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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
from ______ to ______
For the quarterly period ended MARCH 31, 2003
Commission file number 001-14989
WESCO INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-1723342
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or
organization)
225 WEST STATION SQUARE DRIVE
SUITE 700
PITTSBURGH, PENNSYLVANIA 15219 (412) 454-2200
(Address of principal executive offices) (Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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 X No .
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
--- ---
As of April 30, 2003, WESCO International, Inc. had 40,455,493 shares and
4,653,131 shares of common stock and Class B common stock outstanding,
respectively.
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2003 (unaudited) and December
31, 2002......................................................................... 2
Condensed Consolidated Statements of Operations for the three months ended March
31, 2003 and 2002 (unaudited) ................................................... 3
Condensed Consolidated Statements of Cash Flows for the three months ended March
31, 2003 and 2002 (unaudited) ................................................... 4
Notes to Condensed Consolidated Financial Statements (unaudited) ................... 5
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 13
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk............................. 17
ITEM 4. Controls and Procedures................................................................ 18
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K....................................................... 19
Signatures and Certifications.......................................................... 20
1
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31 DECEMBER 31
Dollars in thousands, except share data 2003 2002
----------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................. $ 31,385 $ 22,570
Trade accounts receivable, net of allowance for doubtful
accounts of $9,976 and $10,261 in 2003 and 2002, respectively (NOTE 4).. 243,052 182,249
Other accounts receivable ................................................. 12,628 19,921
Inventories, net .......................................................... 336,508 338,781
Income taxes receivable ................................................... 2,043 6,103
Prepaid expenses and other current assets ................................. 11,274 7,433
----------- -----------
Total current assets ................................................... 636,890 577,057
Property, buildings and equipment, net ........................................ 106,881 110,174
Goodwill ...................................................................... 314,739 314,078
Other assets .................................................................. 16,595 13,809
----------- -----------
Total assets ........................................................... $ 1,075,105 $ 1,015,118
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .......................................................... $ 366,990 $ 346,513
Accrued payroll and benefit costs ......................................... 12,979 19,736
Current portion of long-term debt ......................................... 6,067 5,778
Current deferred income taxes ............................................. 3,439 3,408
Other current liabilities ................................................. 31,440 23,040
----------- -----------
Total current liabilities .............................................. 420,915 398,475
Long-term debt (NOTE 7) ....................................................... 442,352 412,196
Other noncurrent liabilities .................................................. 5,186 5,684
Deferred income taxes ......................................................... 29,619 29,475
----------- -----------
Total liabilities ...................................................... 898,072 845,830
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 20,000,000 shares authorized, no shares
issued or outstanding ................................................... -- --
Common stock, $.01 par value; 210,000,000 shares authorized, 44,488,513 and
44,483,513 shares issued in 2003 and 2002, respectively ................ 445 445
Class B nonvoting convertible common stock, $.01 par value; 20,000,000
shares authorized, 4,653,131 issued in 2003 and 2002 ................... 46 46
Additional capital ........................................................ 570,938 570,923
Retained earnings (deficit) ............................................... (361,956) (366,796)
Treasury stock, at cost; 4,033,020 shares in 2003 and 2002 ................ (33,841) (33,841)
Accumulated other comprehensive income (loss) ............................. 1,401 (1,489)
----------- -----------
Total stockholders' equity ............................................. 177,033 169,288
----------- -----------
Total liabilities and stockholders' equity ............................. $ 1,075,105 $ 1,015,118
=========== ===========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
2
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS
ENDED MARCH 31
In thousands, except share data 2003 2002
------------ ------------
Net sales ............................................ $790,807 $808,917
Cost of goods sold ................................... 645,375 663,273
-------- --------
Gross profit ..................................... 145,432 145,644
Selling, general and administrative expenses ......... 121,740 122,069
Depreciation and amortization ........................ 5,133 5,162
-------- --------
Income from operations ........................... 18,559 18,413
Interest expense, net ................................ 10,388 10,944
Loss on debt extinguishment .......................... -- 1,073
Other expense ........................................ 1,410 1,427
-------- --------
Income before income taxes ....................... 6,761 4,969
Provision for income taxes ........................... 1,921 1,132
-------- --------
Net income ....................................... $ 4,840 $ 3,837
======== ========
Earnings per share:
Basic: ............................................... $ 0.11 $ 0.08
======== ========
Diluted: ............................................. $ 0.10 $ 0.08
======== ========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
3
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED MARCH 31
In thousands 2003 2002
--------- ---------
OPERATING ACTIVITIES:
Net income ................................................................... $ 4,840 $ 3,837
Adjustments to reconcile net income to net cash used by operating activities:
Loss on debt extinguishment ............................................. -- 1,073
Depreciation and amortization ........................................... 5,133 5,162
Accretion of original issue and amortization of purchase discounts ...... 743 743
Amortization of debt issuance costs and interest rate caps .............. 259 219
Deferred income taxes ................................................... 175 (703)
Gain on the sale of property, buildings and equipment ................... (487) (303)
Changes in assets and liabilities, excluding the effects of acquisitions:
Change in receivables facility ........................................ (41,000) (39,200)
Trade and other receivables ........................................... (9,607) 25,694
Inventories ........................................................... 4,177 7,242
Prepaid expenses and other current assets ............................. 225 (243)
Other assets .......................................................... (792) (81)
Accounts payable ...................................................... 17,892 (104,182)
Accrued payroll and benefit costs ..................................... (6,757) (6,641)
Other current and noncurrent liabilities .............................. 8,651 9,161
--------- ---------
Net cash used by operating activities .............................. (16,548) (98,222)
INVESTING ACTIVITIES:
Capital expenditures ......................................................... (1,763) (1,497)
Acquisition payments ......................................................... (1,104) --
Proceeds from the sale of property, buildings and equipment .................. 1,174 755
--------- ---------
Net cash used by investing activities .............................. (1,693) (742)
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ..................................... 71,580 283,456
Repayments of long-term debt ................................................. (43,589) (228,048)
Debt issuance costs .......................................................... (944) (2,976)
Proceeds from the exercise of stock options .................................. 9 136
--------- ---------
Net cash provided by financing activities .......................... 27,056 52,568
Net change in cash and cash equivalents ................................. 8,815 (46,396)
Cash and cash equivalents at the beginning of period .................... 22,570 75,057
--------- ---------
Cash and cash equivalents at the end of period .......................... $ 31,385 $ 28,661
========= =========
Supplemental disclosures:
Non-cash financing activities:
Increase in fair value of interest rate swap ............................ $ (2,211) $ (1,600)
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION
WESCO International, Inc. and its subsidiaries (collectively, "WESCO"),
headquartered in Pittsburgh, Pennsylvania, is a full-line distributor of
electrical supplies and equipment and is a provider of integrated supply
procurement services. WESCO currently operates over 350 branch locations and
five distribution centers in the United States, Canada, Mexico, Puerto Rico,
Guam, the United Kingdom, Nigeria and Singapore.
2. ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated financial statements include the
accounts of WESCO and all of its subsidiaries and have been prepared in
accordance with Rule 10-01 of the Securities and Exchange Commission. The
unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in WESCO's 2002 Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
The unaudited condensed consolidated balance sheet as of March 31, 2003,
the unaudited condensed consolidated statements of operations for the three
months ended March 31, 2003 and March 31, 2002 and the unaudited condensed
consolidated statements of cash flows for the three months ended March 31 2003
and March 31, 2002, in the opinion of management, have been prepared on the same
basis as the audited consolidated financial statements and include all
adjustments necessary for the fair presentation of the results of the interim
periods. All adjustments reflected in the condensed consolidated financial
statements are of a normal recurring nature unless indicated. Results for the
interim periods presented are not necessarily indicative of the results to be
expected for the full year.
Stock Options
WESCO accounts for stock-based compensation arrangements under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") and related interpretations. WESCO
currently records compensation expense for its stock options utilizing the
intrinsic value method in accordance with APB 25. No stock-based employee
compensation cost has been reflected in net income, as all options granted in
the three months ended March 31, 2003 and 2002 had an exercise price equal to
the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and earnings per share if
WESCO had applied the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," to measure stock-based compensation
for past awards:
5
THREE MONTHS ENDED MARCH 31
---------------------------
2003 2002
---------------------------
(IN THOUSANDS)
---------------------------
Net income, as reported ......................................... $ 4,840 $ 3,837
Stock-based employee compensation expense determined
under SFAS No. 123 for all awards, net of related tax .......... 371 575
--------- ---------
Pro forma net income ............................................ $ 4,469 $ 3,262
Earnings per share:
Basic as reported ............................................ $ 0.11 $ 0.08
Basic pro forma .............................................. $ 0.10 $ 0.07
Diluted as reported .......................................... $ 0.10 $ 0.08
Diluted pro forma ............................................ $ 0.10 $ 0.07
For purposes of presenting pro forma results, the fair value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model and the following assumptions:
THREE MONTHS ENDED MARCH 31
---------------------------
2003(1) 2002
---------------------------
Risk-free interest rate -- 3.4%
Expected life (years) -- 6.0
Stock price volatility -- 75.0%
Employee turnover -- 5.0%
(1) There were no option grants during the first quarter of 2003.
Recent Accounting Pronouncements
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of SFAS No. 123." SFAS
No. 148 was issued to provide alternative methods of transition for a voluntary
change to the fair-value-based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
amendments to SFAS No. 123 in paragraphs 2(a)-2(e) of this statement shall be
effective for financial statements for fiscal years ending after December 15,
2002. Currently, WESCO is evaluating the impact of adopting the fair-value-based
method of accounting for stock-based compensation under SFAS No. 148.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term of the
related guarantee. This interpretation also incorporates, without change, the
guidance in FASB Interpretation No. 34, "Disclosure of Indirect Guarantees of
Indebtedness of Others," which is being superseded. The initial recognition and
initial measurement provisions of this interpretation are applicable on a
prospective basis to guarantees issued or modified beginning January 1, 2003.
The adoption of this statement did not have a material impact on WESCO's
financial statements.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." This interpretation requires unconsolidated
variable interest entities to be consolidated by their primary beneficiaries if
the entities do not effectively disperse the risk and rewards of ownership among
their owners and other parties involved. The provisions of this interpretation
are effective immediately to all variable interest entities created after
January 1, 2003 and variable interest entities in which an enterprise obtains an
interest in after that date. For variable interest entities created before this
date, the provisions are effective July 31, 2003. WESCO is currently evaluating
the potential impact of this interpretation on its consolidated financial
statements. However, WESCO does not believe it will affect the accounting
treatment for its Receivables Facility.
