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 ~~September 30, 2020~~March 31, 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 ~~November~~May 6, ~~2020, 50,042,827~~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.			2722

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			4535

Item 4. Controls and Procedures.			4535

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.			4636

Item 1A. Risk Factors.			4636

Item 6. Exhibits.			4737

Signatures			4938

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)			87

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(unaudited)


		As of					As of
Assets	Assets	September 30, 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	$	352,249	$	150,902	Cash and cash equivalents	$	303,887	$	449,135
Trade accounts receivable, net of allowance for expected credit losses of $26,220 and $25,443 in 2020 and 2019, respectively		2,492,248		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	229,275		98,029		Other accounts receivable	234,898		239,199
Inventories	Inventories	2,357,634		1,011,674		Inventories	2,290,453		2,163,831
Prepaid expenses and other current assets	Prepaid expenses and other current assets	166,044		92,447		Prepaid expenses and other current assets	171,099		187,910
Total current assets	Total current assets	5,597,450		2,540,411		Total current assets	5,575,140		5,506,978
Property, buildings and equipment, net of accumulated depreciation of $294,638 and $268,415 in 2020 and 2019, respectively		400,222		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	540,142		235,834		Operating lease assets	519,311		534,705
Intangible assets, net (Note 5)		2,078,468		287,275
Intangible assets, net						Intangible assets, net	2,045,992		2,065,495
Goodwill	Goodwill	3,118,818		1,759,040		Goodwill	3,199,494		3,187,169
Other assets	Other assets	133,239		13,627		Other assets	147,093		131,637
Assets held for sale						Assets held for sale	0		55,073
Total assets	Total assets	$	11,868,339	$	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	$	1,830,877	$	830,478	Accounts payable	$	1,955,365	$	1,707,329
Accrued payroll and benefit costs	Accrued payroll and benefit costs	146,670		49,508		Accrued payroll and benefit costs	157,498		198,535
Short-term debt and current portion of long-term debt		28,844		26,685
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	534,544		177,388		Other current liabilities	592,346		552,301
Total current liabilities	Total current liabilities	2,540,935		1,084,059		Total current liabilities	2,726,011		2,986,995
Long-term debt, net of debt discount and debt issuance costs of $92,343 and $8,876 in 2020 and 2019, respectively		4,878,124		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	419,718		179,830		Operating lease liabilities	399,758		414,889
Deferred income taxes	Deferred income taxes	523,958		146,617		Deferred income taxes	474,274		488,261
Other noncurrent liabilities	Other noncurrent liabilities	292,380		91,391		Other noncurrent liabilities	285,790		278,010
Liabilities held for sale						Liabilities held for sale	0		5,717
Total liabilities	Total liabilities	$	8,655,115	$	2,758,964	Total liabilities	$	8,478,567	$	8,543,825
Commitments and contingencies (Note 12)
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	0		0		Preferred stock, $.01 par value; 20,000,000 shares authorized, 0 shares issued or outstanding	0		0
Preferred stock, Series A, $.01 par value; 25,000 shares authorized, 21,612 shares issued and outstanding in 2020 (Note 9)		0		0
Common stock, $.01 par value; 210,000,000 shares authorized, 67,562,621 and 59,308,018 shares issued and 50,042,751 and 41,797,093 shares outstanding in 2020 and 2019, respectively		676		593
Class B nonvoting convertible common stock, $.01 par value; 20,000,000 shares authorized, 4,339,431 issued and 0 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	1,939,101		1,039,347		Additional capital	1,946,517		1,942,810
Retained earnings	Retained earnings	2,596,022		2,530,429		Retained earnings	2,645,871		2,601,662
Treasury stock, at cost; 21,859,301 and 21,850,356 shares in 2020 and 2019, respectively		(937,520)		(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	(377,461)		(367,772)		Accumulated other comprehensive loss	(246,293)		(263,134)
Total WESCO International, Inc. stockholders' equity	Total WESCO International, Inc. stockholders' equity	3,220,861		2,265,483		Total WESCO International, Inc. stockholders' equity	3,407,060		3,343,722
Noncontrolling interests	Noncontrolling interests	(7,637)		(6,812)		Noncontrolling interests	(7,357)		(7,333)
Total stockholders’ equity	Total stockholders’ equity	3,213,224		2,258,671		Total stockholders’ equity	3,399,703		3,336,389
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	11,868,339	$	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				Nine Months Ended					Three Months Ended
		September 30				September 30					March 31
		2020		2019		2020		2019			2021		2020
Net sales (Note 3)		$	4,141,801	$	2,148,110	$	8,197,154	$	6,259,465
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)	3,356,259		1,747,913		6,641,438		5,067,799		Cost of goods sold (excluding depreciation and amortization)	3,230,441		1,592,249
Selling, general and administrative expenses	Selling, general and administrative expenses	561,971		290,852		1,221,114		883,222		Selling, general and administrative expenses	636,576		299,392
Depreciation and amortization	Depreciation and amortization	45,476		15,612		80,324		46,035		Depreciation and amortization	41,209		16,093
Income from operations	Income from operations	178,095		93,733		254,278		262,409		Income from operations	133,251		60,913
Interest expense, net	Interest expense, net	74,540		14,306		152,281		49,293		Interest expense, net	70,373		16,592
Other, net	Other, net	(777)		(798)		(1,463)		(1,359)		Other, net	(2,807)		(120)
Income before income taxes	Income before income taxes	104,332		80,225		103,460		214,475		Income before income taxes	65,685		44,441
Income tax expense		24,294		15,886		23,707		44,970
Provision for income taxes										Provision for income taxes	6,531		10,266
Net income	Net income	80,038		64,339		79,753		169,505		Net income	59,154		34,175
Less: Net loss attributable to noncontrolling interests	Less: Net loss attributable to noncontrolling interests	(640)		(156)		(825)		(824)		Less: Net loss attributable to noncontrolling interests	(24)		(232)
Net income attributable to WESCO International, Inc.	Net income attributable to WESCO International, Inc.	80,678		64,495		80,578		170,329		Net income attributable to WESCO International, Inc.	59,178		34,407
Less: Preferred stock dividends	Less: Preferred stock dividends	14,511		0		15,787		0		Less: Preferred stock dividends	14,352		0
Net income attributable to common stockholders	Net income attributable to common stockholders	$	66,167	$	64,495	$	64,791	$	170,329	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	41,428		(16,856)		(9,689)		25,905		Foreign currency translation adjustments	16,841		(93,851)
Comprehensive income attributable to common stockholders		$	107,595	$	47,639	$	55,102	$	196,234
Comprehensive income (loss) attributable to common stockholders										Comprehensive income (loss) attributable to common stockholders	$	61,667	$	(59,444)

Earnings per share attributable to common stockholders	Earnings per share attributable to common stockholders									Earnings per share attributable to common stockholders
Basic	Basic	$	1.32	$	1.53	$	1.44	$	3.91	Basic	$	0.89	$	0.82
Diluted	Diluted	$	1.31	$	1.52	$	1.44	$	3.88	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)

Nine Months Ended
September 30
2020 2019
Operating activities:
Net income $ 79,753 $ 169,505
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 80,324 46,035
Deferred income taxes (8,261) 4,621
Other operating activities, net (1,763) 10,876
Changes in assets and liabilities:
Trade accounts receivable, net 3,584 (122,903)
Other accounts receivable (14,702) 15,450
Inventories 77,681 (1,500)
Prepaid expenses and other assets (26,655) (20,720)
Accounts payable 80,489 46,902
Accrued payroll and benefit costs 25,872 (36,055)
Other current and noncurrent liabilities 122,616 4,453
Net cash provided by operating activities 418,938 116,664
Investing activities:
Capital expenditures (42,562) (30,323)
Acquisition payments, net of cash acquired (Note 4) (3,707,575) (27,742)
Other investing activities 26,240 4,575
Net cash used in investing activities (3,723,897) (53,490)
Financing activities:
Repayments of short-term debt, net (9,824) (29,600)
Proceeds from issuance of long-term debt 4,661,830 1,105,397
Repayments of long-term debt (1,045,667) (927,410)
Repurchases of common stock (Note 7) (2,032) (152,735)
Debt issuance costs (79,945) (2,508)
Payment of dividends (15,787) 0
Other financing activities, net (1,255) (11,226)
Net cash provided by (used in) financing activities 3,507,320 (18,082)
Effect of exchange rate changes on cash and cash equivalents (1,014) (3,275)
Net change in cash and cash equivalents 201,347 41,817
Cash and cash equivalents at the beginning of period 150,902 96,343
Cash and cash equivalents at the end of period $ 352,249 $ 138,160
Supplemental disclosures:
Cash paid for interest $ 36,035 $ 38,347
Cash paid for income taxes $ 44,994 $ 54,044
Right-of-use assets obtained in exchange for new operating lease liabilities $ 80,626 $ 48,622


