UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021


☐						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

25-1723342

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

225 West Station Square Drive
Suite 700

15219

Pittsburgh,

Pennsylvania

(Zip Code)

(Address of principal executive offices)

(412) 454-2200

(Registrant's telephone number, including area code)

Not applicable.

(Former name, former address and former fiscal year, if changed since last report)

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

WCC

New York Stock Exchange

Depositary Shares, each representing a 1/1,00th interest in a share of Series A Fixed-Rate Reset Cumulative Perpetual Preferred Stock

WCC PR A

New York Stock Exchange

Preferred Share Purchase Rights

N/A

New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an 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

☑

Accelerated filer

☐

Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~April 30, 2020, 41,873,053~~May 6, 2021, 50,182,480 shares of common stock, $0.01 par value, of the registrant were outstanding.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

Table of Contents


			Page
PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.			2

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.			1622

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			2535

Item 4. Controls and Procedures.			2535

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.			2636

Item 1A. Risk Factors.			2636

Item 6. Exhibits.			2637

Signatures			2838

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

The interim financial information required by this item is set forth in the unaudited Condensed Consolidated Financial Statements and Notes thereto in this Quarterly Report on Form 10-Q, as follows:


			Page

Condensed Consolidated Balance Sheets (unaudited)			3
Condensed Consolidated Statements of Income and Comprehensive Income (Loss) (unaudited)			4
Condensed Consolidated Statements of Cash Flows (unaudited)			5
Condensed Consolidated Statements of Stockholders' Equity (unaudited)			6
Notes to Condensed Consolidated Financial Statements (unaudited)			7

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, ~~of dollars,~~ except share data)

(unaudited)


		As of							As of
Assets	Assets	March 31, 2020		December 31, 2019		Assets	March 31, 2021		December 31, 2020
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	342,560	$	150,902	Cash and cash equivalents	$	303,887	$	449,135
Trade accounts receivable, net of allowance for doubtful accounts of $25,260 and $25,443 in 2020 and 2019, respectively		1,214,331		1,187,359
Trade accounts receivable, net of allowance for expected credit losses of $28,333 and $23,909 in 2021 and 2020, respectively						Trade accounts receivable, net of allowance for expected credit losses of $28,333 and $23,909 in 2021 and 2020, respectively	2,574,803		2,466,903
Other accounts receivable	Other accounts receivable	77,691		98,029		Other accounts receivable	234,898		239,199
Inventories	Inventories	950,521		1,011,674		Inventories	2,290,453		2,163,831
Prepaid expenses and other current assets (Note 4)		192,375		92,447
Prepaid expenses and other current assets						Prepaid expenses and other current assets	171,099		187,910
Total current assets	Total current assets	2,777,478		2,540,411		Total current assets	5,575,140		5,506,978
Property, buildings and equipment, net of accumulated depreciation of $269,582 and $268,415 in 2020 and 2019, respectively		183,997		181,448
Property, buildings and equipment, net of accumulated depreciation of $323,819 and $312,106 in 2021 and 2020, respectively						Property, buildings and equipment, net of accumulated depreciation of $323,819 and $312,106 in 2021 and 2020, respectively	391,240		399,157
Operating lease assets	Operating lease assets	271,602		235,834		Operating lease assets	519,311		534,705
Intangible assets, net of accumulated amortization of $278,711 and $280,442 in 2020 and 2019, respectively		267,628		287,275
Intangible assets, net						Intangible assets, net	2,045,992		2,065,495
Goodwill	Goodwill	1,717,963		1,759,040		Goodwill	3,199,494		3,187,169
Other assets	Other assets	12,288		13,627		Other assets	147,093		131,637
Assets held for sale						Assets held for sale	0		55,073
Total assets	Total assets	$	5,230,956	$	5,017,635	Total assets	$	11,878,270	$	11,880,214
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	804,330	$	830,478	Accounts payable	$	1,955,365	$	1,707,329
Accrued payroll and benefit costs	Accrued payroll and benefit costs	28,940		49,508		Accrued payroll and benefit costs	157,498		198,535
Short-term debt		24,097		26,255
Current portion of long-term debt		379		430
Bank overdrafts		13,951		18,021
Short-term debt and current portion of long-term debt, net of debt issuance costs of $1,039 in 2020						Short-term debt and current portion of long-term debt, net of debt issuance costs of $1,039 in 2020	20,802		528,830
Other current liabilities	Other current liabilities	168,808		159,367		Other current liabilities	592,346		552,301
Total current liabilities	Total current liabilities	1,040,505		1,084,059		Total current liabilities	2,726,011		2,986,995
Long-term debt, net of debt issuance costs of $8,211 and $8,876 in 2020 and 2019, respectively		1,542,602		1,257,067
Long-term debt, net of debt discount and debt issuance costs of $83,627 and $87,142 in 2021 and 2020, respectively						Long-term debt, net of debt discount and debt issuance costs of $83,627 and $87,142 in 2021 and 2020, respectively	4,592,734		4,369,953
Operating lease liabilities	Operating lease liabilities	213,172		179,830		Operating lease liabilities	399,758		414,889
Deferred income taxes	Deferred income taxes	146,977		146,617		Deferred income taxes	474,274		488,261
Other noncurrent liabilities	Other noncurrent liabilities	85,574		91,391		Other noncurrent liabilities	285,790		278,010
Liabilities held for sale						Liabilities held for sale	0		5,717
Total liabilities	Total liabilities	$	3,028,830	$	2,758,964	Total liabilities	$	8,478,567	$	8,543,825
Commitments and contingencies (Note 10)
Commitments and contingencies (Note 11)						Commitments and contingencies (Note 11)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $.01 par value; 20,000,000 shares authorized, 0 shares issued or outstanding	Preferred stock, $.01 par value; 20,000,000 shares authorized, 0 shares issued or outstanding	—		—		Preferred stock, $.01 par value; 20,000,000 shares authorized, 0 shares issued or outstanding	0		0
Common stock, $.01 par value; 210,000,000 shares authorized, 59,381,958 and 59,308,018 shares issued and 41,873,053 and 41,797,093 shares outstanding in 2020 and 2019, respectively		594		593
Class B nonvoting convertible common stock, $.01 par value; 20,000,000 shares authorized, 4,339,431 issued and no shares outstanding in 2020 and 2019, respectively		43		43
Preferred stock, Series A, $.01 par value; 25,000 shares authorized, 21,612 shares issued and outstanding in 2021 and 2020						Preferred stock, Series A, $.01 par value; 25,000 shares authorized, 21,612 shares issued and outstanding in 2021 and 2020	0		0
Common stock, $.01 par value; 210,000,000 shares authorized, 67,726,867 and 67,596,515 shares issued and 50,180,007 and 50,064,985 shares outstanding in 2021 and 2020, respectively						Common stock, $.01 par value; 210,000,000 shares authorized, 67,726,867 and 67,596,515 shares issued and 50,180,007 and 50,064,985 shares outstanding in 2021 and 2020, respectively	678		676
Class B nonvoting convertible common stock, $.01 par value; 20,000,000 shares authorized, 4,339,431 issued and 0 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 0 shares outstanding in 2021 and 2020, respectively	43		43
Additional capital	Additional capital	1,041,637		1,039,347		Additional capital	1,946,517		1,942,810
Retained earnings	Retained earnings	2,565,597		2,530,429		Retained earnings	2,645,871		2,601,662
Treasury stock, at cost; 21,848,336 and 21,850,356 shares in 2020 and 2019, respectively		(937,078)		(937,157)
Treasury stock, at cost; 21,886,291 and 21,870,961 shares in 2021 and 2020, respectively						Treasury stock, at cost; 21,886,291 and 21,870,961 shares in 2021 and 2020, respectively	(939,756)		(938,335)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(461,623)		(367,772)		Accumulated other comprehensive loss	(246,293)		(263,134)
Total WESCO International, Inc. stockholders' equity	Total WESCO International, Inc. stockholders' equity	2,209,170		2,265,483		Total WESCO International, Inc. stockholders' equity	3,407,060		3,343,722
Noncontrolling interests	Noncontrolling interests	(7,044)		(6,812)		Noncontrolling interests	(7,357)		(7,333)
Total stockholders’ equity	Total stockholders’ equity	2,202,126		2,258,671		Total stockholders’ equity	3,399,703		3,336,389
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	5,230,956	$	5,017,635	Total liabilities and stockholders’ equity	$	11,878,270	$	11,880,214

The accompanying notes are an integral part of the condensed consolidated financial statements.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(In thousands, ~~of dollars,~~ except per share data)

(unaudited)


		Three Months Ended							Three Months Ended
		March 31							March 31
		2020		2019			2021		2020
Net sales (Note 3)		1,968,647		1,961,267
Net sales						Net sales	$	4,041,477	$	1,968,647
Cost of goods sold (excluding depreciation and amortization)	Cost of goods sold (excluding depreciation and amortization)	1,592,249		1,578,771		Cost of goods sold (excluding depreciation and amortization)	3,230,441		1,592,249
Selling, general and administrative expenses	Selling, general and administrative expenses	299,392		296,528		Selling, general and administrative expenses	636,576		299,392
Depreciation and amortization	Depreciation and amortization	16,093		15,242		Depreciation and amortization	41,209		16,093
Income from operations	Income from operations	60,913		70,726		Income from operations	133,251		60,913
Net interest and other		16,472		17,120
Interest expense, net						Interest expense, net	70,373		16,592
Other, net						Other, net	(2,807)		(120)
Income before income taxes	Income before income taxes	44,441		53,606		Income before income taxes	65,685		44,441
Provision for income taxes	Provision for income taxes	10,266		11,656		Provision for income taxes	6,531		10,266
Net income	Net income	34,175		41,950		Net income	59,154		34,175
Less: Net loss attributable to noncontrolling interests	Less: Net loss attributable to noncontrolling interests	(232)		(419)		Less: Net loss attributable to noncontrolling interests	(24)		(232)
Net income attributable to WESCO International, Inc.	Net income attributable to WESCO International, Inc.	$	34,407	$	42,369	Net income attributable to WESCO International, Inc.	59,178		34,407
Less: Preferred stock dividends						Less: Preferred stock dividends	14,352		0
Net income attributable to common stockholders						Net income attributable to common stockholders	$	44,826	$	34,407
Other comprehensive income (loss):	Other comprehensive income (loss):					Other comprehensive income (loss):
Foreign currency translation adjustments	Foreign currency translation adjustments	(93,851)		22,517		Foreign currency translation adjustments	16,841		(93,851)
Comprehensive (loss) income attributable to WESCO International, Inc.		$	(59,444)	$	64,886
Comprehensive income (loss) attributable to common stockholders						Comprehensive income (loss) attributable to common stockholders	$	61,667	$	(59,444)

Earnings per share attributable to WESCO International, Inc.
Earnings per share attributable to common stockholders						Earnings per share attributable to common stockholders
Basic	Basic	$	0.82	$	0.94	Basic	$	0.89	$	0.82
Diluted	Diluted	$	0.82	$	0.93	Diluted	$	0.87	$	0.82

The accompanying notes are an integral part of the condensed consolidated financial statements.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In ~~thousands of dollars)~~thousands)

(unaudited)

Three Months Ended
March 31
2020 2019
Operating activities:
Net income $ 34,175 $ 41,950
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 16,093 15,242
Deferred income taxes 1,979 893
Other operating activities, net 1,760 5,961
Changes in assets and liabilities:
Trade accounts receivable, net (53,944) (76,696)
Other accounts receivable 19,236 22,425
Inventories 37,807 (40,768)
Prepaid expenses and other assets (3,125) 15,074
Accounts payable (10,858) 68,085
Accrued payroll and benefit costs (18,973) (27,851)
Other current and noncurrent liabilities 7,378 4,554
Net cash provided by operating activities 31,528 28,869
Investing activities:
Capital expenditures (15,762) (10,828)
Acquisition payments (Note 4) (100,000) (27,742)
Other investing activities 5,497 53
Net cash used in investing activities (110,265) (38,517)
Financing activities:
Repayments of short-term debt, net (383) (28,414)
Proceeds from issuance of long-term debt 585,511 423,666
Repayments of long-term debt (300,511) (377,825)
Repurchases of common stock (Note 7) (1,566) (2,572)
Other financing activities, net (4,360) 4,391
Net cash provided by financing activities 278,691 19,246
Effect of exchange rate changes on cash and cash equivalents (8,296) 159
Net change in cash and cash equivalents 191,658 9,757
Cash and cash equivalents at the beginning of period 150,902 96,343
Cash and cash equivalents at the end of period $ 342,560 $ 106,100
Supplemental disclosures:
Cash paid for interest $ 4,029 $ 4,583
Cash paid for income taxes $ 6,245 $ 5,018
Right-of-use assets obtained in exchange for new operating lease liabilities $ 57,185 $ 8,092


	Three Months Ended
	March 31
	2021		2020
Operating activities:
Net income	$	59,154	$	34,175
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	41,209		16,093
Stock-based compensation expense	5,954		4,626
Gain on divestitures, net (Note 4)	(8,927)		0
Other operating activities, net	5,939		(2,866)
Deferred income taxes	(13,074)		1,979
Changes in assets and liabilities:
Trade accounts receivable, net	(117,412)		(53,944)
Other accounts receivable	7,563		19,236
Inventories	(124,772)		37,807
Other current and noncurrent assets	17,140		(3,125)
Accounts payable	250,987		(10,858)
Accrued payroll and benefit costs	(43,824)		(18,973)
Other current and noncurrent liabilities	40,553		7,378
Net cash provided by operating activities	120,490		31,528
Investing activities:
Capital expenditures	(10,211)		(15,762)
Acquisition payments (Note 4)	0		(100,000)
Proceeds from divestitures (Note 4)	54,142		0
Other investing activities, net	611		5,497
Net cash provided by (used in) investing activities	44,542		(110,265)
Financing activities:
Repayments of short-term debt, net	(8,499)		(383)
Repayment of 5.375% Senior Notes due 2021 (Note 8)	(500,000)		0
Proceeds from issuance of long-term debt	956,595		585,511
Repayments of long-term debt	(736,595)		(300,511)
Repurchases of common stock	(4,342)		(1,566)
Payment of dividends	(14,352)		0
Other financing activities, net	(4,980)		(4,360)
Net cash (used in) provided by financing activities	(312,173)		278,691

Effect of exchange rate changes on cash and cash equivalents	1,893		(8,296)
Net change in cash and cash equivalents	(145,248)		191,658
Cash and cash equivalents at the beginning of period	449,135		150,902
Cash and cash equivalents at the end of period	$	303,887	$	342,560
Supplemental disclosures:
Cash paid for interest	$	10,733	$	4,029
Cash paid for income taxes	$	6,086	$	6,245
Right-of-use assets obtained in exchange for new operating lease liabilities	$	19,960	$	57,185

The accompanying notes are an integral part of the condensed consolidated financial statements.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, ~~of dollars)~~except shares)

(unaudited)


																	Accumulated Other																						Accumulated Other
					Class B							Retained								Comprehensive								Class B			Series A					Retained								Comprehensive
		Common Stock					Common Stock					Additional		Earnings	Treasury Stock								Noncontrolling		Income			Common Stock			Common Stock			Preferred Stock				Additional		Earnings		Treasury Stock			Noncontrolling	Income
		Amount		Shares	Amount		Shares	Capital		(Deficit)		Amount		Shares	Interests		(Loss)				Amount			Shares		Amount		Shares	Amount		Shares	Capital		(Deficit)		Amount		Shares		Interests		(Loss)
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)
Balance, December 31, 2020																			Balance, December 31, 2020		$	676		67,596,515		$	43	4,339,431	$	0	21,612	$	1,942,810	$	2,601,662	$	(938,335)	(21,870,961)		$	(7,333)	$	(263,134)
Exercise of stock-based awards	Exercise of stock-based awards	1		105,620				(39)				79		2,020					Exercise of stock-based awards		2			165,641								(38)				(1,421)		(15,330)
Stock-based compensation expense	Stock-based compensation expense							4,626											Stock-based compensation expense													5,954
Tax withholding related to vesting of restricted stock units and retirement of common stock	Tax withholding related to vesting of restricted stock units and retirement of common stock	—		(31,680)				(2,297)		761									Tax withholding related to vesting of restricted stock units and retirement of common stock		0			(35,289)								(2,209)		(617)
Noncontrolling interests	Noncontrolling interests														(232)				Noncontrolling interests																					(24)
Net income attributable to WESCO	Net income attributable to WESCO									34,407									Net income attributable to WESCO															59,178
Preferred stock dividends																			Preferred stock dividends															(14,352)
Translation adjustments	Translation adjustments																(93,851)		Translation adjustments																						16,841
Balance, March 31, 2020		$	594	59,381,958	$	43	4,339,431	$	1,041,637	$	2,565,597	$	(937,078)	(21,848,336)	$	(7,044)	$	(461,623)
Balance, March 31, 2021																			Balance, March 31, 2021		$	678		67,726,867		$	43	4,339,431	$	0	21,612	$	1,946,517	$	2,645,871	$	(939,756)	(21,886,291)		$	(7,357)	$	(246,293)