6
3. EARNINGS PER SHARE
The following table sets forth the details of basic and diluted earnings
per share:
THREE MONTHS ENDED
MARCH 31
Dollars in thousands, except per share amounts 2003 2002
----------- -----------
Reported net income $ 4,840 $ 3,837
=========== ===========
Weighted average common shares outstanding used in
computing basic earnings per share 45,107,957 44,897,981
Common shares issuable upon exercise of
dilutive stock options 1,306,206 1,759,198
----------- -----------
Weighted average common shares outstanding and
common share equivalents used in computing
diluted earnings per share 46,414,163 46,657,179
=========== ===========
Earnings per share:
Basic $ 0.11 $ 0.08
Diluted $ 0.10 $ 0.08
----------- -----------
4. ACCOUNTS RECEIVABLE SECURITIZATION
WESCO maintains an accounts receivable securitization program ("Receivables
Facility") that requires annual renewal of its terms. Under the Receivables
Facility, WESCO sells, on a continuous basis, to WESCO Receivables Corporation,
a wholly-owned, special purpose company ("SPC"), an undivided interest in all
domestic accounts receivable. The SPC sells without recourse to a third-party
conduit all the eligible receivables while maintaining a subordinated interest,
in the form of overcollateralization, in a portion of the receivables. WESCO has
agreed to continue servicing the sold receivables for the financial institution
at market rates; accordingly, no servicing asset or liability has been recorded.
As of March 31, 2003 and December 31, 2002, securitized accounts receivable
totaled approximately $361 million and $346 million, respectively, of which the
subordinated retained interest was approximately $109 million and $53 million,
respectively. Accordingly, approximately $252 million and $293 million of
accounts receivable balances were removed from the consolidated balance sheets
at March 31, 2003 and December 31, 2002, respectively. WESCO reduced its
accounts receivable securitization program by $41 million in 2003. Costs
associated with the Receivables Facility totaled $1.4 million for both the three
months ended March 31, 2003 and March 31, 2002. These amounts are recorded as
other expenses in the consolidated statements of operations and are primarily
related to the discount and loss on the sale of accounts receivables, partially
offset by related servicing revenue.
The key economic assumptions used to measure the retained interest at the
date of the securitization for securitizations completed in 2003 were a discount
rate of 2% and an estimated life of 1.5 months. At March 31, 2003, an immediate
adverse change in the discount rate or estimated life of 10% and 20% would
result in a reduction in the fair value of the retained interest of $0.1 million
and $0.2 million, respectively. These sensitivities are hypothetical and should
be used with caution. As the figures indicate, changes in fair value based on a
10% variation in assumptions generally cannot be extrapolated because the
relationship of the change in assumption to the change in fair value may not be
linear. Also, in this example, the effect of a variation in a particular
assumption on the fair value of the retained interest is calculated without
changing any other assumption. In reality, changes in one factor may result in
changes in another.
7
5. COMPREHENSIVE INCOME
The following table sets forth comprehensive income and its components:
THREE MONTHS ENDED
MARCH 31
In thousands 2003 2002
------- -------
Net income $ 4,840 $ 3,837
Foreign currency translation adjustment 2,890 (49)
------- -------
Comprehensive income $ 7,730 $ 3,788
------- -------
6. ACQUISITIONS
Certain of our acquisition agreements contain earn-out provisions based
principally on future earnings targets. The most significant of these agreements
relates to the acquisition of Bruckner Supply Company, which provides for an
earn-out potential of $80 million during either one of the next two years if
certain earnings targets are achieved. The maximum amount payable in any single
year under this agreement is $30 million. Certain other acquisitions also
contain contingent consideration provisions, only one of which could require a
significant payment. Management estimates this payment could range from $0 to
$20 million and would be made in 2008.
The following table sets forth supplemental cash flow information with
respect to acquisitions:
THREE MONTHS ENDED
MARCH 31
In thousands 2003 2002
------- -------
Details of acquisitions:
Deferred acquisition payments $1,104 $--
------ ---
Cash paid for acquisitions $1,104 $--
------ ---
7. LONG-TERM DEBT
In March 2003, WESCO successfully completed a series of mortgage financings
which totaled $51 million. Total borrowings under the mortgage financing are
subject to a 22-year amortization schedule with a balloon payment due at the end
of the 10-year term. Proceeds from the borrowings were used to reduce
outstanding borrowing under the 2002 Revolving Credit Facility. Interest rates
on borrowings under this facility are fixed at 6.5%.
8. INCOME TAXES
The following table sets forth the reconciliation between the federal
statutory income tax rate and the effective rate:
THREE MONTHS ENDED
MARCH 31
----------------------
2003 2002
--------- ---------
Federal statutory rate ...................................... 35.0% 35.0%
State taxes, net of federal tax benefit ..................... 0.8 1.4
Nondeductible expenses ...................................... 2.0 1.8
Foreign taxes ............................................... (0.4) (0.4)
Remeasurement of deferred taxes(1) .......................... -- (13.9)
Acquired company net operating loss carryforward(2) ......... (8.6) --
Other ....................................................... (0.4) (1.1)
---- ----
28.4% 22.8%
==== ====
(1)Reflects a decrease in the rate applied to deferred tax items. Management
believes this revised estimate reflects the rate that will be in effect when
these items reverse.
(2)Represents the result of the recognition of a $0.6 million benefit
associated with net operating loss carryforwards previously reserved.