	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			Series A					Retained										Comprehensive									Class B					Series A									Retained										Comprehensive
		Common Stock			Common Stock			Preferred Stock			Additional		Earnings		Treasury Stock				Noncontrolling				Income				Common Stock					Common Stock					Preferred Stock						Additional			Earnings		Treasury Stock							Noncontrolling	Income
		Amount		Shares	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	$	0	0	$	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	0		(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
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)
Exercise of stock-based awards		0		30,665							0				(437)		(10,858)
Stock-based compensation expense											4,901
Tax withholding related to vesting of restricted stock units and retirement of common stock		0		(652)							(37)		27
Capital stock issuance		82		8,150,228				0		21,612	886,740
Noncontrolling interests																			47
Net loss attributable to WESCO													(34,506)
Preferred stock dividends	Preferred stock dividends												(1,276)												Preferred stock dividends																					(14,352)
Translation adjustments	Translation adjustments																			42,734	Translation adjustments																																16,841
Balance, June 30, 2020		$	676	67,562,199	$	43	4,339,431	$	0	21,612	$	1,933,241	$	2,529,842	$	(937,515)	(21,859,194)		$	(6,997)			$	(418,889)
Exercise of stock-based awards		0		479							0				(5)		(107)
Stock-based compensation expense											6,002
Tax withholding related to vesting of restricted stock units and retirement of common stock		0		(57)							(3)		13
Capital stock issuance											(139)
Noncontrolling interests																			(640)
Net income attributable to WESCO													80,678
Preferred stock dividends													(14,511)
Translation adjustments																				41,428
Balance, September 30, 2020		$	676	67,562,621	$	43	4,339,431	$	0	21,612	$	1,939,101	$	2,596,022	$	(937,520)	(21,859,301)		$	(7,637)			$	(377,461)
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			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~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

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

~~(unaudited)~~

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, 2018 $ 592 59,157,696 $ 43 4,339,431 $ 0 0 $ 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 0 (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 $ 0 0 $ 1,015,563 $ 2,349,300 $ (777,216) (18,756,498) $ (6,003) $ (385,918)
Exercise of stock-based awards 0 20,831 6 (157) (3,029)
Stock-based compensation expense 5,150
Repurchases of common stock (22,500) (127,500) (2,394,816)
Tax withholding related to vesting of restricted stock units and retirement of common stock 0 (19) (1) 4
Noncontrolling interests (249)
Net income attributable to WESCO 63,464
Translation adjustments 20,244
Balance, June 30, 2019 $ 593 59,292,704 $ 43 4,339,431 $ 0 0 $ 998,218 $ 2,412,768 $ (904,873) (21,154,343) $ (6,252) $ (365,674)
Exercise of stock-based awards 0 1,983 0 (5) (94)
Stock-based compensation expense 4,426
Repurchases of common stock 32,257 (32,257) (695,496)
Tax withholding related to vesting of restricted stock units and retirement of common stock 0 (190) (13) (4)
Noncontrolling interests (156)
Net income attributable to WESCO 64,495
Translation adjustments (16,856)
Balance, September 30, 2019 $ 593 59,294,497 $ 43 4,339,431 $ 0 0 $ 1,034,888 $ 2,477,259 $ (937,135) (21,849,933) $ (6,408) $ (382,530)

~~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 leading provider of business-to-business distribution, logistics services and supply chain solutions.

~~On June 22, 2020, WESCO completed its previously announced acquisition~~The Company has operating segments that are organized around three strategic business units consisting of ~~Anixter International Inc., a Delaware corporation (“Anixter”). Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020 (the “Merger Agreement”~~Electrical & Electronic Solutions ("EES"), byCommunications & Security Solutions ("CSS") and ~~among Anixter, WESCO and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of WESCO (“Merger Sub”~~Utility & Broadband Solutions ("UBS")~~, Merger Sub was merged with and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a wholly owned subsidiary of WESCO.~~.

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 ~~September 30, 2020,~~March 31, 2021, the unaudited Condensed Consolidated Statements of Income and Comprehensive Income (Loss), the unaudited Condensed Consolidated Statements of Cash Flows, and the unaudited Condensed Consolidated Statements of Stockholders' Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, and the unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019,~~ 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.

InPrior 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, ~~in connection with the acquisition of Anixter,~~ the Company identified new operating ~~segments. These operating~~ segments ~~which have been~~ organized around three strategic business units ~~consist~~consisting of ~~Electrical & Electronic Solutions~~EES, CSS and UBS. These operating segments are equivalent to the Company's reportable segments. The operating segments in the respective periods were determined in accordance with the manner in which WESCO's chief operating decision maker ("~~EES"), Communications & Security Solutions ("CSS"~~CODM") ~~and Utility & Broadband Solutions ("UBS").~~reviewed financial information during those periods. The financial information used by the CODM to evaluate the performance of the Company's operating segments ~~which are equivalent to its reportable segments, are described further~~is disclosed in Note ~~14.~~13, "Business Segments". The applicable comparative financial information reported in the Company's previously issued interim financial statements for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 has been recast in this Quarterly Report on Form 10-Q to conform to the basis of the new segments.

Reclassifications

~~The Condensed Consolidated Balance Sheet as~~For the three months ended March 31, 2020, $0.1 million of ~~December 31, 2019,~~other non-operating income has been reclassified from net interest and other to other, net in the unaudited Condensed Consolidated ~~Statements~~Statement of Income and Comprehensive ~~Income for the three~~Loss, and ~~nine months ended September 30, 2019, 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 for the nine months ended September 30, 2019, respectively, include certain~~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~~

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

~~in the first quarter of 2020. The adoption of this guidance did not have a material impact on the unaudited condensed consolidated financial statements and notes thereto presented herein.~~

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~, which aligned the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard was effective for fiscal years beginning after December 15, 2019. The Company adopted this ASU in the first quarter of 2020. The adoption of this guidance did not have a material 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.

~~In December 2019, the FASB issued 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 ~~Electrical & Electronic Solutions, Communications & Security Solutions,~~EES, CSS and ~~Utility & Broadband Solutions~~UBS operate in the United States, Canada and various other ~~foreign~~international countries. ~~Revenue is measured as the amount of consideration WESCO expects to receive in exchange for transferring goods or providing services.~~

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

Three Months Ended Nine Months Ended
September 30 September 30
(In thousands) 2020 2019 2020 2019
Electrical & Electronic Solutions $ 1,653,726 $ 1,250,080 $ 3,811,498 $ 3,626,423
Communications & Security Solutions 1,388,791 235,920 1,953,967 681,087
Utility & Broadband Solutions 1,099,284 662,110 2,431,689 1,951,955
Total by segment $ 4,141,801 $ 2,148,110 $ 8,197,154 $ 6,259,465


	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

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

Three Months Ended Nine Months Ended
September 30 September 30
(In thousands) 2020 2019 2020 2019
United States $ 3,033,101 $ 1,601,962 $ 6,100,877 $ 4,679,251
Canada 582,700 431,233 1,311,724 1,230,855
Other International 526,000 114,915 784,553 349,359
Total by geography(1)
$ 4,141,801 $ 2,148,110 $ 8,197,154 $ 6,259,465


	Three Months Ended
	March 31
(In thousands)	2021		2020
United States	$	2,930,435	$	1,478,491
Canada	607,753		377,419
Other International(1)	503,289		112,737
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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, $27.7~~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 ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ by approximately ~~$75.4~~$105.4 million and ~~$26.3~~$23.3 million, ~~respectively,~~respectively. As of March 31, 2021 and ~~by approximately $129.0~~December 31, 2020, the Company's estimated product return obligation was $36.6 million and ~~$80.1~~$38.9 million, ~~for the nine months ended September 30, 2020 and 2019,~~ respectively.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

Shipping and handling activities are recognized in net sales when they are billed to the customer. ~~The related costs are recognized as a component of selling, general and administrative expenses.~~ WESCO has elected to recognize shipping and handling costs as a fulfillment cost. Shipping and handling costs recorded as a component of selling, general and administrative expenses totaled ~~$55.5~~$53.3 million and ~~$17.6~~$18.0 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $94.4 million and $52.8 million for the nine months ended September 30, 2020 and 2019,~~ respectively.

4. ACQUISITIONS AND DISPOSALS

Anixter International Inc.

~~As described in Note 1, on~~On June 22, 2020, WESCO completed its ~~previously announced merger~~acquisition of Anixter, a Delaware corporation. Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020 (the “Merger Agreement”), by and among Anixter, WESCO and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of WESCO (“Merger Sub”), Merger Sub was merged with ~~Anixter.~~ and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a wholly owned subsidiary of WESCO. On June 23, 2020, Anixter merged with and into Anixter Inc., with Anixter Inc. surviving to become a wholly owned subsidiary of WESCO.

