets
Estimated
Fair Value
(In thousands)
$
$
1,098,900
735,000
4,165
1,838,065
Weighted-Average
Estimated Useful Life
in Years
19
Indefinite
2
The results of operations of Anixter are included in the consolidated financial statements beginning on June 22, 2020, the
acquisition date. For the years ended December 31, 2021 and 2020, the consolidated statements of income include $9.5 billion
and $4.5 billion of net sales, respectively, and $580.6 million and $180.0 million of income from operations, respectively, for
Anixter. For the years ended December 31, 2021 and 2020, the Company incurred costs related to the Merger of $158.5 million
and $132.2 million, respectively, which primarily consist of advisory, legal, integration, separation and other costs. These costs
are included in selling, general and administrative expenses for both periods.
Pro Forma Financial Information
The following unaudited pro forma financial information presents combined results of operations for the periods presented,
as if the Company had completed the Merger on January 1, 2019. The unaudited pro forma financial information includes
adjustments to amortization and depreciation for intangible assets and property, buildings and equipment, adjustments to
interest expense for the additional indebtedness incurred to complete the acquisition (including the amortization of debt
discount and issuance costs), transaction costs, change in control and severance costs, dividends accrued on the Series A
preferred stock, compensation expense associated with the Wesco phantom stock unit awards described in Note 14, "Employee
Benefit Plans", as well as the respective income tax effects of such adjustments. For the year ended December 31, 2020,
adjustments totaling $7.0 million increased the unaudited pro forma net income attributable to common stockholders, and
adjustments totaling $201.3 million decreased the unaudited pro forma net income attributable to common stockholders for the
year ended December 31, 2019. The unaudited pro forma financial information does not reflect any cost savings, operating
synergies or revenue enhancements that Wesco may achieve as a result of its acquisition of Anixter, the costs to integrate the
operations of Wesco and Anixter or the costs necessary to achieve these cost savings, operating synergies and revenue
enhancements. The unaudited pro forma financial information presented below is not necessarily indicative of consolidated
results of operations of the combined business had the acquisition occurred at the beginning of the respective periods, nor is it
necessarily indicative of future results of operations of the combined company.
(In thousands)
Pro forma net sales
Pro forma net income attributable to common
stockholders
Year Ended
December 31,
2020
December 31,
2019
$
16,016,902 $
17,204,472
119,839
285,100
Canadian Divestitures
On August 6, 2020, the Company entered into a Consent Agreement with the Competition Bureau of Canada regarding the
merger with Anixter. Under the Consent Agreement, the Company was required to divest certain legacy Wesco utility and data
communications businesses in Canada, which had total net sales of approximately $110 million and $120 million for the years
ended December 31, 2020 and 2019, respectively. In February 2021, the Company completed such divestitures for cash
consideration totaling $56.0 million. The Company recognized a net gain from the sale of these businesses of $8.9 million,
which is reported as a component of selling, general and administrative expenses for the year ended December 31, 2021. These
dispositions fulfilled the Company’s divestiture commitments under the Consent Agreement and the net cash proceeds were
used to repay debt.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Sylvania Lighting Services Corp.
On March 5, 2019, WESCO Distribution, Inc. ("Wesco Distribution"), through its WESCO Services, LLC subsidiary,
acquired certain assets and assumed certain liabilities of Sylvania Lighting Services Corp. ("SLS"). Headquartered in
Wilmington, Massachusetts, SLS offers a full spectrum of energy-efficient lighting upgrade, retrofit, and renovation solutions
with annual sales of approximately $100 million and approximately 220 employees across the U.S. and Canada. Wesco
Distribution funded the purchase price paid at closing with borrowings under its then outstanding accounts receivable
securitization facility. The purchase price was allocated to the respective assets and liabilities based upon their estimated fair
values as of the acquisition date, resulting in goodwill of $11.6 million, which is deductible for tax purposes.
The following table sets forth the consideration paid for the acquisition of SLS:
Fair value of assets acquired
Fair value of liabilities assumed
Cash paid for acquisition
Year Ended
December 31, 2019
(In thousands)
$
$
34,812
7,070
27,742
7. ASSETS AND LIABILITIES HELD FOR SALE
On August 6, 2020, the Company entered into a Consent Agreement with the Competition Bureau of Canada regarding the
merger with Anixter. Under the Consent Agreement, the Company agreed to divest certain legacy Wesco businesses in Canada.
Accordingly, the Company determined that the assets and liabilities of these legacy Wesco businesses in Canada met the held
for sale criteria as of December 31, 2020. These businesses did not meet the criteria to be classified as discontinued operations.
As disclosed in Note 6, "Acquisitions and Disposals", the Company completed these divestitures in February 2021.
The assets and liabilities classified as held for sale were as follows:
As of
December 31, 2020
(In thousands)
$
$
$
$
4,258
16,438
395
263
1,938
5,722
26,059
55,073
3,639
541
1,537
5,717
Trade accounts receivable, net
Inventories
Prepaid expenses and other current assets
Property, buildings and equipment, net
Operating lease assets
Intangible assets, net
Goodwill
Total assets held for sale
Accounts payable
Other current liabilities
Operating lease liabilities
Total liabilities held for sale
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
8. PROPERTY, BUILDINGS AND EQUIPMENT
The following table sets forth the components of property, buildings and equipment:
Buildings and leasehold improvements
Furniture, fixtures and equipment(2)
Software costs(2)
As of December 31,
2021
2020(1)
(In thousands)
$
165,691 $
281,864
250,447
698,002
169,873
272,704
229,279
671,856
Accumulated depreciation and amortization
(365,345)
(312,106)
Land
Construction in progress
332,657
25,600
20,755
359,750
26,409
12,998
$
379,012 $
399,157
(1) The components of property, buildings and equipment as of December 31, 2020 exclude a total of $0.3 million that is classified as
held for sale, as disclosed in Note 7, "Assets and Liabilities Held For Sale".
(2) The furniture, fixtures and equipment, and software costs components of property, buildings and equipment as of December 31, 2020
reflect a $6.4 million reclassification between the previously reported amounts of those components to conform to the current period's
presentation.
Depreciation expense was $61.6 million, $40.8 million and $15.9 million, and capitalized software amortization was $27.5
million, $14.3 million and $10.6 million, in 2021, 2020 and 2019, respectively. As of December 31, 2021 and 2020,
unamortized software costs were $103.4 million and $117.5 million, respectively. Furniture, fixtures and equipment include
finance leases of $31.9 million and $25.7 million and related accumulated depreciation of $12.4 million and $7.9 million as of
December 31, 2021 and 2020, respectively.
The Company capitalizes costs associated with implementing its various cloud computing arrangements. Capitalized
implementation costs, which are recorded as a component of other assets in the Consolidated Balance Sheets, were
$39.6 million and $8.8 million as of December 31, 2021 and 2020, respectively, and the related accumulated amortization was
$2.0 million and $1.1 million, respectively.
9. LEASES
Wesco leases substantially all of its real estate, as well as automobiles, trucks, information technology hardware, and other
equipment under lease arrangements classified as operating.
The Company's finance leases, which are recorded in the Consolidated Balance Sheets as a component of property,
buildings and equipment, current portion of long-term debt and long-term debt, are not material to the consolidated financial
statements and notes thereto. Accordingly, finance leases have not been disclosed herein.
The following table sets forth supplemental balance sheet information related to operating leases for the periods presented:
(In thousands)
Operating lease assets
As of December 31,
2021
2020(1)
$
530,863 $
534,705
Current operating lease liabilities(2)
Noncurrent operating lease liabilities
129,881
414,248
Total operating lease liabilities
$
544,129 $
128,322
414,889
543,211
(1) Operating lease assets and liabilities of $1.9 million and $2.1 million, respectively, are classified as held for sale as of December 31,
2020, as disclosed in Note 7, "Assets and Liabilities Held For Sale".
(2) Current operating lease liabilities are recorded as a component of other current liabilities in the Consolidated Balance Sheets.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following table sets forth the Company's total lease cost, which is recorded as a component of selling, general and
administrative expenses, for the periods presented:
(In thousands)
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Year Ended December 31,
2021
2020
2019
$
169,892 $
127,725 $
73,613
3,578
49,464
494
36,230
$
222,934 $
164,449 $
90
23,385
97,088
Variable lease cost consists of the non-lease components described in Note 2, "Accounting Policies", as well as taxes and
insurance for Wesco's leased real estate.
The following table sets forth supplemental cash flow information related to operating leases for the periods presented:
(In thousands)
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new
operating lease liabilities
Year Ended December 31,
2021
2020
2019
$
153,626 $
117,106 $
75,775
157,523
121,207
60,586
As of December 31, 2021 and 2020, the weighted-average remaining lease term for operating leases was 6.0 years and 6.1
years, respectively. The weighted-average discount rate used to measure operating leases was 4.2% and 4.6% as of
December 31, 2021 and 2020, respectively.
The following table sets forth the maturities of the Company's operating lease liabilities and reconciles the respective
undiscounted payments to the operating lease liabilities in the Consolidated Balance Sheet as of December 31, 2021:
2022
2023
2024
2025
2026
Thereafter
Total undiscounted operating lease payments
Less: imputed interest
Total operating lease liabilities
(In thousands)
$
$
152,919
126,012
94,494
64,875
48,813
136,123
623,236
(79,107)
544,129
Operating lease payments include $26.9 million related to options to extend lease terms that are reasonably certain of being
exercised. As of December 31, 2021, the Company has additional leases related to facilities that have not yet commenced of
$67.1 million. These operating leases, which are not recorded in the Consolidated Balance Sheet as of December 31, 2021, will
commence in 2022 with lease terms of 1.5 to 10.5 years.
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10. DEBT
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following table sets forth Wesco’s outstanding indebtedness:
International lines of credit
Accounts Receivable Securitization Facility
Revolving Credit Facility
5.375% Senior Notes due 2021
5.50% Anixter Senior Notes due 2023
5.375% Senior Notes due 2024
6.00% Anixter Senior Notes due 2025
7.125% Senior Notes due 2025
7.250% Senior Notes due 2028, less debt discount of $8,088 and $9,332 in 2021 and 2020,
respectively
Finance lease obligations
Total debt
Plus: Fair value adjustments to the Anixter Senior Notes
Less: Unamortized debt issuance costs
Less: Short-term debt and current portion of long-term debt
Total long-term debt
International Lines of Credit
As of December 31,
2021
2020
(In thousands)
$
7,354 $
1,270,000
596,959
—
58,636
—
4,173
29,575
950,000
250,000
500,000
58,636
350,000
4,173
1,500,000
1,500,000
1,316,912
1,315,668
18,563
17,931
4,772,597
4,975,983
957
1,650
(62,484)
(78,850)
(9,528)
(528,830)
$
4,701,542 $
4,369,953
Certain foreign subsidiaries of Wesco have entered into uncommitted lines of credit, some of which are overdraft facilities,
to support local operations. The maximum borrowing limit varies by facility and ranges between $0.6 million and $31.0
million. The international lines of credit generally are renewable on an annual basis and certain facilities are fully and
unconditionally guaranteed by Wesco Distribution. Accordingly, certain borrowings under these lines directly reduce
availability under its revolving credit facility. The applicable interest rate for borrowings under these lines of credit varies by
country and is governed by the applicable loan agreement. The average interest rate for these facilities was 3.35% and 3.40% at
December 31, 2021 and 2020, respectively.
Accounts Receivable Securitization Facility
On June 22, 2020, Wesco Distribution amended its accounts receivable securitization facility (the “Receivables Facility”)
pursuant to the terms and conditions of a Fifth Amended and Restated Receivables Purchase Agreement (the “Receivables
Purchase Agreement”), by and among WESCO Receivables Corp. (“Wesco Receivables”), Wesco Distribution, the various
purchaser groups from time to time party thereto and PNC Bank, National Association, as Administrator. The Receivables
Purchase Agreement amended and restated the receivables purchase agreement entered into on September 24, 2015 (the “Prior
Receivables Purchase Agreement”).
The Receivables Purchase Agreement, among other things, increased the purchase limit under the Prior Receivables
Purchase Agreement from $600 million to $1,025 million, with the opportunity to exercise an accordion feature that permits
increases in the purchase limit up to an aggregate commitment of $1,400 million, subject to customary conditions, extended the
maturity date to June 22, 2023 and added and amended certain defined terms. Borrowings under the Receivables Facility bear
interest at the 30-day LIBOR rate, with a LIBOR floor, plus applicable spreads. The interest rate spread under the Receivables
Purchase Agreement of 1.20% increased from 0.95% under the Prior Receivables Purchase Agreement. The Receivables
Facility has a commitment fee of 0.45%.
On December 14, 2020, Wesco Distribution amended its Receivables Facility pursuant to the terms and conditions of a First
Amendment to the Fifth Amended and Restated Receivables Purchase Agreement (the “First Receivables Amendment”). The
First Receivables Amendment amended the Receivables Purchase Agreement and permitted an increase to the purchase limit
from $1,025 million to $1,200 million. The maturity date, interest rate spread, and commitment fee of the Receivables Facility
remained unchanged.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
On June 1, 2021, Wesco Distribution amended its Receivables Facility pursuant to the terms and conditions of a Third
Amendment to the Fifth Amended and Restated Receivables Purchase Agreement (the “Third Receivables Amendment”). The
Third Receivables Amendment, among other things, increased the purchase limit under the Receivables Purchase Agreement
from $1,200 million to $1,300 million, increased the aggregate commitment under the accordion feature from $1,400 million to
$1,500 million, extended the maturity date from June 22, 2023 to June 21, 2024, decreased the LIBOR floor from 0.50% to
0.00% and decreased the interest rate spread from 1.20% to 1.15%. The commitment fee of the Receivables Facility remained
unchanged.
Under the Receivables Facility, Wesco sells, on a continuous basis, an undivided interest in all domestic accounts receivable
to Wesco Receivables, a wholly owned special purpose entity (the “SPE”). The SPE sells, without recourse, a senior undivided
interest in the receivables to financial institutions for cash while maintaining a subordinated undivided interest in the
receivables, in the form of overcollateralization. Since Wesco maintains control of the transferred receivables, the transfers do
not qualify for “sale” treatment. As a result, the transferred receivables remain on the balance sheet, and Wesco recognizes the
related secured borrowing. Wesco has agreed to continue servicing the sold receivables for the third-party conduits and
financial institutions at market rates; accordingly, no servicing asset or liability has been recorded.
As of December 31, 2021 and 2020, accounts receivable eligible for securitization totaled $1,728.1 million and
$1,476.1 million, respectively. The Consolidated Balance Sheets as of December 31, 2021 and 2020 include $1,270.0 million
and $950.0 million, respectively, of accounts receivable balances legally sold to third parties, as well as borrowings for equal
amounts. At December 31, 2021, the interest rate for this facility was approximately 1.23%.