8
9. OTHER FINANCIAL INFORMATION (UNAUDITED)
WESCO Distribution, Inc. has issued $400 million of 9 1/8% senior
subordinated notes. The senior subordinated notes are fully and unconditionally
guaranteed by WESCO International, Inc. on a subordinated basis to all existing
and future senior indebtedness of WESCO International, Inc. Condensed
consolidating financial information for WESCO International, Inc., WESCO
Distribution, Inc. and the non-guarantor subsidiaries are as follows:
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 2003
---------------------------------------------------------------------------------------
(IN THOUSANDS)
WESCO Consolidating
International, WESCO Non-Guarantor and Eliminating
Inc. Distribution, Inc. Subsidiaries Entries Consolidated
-------------- ------------------ ------------- --------------- ----------------
Cash and cash equivalents ......... $ 4 $ 22,264 $ 9,117 $ -- $ 31,385
Trade accounts receivable ......... -- 47,131 195,921 -- 243,052
Inventories ....................... -- 293,114 43,394 -- 336,508
Other current assets .............. -- 10,882 16,064 (1,001) 25,945
---------- ---------- ---------- ---------- ----------
Total current assets ........... 4 373,391 264,496 (1,001) 636,890
Intercompany receivables, net ..... -- 172,385 42,848 (215,233) --
Property, buildings and equipment,
net ............................ -- 37,911 68,970 -- 106,881
Goodwill .......................... -- 276,927 37,812 -- 314,739
Investments in affiliates and other
noncurrent assets .............. 390,861 345,174 2,877 (722,317) 16,595
---------- ---------- ---------- ---------- ----------
Total assets ................... $ 390,865 $1,205,788 $ 417,003 $ (938,551) $1,075,105
========== ========== ========== ========== ==========
Accounts payable .................. $ -- $ 353,836 $ 13,154 $ -- $ 366,990
Other current liabilities ......... -- 40,290 14,636 (1,001) 53,925
---------- ---------- ---------- ---------- ----------
Total current liabilities ...... -- 394,126 27,790 (1,001) 420,915
Intercompany payables, net ........ 215,233 -- -- (215,233) --
Long-term debt .................... -- 392,050 50,302 -- 442,352
Other noncurrent liabilities ...... -- 28,751 6,054 -- 34,805
Stockholders' equity .............. 175,632 390,861 332,857 (722,317) 177,033
---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity............ $ 390,865 $1,205,788 $ 417,003 $ (938,551) $1,075,105
========== ========== ========== ========== ==========
9
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2002
---------------------------------------------------------------------------------------
(IN THOUSANDS)
WESCO Consolidating
International, WESCO Non-Guarantor and Eliminating
Inc. Distribution, Inc. Subsidiaries Entries Consolidated
-------------- ------------------- ---------------- ----------------- -----------------
Cash and cash equivalents ......... $ 4 $ 12,449 $ 10,117 $ -- $ 22,570
Trade accounts receivable ......... -- 45,381 136,868 -- 182,249
Inventories ....................... -- 298,495 40,286 -- 338,781
Other current assets .............. -- 15,453 19,778 (1,774) 33,457
---------- ---------- ---------- ---------- ----------
Total current assets ........... 4 371,778 207,049 (1,774) 577,057
Intercompany receivables, net ..... -- 186,269 30,845 (217,114) --
Property, buildings and equipment,
net ............................ -- 41,822 68,352 -- 110,174
Goodwill .......................... -- 247,671 66,407 -- 314,078
Investments in affiliates and other
noncurrent assets .............. 387,887 347,678 1,081 (722,837) 13,809
---------- ---------- ---------- ---------- ----------
Total assets ................... $ 387,891 $1,195,218 $ 373,734 $ (941,725) $1,015,118
========== ========== ========== ========== ==========
Accounts payable .................. $ -- $ 340,748 $ 5,765 $ -- $ 346,513
Other current liabilities ......... -- 39,022 14,714 (1,774) 51,962
---------- ---------- ---------- ---------- ----------
Total current liabilities ...... -- 379,770 20,479 (1,774) 398,475
Intercompany payables, net ........ 217,114 -- -- (217,114) --
Long-term debt .................... -- 398,856 13,340 -- 412,196
Other noncurrent liabilities ...... -- 28,705 6,454 -- 35,159
Stockholders' equity .............. 170,777 387,887 333,461 (722,837) 169,288
---------- ---------- ---------- ---------- ----------
Total liabilities and .......... $ 387,891 $1,195,218 $ 373,734 $ (941,725) $1,015,118
stockholders' equity
========== ========== ========== ========== ==========
10
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003
---------------------------------------------------------------------------------------
(IN THOUSANDS)
WESCO Consolidating
International, WESCO Non-Guarantor and Eliminating
Inc. Distribution, Inc. Subsidiaries Entries Consolidated
-------------- ------------------- ---------------- ----------------- -----------------
Net sales ......................... $ -- $ 681,072 $ 109,735 $ -- $ 790,807
Cost of goods sold ................ -- 555,910 89,465 -- 645,375
Selling, general and administrative
expenses ....................... -- 104,820 16,920 -- 121,740
Depreciation and amortization ..... -- 4,339 794 -- 5,133
Results of affiliates' operations . 2,974 6,542 -- (9,516) --
Interest expense (income), net .... (2,870) 14,628 (1,370) -- 10,388
Other (income) expense ............ -- 8,015 (6,605) -- 1,410
Provision for income taxes ........ 1,004 (3,072) 3,989 -- 1,921
--------- --------- --------- --------- ---------
Net income (loss) .............. $ 4,840 $ 2,974 $ 6,542 $ (9,516) $ 4,840
========= ========= ========= ========= =========
THREE MONTHS ENDED MARCH 31, 2002
---------------------------------------------------------------------------------------
(IN THOUSANDS)
WESCO Consolidating
International, WESCO Non-Guarantor and Eliminating
Inc. Distribution, Inc. Subsidiaries Entries Consolidated
-------------- ------------------- ---------------- ----------------- -----------------
Net sales ......................... $ -- $ 704,320 $ 104,597 $ -- $ 808,917
Cost of goods sold ................ -- 577,775 85,498 -- 663,273