The Company used the net proceeds from the issuance of senior unsecured notes, borrowings under its revolving credit ~~facility~~ and accounts receivable securitization ~~facility (as described further in Note 8),~~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 common stock of Anixter (subject to limited exceptions) was converted into the right to receive (i) $72.82 in cash, (ii) 0.2397 shares of common stock of WESCO, par value $0.01 per share (the “WESCO Common Stock”) and (iii) 0.6356 depositary shares, each representing a 1/1,000th interest in a share of newly issued fixed-rate reset cumulative perpetual preferred stock of WESCO, Series A, with a $25,000 stated amount per whole preferred share and an initial dividend rate equal to 10.625%.

Anixter 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.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

The total preliminary estimated fair value of consideration transferred for the Merger consisted of the 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)The extinguishment of Anixter obligations includes a termination fee of $100.0 million that WESCO paid to entities affiliated with Clayton, Dubilier & Rice, LLC ("CD&R"), on behalf of Anixter, during the three months ended March 31, 2020. Such fee was required to terminate Anixter's then-existing merger agreement with CD&R.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

The Merger was accounted for as a business combination with WESCO acquiring Anixter in 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 their respective acquisition date fair value, with any excess allocated to goodwill. The fair value estimates were based on income, market and cost valuation methods using primarily unobservable inputs developed by management, which are categorized within Level 3 of the fair value hierarchy. Specifically, the fair values of the identified trademark and customer relationship intangible assets were estimated using the relief-from-royalty and multi-period excess earnings methods, respectively. Significant inputs used to value ~~the~~these identifiable intangible assets included projected revenues ~~estimated future cash flows,~~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 deductible for income tax purposes, and has been assigned to the Company's reportable segments based on their relative fair values, as disclosed in Note 5.5, "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.

InSince the ~~third quarter~~initial measurement of ~~2020,~~the 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 ~~and~~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 ~~$5.4~~$30.9 million and ~~$7.3 million, respectively.~~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 ~~the~~these adjustments ~~made in the third quarter of 2020~~ was ~~a decrease~~an increase to goodwill of ~~$7.6~~$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.

1110

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	~~1,309,104~~1,300,710
Other accounts receivable	116,386
Inventories	~~1,424,678~~1,416,296
Prepaid expenses and other current assets	~~53,462~~54,978
Property, buildings and equipment	~~213,020~~211,721
Operating lease assets	~~262,413~~280,285
Intangible assets	1,838,065
Goodwill	~~1,360,373~~1,370,984
Other assets	~~112,386~~141,901
Total assets	$	~~6,793,350~~6,834,789

Liabilities
Accounts payable	$	~~920,163~~912,974
Accrued payroll and benefit costs	69,480
Short-term debt and current portion of long-term debt	13,225
Other current liabilities	~~222,615~~225,516
Long-term debt	~~77,822~~77,617
Operating lease liabilities	~~199,959~~217,303
Deferred income taxes	~~384,890~~373,478
Other noncurrent liabilities	~~206,860~~246,860
Total liabilities	$	~~2,095,014~~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	Identifiable Intangible Assets	Estimated Fair Value		Weighted-Average Estimated Useful Life in Years	Identifiable Intangible Assets	Estimated Fair Value		Weighted-Average Estimated Useful Life in Years(1)
		(In thousands)				(In thousands)
Customer relationships	Customer relationships	$	1,098,900	16	Customer relationships	$	1,098,900	19
Trademarks	Trademarks	735,000		Indefinite	Trademarks	735,000		Indefinite
Non-compete agreements	Non-compete agreements	4,165		1	Non-compete agreements	4,165		2
Total identifiable intangible assets	Total identifiable intangible assets	$	1,838,065		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.

1211

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 ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, the condensed consolidated ~~statements~~statement of income ~~include $2.2 billion and $2.4~~includes $2.1 billion of net sales, ~~respectively,~~ and ~~$80.0 million and $98.4~~$105.4 million of income from operations for ~~Anixter, respectively. Transaction costs~~Anixter. Costs related to the merger ~~were~~are primarily comprised of advisory, restructuring, legal ~~advisory~~ and other costs of ~~$14.5~~$46.3 million and ~~$92.1~~$4.6 million, which are included in selling, general and administrative expenses for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, respectively.

Pro Forma Financial Information

The following unaudited pro forma financial information presents combined results of operations for the ~~periods~~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, ~~change in control and severance costs,~~ dividends accrued on the Series A preferred stock, compensation expense associated with the WESCO phantom stock unit awards described in Note ~~10,~~9, "Employee Benefit Plans", as well as the respective income tax effects of such adjustments. For the three months ended ~~September 30,~~March 31, 2020, ~~and 2019,~~ adjustments totaling ~~$1.5~~$50.2 million and $57.4 million, respectively, decreased the unaudited pro forma net income attributable to common stockholders. For the nine months ended September 30, 2020 and 2019, adjustments totaling $0.4 million and $167.8 million, respectively, 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 or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements. The unaudited pro forma financial information presented below is not necessarily indicative of consolidated results of operations of the combined business had the acquisition occurred at the beginning of the respective ~~fiscal years,~~period, nor is it necessarily indicative of future results of operations of the combined company.

Three Months Ended Nine Months Ended
(In thousands) September 30,
2020 September 30,
2019 September 30,
2020 September 30,
2019
Pro forma net sales $ 4,111,716 $ 4,332,980 $ 11,802,538 $ 12,758,461
Pro forma net income attributable to common stockholders 63,844 66,416 106,858 164,424


	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 iswas required to divest ~~its~~certain legacy ~~Utility~~WESCO utility and ~~Datacom~~data communications businesses in ~~Canada, which had total sales of less than $150 million in 2019. The process to divest~~Canada. In February 2021, the ~~businesses has commenced, and WESCO is working to complete the~~Company completed such divestitures ~~on a timely basis.~~for cash consideration totaling $54.1 million. The Company ~~expects to use the~~recognized a net ~~proceeds~~gain from the ~~divestiture to repay indebtedness.~~

~~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~~sale of ~~Sylvania Lighting Services Corp. ("SLS"). SLS offers a full spectrum~~these businesses of energy-efficient lighting upgrade, retrofit, and renovation solutions with annual sales of approximately $100 million and approximately 220 employees across the U.S. and Canada. WESCO Distribution funded the purchase price paid at closing with borrowings under its then outstanding accounts receivable securitization facility. The purchase price was allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date, resulting in goodwill of $11.6$8.9 million, which is ~~deductible~~reported as a component of selling, general and administrative expenses for ~~tax purposes.~~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 ~~consideration paid~~changes in the carrying value of goodwill:


	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) The beginning balance excludes $26.1 million of goodwill that was classified as held for sale on the UBS segment as of December 31, 2020 and disposed in the first quarter of 2021 as part of the 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, "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 original cost and related accumulated amortization of fully-amortized intangible assets.

(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 2021 as part of the divestitures disclosed in Note 4, "Acquisitions and Disposals".

Amortization expense related to intangible assets totaled $21.6 million and $8.5 million for the ~~acquisition of SLS:~~


	~~Nine Months Ended~~
	~~September 30~~
	~~2019~~
	~~(In thousands)~~
~~Fair value of assets acquired~~	$	~~34,812~~
~~Fair value of liabilities assumed~~	~~7,070~~
~~Cash paid for acquisition~~	$	~~27,742~~

three months ended March 31, 2021 and 2020, respectively.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

~~5. GOODWILL AND INTANGIBLE ASSETS~~

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

Nine Months Ended
September 30
2020
EES CSS UBS Total
(In thousands)
Beginning balance January 1 $ 573,447 $ 235,711 $ 949,882 $ 1,759,040
Adjustments to goodwill for acquisitions
(Note 4)(1) (2)
245,624 858,022 262,544 1,366,190
Foreign currency exchange rate changes (9,137) 323 2,402 (6,412)
Ending balance September 30 $ 809,934 $ 1,094,056 $ 1,214,828 $ 3,118,818

~~(1)~~ ~~Adjustments to goodwill include the final allocation of the purchase price paid for SLS, as described in Note 4, to the respective assets acquired and liabilities assumed.~~

~~(2)~~ ~~The effect of the merger with Anixter on the Company's determination of reportable segments is disclosed in Note 14.~~

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 the Company's share price and market capitalization, both of which indicated that the carrying value of goodwill and indefinite-lived intangible assets may not be recoverable. Accordingly, the Company performed an interim test for impairment as of March 31, 2020. There were no impairment losses identified as a result of this interim test.

As disclosed in Note 1, the Company identified new operating segments during the third quarter of 2020, which changed the composition of its reporting units. Accordingly, the Company reassigned goodwill to the new reporting units using a relative fair value allocation approach. The Company performed a goodwill impairment test immediately before and after it reorganized its reporting structure. Goodwill was tested for 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 the Company's reporting units were determined using a combination of a discounted cash flow analysis and market multiples. In performing the quantitative assessments, management used expected operating margins supported by a combination of historical results, current forecasts, market data and recent economic events, which are categorized within Level 3 of the fair value hierarchy. The Company used a discount rate that reflects market participants' cost of capital. There were no impairment losses identified as a result of these tests.