Accumulated Other
Class B Retained Comprehensive
Common Stock Common Stock Additional Earnings Treasury Stock Noncontrolling Income
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 1 156,760 (90) (54) (184)
Stock-based compensation expense 4,665
Repurchases of common stock 19,144 (19,144) (365,272)
Tax withholding related to vesting of restricted stock units and retirement of common stock — (42,564) (1,822) (531)
Noncontrolling interests (419)
Net income attributable to WESCO 42,369
Translation adjustments 22,517
Balance, March 31, 2019 $ 593 59,271,892 $ 43 4,339,431 $ 1,015,563 $ 2,349,300 $ (777,216) (18,756,498) $ (6,003) $ (385,918)


																			Accumulated Other
				Class B			Series A					Retained							Comprehensive
	Common Stock			Common Stock			Preferred Stock			Additional		Earnings		Treasury Stock			Noncontrolling		Income
	Amount		Shares	Amount		Shares	Amount		Shares	Capital		(Deficit)		Amount		Shares	Interests		(Loss)
Balance, December 31, 2019	$	593	59,308,018	$	43	4,339,431	$	0	0	$	1,039,347	$	2,530,429	$	(937,157)	(21,850,356)	$	(6,812)	$	(367,772)
Exercise of stock-based awards	1		105,620							(39)				79		2,020
Stock-based compensation expense										4,626
Tax withholding related to vesting of restricted stock units and retirement of common stock	0		(31,680)							(2,297)		761
Noncontrolling interests																	(232)
Net income attributable to WESCO												34,407
Translation adjustments																			(93,851)
Balance, March 31, 2020	$	594	59,381,958	$	43	4,339,431	$	0	0	$	1,041,637	$	2,565,597	$	(937,078)	(21,848,336)	$	(7,044)	$	(461,623)

The accompanying notes are an integral part of the condensed consolidated financial statements.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION

WESCO International, Inc. ("WESCO International") and its subsidiaries (collectively, “WESCO” or the "Company"), headquartered in Pittsburgh, Pennsylvania, is a ~~full-line distributor~~leading provider of ~~electrical, industrial~~business-to-business distribution, logistics services and ~~communications maintenance, repair and~~supply chain solutions.

The Company has operating segments that are organized around three strategic business units consisting of Electrical & Electronic Solutions ("~~MRO"~~EES"), Communications & Security Solutions ("CSS") and ~~original equipment manufacturer~~Utility & Broadband Solutions ("~~OEM"~~UBS") products, construction materials, and advanced supply chain management and logistics services used primarily in the industrial, construction, utility and commercial, institutional and government markets. WESCO serves approximately 70,000 active customers globally through approximately 500 branches primarily located in North America, with operations in 16 additional countries and 11 distribution centers located in the United States and Canada..

2. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of WESCO have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). The unaudited condensed consolidated financial information should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in WESCO’s ~~2019~~2020 Annual Report on Form 10-K as filed with the SEC on ~~February 24, 2020.~~March 1, 2021. The Condensed Consolidated Balance Sheet at December 31, ~~2019~~2020 was derived from the audited Consolidated Financial Statements as of that date, but does not include all of the disclosures required by accounting principles generally accepted in the United States of America.

The unaudited Condensed Consolidated Balance Sheet as of March 31, ~~2020,~~2021, the unaudited Condensed Consolidated Statements of Income and Comprehensive Income (Loss), the unaudited Condensed Consolidated Statements of ~~Stockholders' Equity,~~Cash Flows, and the unaudited Condensed Consolidated Statements of ~~Cash Flows~~Stockholders' Equity for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, 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 statement of the results of the interim periods presented herein. All adjustments reflected in the unaudited condensed consolidated financial information are of a normal recurring nature unless indicated. The results for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year.

~~Reclassifications~~

Prior to the completion of its merger with Anixter International Inc. ("Anixter") on June 22, 2020, as described in Note 4, "Acquisitions and Disposals", WESCO had four operating segments that had been aggregated as one reportable segment. Effective on the date of acquisition, the Company added Anixter as a separate reportable segment for the quarterly period ended June 30, 2020. At the beginning of the third quarter of 2020, the Company identified new operating segments organized around three strategic business units consisting of EES, CSS and UBS. These operating segments are equivalent to the Company's reportable segments. The ~~Condensed Consolidated Statement~~operating segments in the respective periods were determined in accordance with the manner in which WESCO's chief operating decision maker ("CODM") reviewed financial information during those periods. The financial information used by the CODM to evaluate the performance of ~~Cash Flows~~the Company's operating segments is disclosed in Note 13, "Business Segments". The applicable comparative financial information reported in the Company's previously issued interim financial statements for the three months ended March 31, ~~2019 includes certain~~2020 has been recast in this Quarterly Report on Form 10-Q to conform to the basis of the new segments.

Reclassifications

For the three months ended March 31, 2020, $0.1 million of other non-operating income has been reclassified from net interest and other to other, net in the unaudited Condensed Consolidated Statement of Income and Comprehensive Loss, and $4.6 million of stock-based compensation expense has been reclassified from other operating activities in the unaudited Condensed Consolidated Statement of Cash Flows. These reclassifications ~~to previously reported amounts~~have been made to conform to the current period presentation.

Recently Adopted Accounting Pronouncements

In ~~June 2016,~~December 2019, the Financial Accounting Standards Board ~~(FASB)~~(the "FASB") issued Accounting Standards Update ~~(ASU) 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which introduced new guidance for the accounting for credit losses on certain financial instruments. The Company adopted this ASU effective January 1, 2020. The adoption of this new credit loss guidance did not have a material impact on the unaudited condensed consolidated financial statements and notes thereto presented herein, and WESCO does not expect it to have a material impact on its financial position or results of operation on an ongoing basis.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~, which amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying and adding certain disclosures. The Company adopted this ASU in the first quarter of 2020. The adoption of this guidance did not have an impact on the unaudited condensed consolidated financial statements and notes thereto presented herein.

~~Recently Issued Accounting Pronouncements~~

~~In August 2018, the FASB issued ASU 2018-14,~~ ~~Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans~~, which amends the disclosure requirements for all employers that sponsor defined benefit pension and other post retirement plans by removing and adding certain disclosures. The amendments in this ASU are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. Management does not expect the adoption of this accounting standard to have a material impact on its condensed consolidated financial statements and notes thereto.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)~~

~~(unaudited)~~

~~In December 2019, the FASB issued ASU~~("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 Topic 740, Income Taxes, and simplifies other aspects of accounting for income taxes. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. ~~Management does not expect~~The Company adopted this ASU in the first quarter of 2021. The adoption of this ~~accounting standard to~~guidance did not have a material impact on ~~its condensed~~the consolidated financial statements and notes ~~thereto.~~thereto presented herein.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

Recently Issued Accounting Pronouncements

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 is currently evaluating the impact related to the replacement of London Interbank Offered Rate (LIBOR) and whether the Company will elect the adoption of the optional guidance.

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.

3. REVENUE

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 ~~following end markets: (1) industrial, (2) construction, (3) utility,~~United States, Canada and ~~(4) commercial, institutional and government. Revenue is measured as the amount of consideration WESCO expects to receive in exchange for transferring goods or providing services.~~various other international countries.

The following tables disaggregate WESCO’s ~~revenue~~net sales by ~~end market~~segment and ~~geography:~~geography for the periods presented:

Three Months Ended
March 31
(In thousands) 2020 2019
Industrial $ 702,214 $ 736,906
Construction 636,503 633,288
Utility 340,945 308,269
Commercial, Institutional and Government 288,985 282,804
Total by end market $ 1,968,647 $ 1,961,267


	Three Months Ended
	March 31
(In thousands)	2021		2020
EES	$	1,720,813	$	1,114,457
CSS	1,250,615		223,726
UBS	1,070,049		630,464
Total by segment	$	4,041,477	$	1,968,647


		Three Months Ended							Three Months Ended
		March 31							March 31
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
United States	United States	$	1,478,491	$	1,460,991	United States	$	2,930,435	$	1,478,491
Canada	Canada	377,419		384,596		Canada	607,753		377,419
Other International(1)	Other International(1)	112,737		115,680		Other International(1)	503,289		112,737
Total by geography(2)	Total by geography(2)	$	1,968,647	$	1,961,267	Total by geography(2)	$	4,041,477	$	1,968,647

(1) No individual other international country's net sales are material.

(2) WESCO attributes revenues from external customers to individual countries on the basis of point of sale.

In accordance with certain contractual arrangements, WESCO receives payment from its customers in advance and recognizes such payment as deferred revenue. Revenue for advance payment is recognized 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 customer’s advance payment. At March 31, ~~2020~~2021 and December 31, ~~2019, $9.9~~2020, $22.6 million and ~~$12.3~~$24.3 million, respectively, of deferred revenue was recorded as a component of other current liabilities in the Condensed Consolidated Balance Sheets.

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 ~~anticipated performance,~~ historical data as well as current and forecasted information. ~~Measurement and recognition of variable~~Variable consideration is reviewed by management on a monthly basis and revenue is adjusted accordingly. Variable consideration reduced revenue for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 by approximately $105.4 million and $23.3 million, respectively. As of March 31, 2021 and ~~$25.5~~December 31, 2020, the Company's estimated product return obligation was $36.6 million and $38.9 million, respectively.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

Shipping and handling ~~costs~~activities are recognized in net sales when they are billed to ~~the customer. These costs are recognized as a component of selling, general and administrative expenses when WESCO does not bill~~ the customer. WESCO has elected to recognize shipping and handling costs as a fulfillment cost. Shipping and handling costs recorded as a component of selling,

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)~~

~~(unaudited)~~

general and administrative expenses totaled ~~$18.0~~$53.3 million and ~~$17.0~~$18.0 million for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

4. ACQUISITIONS

~~The following table sets forth the consideration paid for acquisitions:~~


	~~Three Months Ended~~
	~~March 31~~
	~~2019~~
	~~(In thousands)~~
~~Fair value of assets acquired~~	$	~~34,812~~
~~Fair value of liabilities assumed~~	~~7,070~~
~~Cash paid for acquisitions~~	$	~~27,742~~

~~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 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. AND DISPOSALS

Anixter International Inc.

On ~~January 10,~~June 22, 2020, WESCO ~~International entered into an~~completed its acquisition of Anixter, a Delaware corporation. Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020 (the “Merger Agreement”) ~~with~~, by and among Anixter, ~~International Inc. (“Anixter”)~~WESCO and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of WESCO ~~International~~ (“Merger Sub”)~~. The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement,~~, Merger Sub ~~will be~~was merged with and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a wholly owned subsidiary of ~~WESCO International.~~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 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 ~~Anixter~~ common stock ~~will be~~of Anixter (subject to limited exceptions) was converted into the right to receive (i) ~~$70.00~~$72.82 in cash, without interest, which amount may be increased by up to $2.82 per Anixter common share at closing, based on the volume-weighted average trading price of WESCO International common stock on the New York Stock Exchange during a specified period prior to closing, and subject to further adjustment as set forth in the Merger Agreement (the “cash consideration”), (ii) 0.2397 shares of ~~WESCO International~~ common stock ~~subject to adjustment as set forth in the Merger Agreement~~of WESCO, par value $0.01 per share (the ~~“common stock consideration”~~“WESCO Common Stock”), and (iii) 0.6356 depositary shares, each ~~share~~ representing a 1/1,000th interest in a share of newly issued ~~WESCO International Series A~~ fixed-rate reset cumulative perpetual preferred stock of WESCO, Series A, with a $25,000 stated amount per whole preferred share ~~subject~~and an initial dividend rate equal to ~~adjustment as set forth~~10.625%.

Anixter is 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 should afford the Company the opportunity to digitize its business, and expand its services portfolio and supply chain offerings.

The total preliminary estimated fair value of consideration transferred for the Merger Agreement (the “preferred stock consideration” and, together with the cash consideration and the common stock consideration, (the “Merger Consideration”), in each case less any applicable withholding taxes. Based on the closing price of WESCO International common stock and the liquidation preferenceconsisted of the WESCO International Series A preferred stock underlying the preferred stock consideration, and giving effect to the downside protection described above, the implied value of the per share Merger Consideration was:following:


	(In thousands)
Cash portion attributable to common stock outstanding	$	2,476,010
Cash portion attributable to options and restricted stock units outstanding	87,375
Fair value of cash consideration	2,563,385
Common stock consideration	313,512
Series A preferred stock consideration	573,786
Fair value of equity consideration	887,298
Extinguishment of Anixter obligations, including accrued and unpaid interest(1)	1,247,653
Total purchase consideration	$	4,698,336
Supplemental cash flow disclosure related to acquisitions:
Cash paid for acquisition	$	3,811,038
Less: Cash acquired	(103,463)
Cash paid for acquisition, net of cash acquired	$	3,707,575

(1) ~~(i) $100.00, on January 10, 2020, the last full trading day before the public announcement~~The extinguishment of ~~the merger and (ii) $94.91, on April 30, 2020, the most recent practicable date prior to the date~~Anixter obligations includes a termination fee of ~~this filing.~~

~~Concurrently with the execution of the Merger Agreement,~~$100.0 million that WESCO paid to entities affiliated with Clayton, Dubilier & Rice, LLC (“("CD~~&R”~~&R"), on behalf of Anixter, ~~a termination~~during the three months ended March 31, 2020. Such fee ~~of $100 million that~~ was required to terminate ~~Anixter’s~~Anixter's then-existing merger agreement with CD&R. As of March 31, 2020, the termination fee is recorded on the balance sheet as a component of prepaid expenses and other current assets. Upon consummation of the Merger with Anixter, the $100 million termination fee will be accounted for as a portion of the Merger Consideration paid to the stockholders of Anixter.

The closing of the Merger is subject to the satisfaction or waiver of customary conditions to closing, including the approval or clearance, or the expiration, termination or waiver of the waiting periods under various antitrust laws. As of the date hereof, clearance under the antitrust laws of Canada remains outstanding. Notification of the Merger was filed in Canada on February 27, 2020 and, on April 14, 2020, the Canadian Commissioner of Competition issued a Supplementary Information Request seeking additional information with respect to the Merger and the businesses of Anixter and WESCO. Notification of the

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

The Merger was ~~filed~~accounted for as a business combination with WESCO acquiring Anixter in ~~Mexico~~accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Under the acquisition method of accounting, the preliminary purchase consideration was allocated to the identified assets acquired and liabilities assumed based on ~~February 10, 2020,~~their respective acquisition date fair value, with any excess allocated to goodwill. The fair value estimates were based on income, market and ~~approval was received on April 30, 2020. Approval or clearance has previously been received under the antitrust laws~~cost valuation methods using primarily unobservable inputs developed by management, which are categorized within Level 3 of the ~~United States, Russia~~fair value hierarchy. Specifically, the fair values of the identified trademark and ~~Turkey. WESCO, Anixter~~customer relationship intangible assets were estimated using the relief-from-royalty and ~~Merger Sub have also filed notifications seeking approval under the antitrust laws of Chile (filed on February 20, 2020), but the receipt of approval in Chile~~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 to goodwill is not ~~a condition~~deductible for income tax purposes, and has been assigned to the ~~closing~~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.