Selling, general and administrative
expenses ....................... -- 105,837 16,232 -- 122,069
Depreciation and amortization ..... -- 4,339 823 -- 5,162
Results of affiliates' operations . 1,735 12,338 -- (14,073) --
Interest expense (income), net .... (3,214) 14,302 (144) -- 10,944
Other (income) expense ............ -- 19,058 (16,558) -- 2,500
Provision for income taxes ........ 1,112 (6,388) 6,408 -- 1,132
--------- --------- --------- --------- ---------
Net income (loss) .............. $ 3,837 $ 1,735 $ 12,338 $ (14,073) $ 3,837
========= ========= ========= ========= =========
11
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003
(IN THOUSANDS)
WESCO Consolidating
International, WESCO Non-Guarantor and Eliminating
Inc. Distribution, Inc. Subsidiaries Entries Consolidated
-------------- ------------------- ---------------- ----------------- -----------------
Net cash provided (used) by
operating activities............ $ 1,872 $ 19,517 $(37,937) $-- $(16,548)
Investing activities:
Capital expenditures ........... -- (1,645) (118) -- (1,763)
Acquisitions ................... -- (1,104) -- -- (1,104)
Proceeds from sale of property . -- 1,174 -- -- 1,174
-------- -------- -------- ---- --------
Net cash used in investing
activities ..................... -- (1,575) (118) -- (1,693)
Financing activities:
Net borrowings (repayments) .... (1,881) (8,127) 37,999 -- 27,991
Equity transactions ............ 9 -- -- -- 9
Other .......................... -- -- (944) -- (944)
-------- -------- -------- ---- --------
Net cash (used in) provided by
financing activities............ (1,872) (8,127) 37,055 -- 27,056
-------- -------- -------- ---- --------
Net change in cash and cash
equivalents..................... -- 9,815 (1,000) -- 8,815
Cash and cash equivalents at
beginning of year .............. 4 12,449 10,117 -- 22,570
-------- -------- -------- ---- --------
Cash and cash equivalents at end of
period.......................... $ 4 $ 22,264 $ 9,117 $-- $ 31,385
======== ======== ======== ==== ========
THREE MONTHS ENDED MARCH 31, 2002
(IN THOUSANDS)
WESCO Consolidating
International, WESCO Non-Guarantor and Eliminating
Inc. Distribution, Inc. Subsidiaries Entries Consolidated
-------------- ------------------- ---------------- ----------------- -----------------
Net cash provided (used) by
operating activities.............. $ 2,195 $(84,522) $ 30,309 $(46,204) $(98,222)
Investing activities:
Capital expenditures ............. -- (1,450) (47) -- (1,497)
Proceeds from sale of property ... -- 755 -- -- 755
-------- -------- -------- -------- --------
Net cash used in investing
activities ....................... -- (695) (47) -- (742)
Financing activities:
Net borrowings (repayments) ...... (2,331) 70,316 (12,577) -- 55,408
Equity transaction................ 136 -- -- -- 136
Other ............................ -- (2,976) -- -- (2,976)
-------- -------- -------- -------- --------
Net cash (used in) provided by
financing activities ............. (2,195) 67,340 (12,577) -- 52,568
-------- -------- -------- -------- --------
Net change in cash and cash
equivalents ...................... -- (17,877) 17,685 (46,204) (46,396)
Cash and cash equivalents at
beginning of year ................ 2 17,877 57,178 -- 75,057
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period ........................... $ 2 $ -- $ 74,863 $(46,204) $ 28,661
======== ======== ======== ======== ========
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information
in the unaudited condensed consolidated financial statements and notes thereto
included herein and WESCO International Inc.'s Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in its 2002 Annual Report on Form 10-K.
GENERAL
WESCO is a full-line distributor of electrical supplies and equipment and
is a provider of integrated supply procurement services. WESCO currently
operates over 350 branch locations and five distribution centers in the United
States, Canada, Mexico, Puerto Rico, Guam, the United Kingdom, Nigeria and
Singapore. WESCO serves over 100,000 customers worldwide, offering over
1,000,000 products from over 24,000 suppliers. WESCO's diverse customer base
includes a wide variety of industrial companies; contractors for industrial,
commercial and residential projects; utility companies, and commercial,
institutional and governmental customers. Approximately 89% of WESCO's net sales
are generated from operations in the U.S., 9% from Canada and the remainder from
other countries.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
During the first quarter of 2003, there were no significant changes to
WESCO's Critical Accounting Policies and Estimates referenced in the 2002 Annual
Report on Form 10-K.
RESULTS OF OPERATIONS
First Quarter of 2003 versus First Quarter of 2002
The following table sets forth the percentage relationship to net sales of
certain items in WESCO's condensed consolidated statements of operations for the
periods presented:
THREE MONTHS ENDED MARCH 31
---------------------------
2003 2002
---------- -----------
Net sales 100.0% 100.0%
Gross profit 18.4 18.0
Selling, general and administrative expenses 15.4 15.1
Depreciation and amortization 0.7 0.6
----- -----
Income from operations 2.3 2.3
Interest expense 1.3 1.4
Loss on debt extinguishment -- 0.1
Other expense 0.2 0.2
----- -----
Income before income taxes 0.8 0.6
Provision for income taxes 0.2 0.1
----- -----
Net income 0.6% 0.5%
===== =====
Net sales in the first quarter of 2003 total $790.8 million versus $808.9
million in the comparable 2002 quarter, a 2.2% decline. The decline in sales was
primarily attributable to weaker demand resulting from depressed economic
activity in the industrial production and commercial construction markets.
Gross profit for the first quarter of 2003 of $145.4 million was flat as
compared to 2002's first quarter, although the gross margin percentage improved
to 18.4% versus 18.0% last year. The improvement in the gross margin percentage
was primarily due to improvements in billing margins, which increased 30 basis
points over last year's comparable quarter.