Although all of the Company's reporting units have fair values that currently exceed the respective carrying values, the EES reporting unit with goodwill of $809.9 million had an estimated fair value that exceeded its respective carrying value by less than 10%. The determination of fair value of the reporting units involves significant management judgment, particularly as it relates to the underlying assumptions and factors around expected operating margins and discount rate.

Due to the ongoing uncertainty surrounding the current macroeconomic environment and conditions in the markets in which WESCO operates, as well as the risk that the Company may not fully realize cost savings, operating synergies or revenue improvement as a result of its acquisition of Anixter, there can be no assurance that the fair values of the Company's reporting units will exceed their carrying values in the future, and that goodwill and indefinite-lived intangible assets will be fully recoverable.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

~~The components of intangible assets are as follows:~~

September 30, 2020 December 31, 2019
(In thousands)
Gross Carrying Amount (1)
Accumulated Amortization (1)
Net Carrying Amount
Gross Carrying Amount (1)
Accumulated Amortization (1)
Net Carrying Amount
Intangible assets: Life
Trademarks Indefinite $ 832,525 $ — $ 832,525 $ 98,699 $ — $ 98,699
Trademarks 10 - 15 24,894 (10,961) 13,933 24,800 (9,319) 15,481
Non-compete agreements 2 - 5 4,342 (694) 3,648 196 (180) 16
Customer relationships 10 - 20 1,455,003 (237,896) 1,217,107 358,341 (201,962) 156,379
Distribution agreements 10 - 19 37,281 (27,031) 10,250 37,371 (25,294) 12,077
Patents 10 48,310 (47,305) 1,005 48,310 (43,687) 4,623
$ 2,402,355 $ (323,887) $ 2,078,468 $ 567,717 $ (280,442) $ 287,275

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

Amortization expense related to intangible assets totaled $27.3 million and $8.6 million for the three months ended September 30, 2020 and 2019, respectively, and $45.9 million and $25.7 million for the nine months ended September 30, 2020 and 2019, respectively.

The following table sets forth the remaining estimated amortization expense for intangible assets for the next five years and thereafter:


For year ending December 31,	For year ending December 31,	(In thousands)		For year ending December 31,	(In thousands)
2020		$	26,960
2021	2021	100,459		2021	$	65,703
2022	2022	96,608		2022	84,318
2023	2023	95,288		2023	83,410
2024	2024	91,870		2024	80,767
2025				2025	77,501
Thereafter	Thereafter	834,758		Thereafter	819,867

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. ~~Except for the special award described below, 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 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.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

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 ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ 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				Nine Months Ended					Three Months Ended
		September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019			March 31, 2021		March 31, 2020
Stock-settled stock appreciation rights granted	Stock-settled stock appreciation rights granted	0		0		262,091		213,618		Stock-settled stock appreciation rights granted	136,194		262,091
Weighted-average fair value	Weighted-average fair value	$	0	$	0	$	13.86	$	16.36	Weighted-average fair value	$	33.05	$	13.86

Restricted stock units granted	Restricted stock units granted	444,375		6,256		655,825		181,800		Restricted stock units granted	300,722		211,450
Weighted-average fair value	Weighted-average fair value	$	32.18	$	47.95	$	37.38	$	54.41	Weighted-average fair value	$	76.89	$	48.32

Performance-based awards granted	Performance-based awards granted	0		0		158,756		126,874		Performance-based awards granted	119,792		158,756
Weighted-average fair value	Weighted-average fair value	$	0	$	0	$	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 Nine Months Ended
September 30,
2020 September 30,
2019 September 30,
2020 September 30,
2019
Risk free interest rate n/a n/a 1.4 % 2.5 %
Expected life (in years) n/a n/a 5 5
Expected volatility n/a n/a 30 % 29 %


	Three Months Ended
	March 31, 2021		March 31, 2020
Risk free interest rate	0.8	%	1.4	%
Expected life (in years)	7		5
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 ~~nine~~three months ended ~~September 30, 2020:~~March 31, 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	(182,487)	33.57					Exercised	(186,055)	60.92
Forfeited	Forfeited	(39,112)	65.57					Forfeited	(12,719)	52.57
Outstanding at September 30, 2020		2,377,541	60.37		5.7	$	679
Exercisable at September 30, 2020		1,844,929	$	62.32	5.0	$	679
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

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


	Awards	Weighted- Average Fair Value
Unvested at December 31, 2020	921,495	$	43.15
Granted	300,722	76.89
Vested	(90,178)	60.66
Forfeited	(16,129)	54.57
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, 2021:


	Awards	Weighted- Average Fair Value
Unvested at December 31, 2020	305,269	$	52.61
Granted	119,792	76.50
Vested	(22,371)	62.80
Forfeited	(27,802)	59.87
Unvested at March 31, 2021	374,888	$	59.13

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 nine months ended September 30, 2020:~~

Awards Weighted-
Average
Fair
Value
Unvested at December 31, 2019 363,729 $ 60.00
     Granted 655,825 37.38
     Vested (80,486) 69.68
     Forfeited (8,364) 60.03
Unvested at September 30, 2020 930,704 $ 43.23

~~The following table sets forth a summary of performance-based awards for the nine months ended September 30, 2020:~~

Awards Weighted-
Average
Fair
Value
Unvested at December 31, 2019 195,305 $ 60.24
     Granted 158,756 48.67
     Vested (25,909) 78.04
     Forfeited (20,538) 71.47
Unvested at September 30, 2020 307,614 $ 52.60

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 $6.0 million and ~~$4.4~~$4.6 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the three months ended ~~September 30,~~March 31, 2021 and 2020, and 2019, respectively. WESCO recognized $15.5 million and $14.2 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the nine months ended September 30, 2020 and 2019, respectively. As of ~~September 30, 2020,~~March 31, 2021, there was ~~$39.8~~$62.3 million of total unrecognized compensation ~~cost~~expense related to non-vested stock-based compensation arrangements for all awards previously made of which ~~$6.0~~approximately $22.1 million is expected to be recognized over the remainder of ~~2020, $17.8 million in~~ 2021, ~~$12.4~~$23.8 million in 2022, ~~and $3.6~~$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 common stockholders by the weighted-average number of common shares outstanding during the periods. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average common shares and common share equivalents outstanding during the periods. The dilutive effect of common share equivalents is considered in the diluted earnings per share computation using the treasury stock method, which includes consideration of equity awards.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

The following table sets forth the details of basic and diluted earnings per share:


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30				September 30					March 31
(In thousands, except per share data)	(In thousands, except per share data)	2020		2019		2020		2019		(In thousands, except per share data)	2021		2020
Net income attributable to WESCO International		$	80,678	$	64,495	$	80,578	$	170,329
Net income attributable to WESCO International, Inc.										Net income attributable to WESCO International, Inc.	$	59,178	$	34,407
Less: Preferred stock dividends	Less: Preferred stock dividends	14,511		0		15,787		0		Less: Preferred stock dividends	14,352		0
Net income attributable to common stockholders	Net income attributable to common stockholders	$	66,167	$	64,495	$	64,791	$	170,329	Net income attributable to common stockholders	$	44,826	$	34,407
Weighted-average common shares outstanding used in computing basic earnings per share	Weighted-average common shares outstanding used in computing basic earnings per share	50,043		42,100		44,873		43,545		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	Common shares issuable upon exercise of dilutive equity awards	444		278		231		355		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	Weighted-average common shares outstanding and common share equivalents used in computing diluted earnings per share	50,487		42,378		45,104		43,900		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	Earnings per share attributable to common stockholders									Earnings per share attributable to common stockholders
Basic	Basic	$	1.32	$	1.53	$	1.44	$	3.91	Basic	$	0.89	$	0.82
Diluted	Diluted	$	1.31	$	1.52	$	1.44	$	3.88	Diluted	$	0.87	$	0.82

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 , the computation of diluted earnings per share attributable to common stockholders excluded stock-based awards of approximately ~~2.0~~0.3 million and ~~3.0~~2.3 million, respectively. ~~For the three and nine months ended September 30, 2019, the computation of diluted earnings per share attributable to common stockholders excluded stock-based awards of approximately 1.8 million.~~ These amounts were excluded because their effect would have been antidilutive.

In December 2017, the Company's Board of Directors authorized the repurchase of up to $300 million of the Company's common stock through December 31, 2020. In October 2018, the Board approved an increase to this repurchase authorization from $300 million to $400 million. For the three months ended September 30, 2019, the Company received 695,496 shares from an accelerated stock repurchase transaction entered into on May 7, 2019. For the nine months ended September 30, 2019, the Company received a total of 3,455,584 shares, of which 365,272 were received upon the settlement of an accelerated stock repurchase agreement entered into on November 6, 2018.