Since the initial measurement of the ~~Merger.~~identified assets acquired and liabilities assumed, the Company has recognized adjustments to trade accounts receivable of $9.2 million, inventories of $8.5 million, operating lease assets of $18.0 million, total identifiable intangible assets of $5.4 million, other noncurrent assets of $15.5 million, accounts payable of $7.2 million, operating lease liabilities of $17.0 million, deferred income taxes of $30.9 million and other noncurrent liabilities of $40.0 million. Certain other measurement period adjustments were made to the identified assets acquired and liabilities assumed, none of which were significant, individually or in aggregate. The net impact of these adjustments was an increase to goodwill of $3.0 million.

The estimated fair values of assets acquired and liabilities assumed are based on preliminary calculations and valuations using estimates and assumptions at the time of acquisition. The determination of the fair values of assets acquired and liabilities assumed, especially those related to identifiable intangible assets, is preliminary due to the complexity of combining multibillion dollar businesses. Accordingly, as the Company obtains additional information during the measurement period (not to exceed one year from the acquisition date), estimates and assumptions for the preliminary purchase consideration allocations may change materially.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

The following table sets forth the preliminary allocation of the purchase consideration to the respective fair value of assets acquired and liabilities assumed for the acquisition of Anixter:



	(In thousands)
Assets
Cash and cash equivalents	$	103,463
Trade accounts receivable	1,300,710
Other accounts receivable	116,386
Inventories	1,416,296
Prepaid expenses and other current assets	54,978
Property, buildings and equipment	211,721
Operating lease assets	280,285
Intangible assets	1,838,065
Goodwill	1,370,984
Other assets	141,901
Total assets	$	6,834,789

Liabilities
Accounts payable	$	912,974
Accrued payroll and benefit costs	69,480
Short-term debt and current portion of long-term debt	13,225
Other current liabilities	225,516
Long-term debt	77,617
Operating lease liabilities	217,303
Deferred income taxes	373,478
Other noncurrent liabilities	246,860
Total liabilities	$	2,136,453

Fair value of net assets acquired, including goodwill and intangible assets	$	4,698,336

The following table sets forth the preliminary identifiable intangible assets and their estimated weighted-average useful lives:


Identifiable Intangible Assets	Estimated Fair Value		Weighted-Average Estimated Useful Life in Years(1)
	(In thousands)
Customer relationships	$	1,098,900	19
Trademarks	735,000		Indefinite
Non-compete agreements	4,165		2
Total identifiable intangible assets	$	1,838,065

(1) Measurement period adjustments include an update to the estimated useful lives initially assigned to customer relationships, which resulted in income of $6.4 million during the year ended December 31, 2020.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

The results of operations of Anixter are included in the unaudited condensed consolidated financial statements beginning on June 22, 2020, the acquisition date. For the three months ended March 31, 2021, the condensed consolidated statement of income includes $2.1 billion of net sales, and $105.4 million of income from operations for Anixter. Costs related to the merger are primarily comprised of advisory, restructuring, legal and other costs of $46.3 million and $4.6 million, which are included in selling, general and administrative expenses for the three months ended March 31, 2021 and 2020, respectively.

Pro Forma Financial Information

The following unaudited pro forma financial information presents combined results of operations for the period 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, dividends accrued on the Series A preferred stock, compensation expense associated with the WESCO phantom stock unit awards described in Note 9, "Employee Benefit Plans", as well as the respective income tax effects of such adjustments. For the three months ended March 31, 2020, adjustments totaling $50.2 million decreased the unaudited pro forma net income attributable to common stockholders. 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 ~~expect~~or the costs necessary to ~~complete~~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 ~~Merger~~combined business had the acquisition occurred at the beginning of the respective period, nor is it necessarily indicative of future results of operations of the combined company.


	Three Months Ended
(In thousands)	March 31, 2020
Pro forma net sales	$	4,040,347
Pro forma net income attributable to common stockholders	19,880

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. In February 2021, the ~~second or third calendar quarter~~Company completed such divestitures for cash consideration totaling $54.1 million. The Company recognized a net gain from the sale of ~~2020.~~these businesses of $8.9 million, which is reported as a component of selling, general and administrative expenses for the three months ended March 31, 2021. These sales fulfilled the Company’s divestiture commitments under the Consent Agreement and the net cash proceeds were used to repay debt.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table sets forth the changes in the carrying value of goodwill:


	~~Three Months Ended~~
	~~March 31~~
~~(In thousands)~~	~~2020~~
~~Beginning balance January 1~~	$	~~1,759,040~~
~~Foreign currency exchange rate changes~~	~~(46,894)~~
~~Adjustments to goodwill for acquisitions~~⁽¹⁾	~~5,817~~
~~Ending balance March 31~~	$	~~1,717,963~~


	Three Months Ended
	March 31, 2021
	EES		CSS		UBS		Total
	(In thousands)
Beginning balance January 1(1)	$	853,456	$	1,115,500	$	1,218,213	$	3,187,169
Adjustments to goodwill for acquisitions (Note 4)(2)	(2,290)		3,831		(952)		589
Foreign currency exchange rate changes	6,638		738		4,360		11,736
Ending balance March 31	$	857,804	$	1,120,069	$	1,221,621	$	3,199,494

⁽¹⁾~~Adjustments to~~The beginning balance excludes $26.1 million of goodwill ~~resulted from~~that was classified as held for sale on the ~~final allocation~~UBS segment as of December 31, 2020 and disposed in the first quarter of 2021 as part of the ~~purchase price paid for SLS,~~divestitures disclosed in Note 4, "Acquisitions and Disposals".

(2) 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 4, to"Acquisitions and Disposals".

Intangible Assets

The components of intangible assets are as follows:


		March 31, 2021						December 31, 2020
	Life (in years)	Gross Carrying Amount (1)		Accumulated Amortization (1)		Net Carrying Amount		Gross Carrying Amount (1)		Accumulated Amortization (1)		Net Carrying Amount
Intangible assets:		(In thousands)
Trademarks	Indefinite	$	834,426	$	—	$	834,426	$	833,793	$	—	$	833,793
Customer relationships(2)	10 - 20	1,437,489		(249,177)		1,188,312		1,434,554		(227,585)		1,206,969
Distribution agreements (2)	10 - 19	29,212		(21,463)		7,749		29,212		(21,040)		8,172
Trademarks(2)	10 - 15	24,899		(11,914)		12,985		24,898		(11,415)		13,483
Non-compete agreements	2 - 5	4,422		(1,902)		2,520		4,462		(1,384)		3,078
		$	2,330,448	$	(284,456)	$	2,045,992	$	2,326,919	$	(261,424)	$	2,065,495

(1) Excludes the ~~respective assets acquired~~original cost and ~~liabilities assumed.~~related accumulated amortization of fully-amortized intangible assets.

~~Certain triggering events occurred during~~(2) 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 ~~2020, including the effect~~2021 as part of the ~~ongoing macroeconomic disruption~~divestitures disclosed in Note 4, "Acquisitions and uncertainty caused by a novel coronavirus disease (“COVID-19”) pandemic, as well as the decline in our share price and market capitalization, both of which could indicate that the carrying value of goodwill and indefinite-livedDisposals".

Amortization expense related to intangible assets ~~may not be recoverable. Accordingly, we performed an interim test~~totaled $21.6 million and $8.5 million for ~~impairment. We tested~~the three months ended March 31, 2021 and 2020, respectively.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

The following table sets forth the remaining estimated amortization expense for goodwill impairment on a reporting unit level and the evaluation involved comparing the fair value of each reporting unit to its carrying value. The fair values of our reporting units were determined using a combination of a discounted cash flow analysis and market multiples. We evaluated the recoverability of indefinite-lived intangible assets ~~using~~for the ~~relief-from-royalty method based on projected financial information. Goodwill~~next five years and ~~indefinite-lived trademarks totaled $1.8 billion and $1.9 billion as of March 31, 2020 and December 31, 2019, respectively.~~thereafter:

There were no impairment losses identified as a result of our interim test. Two of our reporting units with goodwill of $261.3 million and $524.9 million, respectively, had estimated fair values that exceeded their respective carrying values by less than 5%. The determination of fair value of our reporting units involves significant management judgment, particularly as it relates to the underlying assumptions and factors around our expected operating margins and discount rate. In performing our quantitative assessments, we used expected operating margins supported by a combination of historical results, current forecasts, market data and recent economic events. We used a discount rate that reflects marketplace participants' cost of capital.


For year ending December 31,	(In thousands)
2021	$	65,703
2022	84,318
2023	83,410
2024	80,767
2025	77,501
Thereafter	819,867

The determination of fair value involves significant management judgment and 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 interim goodwill and indefinite-lived intangible impairment tests will prove to be accurate predictions of future results.

6. STOCK-BASED COMPENSATION

WESCO’s stock-based employee compensation 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. ~~Vesting of restricted~~Restricted stock ~~units is~~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

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)~~

~~(unaudited)~~

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.

Performance-based awards granted in 2021, 2020 and 2019 were based on two equally-weighted performance measures: the three-year average growth rate of WESCO's net income and the three-year cumulative return on net assets. Performance-based awards granted in 2018 were based on two equally-weighted performance measures: the three-year average growth rate of the Company’s fully diluted earnings per share and the three-year cumulative return on net assets.

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, WESCO granted the following stock-settled stock appreciation rights, restricted stock units and performance-based awards at the following weighted-average fair values:


		Three Months Ended							Three Months Ended
		March 31, 2020		March 31, 2019			March 31, 2021		March 31, 2020
Stock-settled stock appreciation rights granted	Stock-settled stock appreciation rights granted	262,091		213,618		Stock-settled stock appreciation rights granted	136,194		262,091
Weighted-average fair value	Weighted-average fair value	$	13.86	$	16.36	Weighted-average fair value	$	33.05	$	13.86

Restricted stock units granted	Restricted stock units granted	211,450		175,544		Restricted stock units granted	300,722		211,450
Weighted-average fair value	Weighted-average fair value	$	48.32	$	54.64	Weighted-average fair value	$	76.89	$	48.32

Performance-based awards granted	Performance-based awards granted	158,756		126,874		Performance-based awards granted	119,792		158,756
Weighted-average fair value	Weighted-average fair value	$	48.67	$	54.64	Weighted-average fair value	$	76.50	$	48.67

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

The fair value of stock-settled stock appreciation rights was estimated using the following weighted-average assumptions:


		Three Months Ended							Three Months Ended
		March 31, 2020		March 31, 2019			March 31, 2021		March 31, 2020
Risk free interest rate	Risk free interest rate	1.4	%	2.5	%	Risk free interest rate	0.8	%	1.4	%
Expected life (in years)	Expected life (in years)	5		5		Expected life (in years)	7		5
Expected volatility	Expected volatility	30	%	29	%	Expected volatility	41	%	30	%

The risk-free interest rate is based on the U.S. Treasury Daily Yield Curve 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~~price over ~~a five-year period~~the expected life preceding the grant ~~date.~~date of the award.

The following table sets forth a summary of stock-settled stock appreciation rights and related information for the three months ended March 31, ~~2020:~~2021:


		Awards	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)			Awards	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at December 31, 2019		2,337,049	$	59.72
Outstanding at December 31, 2020								Outstanding at December 31, 2020	2,161,556	$	60.48
Granted	Granted	262,091	48.32					Granted	136,194	76.80
Exercised	Exercised	(6,589)	42.12					Exercised	(186,055)	60.92
Forfeited	Forfeited	(24,273)	65.33					Forfeited	(12,719)	52.57
Outstanding at March 31, 2020		2,568,278	58.54		5.7	$	—
Exercisable at March 31, 2020		2,027,915	$	59.84	4.9	$	—
Outstanding at March 31, 2021								Outstanding at March 31, 2021	2,098,976	61.55		5.9	$	52,427
Exercisable at March 31, 2021								Exercisable at March 31, 2021	1,729,195	$	61.89	5.2	$	42,612

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)~~

~~(unaudited)~~

The following table sets forth a summary of time-based restricted stock units and related information for the three months ended March 31, ~~2020:~~2021:


		Awards	Weighted- Average Fair Value			Awards	Weighted- Average Fair Value
Unvested at December 31, 2019		363,729	$	60.00
Unvested at December 31, 2020					Unvested at December 31, 2020	921,495	$	43.15
Granted	Granted	211,450	48.32		Granted	300,722	76.89
Vested	Vested	(78,007)	70.07		Vested	(90,178)	60.66
Forfeited	Forfeited	(6,755)	61.67		Forfeited	(16,129)	54.57
Unvested at March 31, 2020		490,417	$	53.38
Unvested at March 31, 2021					Unvested at March 31, 2021	1,115,910	$	50.66

The following table sets forth a summary of performance-based awards for the three months ended March 31, ~~2020:~~2021:


		Awards	Weighted- Average Fair Value			Awards	Weighted- Average Fair Value
Unvested at December 31, 2019		195,305	$	60.24
Unvested at December 31, 2020					Unvested at December 31, 2020	305,269	$	52.61
Granted	Granted	158,756	48.67		Granted	119,792	76.50
Vested	Vested	(25,909)	78.04		Vested	(22,371)	62.80
Forfeited	Forfeited	(20,538)	71.47		Forfeited	(27,802)	59.87
Unvested at March 31, 2020		307,614	$	52.60
Unvested at March 31, 2021					Unvested at March 31, 2021	374,888	$	59.13

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

Vesting of the ~~307,614~~374,888 shares of performance-based awards in the table above is dependent upon the achievement of certain performance targets, including ~~134,010~~187,444 that are dependent upon the three-year average growth rate of WESCO's net income ~~19,797 that are dependent upon the three-year average growth rate of the Company's fully diluted earnings per share,~~ and ~~153,807~~187,444 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.

WESCO recognized ~~$4.6~~$6.0 million and ~~$4.7~~$4.6 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. As of March 31, ~~2020,~~2021, there was ~~$35.9~~$62.3 million of total unrecognized compensation ~~cost~~expense related to non-vested stock-based compensation arrangements for all awards previously made of which approximately ~~$14.3~~$22.1 million is expected to be recognized over the remainder of ~~2020, $13.4 million in~~ 2021, ~~$7.4~~$23.8 million in 2022, ~~and $0.8~~$15.1 million in ~~2023.~~2023 and $1.3 million in 2024.

7. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to ~~WESCO International~~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 ~~WESCO International~~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:


	Three Months Ended
	March 31
(In thousands, except per share data)	2021		2020
Net income attributable to WESCO International, Inc.	$	59,178	$	34,407
Less: Preferred stock dividends	14,352		0
Net income attributable to common stockholders	$	44,826	$	34,407
Weighted-average common shares outstanding used in computing basic earnings per share	50,124		41,837
Common shares issuable upon exercise of dilutive equity awards	1,584		238
Weighted-average common shares outstanding and common share equivalents used in computing diluted earnings per share	51,708		42,075
Earnings per share attributable to common stockholders
Basic	$	0.89	$	0.82
Diluted	$	0.87	$	0.82

For the three months ended March 31, 2021 and 2020 , the computation of diluted earnings per share attributable to common stockholders excluded stock-based awards of approximately 0.3 million and 2.3 million, respectively. These amounts were excluded because their effect would have been antidilutive.