Selling, general and administrative ("SG&A") expenses in the first quarter
of 2003 totaled $121.7 million versus $122.1 million in last year's comparable
quarter. The current quarter's total includes $2.1 million of expense associated
with discretionary retirement plan contribution accruals. However, SG&A expenses
improved compared to last year's quarter due to lower salary and benefit costs
related to the Company's staffing reduction efforts. As a result of this
program, staffing levels declined 4% between the first quarter of 2002 and the
first quarter of 2003. Shipping and handling expense included in SG&A was $2.9
million in the first quarter of 2003 compared with $3.3 million in last year's
first quarter. As a percentage of net sales, SG&A expenses increased to 15.4%
compared with
13
15.1% in the prior year quarter reflecting the negative leverage of lower sales
volume.
Depreciation and amortization was $5.1 million in both of the first quarter
of 2003 and 2002.
Interest expense totaled $10.4 million for the first quarter of 2003 versus
$10.9 million in last year's comparable quarter, a decrease of 4.6%. The decline
was due to a lower amount of indebtedness outstanding during the current quarter
as compared to the first quarter of 2002. Other expense totaled $1.4 million in
both of the first quarters of 2003 and 2002, reflecting costs associated with
the accounts receivable securitization program.
Loss on extinguishment of debt during the first quarter of 2002 totaling
$1.1 million represents a charge associated with the write-off of unamortized
deferred financing fees related to the termination of a revolving credit
facility in March 2002.
Income tax expense totaled $1.9 million in the first quarter of 2003 and
the effective tax rate was 28.4%. Income tax expense totaled $1.1 million in the
first quarter of 2002 and the effective tax rate was 22.8%. The effective tax
rate in the first quarter of 2003 differs from the statutory rate primarily as a
result of the recognition of a $0.6 million benefit associated with net
operating loss carryforwards previously reserved. The effective tax rate in the
first quarter of 2002 differs from the statutory rate primarily as a result of
deferred taxes being remeasured during the quarter reflecting the cumulative
impact of a change in the expected tax rate that will be applicable when the
deferred tax items reverse. The change in estimate was primarily due to state
tax reduction initiatives. In addition, foreign tax credits contributed to the
reduction in the effective rate during both 2003 and 2002.
For the first quarter of 2003, net income totaled $4.8 million, or $0.10
per diluted share, compared with $3.8 million and $0.08 per diluted share, in
the first quarter of 2002. The improvements in net income and earnings per share
were primarily attributable to improved financing costs in the current quarter.
LIQUIDITY AND CAPITAL RESOURCES
Total assets were $1.1 billion and $1.0 billion at March 31, 2003 and
December 31, 2002, respectively. The increase in total assets was principally
attributable to a $60.8 million increase in trade accounts receivable, with $41
million of the increase being attributable to reduced utilization of the
Company's accounts receivable securitization program. During the first quarter
of 2003, total liabilities increased $52.2 million to $898.1 million. The
increase was the result of a $20.5 million increase in trade accounts payable,
coupled with a $30.2 million increase in long-term debt. The increase in
long-term debt was a result of the closing of a $51.0 million real estate
financing during the first quarter. Borrowings under this financing total $13.3
million as of December 31, 2002. During the 2003 first quarter, stockholders'
equity increased $7.7 million to $177.0 million as of March 31, 2003 as a result
of $4.8 million in net income during the quarter, coupled with a $2.9 million
favorable adjustment related to foreign currency translation.
WESCO's liquidity needs arise from seasonal working capital requirements,
capital expenditures, acquisitions and debt service obligations. In addition,
certain of our acquisition agreements contain earn-out provisions based
principally on future earnings targets. The most significant of these agreements
relates to the acquisition of Bruckner Supply Company, which provides for an
earn-out potential of $80 million during either one of the next two years if
certain earnings targets are achieved. The maximum amount payable in any single
year under this agreement is $30 million. Certain other acquisitions also
contain contingent consideration provisions, only one of which could require a
significant payment. Management estimates this payment could range from $0 to
$20 million and would be made in 2008. To meet its funding requirements, WESCO
uses a mix of internally generated cash flow, its revolving credit facility, its
Receivables Facility and equity transactions.
WESCO finances its operating and investing needs, as follows:
Accounts Receivable Securitization Program
WESCO maintains a Receivables Facility with a group of financial
institutions with a purchase commitment up to $350 million. Under the
Receivables Facility, which is subject to an annual renewal in June 2003, WESCO
sells, on a continuous basis, to WESCO Receivables Corporation, a wholly-owned
SPC, an undivided interest in all domestic accounts receivable. The SPC sells
without recourse to a third-party conduit, all the eligible receivables while
maintaining a subordinated interest, in the form of overcollateralization, in a
portion of the receivables. WESCO has agreed to continue servicing the sold
receivables for the financial institution at market rates; accordingly, no
servicing
14
asset or liability has been recorded. The effective cost of this financing
facility is currently approximately 2.0% per annum. As of March 31, 2003, $252
million in funding was outstanding under the Receivables Facility and excess
availability was $36 million.
Mortgage Financing Facility
During the first quarter of 2003, WESCO finalized a $51 million mortgage
financing facility. Borrowings under the mortgage financing are subject to a
22-year amortization schedule with a balloon payment due at the end of the
10-year term. In 2003, scheduled principal payments total approximately $0.8
million. Interest cost for the mortgage facility is fixed at 6.5% per annum.
Proceeds from the borrowings were used to reduce outstanding borrowings under
the 2002 Revolving Credit Facility.