Revolving Credit Facility
On June 22, 2020, Wesco, Wesco Distribution and certain other subsidiaries of Wesco entered into a $1,100 million
revolving credit facility (the “Revolving Credit Facility”), as a replacement of Wesco Distribution’s revolving credit facility
entered into on September 26, 2019, pursuant to the terms and conditions of a Fourth Amended and Restated Credit Agreement,
dated as of June 22, 2020 (the “Revolving Credit Agreement”), among Wesco Distribution, the other U.S. borrowers party
thereto (collectively, the “U.S. Borrowers”), WESCO Distribution Canada LP (“Wesco Canada”), the other Canadian borrowers
party thereto (collectively, the “Canadian Borrowers”), Wesco, the lenders party thereto and Barclays Bank PLC, as the
administrative agent. The Revolving Credit Facility contains a letter of credit sub-facility of up to $175 million and an
accordion feature allowing Wesco Distribution to request increases to the borrowing commitments under the Revolving Credit
Facility of up to $500 million in the aggregate, subject to customary conditions. The Revolving Credit Facility matures in June
2025.
On December 14, 2020, Wesco Distribution and certain other subsidiaries of Wesco entered into an amendment to the
Revolving Credit Facility pursuant to the terms and conditions of a First Amendment to Fourth Amended and Restated Credit
Agreement, dated as of December 14, 2020 (the “Revolver Amendment”), among Wesco Distribution, the other U.S. borrowers
party thereto, WESCO Distribution Canada LP, the other Canadian borrowers party thereto, Wesco, the lenders party thereto
and Barclays Bank PLC, as administrative agent. The Revolver Amendment increased the revolving commitments from
$1,100 million to $1,200 million and amended certain other defined terms. No other material terms were changed.
The obligations of Wesco Distribution and the other U.S. Borrowers under the Revolving Credit Facility have been
guaranteed by Wesco and certain of Wesco Distribution’s subsidiaries (including certain subsidiaries of Anixter). The
obligations of Wesco Canada and the other Canadian Borrowers under the Revolving Credit Facility (including certain
subsidiaries of Anixter) have been guaranteed by certain subsidiaries of Wesco Canada and the other Canadian Borrowers. The
Revolving Credit Facility is secured by (i) substantially all assets of Wesco Distribution, the other U.S. Borrowers and certain
of Wesco Distribution’s subsidiaries (including certain subsidiaries of Anixter), other than, among other things, real property
and accounts receivable sold or intended to be sold pursuant to the Receivables Facility, and (ii) substantially all assets of
Wesco Canada, the other Canadian Borrowers and certain of Wesco Canada’s subsidiaries, other than, among other things, real
property, in each case, subject to customary exceptions and limitations. The applicable interest rate for borrowings under the
Revolving Credit Facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and
1.50% for LIBOR-based borrowings and 0.25% and 0.50% for prime rate-based borrowings. At December 31, 2021, the
interest rate for this facility was approximately 1.54%.
The Revolving Credit Agreement requires compliance with conditions that must be satisfied prior to any borrowing as well
as ongoing compliance with certain customary affirmative and negative covenants. The Revolving Credit Agreement contains
customary events of default. Upon the occurrence and during the continuance of an event of default, the commitments of the
lenders may be terminated, and all outstanding obligations of the loan parties under the Revolving Credit Facility may be
declared immediately due and payable.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
During 2021, Wesco borrowed $2,353.4 million under the Revolving Credit Facility and made repayments in the aggregate
amount of $2,006.4 million. During 2020, aggregate borrowings and repayments under the prior and new revolving credit
facilities were $1,197.9 million and $948.0 million, respectively. Wesco had $564.8 million available under the Revolving
Credit facility at December 31, 2021, after giving effect to outstanding letters of credit and certain borrowings under the
Company's international lines of credit, as compared to $801.5 million available under the Revolving Credit Facility at
December 31, 2020, after giving effect to outstanding letters of credit and certain borrowings under the Company's international
lines of credit.
5.375% Senior Notes due 2021
In November 2013, Wesco Distribution issued $500 million aggregate principal amount of 5.375% Senior Notes due 2021
(the "2021 Notes") through a private offering exempt from the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”). The 2021 Notes were issued at 100% of par and were governed by an indenture (the “2021
Indenture”) entered into on November 26, 2013 between Wesco Distribution, as issuer, and U.S. Bank National Association, as
trustee. The 2021 Notes were unsecured senior obligations of Wesco Distribution and were guaranteed on a senior unsecured
basis by Wesco International. The 2021 Notes had a stated interest rate of 5.375% per annum, payable semi-annually in arrears
on June 15 and December 15 of each year. The 2021 Notes had a maturity date of December 15, 2021 and were redeemable in
whole or in part at any time. The net proceeds of the 2021 Notes were used to prepay a portion of the U.S. sub-facility of the
then outstanding term loan due 2019.
Under the terms of a registration rights agreement dated as of November 26, 2013 among Wesco Distribution, Wesco
International and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the representative of the initial purchasers of the 2021
Notes, Wesco Distribution and Wesco International agreed to register under the Securities Act notes having terms identical in
all material respects to the 2021 Notes (the “2021 Exchange Notes”) and to make an offer to exchange the 2021 Exchange
Notes for the 2021 Notes. Wesco Distribution launched the exchange offer on June 12, 2014 and the exchange offer expired on
July 17, 2014.
On December 15, 2020, Wesco Distribution exercised its right to redeem the entire $500 million aggregate principal amount
of the 2021 Notes, and U.S. Bank, National Association, as trustee under the 2021 Indenture, issued a notice of redemption to
registered holders of the 2021 Notes.
On January 14, 2021, Wesco Distribution redeemed the $500 million aggregate principal amount of the 2021 Notes at a
redemption price equal to 100% of the principal amount plus accrued interest to, but not including, January 14, 2021. The
redemption of the 2021 Notes was funded with available cash, as well as borrowings under the Company's Receivables Facility
and Revolving Credit Facility. The Company recognized a loss of $1.0 million from the redemption of the 2021 Notes resulting
from the write-off of unamortized debt issuance costs, which is recorded as a component of interest expense in the Consolidated
Statement of Income and Comprehensive Income for the year ended December 31, 2021.
5.375% Senior Notes due 2024
In June 2016, Wesco Distribution issued $350 million aggregate principal amount of 5.375% Senior Notes due 2024 (the
"2024 Notes") through a private offering exempt from the registration requirements of the Securities Act. The 2024 Notes were
issued at 100% of par and were governed by an indenture (the “2024 Indenture”) entered into on June 15, 2016 among Wesco
Distribution, as issuer, Wesco International, as parent guarantor, and U.S. Bank National Association, as trustee. The 2024
Notes were unsecured senior obligations of Wesco Distribution and were guaranteed on a senior unsecured basis by Wesco
International. The 2024 Notes had a stated interest rate of 5.375% per annum, payable semi-annually in arrears on June 15 and
December 15 of each year. The 2024 Notes had a maturity date of June 15, 2024. The Company used the net proceeds from the
2024 Notes to redeem its 6.0% Convertible Senior Debentures due 2029.
Under the terms of a registration rights agreement dated as of June 15, 2016 among Wesco Distribution, as the issuer,
Wesco International, as parent guarantor, and Goldman, Sachs & Co., as representative of the initial purchasers of the 2024
Notes, Wesco Distribution and Wesco International agreed to register under the Securities Act notes having terms identical in
all material respects to the 2024 Notes (the “2024 Exchange Notes”) and to make an offer to exchange the 2024 Exchange
Notes for the 2024 Notes. Wesco Distribution launched the exchange offer on December 28, 2016 and the exchange offer
expired on January 31, 2017.
On June 2, 2021, Wesco Distribution exercised its right to redeem the entire $350 million aggregate principal amount of the
2024 Notes, and U.S. Bank, National Association, as trustee under the 2024 Indenture, issued a notice of redemption to
registered holders of the 2024 Notes.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
On July 2, 2021, Wesco Distribution redeemed the $350 million aggregate principal amount of the 2024 Notes at a
redemption price equal to 101.344% of the principal amount plus accrued interest to, but not including, July 2, 2021. The
redemption of the 2024 Notes was funded with borrowings under the Company's Receivables Facility and Revolving Credit
Facility. The Company recognized a loss on debt extinguishment totaling $6.9 million, which included $4.7 million for the
premium paid to redeem the 2024 Notes and $2.2 million for the write-off of unamortized debt issuance costs. The loss was
recorded as a component of interest expense in the Consolidated Statement of Income and Comprehensive Income for the year
ended December 31, 2021.
5.50% Senior Notes due 2023
6.00% Senior Notes due 2025
On April 30, 2020, in connection with the Merger, Wesco Distribution commenced offers to purchase for cash (each, a
“Wesco Tender Offer” and, together the “Wesco Tender Offers”) any and all of Anixter Inc.’s outstanding (i) 5.50% Senior
Notes due 2023 (the “Anixter 2023 Senior Notes”), $350.0 million aggregate principal amount, issued under the Indenture,
dated as of August 18, 2015 (the “Anixter 2023 Indenture”), by and among Anixter Inc., Anixter and Wells Fargo Bank,
National Association, as trustee, and (ii) 6.00% Senior Notes due 2025 (the “Anixter 2025 Senior Notes” and, together with the
Anixter 2023 Senior Notes, the "Anixter Senior Notes"), $250.0 million aggregate principal amount, issued under the Indenture,
dated as of November 13, 2018 (the “Anixter 2025 Indenture” and, together with the Anixter 2023 Indenture, the “Anixter
Indentures”) by and among Anixter Inc., Anixter and Wells Fargo Bank, National Association, as trustee.
Concurrent with the Wesco Tender Offers, Anixter Inc. commenced consent solicitations to amend the definition of
"Change of Control" under the applicable Indenture to exclude the Merger and related transactions and expressly permit a
merger between Anixter Inc. and Anixter (the “Anixter Consent Solicitations”).
On June 23, 2020 (the "Expiration Date"), following the completion of the Merger, the Wesco Tender Offers and Anixter
Consent Solicitations expired and settled. Pursuant to the terms of the Offer to Purchase and Consent Solicitation Statement,
dated April 30, 2020, holders of the Anixter Senior Notes that validly tendered and did not validly withdraw prior to such date,
received total tender offer consideration of $1,012.50 per $1,000 principal amount of Anixter Senior Notes, which amount, in
each case, included an early tender payment of $50.00 per $1,000 principal amount of Anixter Senior Notes. Holders who
validly delivered their consents at or prior to the Expiration Date received a consent fee of $2.50 per $1,000 principal amount of
Anixter Senior Notes.
As of December 31, 2021, $58.6 million and $4.2 million aggregate principal amount of the Anixter 2023 Senior Notes and
Anixter 2025 Senior Notes, respectively, were outstanding.
7.125% Senior Notes due 2025
7.250% Senior Notes due 2028
On June 12, 2020, Wesco Distribution issued $1,500 million aggregate principal amount of 7.125% Senior Notes due 2025
(the “2025 Notes”) and $1,325 million aggregate principal amount of 7.250% Senior Notes due 2028 (the “2028 Notes” and,
together with the 2025 Notes, the “Notes”). The 2025 Notes were issued at a price of 100.000% of the aggregate principal
amount. The 2028 Notes were issued at a price of 99.244% of the aggregate principal amount. Wesco incurred costs related to
the issuance of the 2025 Notes and 2028 Notes totaling $33.1 million and $29.3 million, respectively, which were recorded as a
reduction to the carrying value of the debt and are being amortized over the respective lives of the notes.
The Notes were issued pursuant to, and are governed by, an indenture (the “Notes Indenture”), dated as of June 12, 2020,
between the Company, Wesco Distribution and U.S. Bank National Association, as trustee (the “Trustee”). The Notes and
related guarantees were issued in a private transaction exempt from the Securities Act and have not been, and will not be,
registered under the Securities Act and may not be offered or sold in the U.S. absent registration or an applicable exemption
from, or in a transaction not subject to the registration requirements of the Securities Act and other applicable securities laws.
The Company used the net proceeds from the issuance of the Notes, together with borrowings under its Revolving Credit
Facility and Receivables Facility and existing cash on hand, to finance the Merger and the other transactions contemplated by
the Merger Agreement. The use of proceeds included (i) paying the cash portion of the Merger consideration to stockholders of
Anixter, (ii) refinancing certain existing indebtedness of Anixter contemplated by the Merger Agreement, including financing
the satisfaction and discharge, defeasance, redemption or other repayment in full of the 5.125% Senior Notes due 2021 of
Anixter Inc., a wholly owned subsidiary of Anixter, and financing payments in connection with the Anixter Consent
Solicitations and Wesco Tender Offers, as described above, (iii) refinancing other indebtedness of the Company, and (iv)
paying fees, costs and expenses in connection with the foregoing.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The Notes are unsecured and unsubordinated obligations of Wesco Distribution and are guaranteed on an unsecured,
unsubordinated basis by the Company and Anixter Inc. The 2025 Notes accrue interest at a rate of 7.125% per annum, payable
semi-annually in arrears on June 15 and December 15 of each year. The 2025 Notes will mature on June 15, 2025. The 2028
Notes accrue interest at a rate of 7.250% per annum, payable semi-annually in arrears on June 15 and December 15 of each
year. The 2028 Notes will mature on June 15, 2028.
Wesco Distribution may redeem all or a part of the 2025 Notes at any time prior to June 15, 2022 by paying a “make-whole”
premium plus accrued and unpaid interest, if any, to but excluding the redemption date. In addition, at any time prior to June
15, 2022, Wesco Distribution may redeem up to 35% of the 2025 Notes with the net cash proceeds from certain equity
offerings. At any time between June 15, 2022 and June 14, 2023, Wesco Distribution may redeem all or a part of the 2025
Notes at a redemption price equal to 103.563% of the principal amount. Between June 15, 2023 and June 14, 2024, Wesco
Distribution may redeem all or a part of the 2025 Notes at a redemption price equal to 101.781% of the principal amount. On
and after June 15, 2024, Wesco Distribution may redeem all or a part of the 2025 Notes at a redemption price equal to 100% of
the principal amount.
Wesco Distribution may redeem all or a part of the 2028 Notes at any time prior to June 15, 2023 by paying a “make-whole”
premium plus accrued and unpaid interest, if any, to but excluding the redemption date. In addition, at any time prior to June
15, 2023, Wesco Distribution may redeem up to 35% of the 2028 Notes with the net cash proceeds from certain equity
offerings. At any time between June 15, 2023 and June 14, 2024, Wesco Distribution may redeem all or a part of the 2028
Notes at a redemption price equal to 103.625% of the principal amount. Between June 15, 2024 and June 14, 2025, Wesco
Distribution may redeem all or a part of the 2028 Notes at a redemption price equal to 102.417% of the principal amount.