1216

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

8. DEBT

The following table sets forth WESCO's outstanding indebtedness:


	As of
	March 31, 2021		December 31, 2020
	(In thousands)
International lines of credit	$	20,293	$	29,575
Accounts Receivable Securitization Facility	945,000		950,000
Revolving Credit Facility	475,000		250,000
5.375% Senior Notes due 2021	0		500,000
5.50% Anixter Senior Notes due 2023	58,636		58,636
5.375% Senior Notes due 2024	350,000		350,000
6.00% Anixter Senior Notes due 2025	4,173		4,173
7.125% Senior Notes due 2025	1,500,000		1,500,000
7.250% Senior Notes due 2028, less debt discount of $9,021 and $9,332 in 2021 and 2020, respectively	1,315,979		1,315,668
Finance lease obligations	17,582		17,931
Total debt	4,686,663		4,975,983
Plus: Fair value adjustment to the Anixter Senior Notes	1,479		1,650
Less: Unamortized debt issuance costs	(74,606)		(78,850)
Less: Short-term debt and current portion of long-term debt	(20,802)		(528,830)
Total long-term debt	$	4,592,734	$	4,369,953

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 ~~details~~registration requirements of ~~basic~~the Securities Act of 1933, as amended (the “Securities Act”). The 2021 Notes were issued at 100% of par and ~~diluted earnings per share:~~

Three Months Ended
March 31
(In thousands, except per share data) 2020 2019
Net income attributable to WESCO International $ 34,407 $ 42,369
Weighted-average common shares outstanding used in computing basic earnings per share 41,837 45,076
Common shares issuable upon exercise of dilutive equity awards 238 415
Weighted-average common shares outstanding and common share equivalents used in computing diluted earnings per share 42,075 45,491
Earnings per share attributable to WESCO International
Basic $ 0.82 $ 0.94
Diluted $ 0.82 $ 0.93

~~For the three months ended March 31, 2020 and 2019, the computation of diluted earnings per share attributable to~~were governed by an indenture (the “2021 Indenture”) entered into on November 26, 2013 between WESCO International ~~excluded approximately 2.3 million~~ and ~~1.8 million~~U.S. Bank National Association, as trustee. The 2021 Notes were unsecured senior obligations of ~~stock-based awards, respectively. These amounts~~WESCO Distribution and were ~~excluded because their effect would have been antidilutive.~~

Inguaranteed 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 ~~2017, the Company's Board~~15 of ~~Directors authorized the repurchase~~each year. The 2021 Notes had a maturity date of ~~up to $300 million~~December 15, 2021 and were redeemable in whole or in part at any time. The net proceeds of the ~~Company's common stock through December 31, 2020. In October 2018,~~2021 Notes were used to prepay a portion of the ~~Board approved~~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 ~~increase~~offer to ~~this repurchase authorization from $300 million to $400 million.~~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 ~~November 6, 2018,~~December 15, 2020, WESCO Distribution exercised its right to redeem the ~~Company entered into an accelerated stock repurchase agreement~~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 (the “Redemption Date”), 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, the Redemption Date. The redemption of the 2021 Notes was funded with ~~a financial institution to repurchase shares of its common stock. In exchange for an up-front~~available cash, ~~payment of $100.0 million, the Company received a total of 1,953,167 shares, 365,272 of which were received during the three months ended March 31, 2019. WESCO funded the repurchase with~~as well as borrowings under ~~its~~the Company's accounts receivable securitization and revolving credit facilities.

The total number of shares ultimately delivered under an accelerated stock repurchase transaction is 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. For purposes of computing earnings per share for the three months ended March 31, 2019, share repurchases have been reflected as a reduction to common shares outstanding on the respective delivery dates.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

9. EMPLOYEE BENEFIT PLANS

~~A majority of WESCO’s employees are covered by~~Defined Contribution Plans

WESCO Distribution sponsors a defined contribution retirement savings ~~plans for their services rendered subsequent to WESCO’s formation. WESCO also offers a deferred compensation~~ plan for ~~select individuals. For~~the majority of its U.S. ~~participants, WESCO~~employees. The Company matches contributions made by employees at an amount equal to 50% of participants' total monthly contributions up to ~~a maximum of~~ 6% of eligible compensation. ~~For Canadian participants, WESCO makes contributions~~Contributions are made in ~~amounts ranging from 3%~~cash and employees have the option to 5%transfer balances allocated to their accounts into any of ~~participants' eligible compensation based on years of continuous service. WESCO~~the available investment options. The Company may also make, subject to the Board of Directors' approval, a discretionary contribution to the defined contribution retirement savings plan covering U.S. participants if certain predetermined profit levels are attained.

WESCO Distribution Canada LP, a wholly-owned subsidiary of the Company, sponsors a defined contribution plan for certain Canadian employees. The Company makes contributions in amounts ranging from 3% to 5% of participants' eligible compensation based on years of continuous service.

Anixter Inc. sponsors a defined contribution plan covering all of its non-union U.S. employees (the "Anixter Employee Savings Plan"). The employer match for the Anixter 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 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.

For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, WESCO incurred charges of ~~$2.8~~$16.6 million and ~~$12.6~~$5.7 million, respectively, for all ~~such~~defined contribution plans. ~~Contributions are made in cash to employee retirement savings plan accounts. The~~

Deferred Compensation Plans

WESCO Distribution sponsors a non-qualified deferred compensation plan ~~is an unfunded plan. As~~(the "WESCO Deferred Compensation Plan") that permits select employees to make pre-tax deferrals of ~~March 31, 2020~~salary and ~~December 31, 2019, the Company's obligation under the deferred compensation plan was $21.9 million and $25.2 million, respectively.~~bonus. Employees have the option to transfer balances allocated to their accounts in the ~~defined contribution retirement savings plan and the deferred compensation plan~~WESCO Deferred Compensation Plan into any of the available investment options. The WESCO Deferred Compensation Plan is an unfunded plan. As of March 31, 2021, the Company's obligation under the WESCO Deferred Compensation Plan was $17.8 million, which was included in other noncurrent liabilities in the Condensed 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 Condensed Consolidated Balance Sheet.

Anixter Inc. sponsors a non-qualified deferred compensation plan (the "Anixter Deferred Compensation Plan") that permits select employees to make pre-tax deferrals of salary and bonus. Interest is 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 is further adjusted if certain financial goals are achieved. In the fourth quarter of 2020, the Company made a determination to terminate the Anixter Deferred Compensation Plan. Accordingly, a deferred compensation liability of $43.0 million has been classified in other current liabilities in the Condensed Consolidated Balance Sheet at March 31, 2021 as the Company expects to make lump sum payments directly to participants of the plan during 2021. At December 31, 2020, the deferred compensation liability included in other current liabilities was $45.1 million.

Assets are held in a Rabbi Trust arrangement to provide for the liabilities associated with the deferred compensation plan and an executive non-qualified defined benefit plan. The ~~Company~~assets are invested in marketable securities. As of March 31, 2021 and December 31, 2020, the assets held in this arrangement were $39.8 million and $39.6 million, respectively, and are recorded in other current assets in the Condensed Consolidated Balance Sheets.

Defined Benefit Plans

WESCO sponsors a contributory defined benefit plan (the "EECOL Plan") covering substantially all Canadian employees of EECOL Electric Corp. and a Supplemental Executive Retirement Plan for certain executives of ~~EECOL.~~ EECOL Electric Corp. (the "EECOL SERP").

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

Anixter Inc. sponsors defined benefit pension plans in the U.S., which consist of the Anixter Inc. Pension Plan, the 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 frozen 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 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 pension plans.

In the fourth quarter of 2020, the Company made a determination to terminate both the Anixter Inc. Executive Benefit Plan and the Anixter SERP. Accordingly, pension liabilities totaling $17.5 million associated with the Anixter Inc. Executive Benefit Plan and the Anixter SERP have been classified as current in the Condensed Consolidated Balance Sheet at March 31, 2021 as the Company expects to make lump sum payments directly to participants of these plans during 2021. At December 31, 2020, the pension liabilities included in other current liabilities were $18.1 million.

The Domestic Plans are funded as required by the Employee Retirement Income Security Act of 1974 ("ERISA") and the IRS and the Foreign Plans are funded as required by applicable foreign laws. The EECOL SERP, Anixter Inc. Executive Benefit Plan and the Anixter SERP are unfunded plans.

During the three months ended March 31, 2021 and 2020, the Company made aggregate cash contributions of $2.6 million and $1.0 million, respectively, to its Foreign Plans.

The following table sets forth the components of net periodic pension (benefit) cost for the Company's defined benefit ~~plans.~~plans:


	Domestic Plans(1)				Foreign Plans(1)				Total
	Three Months Ended				Three Months Ended				Three Months Ended
(In thousands)	March 31, 2021		March 31, 2020		March 31, 2021		March 31, 2020		March 31, 2021		March 31, 2020
Service cost	$	764	$	0	$	3,224	$	1,309	$	3,988	$	1,309
Interest cost	2,137		0		2,446		1,037		4,583		1,037
Expected return on plan assets	(4,501)		0		(4,256)		(1,614)		(8,757)		(1,614)
Recognized actuarial gain(2)	0		0		102		27		102		27
Net periodic pension (benefit) cost	$	(1,600)	$	0	$	1,516	$	759	$	(84)	$	759

(1) The Company assumed the Domestic Plans and certain foreign plans, as described above, in connection with the acquisition of Anixter on June 22, 2020. The Company began recognizing the net periodic pension (benefit) cost associated with these plans as of the acquisition date.

(2) For the three months ended March 31, 2021 and 2020, no amounts were reclassified from accumulated other comprehensive income into net income.

The service cost of $4.0 million and $1.3 million for the three months ended March 31, 2021 and 2020, respectively, is reported as a component of selling, general and administrative expenses. The other components of net periodic pension (benefit) cost totaling a net benefit of $4.1 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively, are presented as a component of other non-operating expenses ("other, net").

Other Benefits

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, which 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 March 31, 2021 and December 31, 2020, the estimated fair value of these awards was $15.9 million and $22.8 million, respectively. The Company recognized compensation expense associated with these awards of $5.7 million for the three months ended March 31, 2021, which is reported as a component of selling, general and administrative expenses.

10. 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. Except for benefit plan assets, outstanding indebtedness and foreign currency forward contracts, the carrying value of the Company’s remaining financial instruments approximates fair value.

1319

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

The ~~following table sets forth the components of net periodic benefit costs for the defined benefit plans:~~

Three Months Ended
March 31
(In thousands) 2020 2019
Service cost $ 1,309 $ 1,149
Interest cost 1,037 1,089
Expected return on plan assets (1,614) (1,422)
Recognized actuarial gain 27 (16)
Net periodic benefit cost $ 759 $ 800

The service cost of $1.3 million and $1.1 million for the three months ended March 31, 2020 and 2019, respectively, was reported as a component of selling, general and administrative expenses. The other components of net periodic benefit cost totaling a net benefit of $0.6 million and $0.3 million for the three months ended March 31, 2020 and 2019, respectively, were presented as a component of net interest and other.

~~9. FAIR VALUE OF FINANCIAL INSTRUMENTS~~

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, bank overdrafts, and outstanding indebtedness. The Company's outstanding indebtedness includes $500 million in aggregate principal amount of 5.375% Senior Notes due 2021 and $350 million in aggregate principal amount of 5.375% Senior Notes due 2024. With the exception of these debt instruments, the carrying valuesassets of the Company's ~~financial instruments approximate fair value.~~

~~The following table sets forth WESCO's debt instruments that were not carried~~various defined benefit plans are primarily comprised of common/collective/pool funds (i.e., mutual funds). These funds are valued at the net asset value (NAV) of shares held in the underlying funds. Investments for which fair value ~~as of March 31, 2020 and December 31, 2019:~~

As of
March 31, 2020 December 31, 2019
(In thousands) Fair Value Carrying Amount Fair Value Carrying Amount
5.375% Senior Notes due 2021 $ 458,170 $ 500,000 $ 502,895 $ 500,000
5.375% Senior Notes due 2024 295,358 350,000 363,269 350,000

is measured using the NAV per share practical expedient are not classified in the fair value hierarchy.

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. ~~Changes~~

The carrying value of WESCO's debt instruments with fixed interest rates was $3,230.3 million and $3,730.1 million as of March 31, 2021 and December 31, 2020, respectively. The estimated fair value of this debt was $3,546.5 million and $4,084.7 million as of March 31, 2021 and December 31, 2020, respectively. The reported carrying values of WESCO's other debt instruments, including those with variable interest rates, approximated their fair values as of March 31, 2021 and December 31, 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 the 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 exchange rate. The fair value of foreign currency forward contracts is measured using observable market information. These inputs would be considered Level 2 in the fair value hierarchy. At March 31, 2021, foreign currency forward contracts were revalued at then-current foreign exchange rates with the changes in valuation reflected directly in other non-operating expenses ("other, net") in the Consolidated Statements of Income and Comprehensive Income (Loss) offsetting the transaction gain (loss) recorded on foreign currency-denominated accounts. At March 31, 2021 and December 31, 2020, the gross and net notional amounts of foreign currency forward contracts outstanding were approximately $218.5 million and $111.9 million, respectively. While all of the Company's ~~debt instruments was effected by~~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 ~~current economic~~Condensed Consolidated Balance Sheets. The gross fair value of assets and ~~financial market environment.~~liabilities related to foreign currency forward contracts were immaterial.

~~10.~~11. 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. 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.

In an effort to expand the Company's footprint in the Middle East, WESCO has been doing business since 2009 with WESTEC Supplies General Trading (“WESTEC”), an industrial equipment supplier headquartered in the United Arab Emirates. WESTEC has debt facilities comprised of a $5.8 million term loan and a $1.0 million line of credit to support its working capital requirements and joint sales efforts with WESCO. Due to the nature of WESCO’s arrangement with WESTEC, WESCO has provided a standby letter of credit under its revolving credit facility of up to $7.3 million as security for WESTEC’s debt facilities. As of March 31, 2020, WESTEC had outstanding indebtedness totaling $6.0 million. Management

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)~~

~~(unaudited)~~

~~currently believes the estimated fair value of the noncontingent guarantee on the outstanding indebtedness is nominal and therefore a liability has not been recorded as of March 31, 2020.~~

~~11.~~12. INCOME TAXES

The effective tax rate for the three months ended March 31, 2021 and 2020 was 9.9% and ~~2019 was~~ 23.1% ~~and 21.7%~~, respectively. WESCO’s effective tax rate is typically ~~impacted by~~differs from the federal statutory income tax rate due to the tax effect of intercompany financing, foreign tax rate differences, the U.S. taxes imposed on foreign income, nondeductible expenses and state income taxes. The effective tax rate for the three months ended March 31, ~~2020~~2021 is ~~higher~~lower than the prior period primarily due to a discrete income tax ~~expense related to stock-based awards.~~benefit of $8.3 million resulting from a change in the valuation allowance recorded against foreign tax credit carryforwards. There have been no material adjustments to liabilities for uncertain tax positions since the last annual disclosure for the year ended December 31, ~~2019.~~2020.

~~12. SUBSEQUENT EVENTS~~13. BUSINESS SEGMENTS

~~On April 30, 2020,~~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 CODM evaluates the performance of its operating segments based primarily on net sales, income from operations, and total assets.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

Corporate expenses are incurred to obtain and coordinate financing, tax, information technology, legal and other related services. The Company also has various corporate assets which are reported in ~~connection with WESCO’s previously announced Merger with Anixter, WESCO announced that its wholly owned subsidiary, WESCO Distribution, has commenced (a) offers~~corporate. Segment assets may not include jointly used assets, but segment results include depreciation expense or other allocations related to ~~purchase for cash any~~those assets. Interest expense and all of Anixter Inc.’s, (a wholly owned subsidiary of Anixter), outstanding (i) 5.50% Senior Notes due 2023, $350,000,000 aggregate principal amount, and (ii) 6.00% Senior Notes due 2025, $250,000,000 aggregate principal amount (collectively,other non-operating items are not allocated to the ~~“Anixter Notes,” and such offers,~~segments or reviewed on a segment basis. Corporate expenses are shown in the ~~“Offers”) and (b) solicitations of consents from~~tables below to reconcile the ~~holders of each series of these existing Anixter Notes~~reportable segments to ~~amend~~ the relevant indentures to eliminate certain of the covenants, restrictive provisions, events of default and related provisions therein and exclude the Merger from the change in control provision. Among other conditions, the Offers are conditioned upon the substantially concurrent or prior closing of the Merger.consolidated financial statements.