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 and nine months ended September 30, 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)

8. DEBT

The following table sets forth WESCO's outstanding indebtedness:


		As of					As of
		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands)					(In thousands)
International lines of credit	International lines of credit	$	29,787	$	26,255	International lines of credit	$	20,293	$	29,575
Accounts Receivable Securitization Facility	Accounts Receivable Securitization Facility	890,000		415,000		Accounts Receivable Securitization Facility	945,000		950,000
Revolving Credit Facility	Revolving Credit Facility	325,000		0		Revolving Credit Facility	475,000		250,000
5.375% Senior Notes due 2021	5.375% Senior Notes due 2021	500,000		500,000		5.375% Senior Notes due 2021	0		500,000
5.50% Senior Notes due 2023		58,636		0
5.50% Anixter Senior Notes due 2023						5.50% Anixter Senior Notes due 2023	58,636		58,636
5.375% Senior Notes due 2024	5.375% Senior Notes due 2024	350,000		350,000		5.375% Senior Notes due 2024	350,000		350,000
6.00% Senior Notes due 2025		4,173		0
6.00% Anixter Senior Notes due 2025						6.00% Anixter Senior Notes due 2025	4,173		4,173
7.125% Senior Notes due 2025	7.125% Senior Notes due 2025	1,500,000		0		7.125% Senior Notes due 2025	1,500,000		1,500,000
7.250% Senior Notes due 2028, less debt discount of $9,643		1,315,357		0
7.250% Senior Notes due 2028, less debt discount of $9,021 and $9,332 in 2021 and 2020, respectively						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	Finance lease obligations	14,891		1,373		Finance lease obligations	17,582		17,931
Total debt	Total debt	4,987,844		1,292,628		Total debt	4,686,663		4,975,983
Plus: Fair value adjustment to the Anixter Senior Notes	Plus: Fair value adjustment to the Anixter Senior Notes	1,824		0		Plus: Fair value adjustment to the Anixter Senior Notes	1,479		1,650
Less: Unamortized debt issuance costs	Less: Unamortized debt issuance costs	(82,700)		(8,876)		Less: Unamortized debt issuance costs	(74,606)		(78,850)
Less: Short-term debt and current portion of long-term debt	Less: Short-term debt and current portion of long-term debt	(28,844)		(26,685)		Less: Short-term debt and current portion of long-term debt	(20,802)		(528,830)
Total long-term debt	Total long-term debt	$	4,878,124	$	1,257,067	Total long-term debt	$	4,592,734	$	4,369,953

~~Amended and Restated Accounts Receivable Securitization Facility~~5.375% Senior Notes due 2021

~~On June 22, 2020,~~In November 2013, WESCO Distribution issued $500 million aggregate principal amount of 5.375% Senior Notes due 2021 (the "2021 Notes") through a private offering exempt from the registration requirements of the Securities Act of 1933, as amended ~~its accounts receivable securitization facility~~ (the ~~“Receivables Facility”~~“Securities Act”). The 2021 Notes were issued at 100% of par and were governed by an indenture (the “2021 Indenture”) ~~pursuant to the terms~~entered into on November 26, 2013 between WESCO International and conditions of a Fifth Amended and Restated Receivables Purchase Agreement (the “Receivables Purchase Agreement”), by and among WESCO Receivables Corp. (“WESCO Receivables”), WESCO Distribution, the various purchaser groups from time to time party thereto and PNCU.S. Bank National Association, as ~~Administrator.~~trustee. The ~~Receivables Purchase Agreement amends~~2021 Notes were unsecured senior obligations of WESCO Distribution and ~~restates the amended~~were guaranteed on a senior unsecured basis by WESCO International. The 2021 Notes had a stated interest rate of 5.375% per annum, payable semi-annually in arrears on June 15 and ~~restated receivables purchase agreement entered into on September 24, 2015 (the “Existing Receivables Purchase Agreement”).~~

December 15 of each year. The Receivables Purchase Agreement, among other things, increased the purchase limit under the Existing Receivables Purchase Agreement from $600 million to $1,025 million, with the opportunity to exercise an accordion feature that permits increases2021 Notes had a maturity date of December 15, 2021 and were redeemable in ~~the purchase limit of up to $375 million, extended the term~~whole or in part at any time. The net proceeds of the ~~Receivables Facility~~2021 Notes were used to ~~June 22, 2023 and added and amended certain defined terms. Borrowings under the Receivables Facility bear interest at the 30-day LIBOR rate, with~~prepay a ~~LIBOR floor of 0.5%, plus applicable spreads, The interest rate spread~~portion of the ~~Receivables Facility increased from 0.95% to 1.20%. The commitment fee remained unchanged at 0.45%.~~U.S. sub-facility of the then outstanding term loan due 2019.

Under the ~~Receivables Facility,~~terms of a registration rights agreement dated as of November 26, 2013 among WESCO ~~sells, on a continuous basis, an undivided interest in all domestic accounts receivable to~~Distribution, WESCO ~~Receivables, a wholly owned special purpose entity (the “SPE”). The SPE sells, without recourse, a senior undivided interest in~~International and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the ~~receivables to financial institutions for cash while maintaining a subordinated undivided interest in the receivables, in the form of overcollateralization. Since WESCO maintains control~~representative of the ~~transferred receivables,~~initial purchasers of the transfers do not qualify for “sale” treatment. As a result, the transferred receivables remain on the balance sheet, and WESCO recognizes the related secured borrowing. WESCO has agreed to continue servicing the sold receivables for the third-party conduits and financial institutions at market rates; accordingly, no servicing asset or liability has been recorded.

~~Amended and Restated Asset-Based Revolving Credit Facility~~

~~On June 22, 2020, WESCO,~~2021 Notes, WESCO Distribution and ~~certain other subsidiaries of~~ WESCO entered into a $1,100 million revolving credit facility (the “Revolving Credit Facility”), as a replacement of WESCO Distribution’s existing revolving credit facility entered into on September 26, 2019, pursuantInternational agreed to register under the Securities Act notes having terms identical in all material respects to the ~~terms~~2021 Notes (the “2021 Exchange Notes”) and ~~conditions of a Fourth Amended and Restated Credit Agreement, dated as of June 22, 2020 (the “Credit Agreement”), among~~to make an offer to exchange the 2021 Exchange Notes for the 2021 Notes. WESCO Distribution launched the ~~other~~exchange offer on June 12, 2014 and the exchange offer expired on July 17, 2014.

On December 15, 2020, WESCO Distribution exercised its right to redeem the entire $500 million aggregate principal amount of the 2021 Notes, and U.S. ~~borrowers party thereto (collectively,~~Bank, National Association, as trustee under the ~~“U.S. Borrowers”~~2021 Indenture, issued a notice of redemption to registered holders of the 2021 Notes.

On January 14, 2021 (the “Redemption Date”), WESCO Distribution ~~Canada LP (“WESCO Canada”),~~redeemed the ~~other Canadian borrowers party thereto (collectively,~~$500 million aggregate principal amount of the ~~“Canadian Borrowers”), WESCO,~~2021 Notes at a redemption price equal to 100% of the ~~lenders party thereto~~principal amount plus accrued interest to, but not including, the Redemption Date. The redemption of the 2021 Notes was funded with available cash, as well as borrowings under the Company's accounts receivable securitization and ~~Barclays Bank PLC,~~revolving credit facilities.

1917

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

as the administrative agent. The Revolving Credit Facility contains a letter of credit sub-facility of up to $175 million and an accordion feature allowing WESCO Distribution to request increases to the borrowing commitments under the Revolving Credit Facility of up to $500 million in the aggregate, subject to customary conditions. The Revolving Credit Facility matures in June 2025.

The obligations of WESCO Distribution and the other U.S. Borrowers under the Revolving Credit Facility have been guaranteed by WESCO and certain of WESCO Distribution’s subsidiaries (including certain subsidiaries of Anxiter Inc.). The obligations of WESCO Canada and the other Canadian Borrowers under the Revolving Credit Facility (including certain subsidiaries of Anxiter Inc.) have been guaranteed by certain subsidiaries of WESCO Canada and the other Canadian Borrowers. The Revolving Credit Facility is secured by (i) substantially all assets of WESCO Distribution, the other U.S. Borrowers and certain of WESCO Distribution’s subsidiaries (including certain subsidiaries of Anxiter Inc.), other than, among other things, real property and accounts receivable sold or intended to be sold pursuant to WESCO Distribution’s Receivables Facility, and (ii) substantially all assets of WESCO Canada, the other Canadian Borrowers and certain of WESCO Canada’s subsidiaries, other than, among other things, real property, in each case, subject to customary exceptions and limitations. The applicable interest rate for borrowings under the Revolving Credit Facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.50% for LIBOR-based borrowings and 0.25% and 0.50% for prime rate-based borrowings.