Between June 15, 2025 and June 14, 2026, Wesco Distribution may redeem all or a part of the 2028 Notes at a redemption price
equal to 101.208% of the principal amount. On and after June 15, 2026, Wesco Distribution may redeem all or a part of the
2028 Notes at a redemption price equal to 100% of the principal amount.
The Notes Indenture contains certain covenants that, among other things, limit (i) the Company’s and its subsidiaries’ ability
to pay dividends on or repurchase the Company’s capital stock, incur liens on assets, engage in certain sale and leaseback
transactions or sell certain assets, and (ii) the Company’s and any guarantor’s ability to sell all or substantially all of its assets
to, or merge or consolidate with or into, other persons, in the case of each of the foregoing, subject to certain qualifications and
exceptions, including the termination of certain of these covenants upon the Notes receiving investment grade credit ratings.
The Notes Indenture contains certain events of default, including, among other things, failure to make required payments,
failure to comply with certain agreements or covenants, failure to pay or acceleration of certain other indebtedness, certain
events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the Notes Indenture will
allow either the Trustee or the holders of at least 25% in aggregate principal amount of the applicable series of the then-
outstanding Notes to accelerate, or in certain cases, will automatically cause the acceleration of the amounts due under the
applicable series of Notes.
As of December 31, 2021, $1,500.0 million and $1,325.0 million aggregate principal amount of the 2025 Notes and 2028
Notes, respectively, were outstanding.
Debt Issuance Costs
Wesco capitalizes certain costs associated with the issuance of debt and such costs are amortized over the term of the
respective debt instrument on a straight-line basis. Debt issuance costs are presented in the Consolidated Balance Sheets as a
direct reduction to the carrying amount of the related debt liability. Upon prepayment of debt, the Company accelerates the
recognition of an appropriate amount of the costs as refinancing or extinguishment of debt. As of December 31, 2021 and 2020,
unamortized debt issuance costs of $62.5 million and $78.9 million were recorded in the Consolidated Balance Sheets,
respectively.
Covenant Compliance
Wesco’s credit agreements contain various restrictive covenants that, among other things, impose limitations on:
(i) dividend payments or certain other restricted payments or investments; (ii) the incurrence of additional indebtedness and
guarantees; (iii) creation of liens; (iv) mergers, consolidation or sales of substantially all of Wesco’s assets; (v) certain
transactions among affiliates; (vi) payments by certain subsidiaries to Wesco, and (vii) capital expenditures. In addition, the
Revolving Credit Facility and the Receivables Facility require Wesco to meet certain fixed charge coverage tests depending on
availability or liquidity, respectively.
Wesco was in compliance with all financial covenants contained in its debt agreements as of December 31, 2021.
65
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following table sets forth the aggregate principal repayment requirements for all indebtedness for the next five years
and thereafter, as of December 31, 2021:
2022
2023
2024
2025
2026
Thereafter
Total payments on debt
Debt discount
Total debt
(In thousands)
$
9,528
64,831
1,272,914
2,105,486
2,010
1,325,916
$
4,780,685
(8,088)
$
4,772,597
11. STOCKHODERS' EQUITY
Preferred Stock
There are 20 million shares of preferred stock authorized at a par value of $0.01 per share; there are no shares issued or
outstanding. The Board of Directors has the authority, without further action by the stockholders, to issue all authorized
preferred shares in one or more series and to fix the number of shares, designations, voting powers, preferences, optional and
other special rights and the restrictions or qualifications thereof. The rights, preferences, privileges and powers of each series of
preferred stock may differ with respect to dividend rates, liquidation values, voting rights, conversion rights, redemption
provisions and other matters.
Series A Preferred Stock
The Company's Board of Directors authorized 25,000 shares of fixed-rate reset cumulative perpetual preferred stock, Series
A, with a liquidation preference of $25,000 per whole preferred share and a par value of $0.01 per share (the "Series A
Preferred Stock"). Depositary shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock, are registered
under the Securities Act of 1933, as amended.
In connection with the Merger, as described in Note 6, "Acquisitions and Disposals", the Company issued 21,611,534
depositary shares, representing an interest in approximately 21,612 shares of Series A Preferred Stock.
Holders of shares of the Series A Preferred Stock are entitled to receive, when, as and if declared by the Company's Board
of Directors, cumulative cash dividends at an initial rate of 10.625% per annum of the $25,000 liquidation preference per share.
On June 22, 2025, and every five-year period thereafter, the dividend rate on the Series A Preferred Stock resets and will be
equal to the Five-year U.S. Treasury Rate plus a spread of 10.325%.
Holders of the Series A Preferred Stock are not entitled to convert or exchange their shares of Series A Preferred stock into
shares of any of Wesco’s other classes or series of stock or into any other security of Wesco (other than upon a change of
control involving the issuance of additional shares of common stock or other change of control transaction, in each case,
approved by holders of common stock).
The Series A Preferred Stock has no stated maturity and will not be subject to any sinking fund, retirement fund or purchase
fund or any other obligation of Wesco to redeem, repurchase or retire the Series A Preferred Stock.
Holders of the Series A Preferred Stock will have limited voting rights, including the right to elect two directors to the Board
of Directors of the Company in the event dividends on the Series A Preferred Stock remain unpaid for the equivalent of six or
more full quarterly dividend periods.
Common Stock
There are 210 million shares of common stock and 20 million shares of Class B common stock authorized at a par value of
$0.01 per share. The Class B common stock is identical to the common stock, except for voting and conversion rights. The
holders of Class B common stock have no voting rights. With certain exceptions, Class B common stock may be converted, at
the option of the holder, into the same number of shares of common stock.
66
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The terms of the Revolving Credit Facility, as well as the indentures governing the 2025 Notes and 2028 Notes, place
certain limits on the Company's ability to declare or pay dividends and repurchase common stock. The share repurchases in
2019, as described in Note 13, "Earnings Per Share", were made within the limits of Wesco's various credit agreements. At
December 31, 2021 and 2020, no dividends had been declared and, therefore, no retained earnings were reserved for dividend
payments.
Treasury Stock
Common stock purchased for treasury is recorded at cost. At the date of subsequent reissue, the treasury stock account is
reduced by the cost of such stock, with cost determined on a weighted-average basis.
12. INCOME TAXES
The following table sets forth the components of income before income taxes by jurisdiction:
United States
Foreign
Income before income taxes
2021
Year Ended December 31,
2020
(In thousands)
2019
$
$
396,769 $
26,031 $
198,566
185,143
96,811
83,495
581,912 $
122,842 $
282,061
The following table sets forth the components of the provision for income taxes:
Current income taxes:
Federal
State
Foreign
Total current income taxes
Deferred income taxes:
Federal
State
Foreign
Total deferred income taxes
Provision for income taxes
2021
Year Ended December 31,
2020
(In thousands)
2019
$
107,919 $
25,605 $
31,695
30,206
55,670
193,795
11,322
19,414
56,341
(62,302)
(12,327)
(3,656)
(78,285)
(17,913)
(7,264)
(8,361)
(33,538)
$
115,510 $
22,803 $
8,616
6,347
46,658
6,774
1,846
4,585
13,205
59,863
The following table sets forth the reconciliation between the federal statutory income tax rate and the effective tax rate:
Federal statutory rate
State income taxes, net of federal income tax benefit
Deemed repatriation of undistributed foreign earnings
Tax effect of intercompany financing
Unrecognized tax benefits
Nondeductible expenses
Change in valuation allowance
Other
Effective tax rate
67
Year Ended December 31,
2020
2019
2021
21.0 %
21.0 %
21.0 %
2.0
—
(3.2)
2.5
0.6
(2.8)
(0.2)
19.9 %
1.4
—
(13.4)
2.1
5.7
1.8
—
18.6 %
3.1
(1.3)
(5.5)
(0.4)
0.7
0.6
3.0
21.2 %
Table of Contents
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The undistributed earnings of the Company's foreign subsidiaries amounted to approximately $1,851.6 million at
December 31, 2021. Most of these earnings have been taxed in the U.S. under either the one-time transition tax or the GILTI
tax regime imposed by the TCJA. Future distributions of previously taxed earnings by the Company's foreign subsidiaries
should, therefore, result in minimal U.S. taxation. Wesco has elected to pay the transition tax in installments over eight years.
As of December 31, 2021, the Company's liability for the transition tax was $60.7 million, which is recorded as components of
other current and noncurrent liabilities in the Consolidated Balance Sheet. The Company continues to assert that the remaining
undistributed earnings of its foreign subsidiaries are indefinitely reinvested. The distribution of earnings by Wesco's foreign
subsidiaries in the form of dividends, or otherwise, may be subject to additional taxation. The Company estimates that
additional taxes of approximately $82.2 million would be payable upon the remittance of all previously undistributed foreign
earnings as of December 31, 2021, based upon the laws in effect on that date. The Company believes that it is able to maintain
sufficient liquidity for its domestic operations and commitments without repatriating cash from Wesco's foreign subsidiaries.
The following table sets forth deferred tax assets and liabilities:
Accounts receivable
Inventories
Depreciation of property, buildings and equipment
Operating leases
Amortization of intangible assets
Employee benefits
Stock-based compensation
Prepaid royalty payments
Disallowed business interest expense(1)
Tax loss carryforwards
Foreign tax credit carryforwards
Other(1)
Deferred income taxes before valuation allowance
Valuation allowance
Total deferred income taxes
As of December 31,
2021
2020
(In thousands)
Assets
Liabilities
Assets
Liabilities
$
18,612 $
— $
17,560 $
13,302
—
142,964
—
36,410
12,281
34,866
11,163
39,876
51,632
26,666
387,772
(46,269)
—
45,397
141,686
549,536
—
—
—
—
—
—
8,137
744,756
—
14,793
—
134,377
—
53,040
14,061
—
2,755
36,923
55,637
24,888
354,034
(60,629)
—
—
60,687
136,477
540,520
—
—
—
—
—
—
6,286
743,970
—
$
341,503 $
744,756 $
293,405 $
743,970
(1) The deferred income tax asset of $2.8 million related to disallowed business interest expense as of December 31, 2020 was previously
reported as a component of Other. This amount has been reclassified to conform to the current period's presentation.
Wesco had deferred tax assets of $35.5 million and $34.5 million as of December 31, 2021 and 2020, respectively, related to
foreign net operating loss carryforwards. These net operating loss carryforwards expire beginning in 2022 through 2041, while
some may be carried forward indefinitely. The Company has determined that certain foreign net operating loss carryforwards
will not be realized before they expire. Accordingly, the Company has recorded a valuation allowance of $22.1 million and
$22.3 million against deferred tax assets related to certain foreign net operating loss carryforwards at December 31, 2021 and
2020, respectively. Additionally, these foreign jurisdictions had deferred tax assets of $6.9 million and $8.2 million as of
December 31, 2021 and 2020, respectively, related to other future deductible temporary differences. The Company has recorded
a full valuation allowance against these amounts as of December 31, 2021 and 2020, respectively.
As of December 31, 2021 and 2020, Wesco had deferred tax assets of $4.4 million and $2.4 million, respectively, related to
state net operating loss carryforwards. These carryforwards expire beginning in 2024 through 2040, while some may be carried
forward indefinitely. The deferred tax assets related to disallowed business interest expense as of December 31, 2021 includes
$4.7 million and $6.4 million for Federal and state income tax purposes, respectively. The carryforward period for disallowed
business interest expense is indefinite.
As of December 31, 2021 and 2020, Wesco had deferred tax assets of $51.6 million and $55.6 million, respectively, related
to foreign tax credit carryforwards. The foreign tax credit carryforwards expire beginning in 2027 through 2031. The Company
has determined that certain foreign tax credit carryforwards will not be realized before they expire. Accordingly, the Company
has recorded a valuation allowance of $17.3 million and $30.1 million against these deferred tax assets at December 31, 2021
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
and 2020, respectively. Wesco’s ability to realize its deferred tax assets related to foreign tax credit carryforwards may be
impacted by U.S. tax legislation, our ability to generate sufficient foreign source taxable income, and tax planning strategies
that the Company may implement. The impact of these items, if any, on Wesco's assessment of the realizability of these
deferred tax assets will be recorded as a discrete item in the period in which the Company's assessment changes.
The Company is under examination by tax authorities in various jurisdictions and remains subject to examination until the
applicable statutes of limitation expire. The statutes of limitation for the material jurisdictions in which the Company files
income tax returns remain open as follows:
United States — Federal
United States — Material States
Canada
UK
Australia
2017 and forward
2017 and forward
2012 and forward
2016 and forward
2017 and forward
The following table sets forth the reconciliation of gross unrecognized tax benefits:
Beginning balance January 1
Additions for current year tax positions
Additions for prior year tax positions
Additions for acquired tax positions
Reductions for prior year tax positions
Settlements
Lapse in statute of limitations
Foreign currency exchange rate changes
Ending balance December 31
2021
As of December 31,
2020
(In thousands)
2019
$
68,075 $
54 $
1,293
39,841
8,422
—
(3,853)
(118)
(3,837)
(1,239)
14,009
—
68,048
(43)
—
(15,886)
1,893
$
107,291 $
68,075 $
—
—
—
—
(1,290)
—
51
54
The total amount of unrecognized tax benefits were $107.3 million and $68.1 million as of December 31, 2021 and 2020,
respectively. The amount of unrecognized tax benefits that would affect the effective tax rate if recognized in the consolidated
financial statements for the years ended December 31, 2021, 2020 and 2019 were $36.1 million, $29.1 million, and
$0.1 million, respectively. Within the next twelve months, the amount of unrecognized tax benefits is expected to decrease by
$14.3 million due to the expiration of statutes of limitation. Such change would result in a $3.2 million reduction in income tax
expense.
The Company classifies interest related to unrecognized tax benefits as a component of interest expense, net in the
Consolidated Statement of Income and Comprehensive Income. The Company recognized interest expense on unrecognized tax
benefits of $0.9 million and $0.3 million for the years ended December 31, 2021 and 2020, respectively. In 2019, the Company
recognized interest income on unrecognized tax benefits of $0.8 million. As of December 31, 2021 and 2020, Wesco had a
liability of $6.4 million and $5.5 million, respectively, for interest expense related to unrecognized tax benefits. The Company
classifies penalties related to unrecognized tax benefits as part of income tax expense. For the year ended December 31, 2021,
penalties recorded in income tax expense were $3.4 million. Penalties recorded in income tax expense for 2020 and 2019 were
immaterial. As of December 31, 2021 and 2020, Wesco had a liability of $4.9 million and $1.5 million, respectively, for
penalties related to unrecognized tax benefits.
On October 22, 2021, one of the Company's Mexican affiliates received a tax assessment from the Mexican tax authorities
related to its 2012 income tax return in the amount of approximately $26.0 million. The Company believes the assessment is
without merit and has appealed it. The Company expects any potential liability remaining after availing itself of available
administrative and judicial appeals to be immaterial to its consolidated financial statements and, accordingly, has not recorded a
reserve.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
13. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average
number of common shares outstanding during the periods. Diluted earnings per share is computed by dividing net income
attributable to common stockholders by the weighted-average common shares and common share equivalents outstanding
during the periods. The dilutive effect of common share equivalents is considered in the diluted earnings per share computation
using the treasury stock method, which includes consideration of equity awards.
The following table sets forth the details of basic and diluted earnings per share:
(In thousands, except per share data)
Net income attributable to WESCO International, Inc.