Concurrent with WESCO’s Offers, Anixter announced that Anixter Inc. has commenced solicitations of consents from the holders of each series of the Anixter Notes to amend the relevant indentures to, among other things, exclude the Merger from the change in control provision (the “Anixter Consent Solicitations”) in returnThe following table sets forth financial information by reportable segment for the payment of a consent fee (the “Consent Fee”). Holder of Anixter Notes have the option to participate in either the Offers or the Anixter Consent Solicitations, but not both. In certain circumstances, consents delivered in connection with the Offers may be aggregated with those delivered in connection with the Anixter Consent Solicitations.periods presented:

~~Subject~~


(In thousands)	Three Months Ended March 31, 2021
	EES		CSS		UBS		Corporate		Total
Net sales	$	1,720,813	$	1,250,615	$	1,070,049	$	0	$	4,041,477
Income from operations	100,111		73,964		87,030		(127,854)		133,251

	Three Months Ended March 31, 2020
(In thousands)	EES		CSS		UBS		Corporate		Total
Net sales	$	1,114,457	$	223,726	$	630,464	$	0	$	1,968,647
Income from operations	43,326		9,946		41,785		(34,144)		60,913

There were no material changes to the ~~terms and conditions~~amounts of total assets by reportable segment from those disclosed in the Offer to Purchase and Consent Solicitation Statement, dated April 30, 2020 (the “Offer to Purchase”), payment of the Offer consideration or the Consent Fee, as applicable, is expected to occur at or immediately following the closing of the Merger. Additional information with respect to the Offers and the Anixter Consent Solicitations is included in WESCO’s CurrentCompany's Annual Report on Form ~~8-K, filed with~~10-K for the ~~SEC on April 30,~~fiscal year ended December 31, 2020. Holders of Anixter Notes should also read the Offer to Purchase (and the documents incorporated by reference therein) carefully and in their entirety before making any decision with respect to a tender of Anixter Notes pursuant to the Offers or the Anixter Consent Solicitations, because they contain important information.

1521

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

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 audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in its ~~2019~~2020 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 WESCO International, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, as well as WESCO International, Inc.’s other reports filed with the Securities and Exchange ~~Commission.~~Commission (the "SEC").

Company Overview

WESCO International, Inc. (“("WESCO ~~International”~~International") and its subsidiaries (collectively, “WESCO” or the "Company"), ~~incorporated~~headquartered in ~~1993 and effectively formed in February 1994 upon acquiring a distribution business from Westinghouse Electric Corporation,~~Pittsburgh, Pennsylvania, is a leading North American-based distributor of products and provider of advanced supply chain management and logistics services used primarily in industrial, construction, utility, and commercial, institutional and government (“CIG”) markets. We are a leading provider of ~~electrical, industrial,~~business-to-business distribution, logistics services and ~~communications maintenance, repair and operating ("MRO") and original equipment manufacturer ("OEM") products, construction materials, and advanced~~ supply chain ~~management~~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 ~~logistics services. Our primary product categories include general supplies, wire, cable~~Plan of Merger, dated January 10, 2020, by and ~~conduit, communications~~among Anixter, WESCO and ~~security, electrical distribution~~Warrior Merger Sub, Inc., a Delaware corporation and ~~controls, lighting~~a wholly owned subsidiary of WESCO (“Merger Sub”), Merger Sub was merged with and ~~sustainability,~~into Anixter (the “Merger”), with Anixter surviving the Merger and ~~automation, controls~~continuing as a wholly owned subsidiary of WESCO. On June 23, 2020, Anixter merged with and ~~motors.~~into Anixter Inc., with Anixter Inc. surviving to become a wholly owned subsidiary of WESCO.

We ~~serve approximately 70,000 active customers globally through approximately 500 branches primarily located in North America,~~employ nearly 18,000 people, maintain relationships with operations in 16 additional countries and 11 distribution centers located in the United States and Canada. We employ approximately 9,500 employees worldwide. We distribute over 1,000,000 products, grouped into six categories, from approximately 30,000 suppliers, ~~utilizing a highly automated, proprietary electronic procurement~~ and ~~inventory replenishment system.~~

~~In addition,~~serve more than 125,000 customers worldwide. With nearly 1,500,000 products, end-to-end supply chain services, and extensive digital capabilities, we ~~offer a comprehensive portfolio of~~provide innovative solutions to meet current customer needs across commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. Our innovative value-added ~~capabilities, which includes~~solutions include supply chain management, logistics and transportation, procurement, warehousing and inventory management, as well as kitting and labeling, limited assembly of products and ~~system installation. Our value-added capabilities, extensive geographic reach, experienced workforce~~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.

Prior to the completion of the Merger, we had four operating segments that had been aggregated as one reportable segment. Effective on the date of acquisition, we added Anixter as a separate reportable segment for the quarterly period ended June 30, 2020. At the beginning of the third quarter of 2020, we identified new operating segments organized around three strategic business units consisting of Electrical & Electronic Solutions ("EES"), Communications & Security Solutions ("CSS") and Utility and Broadband Solutions ("UBS"). The applicable comparative financial information reported in our previously issued interim financial statements for the three months ended March 31, 2020 has been recast in this Quarterly Report on Form 10-Q to conform to the basis of the new segments.

The following is a description of each of our reportable segments and their business activities.

Electrical & Electronic Solutions

The EES segment supplies a broad ~~product~~range of products and supply chain solutions ~~have enabled us~~primarily to ~~grow our~~the Construction, Industrial and Original Equipment Manufacturer ("OEM") markets. Product categories include a broad range of electrical equipment and supplies, wire and cable, lubricants, pipe, valves, fittings, fasteners, cutting tools, power transmission, and safety products. In addition, OEM customers require a reliable supply of assemblies and components to incorporate into their own products as well as value-added services such as supplier consolidation, design and technical support, just-in-time supply and electronic commerce, and supply chain management. EES includes the “Electrical and Electronic Solutions” business acquired from Anixter and ~~establish~~the majority of WESCO's legacy industrial and construction businesses.

Communications & Security Solutions

The CSS segment supplies products and customized supply chain solutions to customers in a ~~leading position in North America.~~diverse range of industries including technology, finance, telecommunications service providers, transportation, education, government, healthcare and retail. CSS sells these products directly to end users or through various channels including data communications contractors, security, network, professional audio/visual and systems integrators. CSS has a broad product portfolio that includes copper and fiber optic cable and connectivity, access control, video surveillance, intrusion and fire/life safety, cabinets, power, cable management, wireless, professional audio/video, voice and networking switches and other ancillary products. CSS includes the “Network and Security Solutions” business acquired from Anixter and WESCO's legacy data communications and safety businesses.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Utility & Broadband Solutions

The UBS segment supplies electrical transmission and distribution products, power plant maintenance, repair and operations supplies and smart-grid products, and arranges materials management and procurement outsourcing for the power generation, power transmission and electricity distribution industries. The UBS segment combines the “Utility Power Solutions” business acquired from Anixter, and WESCO's legacy utility, broadband and integrated supply businesses.

Overall Financial Performance

Our financial results for the first three months of ~~2020~~2021 reflect ~~net sales growth through~~ the ~~first ten weeks~~merger with Anixter, the benefit of ~~the quarter, offset by declines during the last two weeks of March,~~margin improvement initiatives, as well as ~~the uncertain~~lower operating ~~environment caused by the COVID-19 virus.~~ expenses due to cost reduction actions, synergy capture and integration initiatives.

Net sales increased ~~$7.4 million,~~$2.1 billion, or ~~0.4%~~105.3%, over the same period last year. Cost of goods sold as a percentage of net sales and gross profit margin was ~~80.9%~~79.9% and ~~80.5%~~20.1%, respectively, for the first three months of ~~2020~~2021, compared to 80.9% and ~~2019, respectively.~~ 19.1%, respectively, for the first three months of 2020. Cost of goods sold for the first quarter of 2021 includes a write-down of $8.9 million to the carrying value of certain personal protective equipment products held in inventory for which current selling prices have declined below cost due to a surplus of such products in the market. This write-down of inventory negatively impacted gross profit as a percentage of net sales for the first quarter of 2021 by 20 basis points.

Selling, general and administrative ("SG&A") expenses as a percentage of net sales were ~~15.2%~~15.8% and ~~15.1%~~15.2% for the first three months of 2021 and 2020, respectively. SG&A expenses for the first quarter of 2021 include merger-related costs of $46.3 million, as well as a net gain of $8.9 million resulting from the sale of WESCO's legacy utility and ~~2019, respectively.~~ data communications businesses in Canada, which were divested in connection with the Merger. Adjusted for these amounts, SG&A expenses for the first quarter of 2021 were $599.2 million, or 14.8% of net sales, reflecting the merger with Anixter, and higher variable compensation expense and benefit costs, partially offset by cost reduction actions and lower salaries and wages resulting from merger-related integration activities. SG&A expenses for the first quarter of 2020 include $4.6 million of merger-related costs.

Operating profit was ~~$60.9~~$133.3 million for the current three month period, compared to ~~$70.7~~$60.9 million for the first three months of ~~2019. Adjusted for $4.6 million of transaction costs related to our merger with Anixter, operating~~2020. Operating profit ~~was $65.5 million~~ for the first quarter of ~~2020.~~ 2021 includes the aforementioned merger-related costs and net gain on the Canadian divestitures. Adjusted for these items, operating profit was $170.6 million, or 4.2% of net sales. For the first three months of 2020, operating profit adjusted for merger-related costs of $4.6 million was $65.5 million, or 3.3% of net sales.

Net income attributable to ~~WESCO International~~common stockholders for the three months ended March 31, ~~2020 and 2019~~2021 was $44.8 million, compared to $34.4 million for the comparable prior period. As adjusted for the aforementioned items, including the related income tax effects, net income attributable to common stockholders was $74.1 million and ~~$42.4~~$38.3 million for the first quarter of 2021 and 2020, respectively. Earnings per diluted share attributable to common stockholders for the first ~~quarter~~three months of ~~2020~~2021 was $0.87, based on 51.7 million diluted shares, compared to $0.82 for the first three months of 2020, based on 42.1 million diluted ~~shares, compared to $0.93 for the first quarter of 2019, based on 45.5 million diluted~~ shares. ~~Adjusted~~As adjusted, earnings per diluted share for the first quarter of 2021 and 2020 was ~~$0.91.~~$1.43 and $0.91, respectively.

WeBeginning in 2020, and continuing through the first quarter of 2021, the COVID-19 pandemic had a significant impact on our business and adversely impacted our results of operations. There continues to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the economic reopening plans and possible resurgence of COVID, including new variants of the virus in various global geographies, and the availability of effective 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 ~~been~~on our business and ~~will continue~~our results of operations and financial condition. Events and factors relating to ~~take~~ the ~~appropriate actions in~~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 ~~virus. Our top priority is~~pandemic, we have taken actions focused on protecting the health and safety of our ~~employees.~~ employees, which is our top priority.

The products and services that we provide are integral to the daily operations of our essential business customers and ~~as such,~~accordingly, we ~~are performing essential activities necessary~~have taken actions to ~~manage basic~~maintain the continuity of our operations in ~~the midst of~~response to the pandemic. ~~To date, our branch locations~~Beginning in March 2020, and continuing through the first quarter of 2021, we have ~~remained operational consistent with existing governmental~~taken, and ~~public health authority directives. We have taken~~continue to take, actions to reduce costs consistent with the expected decline in ~~demand. We will work to prepare our business to respond to~~demand, and other spending across the ~~needs of our customers as demand recovers, which we believe could occur in the second half of this year.~~

Certain triggering events occurred during the first quarter of 2020, including the effect of the ongoing macroeconomic disruption and uncertainty caused by the COVID-19 pandemic, as well as the decline in our share price and market capitalization, both of which could indicate that the carrying value of goodwill and indefinite-lived intangible assets may not be recoverable. Accordingly, we performed an interim test for impairment. We tested for goodwill impairment on a reporting unit level and the evaluation involved comparing the fair value of each reporting unit to its carrying value. The fair values of our reporting units were determined using a combination of a discounted cash flow analysis and market multiples. We evaluated the recoverability of indefinite-lived intangible assets using the relief-from-royalty method based on projected financial information. As of March 31, 2020 and December 31, 2019, goodwill and indefinite-lived trademarks totaled $1.8 billion and $1.9 billion, respectively.Company.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

~~There were no impairment losses identified as a result~~We have experienced, and may continue to experience, reduced customer demand for certain of our ~~interim test. Two~~products and services, including delays or cancellations of ongoing or anticipated projects due to our clients’, suppliers’ and other third parties’ diminished financial conditions. We cannot predict the timeframe for recovery of our ~~reporting units with goodwill of $261.3 million~~customer’s demand for our products and ~~$524.9 million, respectively, had estimated fair values that exceeded their respective carrying values by less than 5%.~~services. The ~~determination of fair value~~full extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward remains highly uncertain and will depend on many factors outside of our ~~reporting units involves significant management judgment, particularly as it relates to~~control, including the ~~underlying assumptions~~duration and factors around our expected operating margins and discount rate. In performing our quantitative assessments, we used expected operating margins supported by a combination of historical results, current forecasts, market data and recent economic events. We used a discount rate that reflects marketplace participants' cost of capital.

~~Although we applied our best judgment assessing the reasonableness~~scope of the ~~financial projections used to estimate~~crisis, the ~~fair value~~availability of ~~our reporting units, there is significant uncertainty surrounding~~effective treatments and vaccines, imposition of protective public safety measures, and the current macroeconomic environment and conditions in the markets in which we operate. A sustained decline in our share price and market capitalization, or any further economic deterioration that could cause our financial performance to fall below our current expectations, could increase the likelihood that the fair values of our reporting units are less than their carrying values, resulting in an impairment of goodwill and indefinite-lived intangible assets in a future period. As a result, there can be no assurance that the estimates and assumptions made for purposesoverall impact of the ~~interim goodwill~~COVID-19 pandemic on the global economy and ~~indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results.~~capital markets.

Cash Flow

We generated ~~$31.5~~$120.5 million of operating cash flow for the first three months of ~~2020. Investing~~2021. Cash provided by operating activities included net income of $59.2 million and adjustments to net income totaling $31.1 million, which were primarily comprised of depreciation and amortization of $41.2 million, deferred income taxes of $13.1 million, stock-based compensation expense of $6.0 million, and a net gain of $8.9 million resulting from the ~~$100.0 million termination fee associated with the acquisition~~divestiture of ~~Anixter,~~WESCO's legacy utility and data communications businesses in Canada, as described in Note 54, "Acquisitions and Disposals" of our Notes to the unaudited Condensed Consolidated Financial ~~Statements,~~Statements. Operating cash flow also included changes in assets and ~~$15.8~~liabilities of $30.1 million.

Investing activities included $54.1 million of net proceeds from the Canadian divestitures and $10.2 million of capital expenditures.

Financing activities were comprised of the redemption of our $500.0 million aggregate principal amount of 5.375% Senior Notes due 2021 (the "2021 Notes"), borrowings and repayments of ~~$360.5~~$713.6 million and ~~$260.5~~$488.6 million, respectively, related to our revolving credit facility (the "Revolving Credit Facility"), as well as borrowings and repayments of ~~$225.0~~$243.0 million and ~~$40.0~~$248.0 million, respectively, related to our accounts receivable securitization facility (the ~~“Receivables Facility”~~"Receivables Facility"). Financing activities for the first three months of ~~2020~~2021 also included net repayments related to our various international lines of credit of approximately ~~$0.4 million.~~$8.5 million, and $14.4 million of dividends paid to holders of our Series A Preferred Stock.

Financing Availability

As of March 31, ~~2020,~~2021, we had ~~$446.6~~$686.9 million in total available borrowing capacity under our Revolving Credit Facility, which was comprised of ~~$231.3~~$298.7 million of availability under the U.S. sub-facility and ~~$215.3~~$388.2 million of availability under the Canadian sub-facility. ~~We had no~~Available borrowing capacity ~~available~~ under our Receivables ~~Facility.~~Facility was $214.0 million. The Revolving Credit Facility and the Receivables Facility mature in ~~September 2024~~June 2025 and ~~September 2022,~~June 2023, respectively.

Critical Accounting Policies and Estimates

~~Effective January 1, 2020, we~~We adopted Accounting Standards Update ~~(ASU) 2016-13,~~("ASU") 2019-12, ~~Financial Instruments—Credit Losses~~Income Taxes (Topic ~~326)~~740): ~~Measurement~~Simplifying the Accounting for Income Taxes, in the first quarter of ~~Credit Losses~~2021. The adoption of this ASU did not have a material impact on ~~Financial Instruments~~our consolidated financial statements and notes thereto..