The Credit Agreement requires compliance with conditions that must be satisfied prior to any borrowing as well as ongoing compliance with certain customary affirmative and negative covenants. The Credit Agreement contains customary events of default. Upon the occurrence and during the continuance of an event of default, the commitments of the lenders may be terminated, and all outstanding obligations of the loan parties under the Revolving Credit Facility may be declared immediately due and payable.

~~5.50% Senior Notes due 2023~~

~~6.00% Senior Notes due 2025~~

On April 30, 2020, in connection with the Merger, WESCO Distribution commenced offers to purchase for cash (each, a “WESCO Tender Offer” and, together the “WESCO Tender Offers”) any and all of Anixter Inc.’s outstanding (i) 5.50% Senior Notes due 2023 (the “Anixter 2023 Senior Notes”), $350.0 million aggregate principal amount, issued under the Indenture, dated as of August 18, 2015 (the “Anixter 2023 Indenture”), by and among Anixter Inc., Anixter and Wells Fargo Bank, National Association, as trustee, and (ii) 6.00% Senior Notes due 2025 (the “Anixter 2025 Senior Notes” and, together with the Anixter 2023 Senior Notes, the "Anixter Senior Notes"), $250.0 million aggregate principal amount, issued under the Indenture, dated as of November 13, 2018 (the “Anixter 2025 Indenture” and, together with the Anixter 2023 Indenture, the “Anixter Indentures”) by and among Anixter Inc., Anixter and Wells Fargo Bank, National Association, as trustee.

Concurrent with the WESCO Tender Offers, Anixter Inc. commenced consent solicitations to amend the definition of "Change of Control" under the applicable Indenture to exclude the Merger and related transactions and expressly permit a merger between Anixter Inc. and Anixter (the “Anixter Consent Solicitations”).

On June 23, 2020 (the "Expiration Date"), following the completion of the Merger, the WESCO Tender Offers and Anixter Consent Solicitations expired and settled. Pursuant to the terms of the Offer to Purchase and Consent Solicitation Statement, dated April 30, 2020, holders of the Anixter Senior Notes that validly tendered and did not validly withdraw prior to such date, received total tender offer consideration of $1,012.50 per $1,000 principal amount of Anixter Senior Notes, which amount, in each case, included an early tender payment of $50.00 per $1,000 principal amount of Anixter Senior Notes. Holders who validly delivered their consents at or prior to the Expiration Date received a consent fee of $2.50 per $1,000 principal amount of Anixter Senior Notes.

~~As of September 30, 2020, $58.6 million and $4.2 million aggregate principal amount of the Anixter 2023 Senior Notes and Anixter 2025 Senior Notes, respectively, were outstanding.~~

~~7.125% Senior Notes due 2025~~

~~7.250% Senior Notes due 2028~~

On June 12, 2020, WESCO Distribution issued $1,500 million aggregate principal amount of 7.125% Senior Notes due 2025 (the “2025 Notes”) and $1,325 million aggregate principal amount of 7.250% Senior Notes due 2028 (the “2028 Notes” and, together with the 2025 Notes, the “Notes”). The 2025 Notes were issued at a price of 100.000% of the aggregate principal amount. The 2028 Notes were issued at a price of 99.244% of the aggregate principal amount.

The Notes were issued pursuant to, and are governed by, an indenture (the “Notes Indenture”), dated as of June 12, 2020, between the Company, WESCO Distribution and U.S. Bank National Association, as trustee (the “Trustee”). The Notes and

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

related guarantees were issued in a private transaction exempt from the Securities Act of 1933, as amended (the “Securities Act”) and have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to the registration requirements of the Securities Act and other applicable securities laws.

The Company used the net proceeds from the issuance of the Notes, together with borrowings under its new and amended credit facilities and existing cash on hand, to finance the Merger and the other transactions contemplated by the Merger Agreement. The use of proceeds included (i) paying the cash portion of the Merger consideration to stockholders of Anixter, (ii) refinancing certain existing indebtedness of Anixter contemplated by the Merger Agreement, including financing the satisfaction and discharge, defeasance, redemption or other repayment in full of the 5.125% Senior Notes due 2021 of Anixter Inc., a wholly owned subsidiary of Anixter, and financing payments in connection with the Anixter Consent Solicitations and WESCO Tender Offers, as described above, (iii) refinancing other indebtedness of the Company, and (iv) paying fees, costs and expenses in connection with the foregoing.

The Notes are unsecured and unsubordinated obligations of WESCO Distribution and are guaranteed on an unsecured, unsubordinated basis by the Company and Anixter Inc. The 2025 Notes accrue interest at a rate of 7.125% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. The 2025 Notes will mature on June 15, 2025. The 2028 Notes accrue interest at a rate of 7.250% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. The 2028 Notes will mature on June 15, 2028.

WESCO Distribution may redeem all or a part of the 2025 Notes at any time prior to June 15, 2022 by paying a “make-whole” premium plus accrued and unpaid interest, if any, to but excluding the redemption date. In addition, at any time prior to June 15, 2022, WESCO Distribution may redeem up to 35% of the 2025 Notes with the net cash proceeds from certain equity offerings. On or after June 15, 2022, WESCO Distribution may redeem all or a part of the 2025 Notes on the redemption dates and at the redemption prices specified in the Notes Indenture. WESCO Distribution may redeem all or a part of the 2028 Notes at any time prior to June 15, 2023 by paying a “make-whole” premium plus accrued and unpaid interest, if any, to but excluding the redemption date. In addition, at any time prior to June 15, 2023, WESCO Distribution may redeem up to 35% of the 2028 Notes with the net cash proceeds from certain equity offerings. On or after June 15, 2023, WESCO Distribution may redeem all or a part of the 2028 Notes on the redemption dates and at the redemption prices specified in the Notes Indenture.

The Notes Indenture contains certain covenants that, among other things, limit (i) the Company’s and its subsidiaries’ ability to pay dividends on or repurchase the Company’s capital stock, incur liens on assets, engage in certain sale and leaseback transactions or sell certain assets, and (ii) the Company’s and any guarantor’s ability to sell all or substantially all of its assets to, or merge or consolidate with or into, other persons, in the case of each of the foregoing, subject to certain qualifications and exceptions, including the termination of certain of these covenants upon the Notes receiving investment grade credit ratings.

The Notes Indenture contains certain events of default, including, among other things, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay or acceleration of certain other indebtedness, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the Notes Indenture will allow either the Trustee or the holders of at least 25% in aggregate principal amount of the applicable series of the then-outstanding Notes to accelerate, or in certain cases, will automatically cause the acceleration of the amounts due under the applicable series of Notes.

9. ~~STOCKHOLDERS' EQUITY~~

~~Series A Preferred Stock~~

The Company's Board of Directors authorized 25,000 shares of fixed-rate reset cumulative perpetual preferred stock, Series A, with a liquidation preference of $25,000 per whole preferred share and a par value of $0.01 per share (the "Series A Preferred Stock"). Depositary shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock, are registered under the Securities Act of 1933, as amended.

~~In connection with the Merger, as described in Note 4, the Company issued 21,611,534 depositary shares, representing an interest in approximately 21,612 shares of Series A Preferred Stock.~~

Holders of shares of the Series A Preferred Stock are entitled to receive, when, as and if declared by the Company's Board of Directors, cumulative cash dividends at an initial rate of 10.625% per annum of the $25,000 liquidation preference per share.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

~~On June 22, 2025, and every five-year period thereafter, the dividend rate on the Series A Preferred Stock resets and will be equal to the Five-year U.S. Treasury Rate plus a spread of 10.325%.~~

Holders of the Series A Preferred Stock are not entitled to convert or exchange their shares of Series A Preferred stock into shares of any of WESCO’s other classes or series of stock or into any other security of WESCO (other than upon a change of control involving the issuance of additional shares of common stock or other change of control transaction, in each case, approved by holders of common stock).

The Series A Preferred Stock has no stated maturity and will not be subject to any sinking fund, retirement fund or purchase fund or any other obligation of WESCO to redeem, repurchase or retire the Series A Preferred Stock.

Holders of the Series A Preferred Stock will have limited voting rights, including the right to elect two directors to the board of directors of the Company in the event dividends on the Series A Preferred Stock remain unpaid for the equivalent of six or more full quarterly dividend periods.

~~Stockholder Rights Plan~~

On July 17, 2020, WESCO's Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock of WESCO, par value $0.01 per share (“WESCO Common Stock”), and adopted a stockholder rights plan, as set forth in the Rights Agreement, dated as of July 17, 2020 (the “Rights Agreement”), by and between WESCO and Computershare Trust Company, N.A., as rights agent. In general terms, the Rights Agreement works by imposing a significant penalty upon any person or group which acquires 10% or more (15% or more in the case of passive investors filing statements on Schedule 13G) of the outstanding WESCO Common Stock without the approval of the Board. The dividend Right was paid on July 27, 2020 to WESCO stockholders of record as of the close of business on July 27, 2020. The Rights Agreement provides that the Rights will expire on July 16, 2021. The Rights have no value upon issuance.