Less: Preferred stock dividends
Net income attributable to common stockholders
Weighted-average common shares outstanding used in computing basic
earnings per share
Common shares issuable upon exercise of dilutive equity awards
Weighted-average common shares outstanding and common share
equivalents used in computing diluted earnings per share
Earnings per share attributable to common stockholders
Basic
Diluted
Year Ended December 31,
2020
2019
2021
$
$
$
$
465,382 $
57,408
407,974 $
100,560 $
30,139
70,421 $
50,300
1,730
46,174
451
223,426
—
223,426
43,104
383
52,030
46,625
43,487
8.11 $
7.84 $
1.53 $
1.51 $
5.18
5.14
The computation of diluted earnings per share attributable to common stockholders excludes stock-based awards that would
have an antidilutive effect on earnings per share. For the year ended December 31, 2021, there were no antidilutive stock-based
awards, and for the years ended December 31, 2020 and 2019, there were approximately 1.8 million and 1.7 million antidilutive
awards, respectively.
In December 2017, the Company's Board of Directors (the "Board") authorized the repurchase of up to $300 million of the
Company's common stock through December 31, 2020 (the "Repurchase Authorization"). In October 2018, the Board approved
an increase to the Repurchase Authorization from $300 million to $400 million.
The Company entered into certain accelerated stock repurchase agreements with a financial institution to repurchase shares
of its common stock pursuant to the Repurchase Authorization. In exchange for up-front cash payments totaling $275.0 million,
the Company repurchased 5,459,030 shares of common stock under the Repurchase Authorization, of which 3,455,584 shares
were received during the year ended December 31, 2019. The Company did not repurchase, nor did it receive, any of its
common stock during the years ended December 31, 2021 and 2020.
The total number of shares ultimately delivered under the accelerated stock repurchase transactions described above were
determined by the average of the volume-weighted-average price of the Company's common stock for each exchange business
day during the respective settlement valuation periods. Wesco funded the repurchases with available cash, and borrowings
under its accounts receivable securitization and revolving credit facilities. For purposes of computing earnings per share, share
repurchases have been reflected as a reduction to common shares outstanding on the respective delivery dates.
14. EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
Wesco Distribution sponsors a defined contribution retirement savings plan for the majority of its U.S. employees (the
"WESCO Distribution, Inc. Retirement Savings Plan"). The Company matches contributions made by employees at an amount
equal to 50% of participants' total monthly contributions up to 6% of eligible compensation. Contributions are made in cash and
employees have the option to transfer balances allocated to their accounts into any of the available investment options. The
Company may also make, subject to the Board of Directors' approval, a discretionary contribution to the WESCO Distribution,
Inc. Retirement Savings Plan if certain predetermined profit levels are attained. Discretionary employer contribution charges of
$13.1 million were incurred for the year ended December 31, 2021. There were no discretionary contributions for the years
ended December 31, 2020 and 2019.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Anixter Inc. sponsors a defined contribution plan covering all of its non-union U.S. employees (the "Anixter Inc. Employee
Savings Plan"). The employer match for the Anixter Inc. Employee Savings Plan is equal to 50% of a participant's contribution
up to 5% of the participant's compensation. Anixter Inc. will also make an annual contribution to the Anixter Inc. Employee
Savings Plan on behalf of each active participant who is hired or rehired on or after July 1, 2015, or is not participating in the
Anixter Inc. Pension Plan. The amount of the employer annual contribution is equal to either 2% or 2.5% of the participant’s
compensation, as determined by the participant’s years of service. This contribution is in lieu of being eligible for the Anixter
Inc. Pension Plan. Certain of Anixter Inc.'s foreign subsidiaries also have defined contribution plans. Contributions to these
plans are based upon various levels of employee participation and legal requirements.
Effective January 1, 2022, the Anixter Inc. Employee Savings Plan will be merged with and into the WESCO Distribution,
Inc. Retirement Savings Plan (the "U.S. Defined Contribution Plan Merger"). On December 31, 2021, participant account
balances were transferred from the Anixter Inc. Employee Savings Plan to the WESCO Distribution, Inc. Retirement Savings
Plan. In connection with the U.S. Defined Contribution Plan Merger, the WESCO Distribution, Inc. Retirement Savings plan
will be amended to change the employer matching contribution at an amount equal to 100% of a participant’s eligible elective
deferrals up to 3% of the participant’s eligible compensation and 50% of the next 4% of eligible compensation, and to eliminate
the discretionary employer contributions.
WESCO Distribution Canada LP, a wholly-owned subsidiary of the Company, sponsors a defined contribution plan
covering the current full-time employees of WESCO Distribution Canada LP and part-time employees meeting certain
requirements for continuous service, earnings and minimum hours of employment (the "Wesco Canadian Defined Contribution
Plan"). The Company makes contributions in amounts ranging from 3% to 5% of participants' eligible compensation based on
years of continuous service. For employees having completed between 20 and 25 or more years of service as of January 1,
2015, the Company's contribution ranges from 5% to 7% of the respective participants' eligible compensation.
Anixter Canada Inc. sponsors a defined contribution plan for certain Canadian employees (the “Anixter Canadian Defined
Contribution Plan”), which provides for core employer contributions in amounts ranging from 3% to 4% of participants' eligible
compensation based on years of continuous service, plus a matching contribution equal to 25% of a participant’s elective
contributions up to 6% of eligible compensation (for a maximum total employer contribution equal to 5.5%).
Effective January 1, 2022, the Anixter Canadian Defined Contribution Plan will be merged with and into an amended Wesco
Canadian Defined Contribution Plan. The amended Wesco Canadian Defined Contribution Plan will provide a core employer
contribution of 3% of a participant’s eligible compensation, plus a matching contribution equal to 50% of a participant’s
elective contributions up to 4% of eligible compensation (for a maximum total employer contribution equal to 5%). The
amended Wesco Canadian Defined Contribution Plan will also require employees of EECOL Electric Corp. hired on or after
January 1, 2022 to join this Canadian defined contribution plan, and will permit enrollment for those not participating in the
defined benefit plan described below.
Wesco incurred charges of $54.7 million, $18.3 million, and $22.9 million for the years ended December 31, 2021, 2020
and 2019, respectively, for all defined contribution plans.
Deferred Compensation Plans
Wesco Distribution sponsors a non-qualified deferred compensation plan (the "Wesco Deferred Compensation Plan") that
permits select employees to make pre-tax deferrals of salary and bonus. Employees have the option to transfer balances
allocated to their accounts in the Wesco Deferred Compensation Plan into any of the available investment options. The Wesco
Deferred Compensation Plan is an unfunded plan. As of December 31, 2021, the Company's obligation under the Wesco
Deferred Compensation Plan was $20.9 million, which was included in other noncurrent liabilities in the Consolidated Balance
Sheet. As of December 31, 2020, the Company's obligation under the Wesco Deferred Compensation Plan was $27.4 million,
of which $10.1 million was included in other current liabilities and $17.3 million was in other noncurrent liabilities in the
Consolidated Balance Sheet.
Anixter Inc. sponsored a non-qualified deferred compensation plan (the "Anixter Deferred Compensation Plan") that
permitted select employees to make pre-tax deferrals of salary and bonus. Interest was accrued monthly on the deferred
compensation balances based on the average ten-year Treasury note rate for the previous three months times a factor of 1.4, and
the rate was further adjusted if certain financial goals were achieved. In the fourth quarter of 2020, the Company terminated the
Anixter Deferred Compensation Plan. Accordingly, a deferred compensation liability of $45.1 million was classified in other
current liabilities in the Consolidated Balance Sheet at December 31, 2020. In the second quarter of 2021, the Company settled
the liability for the Anixter Deferred Compensation Plan by making lump sum payments of $42.8 million directly to
participants.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The Company held assets in a Rabbi Trust arrangement to provide for the liability associated with the Anixter Deferred
Compensation Plan. The assets were invested in marketable securities. As of December 31, 2020, the assets held in this
arrangement were $39.6 million and were recorded in other current assets in the Consolidated Balance Sheet. In the second
quarter of 2021, the Company liquidated this investment arrangement for approximately $39.7 million and used its proceeds
plus available cash to fund the settlement of the Anixter Deferred Compensation Plan described above.
Defined Benefit Plans
Wesco sponsors a contributory defined benefit plan covering substantially all Canadian employees of EECOL Electric
Corp., a wholly-owned subsidiary of the Company (the "EECOL Plan"). The EECOL Plan provides retirement benefits based
on earnings and credited service, and participants contribute 2% of their earnings to the EECOL Plan. Participants become
100% vested after two years of continuous service or, if earlier, at the participant's normal retirement age.
Wesco also sponsors a Supplemental Executive Retirement Plan for certain executives of EECOL Electric Corp. (the
"EECOL SERP"), which provides additional pension benefits based on earnings and credited service. The EECOL SERP is an
unfunded plan. Effective January 1, 2013, the EECOL SERP was closed to new participants and existing participants became
100% vested. EECOL SERP participants now contribute 4% of their earnings to the EECOL Plan.
Anixter Inc. sponsors various defined benefit pension plans in the U.S., which consist of the Anixter Inc. Pension Plan, the
Anixter Inc. Executive Benefit Plan, and the Supplemental Executive Retirement Plan (the "Anixter SERP") (together, the
"Domestic Plans") and various defined benefit pension plans covering employees of foreign subsidiaries in Canada and Europe
(together with the "EECOL Plan" and "EECOL SERP", the "Foreign Plans").
The Anixter Inc. Pension Plan was closed to entrants first hired or rehired on or after July 1, 2015. The majority of the
Anixter defined benefit pension plans are non-contributory, and with the exception of the U.S. and Canada, cover substantially
all full-time employees in their respective countries. Retirement benefits are provided based on compensation as defined in each
of the plan agreements.
The Domestic Plans are funded as required by the Employee Retirement Income Security Act of 1974 ("ERISA") and the
Internal Revenue Service. The Foreign Plans are funded as required by applicable foreign laws.
In the fourth quarter of 2020, the Company terminated both the Anixter Inc. Executive Benefit Plan and the Anixter SERP.
Accordingly, pension liabilities totaling $18.1 million associated with the Anixter Inc. Executive Benefit Plan and the Anixter
SERP were classified as current in the Consolidated Balance Sheet at December 31, 2020. During the year ended December 31,
2021, the Company settled its liabilities for the Anixter Inc. Executive Benefit Plan and Anixter SERP by making lump sum
payments directly to participants totaling $17.9 million.
During the fourth quarter of 2021, the Company adopted certain plan amendments to freeze the benefits provided under the
Anixter Inc. Pension Plan effective December 31, 2021, to close participation in the EECOL Plan effective December 31, 2021,
and to freeze the benefit accruals under the Pension Plan for Employees of Anixter Canada Inc., the EECOL Plan and the
EECOL SERP, effective December 31, 2023. These amendments required the Company to remeasure the projected benefit
obligations associated with these plans, resulting in a gain from curtailment totaling $36.6 million, which is recorded as a
component of other non-operating income in the Consolidated Statement of Income and Comprehensive Income for the year
ended December 31, 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following table presents the changes in benefit obligations, plan assets and funded status for the defined benefit plans:
(In thousands)
Change in Projected Benefit Obligation
Beginning balance
Impact of acquisition(1)
Service cost
Interest cost
Participant contributions
Actuarial (gain) loss, including
assumption changes
Benefits paid from plan assets
Benefits paid from Company assets
Curtailment
Plan amendment
Settlement
Foreign currency exchange rate changes
Ending balance
Change in Plan Assets at Fair Value
Beginning balance
Impact of acquisition(1)
Actual return on plan assets
Participant contributions
Employer contributions
Benefits paid
Settlement
Foreign currency exchange rate changes
Ending balance
Domestic Plans
Foreign Plans
Total
2021
2020
2021
2020
2021
2020
$ 332,484
—
3,033
8,219
—
(10,649)
(8,988)
(527)
(3,900)
—
(17,889)
—
$ 301,783
$ 355,287
—
24,432
—
17,889
(8,988)
(17,889)
—
$ 370,731
$
317,893
1,763
4,787
—
— $ 486,855 $ 134,852 $ 819,339
—
15,173
18,020
846
301,206
9,029
7,162
728
—
12,140
9,801
846
12,911
(4,222)
(547)
(101)
—
—
—
(46,132)
(20,331)
(988)
(36,580)
(104)
(18,108)
(5,256)
$ 332,484 $ 424,096 $ 486,855 $ 725,879
(35,483)
(11,343)
(461)
(32,680)
(104)
(219)
(5,256)
14,044
(9,008)
(448)
—
(37)
(1,235)
30,562
$
324,292
35,217
—
—
(4,222)
—
—
— $ 365,718 $ 103,385 $ 721,005
—
44,093
846
28,129
(20,331)
(18,107)
(3,123)
$ 355,287 $ 381,781 $ 365,718 $ 752,512
218,644
23,947
728
6,838
(9,008)
(1,235)
22,419
—
19,661
846
10,240
(11,343)
(218)
(3,123)
$ 134,852
619,099
10,792
11,949
728
26,955
(13,230)
(995)
(101)
(37)
(1,235)
30,562
$ 819,339
$ 103,385
542,936
59,164
728
6,838
(13,230)
(1,235)
22,419
$ 721,005
Funded Status
$ 68,948
$ 22,803 $ (42,315) $ (121,137) $ 26,633
$ (98,334)
Amounts Recognized in the
Consolidated Balance Sheets
Other assets
Other current liabilities
Other noncurrent liabilities
Net amount recognized
$ 68,948
—
—
$ 68,948
Weighted Average Assumptions Used to
Determine Benefit Obligations
$ 40,921 $
(18,118)
—
179 $ 73,766
(437)
(46,696)
$ 22,803 $ (42,315) $ (121,137) $ 26,633
4,818 $
(437)
(46,696)
(471)
(120,845)
$ 41,100
(18,589)
(120,845)
$ (98,334)
Discount rate
Rate of compensation increase
2.9 %
— %
2.6 %
3.8 %
2.4 %
3.4 %
2.0 %
3.2 %
2.6 %
3.4 %
2.2 %
3.4 %
(1) The Company assumed the Domestic Plans and certain foreign plans in connection with the acquisition of Anixter on June 22, 2020, as
disclosed in Note 6, "Acquisitions and Disposals". For all defined benefit plans assumed as part of the merger with Anixter, the projected
benefit obligation and fair value of plan assets were remeasured as of the acquisition date.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The measurement date for all plans is December 31st. Accordingly, at the end of each fiscal year, the Company determines
the discount rate to measure the plan liabilities at their present value. The discount rate reflects the current rate at which the
pension liabilities could effectively be settled at the measurement date. This rate was estimated at the end of 2021 and 2020
using a yield curve based on corporate bond data, which the Company concluded was consistent with observable market
conditions and industry standards for developing spot rate curves.
At December 31, 2021 and 2020, the consolidated weighted-average discount rate of all plans was 2.6% and 2.2%,
respectively, and these rates were used to measure the projected benefit obligation at the end of each respective year-end. The
consolidated net funded status was $26.6 million at December 31, 2021, compared to a consolidated net unfunded status of
$98.3 million at December 31, 2020.