2002 Revolving Credit Facility
In March 2002, WESCO Distribution, Inc. entered into a $290 million
revolving credit agreement that is collateralized by substantially all inventory
owned by WESCO and also by the accounts receivable of WESCO Canada. Availability
under the agreement, which matures in 2007, is limited to the amount of eligible
inventory and Canadian receivables applied against certain advance rates.
Proceeds from this agreement were used to retire WESCO Distribution Inc.'s
existing revolving credit facility. Interest on this facility is at LIBOR plus a
margin that will range between 2.0% to 2.75% depending upon the amount of excess
availability under the facility. As long as the average daily excess
availability for both the preceding and projected succeeding 90 day period is
greater than $50 million, then WESCO would be permitted to make acquisitions and
repurchase outstanding public stock and bonds. The above permitted transactions
would also be allowed if such excess availability is between $25 million and $50
million and WESCO's fixed charge coverage ratio, as defined by the agreement, is
at least 1.25 to 1.0 after taking into consideration the permitted transaction.
Additionally, if excess availability under the agreement is less than $50
million, then WESCO must maintain a fixed charge coverage ratio of 1.1 to 1.0.
At March 31, 2003, the interest rate was 3.75%. This facility also had various
restrictive covenants including financial ratios. WESCO was in compliance with
all such covenants as of March 31, 2003. As of March 31, 2003, WESCO had no
borrowings outstanding under this facility and, after deducting $19 million in
outstanding letters of credit, $150 million in availability.
Senior Notes
As of March 31, 2003 WESCO has $400 million in aggregate principal amount
of senior subordinated notes due 2008. The notes were issued with an average
issue price of 98%. The net proceeds received by the Company from the notes were
approximately $376 million. Interest on these notes accrues at a rate of 9.125%
per annum and is payable semi-annually on December 1 and June 1.
Interest Rate Swap Agreements
During September and October of 2001, WESCO entered into four separate
fixed-to-floating interest rate swap agreements, each with a notional amount of
$25 million. These agreements have six-year terms expiring concurrently with the
9.125% senior subordinated notes with the intent of converting $100 million of
the senior subordinated notes from a fixed-to-floating rate facility. Pursuant
to these agreements, WESCO will receive fixed interest payments at the rate of
9.125% and will pay interest at three-month LIBOR plus a premium. The LIBOR
rates in the agreements are reset quarterly. During the first quarter of 2003,
the agreements had the effect of reducing the interest cost on $100 million of
the senior notes from 9.125% to 5.52%. The agreements can be terminated by the
counterparty in accordance with a redemption schedule that is consistent with
the redemption schedule for the senior subordinated notes. In May 2003, WESCO
was notified that the counterparty plans to terminate the agreement in June
2003.
WESCO entered into interest rate swap agreements as a means to hedge its
interest rate exposure and maintain certain amounts of variable rate and fixed
rate debt. Since the swaps have been designated as hedging instruments, their
fair values are reflected in the Company's Unaudited Condensed Consolidated
Balance Sheets. Net amounts to be received or paid under the swap agreements are
reflected as adjustments to interest expense.
Management believes that cash generated from operations, together with
amounts available under its credit facilities, will be sufficient to meet
WESCO's working capital, capital expenditures and other cash requirements for
the foreseeable future. There can be no assurance, however, that this will be or
will continue to be the case.
15
Cash Flow
Operating Activities. Cash used by operating activities for the first
quarter of 2003 totaled $16.5 million as compared to cash used by operating
activities of $98.2 million in the prior year. Included in this use of cash was
a $41.0 million use associated with changes in WESCO's Receivables Facility
compared to $39.2 million in the prior year. Cash provided by other operating
activities totaled $24.5 million during the first quarter of 2003 compared to
cash used by other operating activities of $59.0 million in the previous year.
In 2003, cash generated by increases in accounts payable and other current and
non-current liabilities totaling $26.5 million was partially offset by cash used
to fund increases in accounts receivable totaling $9.6 million. In 2002, cash
was utilized to reduce accounts payable were offset by cash generated by
reductions in accounts receivable and inventory.
Investing Activities. Net cash used in investing activities was $1.7 million
during the first quarter of 2003, principally due to capital expenditures.
Acquisition payments totaling $1.1 million were offset by proceeds received from
the sale of property and buildings totaling $1.2 million. In 2002, cash used by
investing activities totaled $1.5 million and were offset somewhat by sale of
property and building of $0.8 million.
Financing Activities. Net cash provided by financing activities during the
first quarter of 2003 totaled $27.1 million. The cash flow provided was a result
of completing the real estate financing during the quarter, which provided $38
million in funding. Partially offsetting this source of cash was a $10 million
reduction in borrowings under the 2002 Revolving Credit Facility. In 2002, cash
provided by financing activities totaled $52.5 million reflecting net borrowings
of $55.4 million.
Contractual Cash Obligations and Other Commercial Commitments
As disclosed above, WESCO finalized a $51 million mortgage financing
facility during the first quarter. As a result of finalizing this agreement, the
total debt owed on the mortgage facility increased $38 million to $51 million as
compared to $13 million referenced in WESCO's 2002 Form 10-K. In 2003, scheduled
principal payments total approximately $0.8 million.
Inflation
The rate of inflation, as measured by changes in the consumer price index,
did not have a material effect on the sales or operating results of the Company
during the periods presented. However, inflation in the future could affect the
Company's operating costs. Price changes from suppliers have historically been
consistent with inflation and have not had a material impact on the Company's
results of operations.
Seasonality
The Company's operating results are affected by certain seasonal factors.