See Note 2, "Accounting Policies" of our Notes to the unaudited Condensed Consolidated Financial Statements for information regarding our significant accounting policies.

1724

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Results of Operations

First Quarter of ~~2020~~2021 versus First Quarter of ~~2019~~2020

The following table sets forth the percentage relationship to net sales of certain items in our Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the periods presented:


	Three Months Ended
	March 31, 2021		March 31, 2020
Net sales	100.0	%	100.0	%
Cost of goods sold (excluding depreciation and amortization)	79.9		80.9
Selling, general and administrative expenses	15.8		15.2
Depreciation and amortization	1.0		0.8
Income from operations	3.3		3.1
Interest expense, net	1.7		0.7
Other, net	—		0.1
Income before income taxes	1.6		2.3
Provision for income taxes	0.1		0.5
Net income attributable to WESCO International, Inc.	1.5		1.8
Preferred stock dividends	0.4		—
Net income attributable to common stockholders	1.1	%	1.8	%

Three Months Ended
March 31
2020 2019
Net sales 100.0 % 100.0 %
Cost of goods sold (excluding depreciation and amortization) 80.9 80.5
Selling, general and administrative expenses 15.2 15.1
Depreciation and amortization 0.8 0.8
Income from operations 3.1 3.6
Net interest and other 0.8 0.8
Income before income taxes 2.3 2.8
Provision for income taxes 0.5 0.6
Net income attributable to WESCO International 1.8 % 2.2 %
Net Sales

The following table sets forth net sales by segment for the periods presented:


	Three Months Ended
(In thousands)	March 31, 2021		March 31, 2020		Growth
EES	$	1,720,813	$	1,114,456	54.4	%
CSS	1,250,615		223,726		459.0	%
UBS	1,070,049		630,465		69.7	%
Total net sales	$	4,041,477	$	1,968,647	105.3	%

Net sales were $4.0 billion for the first quarter of 2021 compared to $2.0 billion for the first quarter of 2020, an increase of 105.3%. The increase primarily reflects the merger with Anixter that was completed on June 22, 2020, along with growth across all segments, as described further below. WESCO's book-to-bill ratio, which measures orders received from customers relative to products shipped and ~~2019. Organic~~billed during the quarter, was above 1.0 at the end of the first quarter of 2021 indicating strong demand. Backlog has grown double digits since the end of the fourth quarter of 2020.

EES reported net sales $1.7 billion for the first quarter of 2021, compared to $1.1 billion for the first quarter of 2020, ~~declined by 1.7% as~~an increase of 54.4%. In addition to the ~~number~~impact of ~~workdays~~the merger, the increase reflects growth in our construction and ~~acquisitions positively impacted~~original equipment manufacturer businesses due to improving economic conditions and strong demand.

CSS reported net sales ~~by 1.6% and 0.5%, respectively. Net sales growth through~~of $1.3 billion for the first ~~ten weeks~~quarter of 2021, compared to $223.7 million for the first quarter of 2020, an increase of 459.0%. The increase reflects the impact from the merger and growth in security solutions, partially offset by project timing, a slowdown in safety sales and the impact of COVID-19 in certain regions.

UBS reported net sales of $1.1 billion for the first quarter of 2021, compared to $630.5 million for the first quarter of 2020, an increase of 69.7%. Along with the impact of the ~~quarter were~~merger, the increase reflects growth in our utility and broadband businesses, partially offset by ~~declines during~~lower sales from integrated supply programs due to the ~~last two weeks~~disruption caused by the COVID-19 pandemic.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Cost of ~~March.~~

~~The following table sets forth organic sales growth for the period presented:~~


	~~Three Months Ended~~
	~~March 31, 2020~~
~~Change in net sales~~	~~0.4~~	%
~~Impact from acquisitions~~	~~0.5~~	%
~~Impact from foreign exchange rates~~	—	%
~~Impact from number of workdays~~	~~1.6~~	%
~~Organic sales growth~~	~~(1.7)~~	%

Note: Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions in the first year of ownership, foreign exchange rates and number of workdays from the overall percentage change in consolidated net sales.Goods Sold

Cost of goods sold for the first quarter of 2021 was $3.2 billion compared to $1.6 billion for the first quarter of 2020, ~~and 2019 was~~an increase of $1.6 ~~billion. As~~billion reflecting the merger with Anixter. Cost of goods sold as a percentage of net sales was 79.9% for the first quarter of 2021, a decrease of 100 basis points compared to 80.9% for the first quarter of 2020. The decrease primarily reflects the favorable impact of margin improvement initiatives, partially offset by a write-down of $8.9 million to the carrying value of certain personal protective equipment products held in inventory for which current selling prices have declined below cost due to a surplus of such products in the market. This write-down of inventory impacted cost of goods sold ~~was 80.9%~~as a percentage of net sales for the first quarter of 2021 by 20 basis points.

Selling, General and ~~80.5%, respectively.~~Administrative Expenses

SG&A expenses for the first quarter of ~~2020~~2021 totaled ~~$299.4~~$636.6 million versus ~~$296.6~~$299.4 million for the first quarter of ~~2019.~~2020. As a percentage of net sales, SG&A expenses were ~~15.2%~~15.8% and ~~15.1%~~15.2%, respectively. The increase in SG&A expenses of $337.2 million, or 112.6%, primarily reflects ~~transaction costs related to our~~the impact of the merger with ~~Anixter of $4.6 million,~~Anixter. In addition, as described below, SG&A payroll expenses were higher in the current quarter, partially offset by lower ~~payroll expenses.~~travel, entertainment and similar expenses due to restrictions imposed on non-essential business travel in response to the COVID-19 pandemic. The realization of synergies and structural cost takeout actions also favorably impacted SG&A expenses for the first quarter of 2021. SG&A expenses for the first quarter of 2021 include merger-related costs of $46.3 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 in connection with the Merger. Adjusted for these amounts, SG&A expenses were $599.2 million, or 14.8% of net sales, for the first quarter of 2021. SG&A expenses for the first quarter of 2020 include $4.6 million of merger-related costs. Adjusted for these costs, SG&A expenses were $294.8 million, or 15.0% of net sales, for the first quarter of 2020.

SG&A payroll expenses for the first quarter of ~~2020~~2021 of ~~$203.6~~$423.7 million ~~decreased~~increased by ~~$3.0~~$220.1 million compared to the same period in ~~2019~~2020 primarily due to ~~lower~~the merger with Anixter. Excluding the impact of the merger, SG&A payroll expenses were up $4.9 million due to higher variable compensation expense and benefit ~~costs.~~costs, partially offset by lower salaries and wages due to the realization of synergies and structural cost takeout actions related to merger activities.

Depreciation and Amortization

Depreciation and amortization ~~for the first quarter of 2020 and was $16.1~~increased $25.1 million ~~compared~~ to ~~$15.2~~$41.2 million for the first quarter of ~~2019.~~2021, compared to $16.1 million for the first quarter of 2020. The first quarter of 2021 includes $15.6 million attributable to the amortization of identifiable intangible assets acquired in the merger with Anixter.

~~Net interest and other totaled $16.5~~Income from Operations

The following tables set forth income from operations by segment for the periods presented:


	Three Months Ended March 31, 2021
(In thousands)	EES		CSS		UBS		Corporate		Total
Income from operations	$	100,111	$	73,964	$	87,030	$	(127,854)	$	133,251

	Three Months Ended March 31, 2020
(In thousands)	EES		CSS		UBS		Corporate		Total
Income from operations	$	43,326	$	9,946	$	41,785	$	(34,144)	$	60,913

Operating profit was $133.3 million for the first quarter of 2021 compared to $60.9 million for the first quarter of 2020, ~~compared~~an increase of 118.8%. The increase primarily reflects the merger with Anixter. For the first quarter of 2021, operating profit for EES, CSS and UBS also reflects the favorable impact of margin improvement initiatives, as well as the realization of synergies and structural cost takeout actions. Additionally, income from operations reflects the benefit of lower travel, entertainment and similar expenses due to ~~$17.1~~restrictions imposed on non-essential business travel in response to the COVID-19 pandemic.

EES reported operating profit of $100.1 million for the first quarter of ~~2019. Net interest and other~~2021, compared to $43.3 million for the first quarter of 2020, ~~includes approximately $0.5 million~~an increase of ~~interest on borrowings against our accounts receivable securitization facility~~$56.8 million. In addition to ~~fund~~ the ~~$100.0 million termination fee~~favorable factors impacting the overall business, as described ~~above.~~above, the increase also reflects lower salaries and wages resulting from merger-related integration activities. Operating profit for the first quarter of 2021 was negatively impacted by higher variable compensation and benefit costs compared to the prior year.

1826

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

~~Income tax expense totaled $10.3~~CSS reported operating profit of $74.0 million for the first quarter of 2021, compared to $9.9 million for the first quarter of 2020, an increase of $64.1 million. Along with the favorable factors impacting the overall business, as described above, the increase also reflects lower salaries and wages as a result of merger-related integration activities. Operating profit for the first quarter of 2021 was negatively impacted by the inventory write-down described above, as well as higher variable compensation and benefit costs compared to ~~$11.7~~the prior year.

UBS reported operating profit of $87.0 million for the first quarter of 2021, compared to $41.8 million for the first quarter of 2020, an increase of $45.2 million. The increase reflects the favorable factors impacting the overall business, as described above, combined with the benefit from the aforementioned gain on the Canadian divestitures.

Interest Expense, net

Net interest expense totaled $70.4 million for the first quarter of 2021, compared to $16.6 million for the first quarter of 2020. The increase in interest expense was driven by financing activity related to the Anixter merger.

Other, net

Other non-operating income ("other, net") totaled $2.8 million for the first quarter of 2021, compared to $0.1 million for the first quarter of 2020.

Income Taxes

Income tax expense totaled $6.5 million for the first quarter of 2021, compared to $10.3 million in last year's comparable period, and the effective tax rate was ~~23.1%~~9.9% and ~~21.7%~~23.1%, respectively. The ~~higher~~lower effective tax rate in the current quarter iswas primarily due to ~~the unfavorable effect of~~a discrete income tax ~~expense~~benefit of $8.3 million associated with ~~stock-based awards. The~~a change in valuation allowance related to foreign tax credit carryforwards, which impacted the effective tax rate ~~for the current period would have been 21.4% without this discrete impact.~~by approximately 12.7 percentage points.

Net Income and Earnings per Share

Net income for the first quarter of ~~2020~~2021 was ~~$34.2~~$59.2 million, compared to net income of ~~$42.0~~$34.2 million for the first quarter of ~~2019.~~2020.

Net loss ~~of $0.2 million and $0.4 million was~~ attributable to noncontrolling interests was less than $0.1 million for the first quarter of ~~2020 and 2019, respectively.~~2021, compared to $0.2 million for the first quarter of 2020.

Preferred stock dividends expense of $14.4 million for the first quarter of 2021 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 ~~WESCO International~~common stockholders were $44.8 million and $0.87 per diluted share, respectively, for the first quarter of 2021, compared with $34.4 million and $0.82 per diluted share, respectively, for the first quarter of ~~2020, compared with net income and earnings per diluted share of $42.4 million and $0.93 per diluted share, respectively, for the first quarter of 2019.~~2020. Adjusted for merger-related costs, the ~~merger-related transaction costs discussed above,~~net gain on the sale of WESCO's legacy utility and data communications businesses in Canada, and the related income tax effects, net income and earnings per diluted share attributable to ~~WESCO International~~common stockholders for the three months ended March 31, 2021 were $74.1 million and $1.43, respectively. Adjusted for merger-related costs and interest, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $38.3 million and $0.91, ~~per share,~~ respectively, for the three months ended March 31, 2020.

The following tables ~~set forth~~reconcile income from operations, net interest expense, provision for income taxes and earnings per diluted share to adjusted net income ~~attributable to WESCO International~~from operations, adjusted net interest expense, adjusted provision for income taxes and adjusted earnings per diluted ~~share:~~share, which are non-GAAP financial measures, for the periods presented:

Three Months Ended
Adjusted SG&A Expenses: March 31, 2020 March 31, 2019
Selling, general and administrative expenses $ 299,392 $ 296,528
Merger-related costs (4,608) —
Adjusted selling, general and administrative expenses $ 294,784 $ 296,528

Three Months Ended
Adjusted Income from Operations: March 31, 2020 March 31, 2019
Income from operations $ 60,913 $ 70,726
Merger-related costs 4,608 —
Adjusted income from operations $ 65,521 $ 70,726

Three Months Ended
Adjusted Net Interest and Other: March 31, 2020 March 31, 2019
Net interest and other $ 16,472 $ 17,120
Merger-related interest expense (515) —
Adjusted net interest and other $ 15,957 $ 17,120


	Three Months Ended
Adjusted Income from Operations:	March 31, 2021		March 31, 2020
	(In thousands)
Income from operations	$	133,251	$	60,913
Merger-related costs	46,322		4,608
Net gain on Canadian divestitures	(8,927)		—
Adjusted income from operations	$	170,646	$	65,521

1927

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Three Months Ended
Adjusted Provision for Income Taxes: March 31, 2020 March 31, 2019
Provision for income taxes $ 10,266 $ 11,656
Income tax effect of merger-related transaction costs 1,183 —
Adjusted provision for income taxes $ 11,449 $ 11,656


	Three Months Ended
Adjusted Interest Expense, Net:	March 31, 2021		March 31, 2020
	(In thousands)
Interest expense, net	$	70,373	$	16,592
Merger-related interest expense(1)	—		(515)
Adjusted interest expense, net	$	70,373	$	16,077

(1) The adjustment for the three months ended March 31, 2020 represents interest for borrowings against our prior accounts receivable securitization facility to fund the $100.0 million termination fee described above.


	Three Months Ended
Adjusted Provision for Income Taxes:	March 31, 2021		March 31, 2020
	(In thousands)
Provision for income taxes	$	6,531	$	10,266
Income tax effect of adjustments to income from operations and net interest(1)	8,145		1,183
Adjusted provision for income taxes	$	14,676	$	11,449

(1) The adjustments to income from operations and net interest expense have been tax effected at rates of 21.8% and 23.1% for the three months ended March 31, 2021 and 2020, respectively.


	Three Months Ended
Adjusted Earnings per Diluted Share:	March 31, 2021		March 31, 2020
(In thousands, except per share data)
Adjusted income from operations	$	170,646	$	65,521
Adjusted interest expense, net	70,373		16,077
Other, net	(2,807)		(120)
Adjusted income before income taxes	103,080		49,564
Adjusted provision for income taxes	14,676		11,449
Adjusted net income	88,404		38,115
Net loss attributable to noncontrolling interests	(24)		(232)
Adjusted net income attributable to WESCO International, Inc.	88,428		38,347
Preferred stock dividends	14,352		—
Adjusted net income attributable to common stockholders	$	74,076	$	38,347

Diluted shares	51,708		42,075
Adjusted earnings per diluted share	$	1.43	$	0.91

Note: For the three months ended March 31, 2021, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related costs, a net gain on the sale of WESCO's legacy utility and data communications businesses in Canada, and the related income tax effects. For the three months ended March 31, 2020, income from operations, net interest expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related costs and interest, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

Three Months Ended
Adjusted Earnings Per Diluted Share: March 31, 2020 March 31, 2019
Adjusted income from operations $ 65,521 $ 70,726
Adjusted net interest and other 15,957 17,120
Adjusted income before income taxes 49,564 53,606
Adjusted provision for income taxes 11,449 11,656
Adjusted net income 38,115 41,950
Net loss attributable to noncontrolling interests (232) (419)
Adjusted net income attributable to WESCO International, Inc. $ 38,347 $ 42,369
Diluted shares 42,075 45,491
Adjusted earnings per diluted share $ 0.91 $ 0.93

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

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:


	Three Months Ended March 31, 2021
(In thousands)	EES			CSS			UBS			Corporate		Total
Net income attributable to common stockholders	$	100,629		$	73,594		$	87,013		$	(216,410)	$	44,826
Net loss attributable to noncontrolling interests	(75)			—			—			51		(24)
Preferred stock dividends	—			—			—			14,352		14,352
Provision for income taxes	—			—			—			6,531		6,531
Interest expense, net	—			—			—			70,373		70,373
Depreciation and amortization	10,563			16,293			5,210			9,143		41,209
EBITDA	$	111,117		$	89,887		$	92,223		$	(115,960)	$	177,267
Other, net	(443)			370			17			(2,751)		(2,807)
Stock-based compensation expense(1)	1,351			425			340			2,577		4,693
Merger-related costs	—			—			—			46,322		46,322
Net gain on Canadian divestitures	—			—			(8,927)			—		(8,927)
Adjusted EBITDA	$	112,025		$	90,682		$	83,653		$	(69,812)	$	216,548
Adjusted EBITDA margin %	6.5%			7.3%			7.8%					5.4%
(1) Stock-based compensation expense in the calculation of adjusted EBITDA for the three months ended March 31, 2021 excludes $1.3 million as such amount is included in merger-related costs.