At December 31, 2021 and 2020, the Company's projected benefit obligation was $301.8 million and $332.5 million,
respectively, for the Domestic Plans and $424.1 million and $486.9 million, respectively, for the Foreign Plans. The Company
had 9 plans at December 31, 2021 and 13 plans at December 31, 2020 for which the projected benefit obligation was in excess
of the fair value of plan assets. For these plans, the aggregate projected benefit obligation was $214.5 million and $504.8
million, respectively, and the aggregate fair value of plan assets was $167.4 million and $365.4 million, respectively.
At December 31, 2021 and 2020, the Company' accumulated benefit obligation was $301.8 million and $328.2 million,
respectively, for the Domestic Plans and $390.8 million and $417.6 million, respectively, for the Foreign Plans. The Company
had 9 plans at December 31, 2021 and 13 plans at December 31, 2020 for which the accumulated benefit obligation was in
excess of the fair value of plan assets. For these plans, the aggregate accumulated benefit obligation was $194.6 million and
$435.6 million, respectively, and the aggregate fair value of plan assets was $167.4 million and $365.4 million, respectively.
The following tables set forth the components of net periodic pension (benefit) cost for the Company's defined benefit plans:
(In thousands)
Components of Net Periodic
Pension (Benefit) Cost
Domestic Plans(1)
2020
2021
2019
2021
Foreign Plans(1)
2020
2019
2021
Total
2020
2019
Service cost
Interest cost
$ 3,033 $ 1,763 $ — $ 12,140 $ 9,029 $ 4,602 $ 15,173 $ 10,792 $ 4,602
8,219
4,787
—
9,801
7,162
4,362
18,020
11,949
4,362
Expected return on plan assets
(17,097) (8,395) —
(17,834) (11,659) (5,695) (34,931) (20,054) (5,695)
Recognized actuarial gain
—
—
—
90
—
(63)
90
—
(63)
Curtailment
(3,900) —
—
(32,680) —
—
(36,580) —
—
Settlement
Net periodic pension (benefit)
cost
290
—
—
(59)
(144) —
231
(144) —
$ (9,455) $ (1,845) $ — $ (28,542) $ 4,388 $ 3,206 $ (37,997) $ 2,543 $ 3,206
(1) As described above, the Company assumed the Domestic Plans and certain foreign plans in connection with the acquisition of Anixter on
June 22, 2020. The Company began recognizing the associated net periodic pension (benefit) cost as of the acquisition date.
The service cost of $15.2 million, $10.8 million and $4.6 million for the years ended December 31, 2021, 2020 and 2019,
respectively, is reported as a component of selling, general and administrative expenses. The other components of net periodic
pension (benefit) cost totaling net benefits of $53.2 million, $8.2 million and $1.4 million for the years ended December 31,
2021, 2020 and 2019, respectively, are presented as components of other non-operating income ("other income, net").
The following weighted-average actuarial assumptions were used to determine net periodic pension (benefit) cost:
Domestic Plans(1)
2020
2021
2019
2021
Foreign Plans(1)
2020
Discount rate
Expected return on plan assets
Rate of compensation increase
2.6 %
5.3 %
3.8 %
2.9 %
5.5 %
3.8 %
— %
— %
— %
2.0 %
4.9 %
3.2 %
2.2 %
5.2 %
3.4 %
2019
2021
4.0 %
6.4 %
3.8 %
2.3 %
5.1 %
3.4 %
Total
2020
2.5 %
5.3 %
3.5 %
2019
4.0 %
6.4 %
3.8 %
(1) As described above, the Company assumed the Domestic Plans and certain foreign plans in connection with the acquisition of Anixter on
June 22, 2020. The Company began using the related assumptions as of the acquisition date.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the invested assets and
future assets to be invested to provide for the benefits included in the projected benefit obligation. The Company uses historic
plan asset returns combined with current market conditions to estimate the rate of return. The weighted-average expected long-
term rate of return on plan assets used in the determination of net periodic pension cost for 2021 was 5.1%.
As a result of the combined effect of valuation changes in both the equity and bond markets, the plan assets produced an
actual gain of 6.0% in 2021. The difference between the expected return and actual return on plan assets is amortized into
expense over the service lives of the plan participants. These amounts are reflected on the balance sheet through charges to
accumulated other comprehensive loss, a component of stockholders’ equity.
The following table sets forth the changes and the end of year components of accumulated other comprehensive (income)
loss for the defined benefit plans:
(In thousands)
Changes to Balance:
Beginning balance, before tax effect
Prior service credit arising in current year
Net actuarial gain arising in current year
Recognized actuarial gain
Curtailment
Settlement
Foreign currency exchange rate changes
Ending balance, before tax effect
(In thousands)
Components of Balance:
Prior service credit
Net actuarial gain
Ending balance, before tax effect
Tax effect
Ending balance, after tax effect
Year Ended December 31,
2021
2020
$
(3,062) $
8,890
(100)
(37)
(93,064)
(12,154)
(90)
36,580
(231)
1,179
—
(101)
144
196
$
(58,788) $
(3,062)
As of December 31,
2021
2020
$
(137) $
(58,651)
(58,788)
13,605
(37)
(3,025)
(3,062)
562
$
(45,183) $
(2,500)
The following benefit payments, which reflect expected future service, are expected to be paid as follows:
(In thousands)
Domestic Plans
Foreign Plans
Total
2022
2023
2024
2025
2026
2027 to 2031
$
11,215 $
9,430 $
11,743
12,385
12,890
13,508
73,410
9,654
10,294
11,065
11,525
84,171
20,645
21,397
22,679
23,955
25,033
157,581
The Company expects to contribute approximately $10.8 million to its Foreign Plans in 2022. The Company does not expect
to make a contribution to its domestic qualified pension plan in 2022 due to its overfunded status.
The assets of the various defined benefit plans are held in separate independent trusts and managed by independent third
party advisors. The investment objective for the defined benefit plans is to ensure an adequate level of assets is available to fund
the benefits owed to employees and their beneficiaries when they become payable. In meeting this objective, the Company
seeks to achieve a level of absolute investment return consistent with a prudent level of portfolio risk. The Company's risk
preference is to refrain from exposing the plans to higher volatility in pursuit of potential higher returns.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The asset mixes and the asset allocation guidelines for the Domestic Plans and Foreign Plans are summarized as follows:
Equities
Debt securities:
Domestic treasuries
Corporate bonds
Other
Total debt securities
Property/real estate
Other
Equities
Debt securities:
Corporate bonds
Other
Total debt securities
Property/real estate
Insurance products
Other
Equities
Debt securities:
Domestic treasuries
Corporate bonds
Other
Total debt securities
Property/real estate
Other
Domestic Plans
Allocation Guidelines
December 31,
2021
Min
Target
Max
10.8 %
5 %
10 %
15 %
36.1
25.7
7.6
69.4
19.0
0.8
—
—
3
3
—
34
40
7
81
8
1
100.0 %
100 %
—
—
13
13
—
Foreign Plans
Allocation Guidelines
December 31,
2021
Min
Target
Max
39.2 %
25 %
39 %
48 %
4.5
43.5
48.0
4.4
4.9
3.5
—
26
2
5
3
—
48
48
5
5
3
100.0 %
100 %
37
65
8
5
13
Domestic Plans
Allocation Guidelines
December 31,
2020
Min
Target
Max
38.6 %
30 %
37 %
45 %
22.2
6.7
15.6
44.5
14.8
2.1
100.0 %
—
—
9
9
—
24
8
14
46
16
1
100 %
40
40
19
23
5
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Equities
Debt securities:
Corporate bonds
Other
Total debt securities
Property/real estate
Insurance products
Other
Foreign Plans
Allocation Guidelines
December 31,
2020
Min
Target
Max
38.1 %
25 %
41 %
48 %
5.9 %
40.6
46.5
4.8
5.4
5.2
100.0 %
1
26
2
5
3
1
44
45
6
5
3
100 %
37
65
8
5
12
The plans' pension committees meet regularly to assess investment performance relative to asset allocation guidelines. The
Company periodically rebalances its asset portfolios to be in line with its allocation guidelines.
For 2021, the investment policy guidelines of the Domestic Plans were as follows:
•
•
•
•
• Derivative instruments such as futures, swaps and options may be used on a limited basis; for funds that employ
Each asset class is managed by one or more active and passive investment managers
Each asset class may be invested in a commingled fund, mutual fund, or separately managed account
Investment in Exchange Traded Funds ("ETFs") is permissible
Each manager is expected to be "fully invested" with minimal cash holdings
•
•
•
derivatives, the loss of invested capital to the Trust should be limited to the amount invested in the fund
The equity portfolio is diversified by sector and geography
The real assets portfolio is invested in Real Estate Investment Trusts ("REITs") and private real estate
The fixed income is invested in U.S. Treasuries, investment grade corporate debt (denominated in U.S. dollars), and
other credit investments including below investment grade rated bonds and loans, securitized credit, and emerging
market debt
The investment policies for the Foreign Plans are the responsibility of the various trustees. Generally, the investment policy
guidelines are as follows:
• Make sure that the obligations to the beneficiaries of the plan can be met
• Maintain funds at a level to meet the minimum funding requirements
•
The investment managers are expected to provide a return, within certain tracking tolerances, close to that of the
relevant market’s indices
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following tables set forth the fair value of assets by asset category for the Domestic Plans and Foreign Plans:
(In thousands)
Domestic Plans
Equities
Debt securities:
Domestic treasuries
Corporate bonds
Other
Property/real estate
Other
Level 1
Level 2
Level 3
NAV (1)
Total
December 31, 2021
$
— $
— $
— $
40,102 $
40,102
—
—
—
—
2,865
—
—
—
—
—
—
—
—
—
—
133,672
133,672
95,198
28,246
70,648
—
95,198
28,246
70,648
2,865
Total investments in Domestic Plans
$
2,865 $
— $
— $
367,866 $
370,731
Foreign Plans
Equities
Debt securities:
Corporate bonds
Other
Property/real estate
Insurance products
Other
$
— $
— $
— $
149,707 $
149,707
—
—
—
—
1,248
—
—
—
18,781
—
—
—
—
—
—
17,328
165,863
16,632
—
12,222
17,328
165,863
16,632
18,781
13,470
Total investments in Foreign Plans
$
1,248 $
18,781 $
— $
361,752 $
381,781
Total
Equities
Debt securities:
Domestic treasuries
Corporate bonds
Other
Property/real estate
Insurance products
Other
Total investments
$
— $
— $
— $
189,809 $
189,809
—
—
—
—
—
4,113
—
—
—
—
18,781
—
—
—
—
—
—
—
133,672
112,526
194,109
87,280
—
12,222
133,672
112,526
194,109
87,280
18,781
16,335
$
4,113 $
18,781 $
— $
729,618 $
752,512
(1) Investments measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy. The
amounts presented in the tables above are intended to reconcile the fair value hierarchy to the total fair value of plan assets.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(In thousands)
Domestic Plans
Equities
Debt securities:
Domestic treasuries
Corporate bonds
Other
Property/real estate
Other
Level 1
Level 2
Level 3
NAV (1)
Total
December 31, 2020
$
— $
— $
— $
137,098 $
137,098
—
—
—
—
7,302
—
—
—
—
—
—
—
—
—
—
78,808
23,824
55,547
52,708
—
78,808
23,824
55,547
52,708
7,302
Total investments in Domestic Plans
$
7,302 $
— $
— $
347,985 $
355,287
Foreign Plans
Equities
Debt securities:
Corporate bonds
Other
Property/real estate
Insurance products
Other
Total investments in Foreign Plans
Total
Equities
Debt securities:
Domestic treasuries
Corporate bonds
Other
Property/real estate
Insurance products
Other
Total investments
$
— $
— $
— $
139,537
139,537
—
—
—
—
747
—
—
—
19,611
—
—
—
—
—
—
21,677
148,469
17,365
—
18,312
21,677
148,469
17,365
19,611
19,059
747 $
19,611 $
— $
345,360 $
365,718
— $
— $
— $
276,635 $
276,635
—
—
—
—
—
—
—
—
—
—
—
—
78,808
45,501
204,016
70,073
—
8,049
8,049 $
19,611
—
19,611 $
—
—
— $
—
18,312
693,345 $
78,808
45,501
204,016
70,073
19,611
26,361
721,005
$
$
$
(1) Investments measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy. The
amounts presented in the tables above are intended to reconcile the fair value hierarchy to the total fair value of plan assets.
The assets of the Domestic Plans and Foreign Plans are measured at fair value, which is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Financial assets and liabilities are classified in the fair value hierarchy based on the lowest level of any input that is
significant to the measurement of fair value. Investments for which fair value is measured using the net asset value (NAV) per
share practical expedient are not classified in the fair value hierarchy. The majority of pension assets are comprised of common/
collective/pool funds (i.e., mutual funds). These funds are valued at the net asset value of shares held in the underlying funds.
The fair value methods described above may not be indicative of net realizable value or reflective of future fair values.
Additionally, while the Company believes the valuation methods are appropriate and consistent with other market participants,
the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a
different fair value measurement at the reporting date.
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Other Benefits
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
As permitted by the Merger Agreement, Anixter granted restricted stock units prior to June 22, 2020 in the ordinary course
of business to its employees and directors. These awards, for which vesting did not accelerate solely as a result of the Merger,
were converted into cash-only settled Wesco phantom stock units, which vest ratably over a 3-year period. As of December 31,
2021 and 2020, the estimated fair value of these awards was $22.7 million and $22.8 million, respectively.
As of December 31, 2021, the Company's liability for these awards was $17.3 million, of which $10.9 million was included
in accrued payroll and benefit costs and $6.4 million was a component of other noncurrent liabilities in the Consolidated
Balance Sheet. As of December 31, 2020, the Company's liability for these awards was $11.7 million, of which $6.5 million
was included in accrued payroll and benefit costs and $5.2 million was a component of other noncurrent liabilities in the
Consolidated Balance Sheet.
The Company recognized compensation expense associated with these awards of $13.6 million and $9.2 million for the
years ended December 31, 2021 and 2020, respectively, which is reported as a component of selling, general and administrative
expenses.
15. STOCK-BASED COMPENSATION
Wesco sponsors a stock-based compensation plan. On May 27, 2021, the Company's stockholders approved the WESCO
International, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”). The 2021 Plan is administered by the Compensation
Committee of the Company's Board of Directors.
The 2021 Plan was designed to be the successor plan to all prior stock-based compensation plans. Accordingly, no new
awards may be granted under the Company’s 1999 Long-Term Incentive Plan, as amended and restated (the “1999 Plan”) or
any other prior plan. Awards outstanding under any such prior plans will remain in full force and effect under such plans
according to their respective terms. To the extent that any such award is forfeited, terminates, expires or lapses without being
exercised, or is settled for cash, the shares subject to such award not delivered will again be available for awards under the 2021
Plan.