Sales are typically at their lowest during the first quarter due to a reduced
level of activity during the winter months. Sales increase during the warmer
months beginning in March and continuing through November. Sales drop again
slightly in December as the weather cools and also as a result of a reduced
level of activity during the holiday season. As a result, the Company reports
sales and earnings in the first quarter that are generally lower than that of
the remaining quarters.
Impact of Recently Issued Accounting Standards
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of SFAS No. 123." SFAS
No. 148 was issued to provide alternative methods of transition for a voluntary
change to the fair-value-based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
amendments to SFAS No. 123 in paragraphs 2(a)-2(e) of this statement shall be
effective for financial statements for fiscal years ending after December 15,
2002. Currently, WESCO is evaluating the impact of adopting the fair-value-based
method of accounting for stock-based compensation under SFAS No. 148.
16
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term of the
related guarantee. This interpretation also incorporates, without change, the
guidance in FASB Interpretation No. 34, "Disclosure of Indirect Guarantees of
Indebtedness of Others," which is being superseded. The initial recognition and
initial measurement provisions of this interpretation are applicable on a
prospective basis to guarantees issued or modified beginning January 1, 2003.
The adoption of this statement did not have a material impact on WESCO's
financial statements.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." This interpretation requires unconsolidated
variable interest entities to be consolidated by their primary beneficiaries if
the entities do not effectively disperse the risk and rewards of ownership among
their owners and other parties involved. The provisions of this interpretation
are effective immediately to all variable interest entities created after
January 1, 2003 and variable interest entities in which an enterprise obtains an
interest in after that date. For variable interest entities created before this
date, the provisions are effective July 31, 2003. WESCO is currently evaluating
the potential impact of this interpretation on its consolidated financial
statements. However, WESCO does not believe it will affect the accounting
treatment for its Receivables Facility.
FORWARD-LOOKING STATEMENTS
From time to time in this report and in other written reports and oral
statements, references are made to expectations regarding the future performance
of WESCO. When used in this context, the words "anticipates," "plans,"
"believes," "estimates," "intends," "expects," "projects" and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain such words. Such statements including,
but not limited to, WESCO's statements regarding its business strategy, growth
strategy, productivity and profitability enhancement, new product and service
introductions and liquidity and capital resources are based on management's
beliefs, as well as on assumptions made by, and information currently available
to, management, and involve various risks and uncertainties, certain of which
are beyond WESCO's control. WESCO's actual results could differ materially from
those expressed in any forward-looking statement made by or on behalf of WESCO.
In light of these risks and uncertainties there can be no assurance that the
forward-looking information will in fact prove to be accurate. Factors that
might cause actual results to differ from such forward-looking statements
include, but are not limited to, an increase in competition, the amount of
outstanding indebtedness, the availability of appropriate acquisition
opportunities, availability of key products, functionality of information
systems, international operating environments and other risks that are described
in WESCO's Annual Report on Form 10-K for the year ended December 31, 2002 which
are incorporated by reference herein. WESCO has undertaken no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Except as discussed below, there have not been any material changes to
WESCO's exposures to market risk during the quarter ended March 31, 2003 that
would require an update to the disclosures provided in WESCO's Form 10-K for the
year-ended December 31, 2002.
At March 31, 2003 the net fair value of interest-rate-related derivatives
designated as fair value hedges of debt was $7.3 million.
In May 2003, WESCO was notified that the counterparty plans to terminate the
interest rate swap agreement in June 2003.
17
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the
participation of our management, including the Chief Executive Officer ("CEO")
and Chief Financial Officer ("CFO"), of the effectiveness of the design and
operation of our disclosure controls and procedures within 90 days before the
filing date of this quarterly report. Based on that evaluation, management,
including the CEO and CFO, concluded that our disclosure controls and procedures
were effective to ensure that information required to be disclosed by WESCO in
reports that it files under the Exchange Act are recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission rules and forms. There have been no significant changes in our
internal controls or in other factors that could significantly affect internal
controls subsequent to their evaluation.
18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None were filed in the quarter ended March 31, 2003.
(b) REPORTS ON FORM 8-K
On March 17, 2003, WESCO filed a Current Report on Form 8-K pursuant to
Item 5 announcing WESCO had issued a press release regarding successful
completion of a series of mortgage financings.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on May 14, 2003 on its
behalf by the undersigned thereunto duly authorized.
WESCO International, Inc. and Subsidiaries
By: /s/ Stephen A. Van Oss
-------------------------------------------
Stephen A. Van Oss
Vice President, Chief Financial Officer
20
CERTIFICATION PURSUANT TO
THE SARBANES-OXLEY ACT OF 2002
I, Roy W. Haley, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WESCO
International, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 14, 2003 By: /s/ Roy W. Haley
-----------------------------------------
Roy W. Haley
Chairman and Chief Executive Officer
21
CERTIFICATION PURSUANT TO
THE SARBANES-OXLEY ACT OF 2002
I, Stephen A. Van Oss, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WESCO
International, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 14, 2003 By: /s/ Stephen A. Van Oss
----------------------------------------
Stephen A. Van Oss
Vice President, Chief Financial Officer
22
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WESCO International, Inc. (the
"Company") on Form 10-Q for the period ended March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), each of
the undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
Date: May 14, 2003 By: /s/ Roy W. Haley
-------------------------------------
Roy W. Haley
Chairman and Chief Executive Officer
23
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WESCO International, Inc. (the
"Company") on Form 10-Q for the period ended March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), each of
the undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
Date: May 14, 2003 By: /s/ Stephen A. Van Oss
--------------------------------------------
Stephen A. Van Oss
Vice President, Chief Financial Officer
24