	Three Months Ended March 31, 2020
(In thousands)	EES			CSS			UBS			Corporate		Total
Net income attributable to common stockholders	$	43,446		$	9,946		$	41,785		$	(60,770)	$	34,407
Net loss attributable to noncontrolling interests	(232)			—			—			—		(232)
Provision for income taxes	—			—			—			10,266		10,266
Interest expense, net	—			—			—			16,592		16,592
Depreciation and amortization	6,876			1,841			3,521			3,855		16,093
EBITDA	$	50,090		$	11,787		$	45,306		$	(30,057)	$	77,126
Other, net	(120)			—			—			—		(120)
Stock-based compensation expense	1,079			156			293			3,098		4,626
Merger-related costs	—			—			—			4,608		4,608
Adjusted EBITDA	$	51,049		$	11,943		$	45,599		$	(22,351)	$	86,240
Adjusted EBITDA margin %	4.6		%	5.3		%	7.2		%			4.4		%

Note: EBITDA, Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of our performance and ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before other non-operating expenses ("other, net"), non-cash stock-based compensation, merger-related costs and net gain on the sale of WESCO's legacy utility and data communications businesses in Canada. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.

Adjusted EBITDA for EES was $112.0 million for the first quarter of 2021, or 6.5% of net sales, compared to $51.0 million for the first quarter of 2020, or 4.6% of net sales.

Adjusted EBITDA for CSS was $90.7 million for the first quarter of 2021, or 7.3% of net sales, compared to $11.9 million for the first quarter of 2020, or 5.3% of net sales.

Adjusted EBITDA for UBS was $83.7 million for the first quarter of 2021, or 7.8% of net sales, compared to $45.6 million for the first quarter of 2020, or 7.2% of net sales.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Liquidity and Capital Resources

Total assets, total liabilities and total stockholders' equity were ~~$5.2~~$11.9 billion, $8.5 billion and ~~$5.0~~$3.4 billion at March 31, ~~2020~~2021 and December 31, ~~2019, respectively. Total liabilities were $3.0 billion and $2.8 billion at March 31,~~ 2020, ~~and December 31, 2019, respectively. Total stockholders' equity was $2.2 billion and $2.3 billion at March 31, 2020 and December 31, 2019,~~ respectively.

Our liquidity needs generally arise from fluctuations in our working capital requirements, capital expenditures, acquisitions and debt service obligations. As of March 31, ~~2020,~~2021, we had ~~$446.6~~$686.9 million in available borrowing capacity under our Revolving Credit Facility and $214.0 million in available borrowing capacity under our Receivables Facility, which combined with available cash of ~~$285.2~~$136.5 million, provided liquidity of $731.8 million. Our available cash includes $100 million that we borrowed under our Revolving Credit Facility in March as a precautionary measure to increase our cash position and preserve financial flexibility in light of the current uncertainty resulting from the COVID-19 pandemic.$1.0 billion. Cash included in our determination of liquidity represents cash in certain deposit and interest bearing investment accounts. 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. In addition, 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 March 31, ~~2020,~~2021, approximately ~~54%~~69% of our debt portfolio was comprised of fixed rate debt.

~~Between now and closing~~As described in Note 8, "Debt" of our Notes to the ~~Anixter acquisition, our capital allocation priorities include supporting our organic sales growth opportunities and repaying or holding cash available for debt repayment. Prior to signing~~unaudited Condensed Consolidated Financial Statements, on January 14, 2021 (the “Redemption Date”), we redeemed the ~~Merger Agreement with Anixter, we obtained debt financing commitments comprised of a senior secured asset-based revolving credit facility in~~$500 million aggregate principal amount of ~~$1.2 billion and an unsecured bridge facility in aggregate~~our 2021 Notes at a redemption price equal to 100% of the principal amount ~~of $3.2 billion. Prior~~plus accrued interest to, but not including, the ~~completion~~Redemption Date. The redemption of the ~~merger, we intend to enter into permanent financing to replace the unsecured bridge facility,~~2021 Notes was funded with available cash, as well as ~~a consent solicitation, tender offer or exchange offer with respect to Anixter's 5.50% Senior Notes due 2023~~borrowings under our accounts receivable securitization and 6.00% Senior Notes due 2025. We expect to use proceeds of the debt financing commitments, together with proceeds of any permanent financing replacing the debt financing commitments, amounts available under the senior secured asset-based revolving credit ~~facility and existing cash on hand to consummate the merger. There can be no assurance that WESCO will finance~~facilities.

Since the merger ~~in this anticipated manner~~with Anixter, we have used cash and the ~~completion~~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 $534 million. Over the ~~merger is not contingent upon the completion of any debt financing. After~~

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~closing,~~next several quarters, it is expected that excess liquidity will be directed primarily at debt reduction and ~~costs related to the~~merger-related integration ~~process,~~activities, and we expect to maintain sufficient liquidity through our credit facilities and cash balances. We ~~anticipate~~expect to spend between $100 million to $120 million on capital expenditures in ~~2020~~2021, much of which will be invested to ~~be sufficient to support~~align the systems of our ~~business initiatives.~~legacy businesses and enhance our digital tools.

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 also communicate on a regular basis with our lenders regarding our financial and working capital performance, liquidity position and financial leverage. Our financial leverage ratio, on a pro forma basis, was ~~3.1~~4.9 as of March 31, ~~2020~~2021 and ~~2.8~~5.3 as of December 31, ~~2019.~~2020. In addition, we are in compliance with all covenants and restrictions contained in our debt agreements as of March 31, ~~2020, and we expect to maintain compliance with all such covenants and restrictions following our merger with Anixter.~~2021.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

The following table sets forth our financial leverage ratio, aswhich is a non-GAAP financial measure, for the periods presented:


	Pro Forma(1)
	Twelve Months Ended
(In millions of dollars, except ratio)	March 31, 2021		December 31, 2020
Net income attributable to common stockholders	$	90.3	$	115.6
Net loss attributable to noncontrolling interests	(0.3)		(0.5)
Preferred stock dividends	44.5		30.1
Provision for income taxes	39.6		55.7
Interest expense, net	292.9		255.8
Depreciation and amortization	161.5		153.5
EBITDA	628.5		610.2
Other, net	(4.8)		4.6
Stock-based compensation	30.3		34.7
Merger-related costs and fair value adjustments	245.6		206.7
Out-of-period adjustment	18.9		18.9
Net gain on sale of asset and Canadian divestitures	(28.7)		(19.8)
Adjusted EBITDA	$	889.8	$	855.3

	As of
	March 31, 2021		December 31, 2020
Short-term borrowings and current portion of long-term debt	$	20.8	$	528.8
Long-term debt	4,592.7		4,370.0
Debt discount and debt issuance costs(2)	83.6		88.2
Fair value adjustments to Anixter Senior Notes due 2023 and 2025(2)	(1.5)		(1.7)
Total debt	4,695.6		4,985.3
Less: Cash and cash equivalents	303.9		449.1
Total debt, net of cash	$	4,391.7	$	4,536.2

Financial leverage ratio	4.9		5.3

(1)Pro forma adjusted EBITDA includes the financial results of ~~March 31, 2020~~WESCO's legacy utility and ~~December 31, 2019:~~data communications businesses in Canada, which were divested in the first quarter of 2021 under a Consent Agreement with the Competition Bureau of Canada.

Twelve Months Ended
(In millions of dollars, except ratio) March 31,
2020 December 31,
2019
Income from operations $ 336.4 $ 346.2
Depreciation and amortization 63.0 62.2
EBITDA $ 399.4 $ 408.4
As of
March 31,
2020 December 31,
2019
Short-term borrowings and current debt $ 24.5 $ 26.7
Long-term debt 1,542.6 1,257.1
Debt issuance costs ⁽¹⁾
8.2 8.8
Total debt 1,575.3 1,292.6
Less: cash and cash equivalents 342.6 150.9
Total debt, net of cash $ 1,232.7 $ 1,141.7
Financial leverage ratio 3.1 2.8

⁽¹⁾(2)Long-term debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance ~~costs.~~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 ~~is a non-GAAP measure of~~measures the use of debt. Financial leverage ratio is calculated by dividing total debt, ~~including~~excluding debt discount, debt issuance costs and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA ~~which is also a non-GAAP financial measure,~~ 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 ("other, net"), non-cash stock-based compensation, costs and fair value adjustments associated with the merger with Anixter, an out-of-period adjustment related to inventory absorption accounting, and net gain on the sale of a U.S. operating branch and WESCO's legacy utility and data communications businesses in Canada. Pro forma financial leverage ratio is calculated by dividing total debt, excluding debt discount and debt issuance costs, net of cash, by pro forma adjusted EBITDA. Pro forma EBITDA and pro forma adjusted EBITDA gives effect to the combination of WESCO and Anixter as if it had occurred at the beginning of the respective trailing twelve month period.

~~At March~~

31 ~~2020, we had cash and cash equivalents totaling $342.6 million,~~

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Most of ~~which $104.3 million was held~~the undistributed earnings of our foreign subsidiaries have been taxed in the U.S. under either the one-time transition tax or the global intangible low-taxed income ("GILTI") tax regime imposed by ~~foreign subsidiaries. As a result of~~ the Tax Cuts and Jobs Act of 2017 ~~(the "TCJA"~~("TCJA"), we reevaluated our intent and ability to repatriate foreign earnings based upon the liquidity of our domestic operations and the cash flow needs of our foreign subsidiaries. Consequently, during the years ended December 31, 2019 and 2018, we repatriated. Except for a portion of ~~the~~foreign earnings previously taxed ~~earnings attributable to our~~in the U.S. that can effectively be distributed without further material U.S. or foreign ~~operations. We~~taxation, we continue to assert that the ~~remaining~~ undistributed earnings of our foreign subsidiaries are indefinitely reinvested. To the ~~majority~~extent the earnings of ~~which were~~our foreign subsidiaries are distributed in the form of dividends, such earnings may be subject to ~~the one-time tax imposed by the TCJA, are indefinitely reinvested.~~additional taxes. We believe that we are able to maintain a sufficient level of liquidity for our domestic operations and commitments without ~~repatriating~~incurring any material tax cost to repatriate cash held by ~~these~~our foreign subsidiaries. ~~Upon any future repatriation, additional tax expense or benefit may be incurred; however, we do not believe such amount would be material.~~

Cash Flow

Operating Activities. Net cash generated from operations for the first three months of 2021 totaled $120.5 million, compared with net cash provided by operating activities of $31.5 million for the first three months of 2020. Operating activities included net income of $59.2 million and adjustments to net income totaling $31.0 million, which were primarily comprised of depreciation and amortization of $41.2 million, deferred income taxes of $13.1 million, stock-based compensation expense of $6.0 million, and a net gain of $8.9 million resulting from the Canadian divestitures. Other sources of cash in the first three months of 2021 included an increase in accounts payable of $251.0 million due to higher purchases of inventory, an increase in other current and noncurrent liabilities of $40.5 million, a decrease in other accounts receivable of $7.6 million, and a decrease in other current and noncurrent assets of $17.1 million. Primary uses of cash in the first three months of 2021 included an increase in inventories of $124.8 million to support increased customer demand, an increase in trade accounts receivable of $117.4 million resulting from higher sales in the latter part of the quarter, and a decrease in accrued payroll and benefit costs of $43.8 million.

Net cash provided by operating activities for the first three months of 2020 totaled $31.5 million, ~~compared with $28.9 million of cash generated for the first three months of 2019. Operating activities~~which included net income of $34.2 million and adjustments to net income totaling $19.8 million, which were primarily comprised of depreciation and amortization of $16.1 million and stock-based compensation expense of $4.6 million. Other sources of cash in the first three months of 2020 included a decrease in inventories of $37.8 million, a decrease in other accounts receivable of $19.2 million, ~~due primarily to the collection of supplier volume rebates earned in 2019,~~ and an increase in other current and noncurrent liabilities of $7.4 million. Primary uses of cash in the first three months of 2020 ~~included:~~included an increase in trade accounts receivable of $53.9 ~~million;~~million, a decrease in accrued payroll and benefit costs of $19.0 million, ~~resulting from the payment of management incentive compensation earned in 2019;~~ a decrease in accounts payable of $10.9 ~~million; and, an increase in prepaid expenses and other assets of $3.1 million.~~

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

Net cash provided by operating activities for the first three months of 2019 totaled $28.9 million, which included net income of $42.0 million and adjustments to net income totaling $22.1 million. Other sources of cash in the first three months of 2019 included an increase in accounts payable of $68.1 million, a decrease in other accounts receivable of $22.4 million due primarily to the collection of supplier volume rebates earned in 2018, a decrease in prepaid expenses and other assets of $15.1 million, and an increase in other current and noncurrent ~~liabilities~~assets of ~~$4.6~~$3.1 million. Primary uses of cash in the first three months of 2019 included: an increase in trade accounts receivable of $76.7 million resulting from higher sales in the latter part of the quarter; an increase in inventories of $40.8 million primarily to support growth in our business; and, a decrease in accrued payroll and benefit costs of $27.9 million resulting from the payment of management incentive compensation earned in 2018.

Investing Activities. Net cash ~~used in~~provided by investing activities for the first three months of ~~2020~~2021 was ~~$110.3~~$44.5 million, compared with ~~$38.5~~$110.3 million of net cash used during the first three months of ~~2019.~~2020. Included in the first three months of 2021 was $54.1 million of net proceeds from the divestiture of WESCO's legacy utility and data communications businesses in Canada, as described in Note 4, "Acquisitions and Disposals" of our Notes to the unaudited Condensed Consolidated Financial Statements. Included in the first three months of 2020 was ~~the~~a $100.0 million termination fee associated with the acquisition of Anixter, as described in Note 4, "Acquisitions and Disposals" of our Notes to the unaudited Condensed Consolidated Financial Statements. ~~In the first quarter of 2019, we made payments of $27.7 million to acquire Sylvania Lighting Solutions ("SLS").~~ Capital expenditures were $10.2 million for the three month period ended March 31, 2021, compared to $15.8 million for the three month period ended March 31, ~~2020, compared to $10.8 million for the three month period ended March 31, 2019.~~2020.

Financing Activities. Net cash used in financing activities for the first three months of 2021 was $312.2 million, compared to $278.7 million of net cash provided by financing activities for the first three months of ~~2020 was $278.7~~2020. During the first three months of 2021, financing activities consisted of the redemption of our $500.0 million ~~compared~~aggregate principal amount of 2021 Notes, borrowings and repayments of $713.6 million and $488.6 million, respectively, related to ~~$19.2~~our Revolving Credit Facility, as well as borrowings and repayments of $243.0 million and $248.0 million, respectively, related to our Receivables Facility. Financing activities for the first three months of ~~2019.~~ 2021 also included net repayments related to our various international lines of credit of approximately $8.5 million, and $14.4 million of dividends paid to holders of our Series A Preferred Stock

During the first three months of 2020, financing activities consisted of borrowings and repayments of $360.5 million and $260.5 million, respectively, related to our ~~Revolving Credit Facility,~~prior revolving credit facility, as well as borrowings and repayments of $225.0 million and $40.0 million, respectively, related to our ~~Receivables Facility.~~prior accounts receivable securitization facility. Financing activities for the first three months of 2020 also included net repayments related to our various international lines of credit of approximately $0.4 ~~million.~~

During the first three months of 2019, financing activities consisted of borrowings and repayments of $253.7 million and $272.8 million, respectively, related to our Revolving Credit Facility, borrowings and repayments of $170.0 million and $105.0 million, respectively, related to our Receivables Facility, and repayments of $24.8 million to pay off our Term Loan Facility. Financing activities for the first three months of 2019 also included net repayments related to our various international lines of credit of approximately $3.7 million.