~~10. PENSION~~EMPLOYEE BENEFIT PLANS ~~POST-RETIREMENT BENEFITS AND OTHER BENEFITS~~

Defined Contribution Plans

WESCO Distribution sponsors a defined contribution retirement savings plan for the majority of its U.S. employees. The Company matches contributions made by employees at an amount equal to 50% of participants' total monthly contributions up to 6% of eligible compensation. Contributions are made in cash and employees have the option to transfer balances allocated to their accounts into any of the available investment options. The Company may also make, subject to the Board of Directors' approval, a discretionary contribution to the defined contribution retirement savings plan covering U.S. participants if certain predetermined profit levels are attained. ~~Due to the COVID-19 pandemic and its adverse effect on WESCO's results of operations, the Company suspended matching employer contributions between April 16, 2020 and September 30, 2020.~~

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, 2021 and 2020, WESCO incurred charges of $16.6 million and $5.7 million, respectively, for all defined contribution plans.

Deferred Compensation Plans

WESCO Distribution sponsors a non-qualified deferred compensation plan (the "WESCO Deferred Compensation Plan") that permits select employees to make pre-tax deferrals of salary and bonus. Employees have the option to transfer balances allocated to their accounts in the WESCO Deferred Compensation Plan into any of the available investment options. The WESCO Deferred Compensation Plan is an unfunded plan. As of ~~September 30, 2020,~~March 31, 2021, the Company's obligation under the WESCO Deferred Compensation Plan was $26.0 million, of which $10.1 million was included in other current liabilities and $15.9 million in other noncurrent liabilities in the Condensed Consolidated Balance Sheet. At December 31, 2019, the Company's obligation under the WESCO Deferred Compensation Plan was $25.2$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 ~~INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

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. ~~At September 30,~~In the fourth quarter of 2020, the Company made a determination to terminate the Anixter Deferred Compensation Plan. Accordingly, a deferred compensation ~~liabilities included~~liability of $43.0 million has been classified in other current ~~liabilities and other noncurrent~~ liabilities in the Condensed Consolidated Balance Sheet ~~were $3.8 million and $42.4 million, respectively.~~

~~Concurrent with~~at March 31, 2021 as the ~~implementation~~Company expects to make lump sum payments directly to participants of the ~~Anixter Deferred Compensation Plan,~~plan during 2021. At December 31, 2020, the ~~Company established~~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 assets are invested in marketable securities. ~~At September 30,~~As of March 31, 2021 and December 31, 2020, ~~$39.5~~the assets held in this arrangement were $39.8 million ~~was~~and $39.6 million, respectively, and are recorded in other current assets in the Condensed Consolidated Balance ~~Sheet for this arrangement.~~Sheets.

Defined Benefit Plans

WESCO sponsors a contributory defined benefit plan (the "EECOL Plan") covering substantially all Canadian employees of EECOL Electric Corp. ~~(""EECOL")~~ and a Supplemental Executive Retirement Plan for certain executives of 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 ~~"Anixter Domestic~~"Domestic Plans") and various defined benefit pension plans covering employees of foreign subsidiaries in Canada and Europe (together with the ~~" Anixter Foreign~~"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 ~~these~~the Anixter defined benefit pension plans are non-contributory, and with the exception of U.S. and Canada, cover substantially all full-time ~~domestic employees and certain~~ employees in ~~other~~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 ~~Domestic Plans~~Inc. Executive Benefit Plan and the Anixter ~~Foreign Plans.~~ 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 ~~Anixter~~ Domestic Plans are funded as required by the Employee Retirement Income Security Act of 1974 ("ERISA") and the IRS and ~~all Anixter~~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 ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, the Company made aggregate cash contributions of ~~$2.9~~$2.6 million and ~~$4.7~~$1.0 million, respectively, ~~for all of the benefit plans described above.~~

~~For the nine months ended September 30, 2020 and 2019, WESCO incurred total charges of $13.6 million and $24.7 million, respectively, for all of the benefit plans described above.~~

to its Foreign Plans.

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


		Three Months Ended				Nine Months Ended					Domestic Plans(1)				Foreign Plans(1)				Total
		September 30				September 30					Three Months Ended				Three Months Ended				Three Months Ended
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	March 31, 2021		March 31, 2020		March 31, 2021		March 31, 2020		March 31, 2021		March 31, 2020
Service cost	Service cost	$	3,826	$	1,158	$	6,801	$	3,446	Service cost	$	764	$	0	$	3,224	$	1,309	$	3,988	$	1,309
Interest cost	Interest cost	4,844		1,098		7,170		3,267		Interest cost	2,137		0		2,446		1,037		4,583		1,037
Expected return on plan assets	Expected return on plan assets	(8,399)		(1,433)		(12,001)		(4,265)		Expected return on plan assets	(4,501)		0		(4,256)		(1,614)		(8,757)		(1,614)
Recognized actuarial gain~~(1)~~(2)	Recognized actuarial gain~~(1)~~(2)	(1)		(16)		52		(47)		Recognized actuarial gain~~(1)~~(2)	0		0		102		27		102		27
Net periodic benefit cost		$	270	$	807	$	2,022	$	2,401
Net periodic pension (benefit) cost										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 ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ no amounts were reclassified from accumulated other comprehensive income into net ~~income, respectively.~~income.

The service cost of ~~$3.8~~$4.0 million and ~~$1.2~~$1.3 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $6.8 million and $3.4 million for the nine months ended September 30, 2020 and 2019,~~ respectively, is reported as a component of selling, general and administrative expenses. The other components of net periodic ~~benefit~~pension (benefit) cost totaling a net benefit of ~~$3.6~~$4.1 million and ~~$0.4~~$0.6 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $4.8 million and $1.0 million for the nine months ended September 30, 2020 and 2019,~~ respectively, are presented as a component of other non-operating expenses ("other, net").

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

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 ~~September 30,~~March 31, 2021 and December 31, 2020, the estimated fair value of these awards was ~~$13.4 million.~~$15.9 million and $22.8 million, respectively. The Company recognized compensation expense associated with these awards of ~~$1.4 million and $2.3~~$5.7 million for the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021, which is reported as a component of selling, general and administrative expenses.

~~11.~~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.~~ indebtedness and foreign currency forward contracts, the carrying value of the Company’s remaining financial instruments approximates fair value.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

(unaudited)

The assets of the Company's 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 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.

The carrying value of WESCO's debt instruments with fixed interest rates was ~~$3,730.0~~$3,230.3 million and ~~$850.0~~$3,730.1 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The estimated fair value of this debt was ~~$4,015.6~~$3,546.5 million and ~~$866.2~~$4,084.7 million as of March 31, 2021 and December 31, 2020, respectively. The reported carrying values of WESCO's other ~~financial~~debt instruments, including ~~indebtedness~~those with variable interest rates, approximated their fair values as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

The Company purchases foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated accounts on its ~~reported income.~~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 ~~which~~that could affect the value of ~~the~~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 ~~September 30, 2020,~~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 ~~Condensed~~ Consolidated Statements of Income and Comprehensive Income (Loss) offsetting the transaction gain (loss) recorded on foreign currency-denominated accounts. At ~~September 30,~~March 31, 2021 and December 31, 2020, the gross and net notional amounts of foreign currency forward contracts outstanding were approximately ~~$104.8 million.~~$218.5 million and $111.9 million, respectively. While all of the Company's foreign currency forward contracts are subject to master netting arrangements with its counterparties, assets and liabilities related to these contracts are presented on a gross basis within the Condensed Consolidated Balance Sheets. The gross fair value of assets and liabilities related to foreign currency forward contracts were immaterial.

~~12.~~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 September 30, 2020, WESTEC had outstanding indebtedness totaling $6.0 million. Management 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 September 30, 2020.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

~~13.~~12. INCOME TAXES

The effective tax rate for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 was ~~23.3%~~9.9% and ~~22.9%, respectively. The effective tax rate for the three and nine months ended September 30, 2019 was 19.8% and 21.0%~~23.1%, 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 ~~rates~~rate for the ~~current year periods are higher~~three months ended March 31, 2021 is lower than the ~~corresponding~~ prior ~~year periods~~period primarily due to ~~expenses incurred by WESCO to complete~~a discrete income tax benefit of $8.3 million resulting from a change in the ~~acquisition of Anixter.~~

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 ~~except~~ for ~~preliminary amounts recorded in connection with~~ the acquisition of Anixter, which totaled $30.0 million. In addition, the Company reassessed the realizability of certain deferred income tax assets acquired, including Anixter’s foreign tax credit carryforwards. As a result, the Company preliminary allocated $59.4 million to a foreign tax credit carryforward and $41.4 million to the related valuation allowance.year ended December 31, 2020.