The maximum number of shares of the Company’s common stock that may be granted pursuant to awards under the 2021
Plan is 2,150,000, less any shares issued under the 1999 Plan between March 31, 2021 and May 27, 2021. If any award granted
under the 2021 Plan is forfeited, terminates, expires or lapses instead of being exercised, or is settled for cash, the shares subject
to such award will again be available for grant under the 2021 Plan. Shares delivered by participants or withheld by the
Company to pay all or a portion of the exercise price or withholding taxes with respect to stock option or stock appreciation
right awards will not again be available for issuance. Shares delivered by participants or withheld by the Company to satisfy
applicable tax withholding obligations with respect to restricted shares or restricted stock units will again be available for grant
under the 2021 Plan. As of December 31, 2021, 2,138,865 shares of common stock were reserved under the 2021 Plan for
future equity award grants.
Stock-based employee compensation awards outstanding under Wesco's plans are comprised of stock-settled stock
appreciation rights, restricted stock units and performance-based awards. Compensation cost for all stock-based awards is
measured at fair value on the date of grant and compensation cost is recognized, net of estimated forfeitures, over the service
period for awards expected to vest. The fair value of stock-settled stock appreciation rights is determined using the Black-
Scholes model. The fair value of restricted stock units and performance-based awards with performance conditions is
determined by the grant-date closing price of Wesco’s common stock. The forfeiture assumption is based on Wesco’s historical
employee behavior that is reviewed on an annual basis. No dividends are assumed. For stock-settled stock appreciation rights
that are exercised and for restricted stock units and performance-based awards that vest, shares are issued out of Wesco's
outstanding common stock.
Stock-settled stock appreciation rights vest ratably over a three-year period and terminate on the tenth anniversary of the
grant date unless terminated sooner under certain conditions. Restricted stock unit awards granted in February 2020 and prior
vest based on a minimum time period of three years. The special award described below vests in tranches. Restricted stock units
awarded in 2021 vest ratably over a three-year period on each of the first, second and third anniversaries of the grant date.
Vesting of performance-based awards is based on a three-year performance period, and the number of shares earned, if any,
depends on the attainment of certain performance levels. Outstanding awards would vest upon the consummation of a change in
control transaction and performance-based awards would vest at the target level.
On July 2, 2020, a special award of restricted stock units was granted to certain officers of the Company. These awards vest
in tranches of 30% on each of the first and second anniversaries of the grant date and 40% on the third anniversary of the grant
date, subject, in each case, to continued employment through the applicable anniversary date.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Performance-based awards granted in 2021, 2020 and 2019 are based on two equally-weighted performance measures: the
three-year average growth rate of Wesco's net income attributable to common stockholders and the three-year cumulative return
on net assets.
Wesco recognized $30.8 million, $19.3 million and $19.1 million of non-cash stock-based compensation expense, which is
included in selling, general and administrative expenses, for the years ended December 31, 2021, 2020 and 2019, respectively.
As of December 31, 2021, there was $45.1 million of total unrecognized compensation expense related to non-vested stock-
based compensation arrangements for all awards previously made of which approximately $26.4 million is expected to be
recognized in 2022, $17.0 million in 2023 and $1.7 million in 2024.
The aggregate intrinsic value of awards exercised during the years ended December 31, 2021, 2020, and 2019 was $69.7
million, $8.8 million, and $10.7 million, respectively. The gross deferred income tax benefit associated with the exercise of
stock-based awards totaled $16.8 million, $2.0 million, and $2.5 million in 2021, 2020, and 2019, respectively.
The following table sets forth a summary of stock-settled stock appreciation rights and related information for the periods
presented:
Year Ended December 31,
2021
2020
2019
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
(In
thousands)
Awards
Weighted-
Average
Exercise
Price
Awards
Weighted-
Average
Exercise
Price
Awards
Beginning of year
2,161,556 $
60.48
2,337,049 $
59.72
2,351,633 $
Granted
Exercised
Canceled
End of year
Exercisable at end
139,592
(916,906)
(13,854)
1,370,388
77.05
60.70
54.42
62.09
262,091
(391,339)
(46,245)
48.32
47.11
65.93
213,618
(113,099)
(115,103)
6.1 $ 95,246
2,161,556
60.48
2,337,049
59.26
54.63
35.01
65.27
59.72
of year
1,001,708 $
62.79
5.3 $ 68,920
1,630,891 $
62.72
1,723,370 $
59.00
The following table sets forth the weighted-average assumptions used to estimate the fair value of stock-settled stock
appreciation rights granted during the periods presented:
Stock-settled stock appreciation rights granted
Risk free interest rate
Expected life (in years)
Expected volatility
Year Ended December 31,
2020
262,091
1.4%
5
30%
2021
139,592
0.8%
7
41%
2019
213,618
2.5%
5
29%
The risk-free interest rate is based on the U.S. Treasury Daily Yield Curve rate as of the grant date. The expected life is
based on historical exercise experience and the expected volatility is based on the volatility of the Company's daily stock prices
over the expected life preceding the grant date.
The weighted-average fair value per stock-settled stock appreciation right granted was $33.19, $13.86 and $16.36 for the
years ended December 31, 2021, 2020 and 2019, respectively.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following table sets forth a summary of time-based restricted stock units and related information for the periods
presented:
2021
Weighted-
Average
Fair
Value
Awards
Unvested at beginning of year
921,495 $
Granted
Vested
Forfeited
Unvested at end of year
314,480
(232,152)
(29,661)
974,162 $
43.15
77.81
44.10
63.86
53.48
Year Ended December 31,
2020
Weighted-
Average
Fair
Value
Awards
363,729 $
656,717
(83,253)
(15,698)
921,495 $
60.00
37.44
69.17
56.79
43.15
2019
Weighted-
Average
Fair
Value
Awards
327,798 $
192,106
(136,777)
(19,398)
363,729 $
57.87
54.13
46.52
59.62
60.00
The following table sets forth a summary of performance-based awards and related information for the periods presented:
2021
Weighted-
Average
Fair
Value
Awards
Unvested at beginning of year
305,269 $
Granted
Vested
Forfeited
Unvested at end of year
122,812
(22,371)
(24,891)
380,819 $
52.61
76.76
62.80
61.26
59.23
Year Ended December 31,
2020
Weighted-
Average
Fair
Value
Awards
195,305 $
158,756
(25,909)
(22,883)
305,269 $
60.24
49.56
78.04
69.39
52.61
2019
Weighted-
Average
Fair
Value
Awards
138,896 $
126,874
(25,696)
(44,769)
195,305 $
59.33
54.64
42.44
52.11
60.24
Vesting of the 380,819 shares of performance-based awards in the table above is dependent upon the achievement of certain
performance targets, including half that are dependent upon the three-year average growth rate of Wesco's net income
attributable to common stockholders and the other half that are based upon the three-year cumulative return on net assets. These
awards are accounted for as awards with performance conditions; compensation cost is recognized over the performance period
based upon Wesco's determination of whether it is probable that the performance targets will be achieved.
16. COMMITMENTS AND CONTINGENCIES
From time to time, a number of lawsuits and claims have been or may be asserted against the Company relating to the
conduct of its business, including litigation relating to commercial, product and employment matters (including wage and hour).
The outcome of any litigation cannot be predicted with certainty, and some lawsuits may be determined adversely to Wesco.
However, management does not believe that the ultimate outcome of any such pending matters is likely to have a material
adverse effect on Wesco's financial condition or liquidity, although the resolution in any fiscal period of one or more of these
matters may have a material adverse effect on Wesco's results of operations for that period.
As of December 31, 2021, the Company had $50.1 million in outstanding letters of credit and guarantees.
17. BUSINESS SEGMENTS
The Company has operating segments that are organized around three strategic business units consisting of EES, CSS and
UBS. These operating segments are equivalent to the Company's reportable segments. The Company's chief operating decision
maker evaluates the performance of its operating segments based primarily on net sales, income from operations, adjusted
EBITDA, adjusted EBITDA margin percentage, and total assets.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following is a description of each of the Company's reportable segments and their business activities.
Electrical & Electronic Solutions
The EES segment, with over 6,400 employees supporting customers in over 50 countries, supplies a broad range of products
and solutions primarily to the construction, industrial and original equipment manufacturer ("OEM") markets. The product
portfolio in this business includes a broad range of electrical equipment and supplies, automation and connected devices (the
"Internet of Things" or "IoT"), security, lighting, wire and cable, safety, and maintenance, repair and operating ("MRO")
products from industry-leading manufacturing partners. The EES service portfolio includes contractor solutions to improve
project execution, direct and indirect manufacturing supply chain optimization programs, lighting and renewables advisory
services, and digital and automation solutions to improve safety and productivity.
Communications & Security Solutions
The CSS segment, with over 3,300 employees supporting customers in over 50 countries, is a global leader in the network
infrastructure and security markets. CSS sells products directly to end-users or through various channels including data
communications contractors, security, network, professional audio/visual and systems integrators. In addition to the core
network infrastructure and security portfolio, CSS has a broad offering of safety and energy management solutions. CSS
products are often combined with supply chain services to increase efficiency and productivity, including installation
enhancement, project deployment, advisory, and IoT and digital services.
Utility & Broadband Solutions
The UBS segment, with over 2,400 employees supporting customers primarily in the U.S. and Canada, provides products
and services to investor-owned utilities, public power companies, including municipalities, as well as global service providers,
wireless providers, broadband operators and the contractors that service these customers. The UBS segment also includes
Wesco's integrated supply business, which provides products and services to large industrial and commercial end-users to
support their MRO spend. The products sold into the utility and broadband markets include wire and cable, transformers,
transmission and distribution hardware, switches, protective devices, connectors, lighting, conduit, fiber and copper cable,
connectivity products, pole line hardware, racks, cabinets, safety and MRO products, and point-to-point wireless devices. The
UBS segment also offers a complete set of service solutions to improve customer supply chain efficiencies.
Corporate
Corporate primarily incurs costs related to treasury, tax, information technology, legal and other centralized functions. The
Company also has various corporate assets which are reported in corporate. Segment assets may not include jointly used assets,
but segment results include depreciation expense or other allocations related to those assets. Interest expense and other non-
operating items are either not allocated to the segments or reviewed on a segment basis. Corporate expenses and assets not
directly identifiable with a reportable segment are reported in the tables below to reconcile the reportable segments to the
consolidated financial statements.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following table sets forth financial information by reportable segment for the periods presented:
(In thousands)
Net sales
Income from operations
Adjusted EBITDA
Adjusted EBITDA Margin %
Supplemental information:
Year Ended December 31, 2021
EES
CSS
UBS
Corporate
Total
$ 7,621,263
$ 5,715,238
$ 4,881,011
$
—
$ 18,217,512
542,059
604,461
395,343
480,820
412,740
428,367
(548,269)
801,873
(337,965)
1,175,683
7.9 %
8.4 %
8.8 %
6.5 %
Depreciation and amortization
$
55,998
$
82,870
$
22,447
$
37,239
$
198,554
Capital expenditures
4,469
3,197
5,207
41,873
54,746
(In thousands)
Net sales
Income from operations
Adjusted EBITDA
Adjusted EBITDA Margin %
Supplemental information:
Year Ended December 31, 2020
EES
CSS
UBS
Corporate
Total
$ 5,479,760
$ 3,323,264
$ 3,522,971
$
—
$ 12,325,995
260,207
308,327
217,163
280,656
231,702
265,593
(362,034)
(194,259)
5.6 %
8.4 %
7.5 %
347,038
660,317
5.4 %
Depreciation and amortization
$
35,811
$
37,765
$
22,380
$
25,644
$
121,600
Capital expenditures
7,081
1,495
12,834
35,261
56,671
(In thousands)
Net sales
Income from operations
Adjusted EBITDA
Adjusted EBITDA Margin %
Supplemental information:
Year Ended December 31, 2019
EES
CSS
UBS
Corporate
Total
$ 4,860,541
$
909,496
$ 2,588,880
$
—
$ 8,358,917
261,788
291,473
6.0 %
43,835
51,067
5.6 %
184,931
198,745
7.7 %
(144,337)
(110,769)
346,217
430,516
5.2 %
62,107
44,067
Depreciation and amortization
$
28,569
$
7,155
$
13,583
$
12,800
$
Capital expenditures
20,405
3,093
6,460
14,109
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following table sets forth total assets by reportable segment for the periods presented:
(In thousands)
EES
CSS
UBS
Corporate(1)
Total
Total assets
$
4,098,335 $
4,601,132 $
3,266,231 $
652,001 $
12,617,699
As of
December 31, 2021
As of
December 31, 2020
(In thousands)
EES
CSS
UBS
Corporate(1)
Total
Total assets
$
3,726,855 $
4,275,611 $
2,947,406 $
930,342 $
11,880,214
(1) Total assets for Corporate primarily consist of cash and cash equivalents, deferred income taxes, fixed assets and right-of-use assets
associated with operating leases.
The following table sets forth tangible long-lived assets, which include property, buildings and equipment, and operating
lease assets, by geographic area:
(In thousands)
United States
Canada
Other International(1)
Total
As of December 31,
2021
2020
$
698,942 $
141,380
69,553
693,807
146,620
93,435
$
909,875 $
933,862
(1) No individual other international country's tangible long-lived assets are material.
85
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
The following tables reconcile net income attributable to common stockholders to adjusted EBITDA and adjusted EBITDA
margin % by segment, which are non-GAAP financial measures, for the periods presented:
(In thousands)
Net income attributable to common stockholders
Net income attributable to noncontrolling
interests
Preferred stock dividends
Provision for income taxes
Interest expense, net
Depreciation and amortization
Other (income) expense, net(1)
Stock-based compensation expense(2)
Merger-related and integration costs
Net gain on Canadian divestitures
Year Ended December 31, 2021
EES
CSS
UBS
Corporate
Total
$ 543,633 $ 394,031 $ 412,698 $ (942,388) $ 407,974
298
—
—
—
55,998
(1,872)
6,404
—
—
—
—
—
—
—
—
—
—
82,870
22,447
722
57,408
115,510
268,073
37,239
1,020
57,408
115,510
268,073
198,554
1,312
2,607
—
—
42
2,107
—
(8,927)
(47,594)
(48,112)
14,581
25,699
158,484
158,484
—
(8,927)
Adjusted EBITDA
$ 604,461 $ 480,820 $ 428,367 $ (337,965) $ 1,175,683
Adjusted EBITDA margin %
6.5 %
7.9 %
(1) Corporate other non-operating income in the calculation of adjusted EBITDA for the year ended December 31, 2021 includes a
$36.6 million curtailment gain resulting from the remeasurement of the Company's pension obligations in the U.S. and Canada due
to amending certain terms of such defined benefit plans.
8.4 %
8.8 %
(2) Stock-based compensation expense in the calculation of adjusted EBITDA for the year ended December 31, 2021 excludes
$5.1 million as such amount is included in merger-related and integration costs.