Contractual Cash Obligations and Other Commercial Commitments

There were no material changes in our contractual obligations and other commercial commitments that would require an update to the disclosure provided in our ~~2019~~2020 Annual Report on Form 10-K.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Inflation

The rate of inflation, as measured by changes in the producer price index, affects different commodities, the cost of products purchased and ultimately the pricing of our different products and product classes to our customers. For the three months ended March 31, ~~2020,~~2021, pricing related to inflation ~~impacted~~did not have a material impact on our ~~sales by less than 1%.~~sales.

Seasonality

Our operating results are not significantly affected by seasonal factors. Sales during the first ~~quarter~~and fourth quarters are usually affected by a reduced level of ~~activity. Sales during~~activity due to the ~~second, third and fourth quarters are generally 5% to 7% higher than the first quarter.~~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.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

Guarantor Financial Statements

WESCO Distribution (the “Issuer”) has outstanding ~~$500 million in aggregate principal amount of 5.375% Senior Notes due 2021 (the “2021 Notes”) and~~ $350 million in aggregate principal amount of 5.375% Senior Notes due 2024 (the “2024 Notes” ~~and, together with the 2021 Notes, the “Notes”~~).

The 2024 Notes are unsecured senior obligations of WESCO Distribution and are fully and unconditionally guaranteed on a senior unsecured basis by WESCO International and Anixter Inc. (the ~~“Parent Guarantor”~~“Guarantors”), ranking pari passu in right of payment with all other existing and future senior obligations of the Issuer, including obligations under other unsubordinated indebtedness. The 2024 Notes are effectively subordinated to all existing and future obligations of the Issuer that are secured by liens on any property or assets of the Issuer, including the Issuer’s Revolving Credit Facility and the then outstanding term loan facility (the ~~��Senior~~“Senior Secured Credit Facilities”), to the extent of the value of the collateral securing such obligations, and are structurally subordinated to all liabilities (including trade payables) of any of the ~~Parent Guarantor’s~~Guarantors’s or the Issuer’s subsidiaries (the “non-Guarantor Subsidiaries”) and senior in right of payment to all existing and future obligations of the Issuer that are, by their terms, subordinated in right of payment to the 2024 Notes.

The 2024 Notes are guaranteed by the ~~Parent Guarantor~~Guarantors and not by the non-Guarantor Subsidiaries. In the event of a bankruptcy, liquidation or reorganization of any of the non-Guarantor Subsidiaries, such non-Guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute or contribute, as the case may be, any of their assets to the Issuer or the ~~Parent Guarantor.~~Guarantors. Therefore, the 2024 Notes and the guarantee of the ~~Parent Guarantor~~Guarantors (the ~~“Parent Guarantee”~~“Guarantee”) are effectively subordinated to the liabilities of the non-Guarantor Subsidiaries.

The ~~Parent~~ Guarantee constitutes a senior obligation of the ~~Parent Guarantor,~~Guarantors, ranking pari passu in right of payment with all other senior obligations of the ~~Parent Guarantor,~~Guarantors, including obligations under other unsubordinated indebtedness. The ~~Parent~~ Guarantee is effectively subordinated to all existing and future obligations incurred by the ~~Parent Guarantor~~Guarantors that are secured by liens on any property or assets of the ~~Parent Guarantor,~~Guarantors, including the Senior Secured Credit Facilities, to the extent of the value of the collateral securing such obligations, structurally subordinated to all liabilities (including trade payables) of the non-Guarantor Subsidiaries and senior in right of payment to all existing and future obligations of the ~~Parent Guarantor~~Guarantors that are, by their terms, subordinated in right of payment to the ~~Parent~~ Guarantee.

The ~~Parent Guarantor guarantees~~Guarantors guarantee to each holder of the 2024 Notes and to the respective trustees (i) the due and punctual payment of the principal of, premium, if any, and interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of and interest on the 2024 Notes, to the extent lawful, and the due and punctual payment of all other obligations and due and punctual performance of all obligations of the Issuer to the holders or the respective trustee all in accordance with the terms of the 2024 Notes and the indentures governing the 2024 Notes and (ii) in the case of any extension of time of payment or renewal of any 2024 Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at stated maturity, by acceleration or otherwise.

If the Issuer becomes a debtor in a case under the U.S. Bankruptcy Code or ~~encounter~~encounters other financial difficulty, under federal or state fraudulent transfer law, a court may void, subordinate or otherwise decline to enforce the 2024 Notes. A court might do so if it is found that when the Issuer issued the 2024 Notes, or in some states when payments became due under the 2024 Notes, the Issuer received less than reasonably equivalent value or fair consideration and either: (i) were insolvent or rendered insolvent by reason of such incurrence; (ii) were left with inadequate capital to conduct its business; or (iii) believed or reasonably should have believed that the Issuer would incur debts beyond its ability to pay.

~~The~~

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

A court might also void an issuance of the 2024 Notes without regard to the above factors, if the court found that the Issuer issued the 2024 Notes with actual intent to hinder, delay or defraud its creditors. A court would likely find that the Issuer did not receive reasonably equivalent value or fair consideration for the 2024 Notes, if the Issuer did not substantially benefit directly or indirectly from the issuance of the 2024 Notes. If a court were to void the issuance of the 2024 Notes, holders would no longer have any claim against the Issuer. Sufficient funds to repay the 2024 Notes may not be available from other sources. In addition, the court might direct holders to repay any amounts that they already received from the Issuer.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

The following tables present summarized financial information for WESCO International, ~~and~~ WESCO Distribution and Anixter Inc. on a combined basis after elimination of (i) intercompany transactions and balances among such entities and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor. The summarized financial information has been prepared in accordance with Rule 13-01 of Regulation S-X.


Summarized Balance Sheets	Summarized Balance Sheets									Summarized Balance Sheets
(In thousands of dollars)
(In thousands)						(In thousands)
(unaudited)	(unaudited)									(unaudited)
		As of							As of
		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets	Assets					Assets
Current assets	Current assets	$	845,631	$	582,075	Current assets	$	2,369,262	$	2,259,748
Due from non-guarantor subsidiaries	Due from non-guarantor subsidiaries	465,268		465,012		Due from non-guarantor subsidiaries	298,508		277,957
Total current assets	Total current assets	1,310,899		1,047,087		Total current assets	2,667,770		2,537,705
Noncurrent assets	Noncurrent assets	515,326		484,552		Noncurrent assets	3,338,955		3,368,247
Total assets	Total assets	$	1,826,225	$	1,531,639	Total assets	$	6,006,725	$	5,905,952
Liabilities	Liabilities					Liabilities
Current liabilities	Current liabilities	$	441,402	$	445,075	Current liabilities	$	1,440,047	$	1,821,835
Due to non-guarantor subsidiaries	Due to non-guarantor subsidiaries	3,296,996		3,133,326		Due to non-guarantor subsidiaries	2,319,889		2,046,613
Total current liabilities	Total current liabilities	3,738,398		3,578,401		Total current liabilities	3,759,936		3,868,448
Noncurrent liabilities	Noncurrent liabilities	1,198,399		1,067,486		Noncurrent liabilities	4,376,826		4,169,639
Total liabilities	Total liabilities	$	4,936,797	$	4,645,887	Total liabilities	$	8,136,762	$	8,038,087


Summarized Statement of Income (Loss)
(In ~~thousands of dollars)~~thousands)
(unaudited)
	Three Months Ended
	March 31, ~~2020~~2021
Net sales⁽¹⁾	$	~~873,594~~2,253,878
Gross profit⁽¹⁾	~~168,571~~438,544
Net ~~income~~loss	$	~~285~~ (49,616)

⁽¹⁾ Includes ~~$8.9~~$15.6 million of net sales and cost of goods sold to non-guarantor subsidiaries.

Impact of Recently Issued Accounting Standards

See Note 2, "Accounting Policies" of our Notes to Condensed Consolidated Financial Statements for information regarding the effect of new accounting pronouncements.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Forward-Looking Statements

~~From time to time in this report and in other written reports and oral~~All statements ~~references~~made herein that are made to expectations regarding our future performance. When used in this context, the words “anticipates,” “plans,” “believes,” “estimates,” “intends,” “expects,” “projects,” “will” and similar expressions may identifynot historical facts should be considered as forward-looking statements ~~although not all forward-looking statements contain such words.~~within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements ~~including,~~involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These statements include, but are not limited to, ~~our~~ statements regarding the expected benefits and costs of the transaction between WESCO and Anixter International Inc., including anticipated future financial and operating results, synergies, accretion and growth rates, and the combined company's plans, objectives, expectations and intentions, statements that address the combined company's expected future business ~~strategy, growth strategy, competitive strengths, productivity~~ and ~~profitability enhancement, competition, new product~~financial performance, and ~~service introductions~~other statements identified by words such as "anticipate," "plan," "believe," "estimate," "intend," "expect," "project," "will" and ~~liquidity and capital resources~~similar words, phrases or expressions. These forward-looking statements are based on ~~management’s~~current expectations and beliefs of WESCO's management, as well as on assumptions made by, and information currently available to, WESCO's management, current market trends and market conditions and involve ~~various~~ risks and uncertainties, ~~some~~many of which are ~~beyond our control. In addition,~~outside of WESCO's and WESCO's management's control, and which may cause actual results to differ materially from those contained in forward-looking ~~statements in this document~~statements. Accordingly, you should not place undue reliance on such statements.

Those risks, uncertainties and assumptions include ~~information regarding our proposed acquisition~~the risk of ~~Anixter,~~any unexpected costs or expenses resulting from the ~~potential effects~~transaction, the risk of any litigation or post-closing regulatory action relating to the transaction, the risk that the transaction could have an adverse effect on the ability of the ~~pending acquisition~~combined company to retain customers and retain and hire key personnel and maintain relationships with its suppliers, customers and other business relationships and on ~~our~~its operating results and business ~~and operations prior to~~generally, or the ~~consummation thereof,~~risk that problems may arise in successfully integrating the ~~effects on WESCO if~~businesses of the ~~acquisition is not consummated, information regarding~~companies, which may result in the combined ~~operations~~company not operating as effectively and ~~business~~efficiently as expected, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of ~~WESCO and Anixter following~~ the ~~acquisition, if consummated, and statements regarding~~proposed transaction or it may take longer than expected to achieve those synergies or benefits, the risk that the leverage of the company may be higher than anticipated, the impact of natural disasters, health epidemics and other outbreaks, especially the outbreak of COVID-19 since December 2019, which may have a material adverse effect on ~~WESCO's business. Our~~the combined company's business, results of operations and financial conditions, and other important factors that could cause actual results ~~could~~to differ materially from those ~~expressed in any forward-looking statement made by us or on our behalf. In light of these risks~~projected. All such factors are difficult to predict and ~~uncertainties, there~~are beyond each company's control. Additional factors that could cause results to differ materially from those described above can be ~~no assurance that the forward-looking information will~~found in ~~fact prove to be accurate. Certain of these risks are set forth in the WESCO International’s~~WESCO's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019, as well as WESCO International’s~~2020 and WESCO's other reports filed with the SEC. ~~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.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risks.

For a discussion of changes to the market risks that were previously disclosed in our ~~2019~~2020 Annual Report on Form 10-K, refer to Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations” and to Part II, Item 1A, "Risk Factors”.

Item 4. 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 and internal control over financial reporting were effective as of the end of the period covered by this report.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarterly period ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

PART II—OTHER INFORMATION

Item 1. 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. 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.

Item 1A. Risk Factors.

~~The following is an additional~~There have been no material changes to the risk ~~factor to those~~factors previously disclosed in Item 1A. to Part 1 of WESCO’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~

The COVID-19 pandemic has adversely affected how we, our suppliers and our customers are operating our businesses, and the duration and extent to which it will affect our business, financial condition, results of operations, cash flows, liquidity, and stock price are uncertain.

In December 2019, a novel coronavirus disease (“COVID-19”) was reported in China, and on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. Governmental authorities around the world have implemented measures to reduce the spread of COVID-19, and this widespread health crisis is adversely affecting the broader economies, financial markets, workforces, our suppliers and customers, and the business environment.

We cannot be certain about the impact that COVID-19 will have on our business and operations going forward. The duration and extent of the impact from the COVID-19 pandemic depends on future developments for which there is significant uncertainty at this time, such as the severity and transmission rate of the virus, governmental, business and individuals' actions taken in response, the extent and effectiveness of containment actions, restrictions or disruptions to transportation, including reduced availability of ground or air transport, the impact of these and other factors on our employees, including disruptions to our operations resulting from the illness of any of our employees, the impact of these and other factors on our ability to sell and provide our products and services, including as a result of travel restrictions and people working from home, the effect on our suppliers and disruptions to the global supply chain, the effect on our customers and their demand for our products and services and ability to pay for them, and any closures of our and our suppliers’ and customers’ facilities. While we are supporting essential businesses and have not had to close our facilities for extended periods of time as of the date of this filing, there is significant uncertainty about what steps we may need to take in response to the pandemic in the future. We have taken actions to reduce costs and cash expenditures, including reductions in administrative expenses, payroll and benefits, capital expenditures, and other costs, and further steps may become necessary in the future. We have also drawn against our credit facilities as a precautionary measure to increase our cash position and preserve financial flexibility in light of the current uncertainty. Due to the uncertainty of COVID-19, we will continue to assess the situation, including the impact of governmental regulations that might be imposed in response to the pandemic. In addition, the impact of COVID-19 on macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, and interest rates. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.

Any of these events could materially adversely affect our business, financial condition, results of operations, cash flows, liquidity and stock price, and could also have the effect of heightening the other risks described in “Risk Factors” under Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” under Item 7 of our Annual Report on Form 10-K, filed with the SEC on February 24, 2020, including Operational Risks, Financial Risks, Regulatory and Legal Risks, and Risks Related to Our Pending Acquisition of Anixter, as well as in subsequent SEC filings.

2020.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Item 6. Exhibits.

(a)Exhibits

(10)Material Contracts

(1) Agreement, dated May 28, 2020, memorializing terms of employment of Theodore Dosch by WESCO International, Inc. (filed herewith)

(2 ) S e cond Am endment to Fifth Amended and Restated Receivables Purchase A greement (filed herewith)

(31) Rule 13a-14(a)/15d-14(a) Certifications

(1) Certification of Chief Executive Officer pursuant to Rules 13a-14(a) promulgated under the Exchange Act.

(2) Certification of Chief Financial Officer pursuant to Rules 13a-14(a) promulgated under the Exchange Act.

(32) Section 1350 Certifications

(1) Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(2) Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Schema Document.

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements 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.


						WESCO International, Inc.
						(Registrant)


May ~~1, 2020~~7, 2021	By:	/s/ David S. Schulz
(Date)		David S. Schulz
		~~Senior~~Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)


May 7, 2021	By:	/s/ Matthew S. Kulasa
(Date)		Matthew S. Kulasa
		Senior Vice President, Corporate Controller and Chief Accounting Officer
		(Principal Accounting Officer)


	Three Months Ended
Adjusted SG&A Expenses:	March 31, 2020		March 31, 2019

Selling, general and administrative expenses	$	299,392	$	296,528
Merger-related costs	(4,608)		—
Adjusted selling, general and administrative expenses	$	294,784	$	296,528


	Three Months Ended
Adjusted Net Interest and Other:	March 31, 2020		March 31, 2019

Net interest and other	$	16,472	$	17,120
Merger-related interest expense	(515)		—
Adjusted net interest and other	$	15,957	$	17,120