(In thousands)
EES
CSS
UBS
Corporate
Total
Net income attributable to common stockholders
$ 262,829 $ 217,211 $ 231,678 $ (641,297) $
70,421
Year Ended December 31, 2020
Net loss attributable to noncontrolling interests
(842)
Preferred stock dividends
Provision for income taxes
Interest expense, net
Depreciation and amortization
Other (income) expense, net
Stock-based compensation expense(3)(4)
Merger-related and integration costs
Merger-related fair value adjustments
Out-of-period adjustment(3)
Gain on sale of asset
—
—
—
35,811
(1,780)
4,080
—
15,411
12,634
(19,816)
—
—
—
—
—
—
—
—
37,765
22,380
(48)
1,403
—
22,000
2,325
—
24
1,336
—
6,282
3,893
—
321
30,139
22,803
226,591
25,644
(521)
30,139
22,803
226,591
121,600
(591)
(2,395)
9,895
16,714
132,236
132,236
—
—
—
43,693
18,852
(19,816)
Adjusted EBITDA
$ 308,327 $ 280,656 $ 265,593 $ (194,259) $ 660,317
Adjusted EBITDA margin %
5.4 %
5.6 %
(3) Stock-based compensation and the out-of-period adjustment by reportable segment for the year ended December 31, 2020, as
previously reported in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, have been
reallocated to conform to the current period's presentation.
7.5 %
8.4 %
(4) Stock-based compensation expense in the calculation of adjusted EBITDA for the year ended December 31, 2020 excludes
$2.6 million as such amount is included in merger-related and integration costs.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(In thousands)
EES
CSS
UBS
Corporate
Total
Net income attributable to common stockholders
$ 264,570 $
43,835 $ 184,931 $ (269,910) $ 223,426
Year Ended December 31, 2019
Net loss attributable to noncontrolling interests
(1,228)
Provision for income taxes
Interest expense, net
Depreciation and amortization
Other income, net
Stock-based compensation expense
Merger-related costs
Adjusted EBITDA
—
—
28,569
(1,554)
1,116
—
—
—
—
—
—
—
7,155
13,583
—
77
—
—
231
—
—
(1,228)
59,863
65,710
12,800
—
17,638
3,130
59,863
65,710
62,107
(1,554)
19,062
3,130
$ 291,473 $
51,067 $ 198,745 $ (110,769) $ 430,516
Adjusted EBITDA margin %
6.0 %
5.6 %
7.7 %
5.2 %
Note: Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company's
performance and its ability to meet debt service requirements. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation
and amortization before foreign exchange and other non-operating expenses (income), non-cash stock-based compensation, costs and fair
value adjustments associated with the merger with Anixter, an out-of-period adjustment related to inventory cost absorption accounting,
and net gains on the divestiture of Wesco's legacy utility and data communications businesses in Canada and sale of an operating branch
in the U.S. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our
disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such
term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our
management, including our principal executive officer and principal financial officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the updated framework in Internal Control — Integrated
Framework (2013) (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission on
May 14, 2013. Based on our evaluation under the 2013 Framework, our management concluded that our internal control over
financial reporting was effective as of December 31, 2021.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included
herein.
Changes in Internal Control Over Financial Reporting
During the last fiscal quarter of 2021, there were no changes in the Company’s internal control over financial reporting
identified in connection with management’s evaluation of the effectiveness of the Company’s internal control over financial
reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
88
Table of Contents
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information set forth under the captions “Board of Directors” and “Executive Officers” in our definitive Proxy
Statement for our 2022 Annual Meeting of Stockholders is incorporated herein by reference.
Codes of Business Ethics and Conduct
We have adopted a Code of Business Ethics and Conduct (“Code of Conduct”) that applies to our Directors, officers and
employees that is available on our website at www.wesco.com by selecting the “Investors” tab followed by the “Corporate
Governance” heading. Any amendment or waiver of the Code of Conduct for our officers or Directors will be disclosed
promptly at that location on our website.
We also have adopted a Senior Financial Executive Code of Principles for Senior Executives (“Senior Financial Executive
Code”) that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or
persons performing these functions. The Senior Financial Executive Code is also available at that same location on our website.
We intend to timely disclose any amendment or waiver of the Senior Financial Executive Code on our website and will retain
such information on our website as required by applicable SEC rules.
A copy of the Code of Conduct and/or Senior Financial Executive Code may also be obtained upon request by any
stockholder, without charge, by writing to us at WESCO International, Inc., 225 West Station Square Drive, Suite 700,
Pittsburgh, Pennsylvania 15219, Attention: Corporate Secretary.
The information required by Item 10 that relates to our Directors and executive officers, including the Audit Committee and
its financial expert, required by this item, is incorporated by reference from the information appearing under the captions
“Corporate Governance,” “Board and Committee Meetings” and “Security Ownership” in our definitive Proxy Statement for
our 2022 Annual Meeting of Stockholders that is to be filed with the SEC pursuant to the Exchange Act within 120 days of the
end of our fiscal year on December 31, 2021.
Item 11. Executive Compensation.
The information set forth under the captions “Compensation Discussion and Analysis” and “Director Compensation” in our
definitive Proxy Statement for our 2022 Annual Meeting of Stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information set forth under the caption “Security Ownership” in our definitive Proxy Statement for our 2022 Annual
Meeting of Stockholders is incorporated herein by reference.
The following table provides information as of December 31, 2021 with respect to the shares of our common stock that may
be issued under our existing equity compensation plans:
Plan Category
Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for future issuance
under equity
compensation plans
Equity compensation plans approved by security holders
2,725,369 $
Equity compensation plans not approved by security holders
Total
—
2,725,369 $
31.29
—
31.29
2,138,865
—
2,138,865
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information set forth under the captions “Transactions with Related Persons” and “Corporate Governance” in our
definitive Proxy Statement for our 2022 Annual Meeting of Stockholders is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information set forth under the caption “Independent Registered Public Accounting Firm Fees and Services” in our
definitive Proxy Statement for our 2022 Annual Meeting of Stockholders is incorporated herein by reference.
89
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedule.
The financial statements, financial statement schedule and exhibits listed below are filed as part of this annual report:
(a)
(1) Financial Statements
The list of financial statements required by this item is set forth in Item 8, “Financial Statements and Supplementary
Data,” and is incorporated herein by reference.
(2) Financial Statement Schedule
Schedule II — Valuation and Qualifying Accounts
(b)
Exhibits
Exhibit No.
2.1
Description of Exhibit
Agreement and Plan of Merger, dated as of January 10,
2020, by and among WESCO International, Inc.,
Warrior Merger Sub, Inc. and Anixter International Inc.
Prior Filing or Sequential Page Number
Incorporated by reference to Exhibit 2.1 to Wesco’s
Current Report on Form 8-K, dated January 13, 2020
3.1
3.2
3.3
3.4
3.5
4.1
Restated Certificate of Incorporation of WESCO
International, Inc.
Certificate of Amendment of Certificate of
Incorporation to Restated Certificate of Incorporation
of WESCO International, Inc.
Incorporated by reference to Exhibit 3.1 to Wesco’s
Registration Statement on Form S-4, dated September
28, 2001 (No. 333-70404)
Incorporated by reference to Exhibit 3.1 to Wesco’s
Current Report on Form 8-K, dated May 29, 2014
Amended and Restated By-laws of WESCO
International, Inc., effective as of May 29, 2014
Incorporated by reference to Exhibit 3.2 to Wesco’s
Current Report on Form 8-K, dated May 29, 2014
Certificate of Designations with respect to the Series A
Preferred Stock, dated June 22, 2020
Incorporated by reference to Exhibit 3.1 to Wesco’s
Current Report on Form 8-K, dated June 22, 2020
Certificate of Designations of Series B Junior
Participating Preferred Stock of WESCO International,
Inc.
Incorporated by reference to Exhibit 3.1 to Wesco’s
Current Report on Form 8-K, dated July 17, 2020
Indenture, dated November 26, 2013, among WESCO
Distribution, Inc. and U.S. Bank National Association,
as trustee
Incorporated by reference to Exhibit 4.1 to Wesco’s
Current Report on Form 8-K, dated November 27,
2013
4.2
Form of 5.375% Unrestricted Note due 2021
4.3
Indenture, dated June 15, 2016, among WESCO
Distribution, Inc. and U.S. Bank National Association,
as trustee
4.4
Form of 5.375% Unrestricted Note due 2024
Incorporated by reference to Exhibit A-2 to Exhibit 4.1
to Wesco’s Current Report on Form 8-K, dated
November 27, 2013
Incorporated by reference to Exhibit 4.1 to Wesco’s
Current Report on Form 8-K, dated June 15, 2016
Incorporated by reference to Exhibit A-2 to Exhibit 4.1
to Wesco’s Current Report on Form 8-K, dated June
15, 2016
4.5
4.6
Indenture, dated June 12, 2020, between WESCO
International, Inc., WESCO Distribution, Inc. and U.S.
Bank National Association, as trustee
Incorporated by reference to Exhibit 4.1 to Wesco’s
Current Report on Form 8-K, dated June 12, 2020
Form of 7.125% Senior Note due 2025
Incorporated by reference to Exhibit A-1 to Exhibit 4.1
to Wesco’s Current Report on Form 8-K, dated June
12, 2020
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Table of Contents
Exhibit No.
4.7
Description of Exhibit
Form of 7.250% Senior Note due 2028
4.8
Deposit Agreement, dated as of June 19, 2020, among
WESCO International, Inc., Computershare Inc. and
Computershare Trust Company, N.A., jointly as the
Depositary, and the holders from time to time of the
Depositary Receipts described therein
4.9
Form of Depositary Receipt
4.10
Rights Agreement, dated as of July 17, 2020, between
WESCO International, Inc. and Computershare Trust
Company, N.A., as rights agent, which includes the
form of Certificate of Designations as Exhibit A, the
form of Right Certificate as Exhibit B and the
Summary of Rights to Purchase Preferred Shares as
Exhibit C
4.11
Description of WESCO International, Inc.’s securities
1999 Deferred Compensation Plan for Non-Employee
Directors, as amended and restated September 20, 2007
Form of Stock Appreciation Rights Agreement for
Employees
Prior Filing or Sequential Page Number
Incorporated by reference to Exhibit A-2 to Exhibit 4.1
to Wesco’s Current Report on Form 8-K, dated June
12, 2020
Incorporated by reference to Exhibit 4.2 to Wesco’s
Registration Statement on Form 8-A, dated June 19,
2020
Incorporated by reference to Exhibit A to Exhibit 4.2 to
Wesco’s Registration Statement on Form 8-A, dated
June 19, 2020
Incorporated by reference to Exhibit 4.1 to Wesco’s
Current Report on Form 8-K, dated July 17, 2020
Incorporated by reference to Exhibit 4.11 to Wesco's
Annual Report on Form 10-K for the year ended
December 31, 2020
Incorporated by reference to Exhibit 10.5 to Wesco's
Annual Report on Form 10-K for the year ended
December 31, 2011
Incorporated by reference to Exhibit 10.7 to Wesco's
Annual Report on Form 10-K for the year ended
December 31, 2011
Amended and Restated Employment Agreement, dated
as of September 1, 2009, between WESCO
International Inc. and John J. Engel
Incorporated by reference to Exhibit 10.2 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2009
1999 Long-Term Incentive Plan, as restated effective
as of May 30, 2013
Incorporated by reference to Appendix A to the Proxy
Statement filed on Schedule 14A on April 16, 2013
Form of Stock Appreciation Rights Agreement for
Employees
Fourth Amended and Restated Receivables Purchase
Agreement, dated as of September 24, 2015, by and
among WESCO Receivables Corp., WESCO
Distribution, Inc., the various Purchaser Groups from
time to time party thereto and PNC Bank, National
Association, as Administrator
Form of Director and Officer Indemnification
Agreement, entered among WESCO International, Inc.
and certain of its executive officers and directors listed
on a schedule attached thereto
Incorporated by reference to Exhibit 10.33 to Wesco's
Annual Report on Form 10-K for the year ended
December 31, 2014
Incorporated by reference to Exhibit 10.2 to Wesco’s
Current Report on Form 8-K, dated September 24,
2015
Incorporated by reference to Exhibit 10.24 to Wesco's
Annual Report on Form 10-K for the year ended
December 31, 2015
First Amendment to Fourth Amended and Restated
Receivables Purchase Agreement, dated as of
December 18, 2015
Incorporated by reference to Exhibit 10.1 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016
Second Amendment to Fourth Amended and Restated
Receivables Purchase Agreement, dated as of April 19,
2016
Incorporated by reference to Exhibit 10.2 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
Third Amendment to Fourth Amended and Restated
Receivables Purchase Agreement, dated as of May 10,
2016
Incorporated by reference to Exhibit 10.3 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016
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Table of Contents
Exhibit No.
10.11
Description of Exhibit
Fourth Amendment to Fourth Amended and Restated
Receivables Purchase Agreement, dated as of May 27,
2016
Prior Filing or Sequential Page Number
Incorporated by reference to Exhibit 10.4 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
Fifth Amendment to Fourth Amended and Restated
Receivables Purchase Agreement, dated as of
November 8, 2017
Incorporated by reference to Exhibit 10.1 to Wesco's
Current Report on Form 8-K, dated November 8, 2017
Sixth Amendment to Fourth Amended and Restated
Receivables Agreement, dated as of December 29,
2017
Incorporated by reference to Exhibit 10.22 to Wesco’s
Annual Report on Form 10-K for the year ended
December 31, 2017
Form of Non-Employee Director Restricted Stock Unit
Agreement
Form of Restricted Stock Unit Agreement for
Employees
Form of Stock Appreciation Rights Agreement for
Employees
Incorporated by reference to Exhibit 10.23 to Wesco’s
Annual Report on Form 10-K for the year ended
December 31, 2017
Incorporated by reference to Exhibit 10.24 to Wesco’s
Annual Report on Form 10-K for the year ended
December 31, 2017
Incorporated by reference to Exhibit 10.25 to Wesco’s
Annual Report on Form 10-K for the year ended
December 31, 2017
Form of Notice of Performance Share Award Under the
WESCO International, Inc. 1999 Long-Term Incentive
Plan, as amended May 31, 2017
Incorporated by reference to Exhibit 10.26 to Wesco’s
Annual Report on Form 10-K for the year ended
December 31, 2017
1999 Long-Term Incentive Plan, as restated effective
as of May 31, 2017
Incorporated by reference to Appendix A to the Proxy
Statement filed on Schedule 14A on April 17, 2017
Seventh Amendment to Fourth Amended and Restated
Receivables Agreement, dated as of April 23, 2018
Incorporated by reference to Exhibit 10.1 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2018
Eighth Amendment to Fourth Amended and Restated
Receivables Agreement, dated as of December 21,
2018
Incorporated by reference to Exhibit 10.30 to Wesco’s
Annual Report on Form 10-K for the year ended
December 31, 2018
Third Amended and Restated Credit Agreement, dated
as of September 26, 2019 among WESCO Distribution,
Inc., the other U.S. Borrowers party thereto, WESCO
Distribution Canada LP, the other Canadian Borrowers
party thereto, WESCO International, Inc., the Lenders
party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, and JPMorgan Chase Bank,
N.A., Toronto Branch, as Canadian Administrative
Agent
Incorporated by reference to Exhibit 10.1 to Wesco’s
Current Report on Form 8-K, dated September 30,
2019
Ninth Amendment to Fourth Amended and Restated
Receivables Purchase Agreement, dated as of
September 26, 2019
Incorporated by reference to Exhibit 10.2 to Wesco’s
Current Report on Form 8-K, dated September 30,
2019
Fourth Amended and Restated Credit Agreement, dated
as of June 22, 2020, by and among WESCO
Distribution, Inc., the other U.S. borrowers party
thereto, WESCO Distribution Canada LP, the other
Canadian borrowers party thereto, WESCO
International, Inc., the lenders party thereto and
Barclays Bank PLC., as administrative agent
Fifth Amended and Restated Receivables Purchase
Agreement, dated as of June 22, 2020, by and among
WESCO Receivables Corp., WESCO Distribution,
Inc., the various purchaser groups from time to time
party thereto and PNC Bank, National Association, as
administrator.
Incorporated by reference to Exhibit 10.1 to Wesco’s
Current Report on Form 8-K, dated June 24, 2020
Incorporated by reference to Exhibit 10.2 to Wesco’s
Current Report on Form 8-K, dated June 24, 2020
10.25
Form of Restricted Stock Unit Award Agreement
(Special Awards)
Incorporated by reference to Exhibit 10.1 to Wesco’s
Current Report on Form 8-K, dated June 25, 2020
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Table of Contents
Exhibit No.
10.26
Description of Exhibit
WESCO International, Inc. Change in Control
Severance Plan
Prior Filing or Sequential Page Number
Incorporated by reference to Exhibit 10.2 to Wesco’s
Current Report on Form 8-K, dated June 25, 2020
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
Agreement, dated June 22, 2020, memorializing terms
of employment of David Schulz by WESCO
International, Inc.
Incorporated by reference to Exhibit 10.1 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2020
Agreement, dated June 22, 2020, memorializing terms
of employment of Nelson Squires by WESCO
International, Inc.
Incorporated by reference to Exhibit 10.2 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2020
Agreement, dated June 22, 2020, memorializing terms
of employment of Christine Wolf by WESCO
International, Inc.
Incorporated by reference to Exhibit 10.3 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2020
Agreement, dated June 22, 2020, memorializing terms
of employment of Diane Lazzaris by WESCO
International, Inc.
Incorporated by reference to Exhibit 10.4 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2020
First Amendment to Fourth Amended and Restated
Credit Agreement, dated as of December 14, 2020,
among WESCO Distribution, the other U.S. borrowers
party thereto, WESCO Distribution Canada LP, the
other Canadian borrowers party thereto, WESCO, the
lenders party thereto and Barclays Bank PLC, as
administrative agent.
First Amendment to Fifth Amended and Restated
Receivables Purchase Agreement, dated December 14,
2020 (the “Receivables Amendment”), by and among
WESCO Receivables Corp., WESCO Distribution, the
various purchaser groups from time to time party
thereto and PNC Bank, National Association, as
administrator.
Incorporated by reference to Exhibit 10.40 to Wesco’s
Annual Report on Form 10-K for the year ended
December 31, 2020
Incorporated by reference to Exhibit 10.41 to Wesco’s
Annual Report on Form 10-K for the year ended
December 31, 2020
WESCO International, Inc. 2021 Omnibus Incentive
Plan
Incorporated by reference to Appendix A to the Proxy
Statement on Schedule 14A, filed on April 12, 2021
Agreement, dated May 28, 2020, memorializing terms
of employment of Theodore Dosch by WESCO
International, Inc.
Incorporated by reference to Exhibit 10.1 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2021
Second Amendment to Fifth Amended and Restated
Receivables Purchase Agreement
Form of WESCO International, Inc. 2021 Omnibus
Incentive Plan Restricted Stock Unit Award Agreement
(for employees)
Form of WESCO International, Inc. 2021 Omnibus
Incentive Plan Restricted Stock Unit Award Agreement
(for non-employee directors)
Form of WESCO International, Inc. 2021 Omnibus
Incentive Plan Stock Appreciation Right Award
Agreement
Third Amendment to Fifth Amended and Restated
Receivables Purchase Agreement, dated as of June 1,
2021 (the “Receivables Amendment”), by and among
WESCO Receivables Corp., WESCO Distribution,
Inc., the various purchaser groups from time to time
party thereto, and PNC Bank, National Association, as
administrator
Incorporated by reference to Exhibit 10.2 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2021
Incorporated by reference to Exhibit 10.2 to Wesco’s
Current Report on Form 8-K, dated May 27, 2021
Incorporated by reference to Exhibit 10.3 to Wesco’s
Current Report on Form 8-K, dated May 27, 2021
Incorporated by reference to Exhibit 10.4 to Wesco’s
Current Report on Form 8-K, dated May 27, 2021
Incorporated by reference to Exhibit 10.1 to Wesco’s
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2021
10.40
Form of WESCO International, Inc. 2021 Omnibus
Incentive Plan Nonqualified Stock Option Award
Agreement
Incorporated by reference to Exhibit 10.1 to Wesco’s
Current Report on Form 8-K, dated February 16, 2022
93
Table of Contents
Exhibit No.
10.41
Description of Exhibit
Form of WESCO International, Inc. 2021 Omnibus
Incentive Plan Performance Share Unit Award
Agreement
Prior Filing or Sequential Page Number
Incorporated by reference to Exhibit 10.2 to Wesco’s
Current Report on Form 8-K, dated February 16, 2022
21.1
23.1
31.1
31.2
32.1
32.2
101
104
Subsidiaries of WESCO International, Inc.
Consent of Independent Registered Public Accounting
Firm
Filed herewith
Filed herewith
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) promulgated under the Exchange Act
Filed herewith
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) promulgated under the Exchange Act
Filed herewith
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Filed herewith
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Filed herewith
Interactive Data File
Cover Page Interactive Data File (embedded within the
Inline XBRL document)
Filed herewith
Filed herewith
The registrant hereby agrees to furnish supplementally to the Commission, upon request, a copy of any omitted schedule to any
of the agreements contained herein.
Copies of exhibits may be retrieved electronically at the U.S. Securities and Exchange Commission’s home page at
www.sec.gov. Exhibits will also be furnished without charge by writing to David S. Schulz, Executive Vice President and Chief
Financial Officer, 225 West Station Square Drive, Suite 700, Pittsburgh, Pennsylvania 15219. Requests may also be directed to
(412) 454-2200.
94
Table of Contents
Schedule II—Valuation and Qualifying Accounts
Allowance for expected credit losses
Year Ended December 31, 2021
Year Ended December 31, 2020
Year Ended December 31, 2019
Balance at
beginning
of period
Charged to
earnings
Charged to
other
accounts(1)
(In thousands)
Balance at
Deductions(2)
end of period
$
23,909 $
12,944 $
13,669 $
(8,800) $
41,722
25,443
24,468
11,701
7,006
5,160
52
(18,395)
(6,083)
23,909
25,443
(1) For the years ended December 31, 2021 and 2020, the amount charged to other accounts primarily relates to the
acquisition of Anixter.
(2) Includes a reduction in the allowance for expected credit losses due to the write-off of trade accounts receivable.
Allowance for deferred tax assets
Year Ended December 31, 2021
Year Ended December 31, 2020
Year Ended December 31, 2019
Balance at
beginning
of period
Charged to
earnings
Charged to
other
accounts(1)
(In thousands)
Balance at
Deductions(2)
end of period
$
60,629 $
1,115 $
1,791 $
(17,266) $
46,269
5,854
4,072
1,900
1,745
52,875
37
—
—
60,629
5,854
(1) For the year ended December 31, 2020, the amount charged to other accounts includes $59.3 million that was recorded in
connection with the acquisition of Anixter.
(2) For the year ended December 31, 2021, deductions primarily include a decrease in the valuation allowance recorded
against deferred tax assets related to foreign tax credit carryforwards.
Item 16. Form 10-K Summary.
Not applicable.
95
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
WESCO INTERNATIONAL, INC.
By:
/s/ JOHN J. ENGEL
Name: John J. Engel
Title: Chairman, President and Chief Executive Officer
Date:
February 25, 2022
WESCO INTERNATIONAL, INC.
By:
/s/ DAVID S. SCHULZ
Name: David S. Schulz
Title: Executive Vice President and Chief Financial Officer
Date:
February 25, 2022
96
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ JOHN J. ENGEL
John J. Engel
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
/s/ DAVID S. SCHULZ
David S. Schulz
Executive Vice President and Chief Financial
Officer
(Principal Financial Officer)
Date
February 25, 2022
February 25, 2022
/s/ MATTHEW S. KULASA
Matthew S. Kulasa
Senior Vice President, Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
/s/ ANNE M. COONEY
Anne M. Cooney
/s/ MATTHEW J. ESPE
Matthew J. Espe
/s/ BOBBY J. GRIFFIN
Bobby J. Griffin
/s/ JOHN K. MORGAN
John K. Morgan
/s/ STEVEN A. RAYMUND
Steven A. Raymund
/s/ JAMES L. SINGLETON
James L. Singleton
/s/ EASWARAN SUNDARAM
Easwaran Sundaram
/s/ LAURA K. THOMPSON
Laura K. Thompson
Director
Director
Director
Director
Director
Director
Director
Director
97
Non-GAAP Reconciliations
(Dollars in millions, except for per share data and percentages)
Adjusted EBITDA:
Income from operations
Merger-related and integration costs
Accelerated trademark amortization
Merger-related fair value adjustments
Out-of-period adjustment
Net gain on sale of assets and divestures
Adjusted income from operations
Stock-based compensation
Depreciation and amortization
Less: accelerated trademark amortization
Adjusted EBITDA
Adjusted net income attributable to
common stockholders:
Net income attributable to WESCO International, Inc.
Income tax expense for the Tax Cuts
and Jobs Act of 2017 (TCJA)
Adjustments to income from operations, net of tax
Adjusted net income attributable to WESCO International, Inc.
Preferred stock dividends
Adjusted net income attributable to common stockholders
Adjusted Diluted EPS:
Diluted share count
Adjusted Diluted EPS1
Free cash flow:
Cash provided by operations
Less: capital expenditures
Add: merger-related cash costs
Free cash flow
Adjusted net income
Free cash flow as a % of adjusted net income
2021 Annual Report
98
2017
2018
2019
2020
2021
319
353
346
-
-
-
-
-
319
15
64
-
398
164
26
-
190
-
190
48.4
3.93
149
(22)
-
128
190
67%
-
-
-
-
-
353
16
63
-
432
227
-
-
227
-
227
47.2
4.82
297
(36)
-
261
225
116%
3
-
-
-
-
349
19
62
-
431
223
-
3
226
-
226
43.5
5.20
224
(44)
-
180
225
81%
347
132
-
44
19
(20)
522
17
122
-
660
101
-
133
234
30
204
46.6
4.37
544
(57)
99
586
233
251%
802
158
32
-
-
(9)
983
26
199
(32)
1,176
465
-
111
577
57
519
52.0
9.98
67
(55)
81
94
578
16%
1 2017 excludes the income tax expense related to the application of the TCJA. 2019 excludes transaction costs related to Wesco’s merger with Anixter. 2020 excludes merger-related costs and fair value
adjustments, an out-of-period adjustment related to inventory absorption accounting, gain on sale of a U.S. operating branch, and the related income tax effects. 2021 excludes merger-related and
integration costs, a net gain on divestitures, accelerated trademark amortization, and the related income tax effects.
99
Wesco International
Corporate Information
Corporate Headquarters
WESCO International, Inc.
Suite 700
225 West Station Square Drive
Pittsburgh, PA 15219-1122
Phone: 412-454-2200
www.wesco.com
Investor Relations
For questions regarding Wesco, contact Investor Relations
at investorrelations@wesco.com. A copy of the Company’s
Annual Report on Form 10-K or other financial information
may be requested through our website (www.wesco.com) or by
contacting Investor Relations.
Common Stock
Wesco is listed on the New York Stock Exchange under the
ticker symbol WCC.
Annual Meeting
The Annual Meeting of Stockholders will be held on
May 26, 2022, at 2:00 p.m., EDT, hosted virtually at:
www.virtualshareholdermeeting.com/WCC/2022
Transfer Agent And Registrar
Computershare
P.O. Box 505000
Louisville, KY 40233
Toll free: 877-264-3927
TDD for Hearing Impaired: 800-231-5469
Foreign Shareholders: 201-680-6578
TDD Foreign Shareholders: 201-680-6610
Website address:
www.computershare.com/investor
Independent Registered Public
Accounting Firm
PricewaterhouseCoopers LLP
Pittsburgh, PA
Certifications To The NYSE And The SEC
On June 24, 2021, the Company submitted its CEO Certification
to the NYSE under NYSE Rule 303A.12(a).
Also, any CEO/CFO certifications required to be filed
with the SEC, including the Section 302 certifications,
are filed by the Company as exhibits to its Annual Report on
Form 10-K.
An online version of the Annual Report is available
at www.wesco.com
2021 Annual Report
100
Executive Officers
(as of December 31, 2021)
John J. Engel
Chairman, President, and
Chief Executive Officer
James F. Cameron
Executive Vice President
and General Manager, Utility
and Broadband Solutions
Theodore A. Dosch
Executive Vice President, Strategy
and Chief Transformation Officer
William C. Geary, II
Executive Vice President and
General Manager, Communications
and Security Solutions
Akash Khurana
Executive Vice President and
Chief Information and Digital Officer
Diane E. Lazzaris
Executive Vice President,
General Counsel and
Corporate Secretary
Hemant Porwal
Executive Vice President,
Supply Chain and Operations
David S. Schulz
Executive Vice President and
Chief Financial Officer
Nelson J. Squires, III
Executive Vice President and
General Manager, Electrical and
Electronic Solutions
Christine A. Wolf
Executive Vice President and Chief
Human Resources Officer
Corporate Governance
Board Of Directors
John J. Engel
Chairman, President,
and Chief Executive Officer
Wesco International
Anne M. Cooney
Former President, Process
Industries & Drives Division
Siemens Industry, Inc.
Matthew J. Espe
Operating Partner
Advent International
Bobby J. Griffin
Former President
International Operations
Ryder System, Inc.
John K. Morgan
Former Chairman,
President, and Chief
Executive Officer
Zep Inc.
Steven A. Raymund
Former Chairman and
Chief Executive Officer
Tech Data Corporation
James L. Singleton
Chairman and
Chief Executive Officer
Cürex Group Holdings, LLC
Easwaran Sundaram
Operating Executive
Tailwind Capital
Laura K. Thompson
Former Executive Vice
President and Chief
Financial Officer
The Goodyear Tire &
Rubber Company
Wesco International
225 West Station Square Drive, Suite 700
Pittsburgh, Pennsylvania 15219-1122
412-454-2200
wesco.com
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