~~14.~~13. BUSINESS SEGMENTS

~~Prior to the completion of its merger with Anixter on June 22, 2020, as described in Note 4, WESCO had four~~The Company has 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. In the third quarter, the Company identified new operating segmentsare 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 ~~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.~~based primarily on net sales, income from operations, and total assets.

~~The following is a description of each of the Company's reportable segments and their business activities.~~

~~Electrical & Electronic Solutions~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

The EES segment supplies a broad range of products and supply chain solutions primarily to the Construction, Industrial and Original Equipment Manufacturer ("OEM") markets. Product categories include a broad range of electrical equipment and supplies as well as 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 the majority of the legacy WESCO industrial and construction businesses.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)

~~Communications & Security Solutions~~(unaudited)

The CSS segment supplies products and customized supply chain solutions to customers in a 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 the legacy data communications and safety businesses from WESCO.

~~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, the WESCO utility business, a portion of the legacy WESCO broadband business as well as the legacy WESCO integrated supply business.

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 corporate. Segment assets may not include jointly used assets, but segment results include depreciation expense or other allocations related to those assets. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis. Corporate expenses ~~and assets~~ are shown in the tables below to reconcile the reportable segments to the consolidated financial statements.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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

~~(unaudited)~~

For the three and nine months ended September 30, 2020 and September 30, 2019, the Company's CODM evaluated the performance of its operating segments based primarily on net sales, income from operations, and total assets.

The following table sets forth ~~net sales and income from operations~~financial information by reportable segment for the periods presented:


(In thousands)	(In thousands)	Three Months Ended September 30, 2020										(In thousands)	Three Months Ended March 31, 2021
		EES		CSS		UBS		Corporate		Total			EES		CSS		UBS		Corporate		Total
Net sales	Net sales	$	1,653,726	$	1,388,791	$	1,099,284	$	0	$	4,141,801	Net sales	$	1,720,813	$	1,250,615	$	1,070,049	$	0	$	4,041,477
Income from operations	Income from operations	105,508		89,634		74,092		(91,139)		178,095		Income from operations	100,111		73,964		87,030		(127,854)		133,251

		Three Months Ended September 30, 2019											Three Months Ended March 31, 2020
(In thousands)	(In thousands)	EES		CSS		UBS		Corporate		Total		(In thousands)	EES		CSS		UBS		Corporate		Total
Net sales	Net sales	$	1,250,080	$	235,920	$	662,110	$	0	$	2,148,110	Net sales	$	1,114,457	$	223,726	$	630,464	$	0	$	1,968,647
Income from operations	Income from operations	72,007		10,555		43,811		(32,640)		93,733		Income from operations	43,326		9,946		41,785		(34,144)		60,913

		Nine Months Ended September 30, 2020
(In thousands)		EES		CSS		UBS		Corporate		Total
Net sales		$	3,811,498	$	1,953,967	$	2,431,689	$	0	$	8,197,154
Income from operations		194,643		127,502		167,651		(235,518)		254,278

		Nine Months Ended September 30, 2019
(In thousands)		EES		CSS		UBS		Corporate		Total
Net sales		$	3,626,423	$	681,087	$	1,951,955	$	0	$	6,259,465
Income from operations		198,774		32,501		134,431		(103,297)		262,409

~~The following table sets forth~~There were no material changes to the amounts of total assets by reportable segment from those disclosed in the Company's Annual Report on Form 10-K for the ~~periods presented:~~

As of
September 30, 2020
(In thousands) EES CSS UBS
Corporate(1)
Total
Total assets $ 3,838,242 $ 4,592,463 $ 2,990,621 $ 447,013 $ 11,868,339
As of
December 31, 2019
(In thousands) EES CSS UBS
Corporate(1)
Total
Total assets $ 2,523,481 $ 610,046 $ 1,747,809 $ 136,299 $ 5,017,635

~~(1)Total assets for Corporate primarily consist of cash and cash equivalents, deferred income taxes, fixed assets and leases.~~

fiscal year ended December 31, 2020.

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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 ~~("SEC"~~(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 provider of business-to-business distribution, logistics services and supply chain solutions.

On June 22, 2020, ~~WESCO~~we completed ~~its previously announced~~our acquisition of Anixter International Inc. ("Anixter"), a Delaware ~~corporation (“Anixter”).~~corporation. Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020, ~~(the “Merger Agreement”),~~ by and among Anixter, WESCO and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of WESCO (“Merger Sub”), Merger Sub was merged with and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a wholly owned subsidiary of WESCO. On June 23, 2020, Anixter merged with and into Anixter Inc., with Anixter Inc. surviving to become a wholly owned subsidiary of WESCO.

~~As a result of the Merger, the Company now employs over~~We employ nearly 18,000 people, ~~maintains~~maintain relationships with ~~over~~approximately 30,000 suppliers, and ~~serves~~serve more than ~~150,000~~125,000 customers worldwide. With nearly 1,500,000 products, end-to-end supply chain services, and ~~leading~~extensive digital capabilities, ~~WESCO provides~~we provide innovative solutions to meet current customer needs across commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. ~~WESCO operates nearly~~Our innovative value-added solutions include supply chain management, logistics and transportation, procurement, warehousing and inventory management, as well as kitting and labeling, limited assembly of products and installation enhancement. We have approximately 800 ~~branch~~branches, warehouses and ~~warehouse locations~~sales offices with operations in ~~over~~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 ~~its merger with Anixter on June 22, 2020, as described in Note 4 of our Notes to~~ the ~~unaudited Condensed Consolidated Financial Statements, WESCO~~Merger, we had four operating segments that had been aggregated as one reportable segment. Effective on the date of acquisition, ~~the Company~~we added Anixter as a separate reportable segment for the quarterly period ended June 30, 2020. InAt the beginning of the third quarter ~~the Company~~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 ~~and nine~~ months ended ~~September 30, 2019~~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 ~~the Company's~~our reportable segments and their business activities.

Electrical & Electronic Solutions

The EES segment supplies a broad range of products and supply chain solutions primarily to the Construction, Industrial and Original Equipment Manufacturer ("OEM") markets. Product categories include a broad range of electrical equipment and supplies, ~~as well as~~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 the majority of ~~the~~WESCO's legacy ~~WESCO~~ industrial and construction businesses.

Communications & Security Solutions

The CSS segment supplies products and customized supply chain solutions to customers in a 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 ~~the~~WESCO's legacy data communications and safety ~~businesses from WESCO.~~

businesses.

2722

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, ~~the WESCO~~and WESCO's legacy utility, ~~business, a portion of the legacy WESCO~~ broadband ~~business as well as the legacy WESCO~~and integrated supply ~~business.~~businesses.

Overall Financial Performance

Our financial results for the first ~~nine~~three months of ~~2020~~2021 reflect the ~~unfavorable business conditions caused by~~merger with Anixter, the ~~COVID-19 pandemic, offset by~~benefit of margin improvement initiatives, as well as lower operating expenses due to cost reduction actions, ~~taken in response to such conditions, as well as the merger with Anixter.~~ synergy capture and integration initiatives.

Net sales increased ~~$1.9~~$2.1 billion, or ~~31.0%~~105.3%, over the same period last year. Cost of goods sold as a percentage of net sales and gross profit margin was ~~81.0%~~79.9% and 20.1%, respectively, for the first ~~nine~~three months of ~~2020~~2021, compared to 80.9% and ~~2019.~~ 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 ~~14.9%~~15.8% and ~~14.1%~~15.2% for the first ~~nine~~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 ~~$254.3~~$133.3 million for the current ~~nine~~three month period, compared to ~~$262.4~~$60.9 million for the first ~~nine~~three months of ~~2019. Adjusted~~2020. Operating profit for ~~$120.1 million~~the first quarter of ~~transaction~~2021 includes the aforementioned merger-related costs and ~~fair value adjustments related to our merger with Anixter, as well as a~~net gain on the ~~sale of an operating branch in the U.S. of $19.8 million, SG&A expenses as a percentage of nets sales were 14.0%, and~~Canadian divestitures. Adjusted for these items, operating profit was ~~$354.6~~$170.6 million, or 4.2% of net sales. For the first three months of 2020, operating profit adjusted for ~~the nine months ended September 30, 2020.~~ merger-related costs of $4.6 million was $65.5 million, or 3.3% of net sales.

Net income attributable to common stockholders for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$64.8~~$44.8 million, compared to ~~$170.3~~$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 $38.3 million for the first quarter of 2021 and 2020, respectively. Earnings per diluted share attributable to common stockholders for the first ~~nine~~three months of ~~2020~~2021 was ~~$1.44,~~$0.87, based on ~~45.1~~51.7 million diluted shares, compared to ~~$3.88~~$0.82 for the first ~~nine~~three months of ~~2019,~~2020, based on ~~43.9~~42.1 million diluted shares. As adjusted, earnings per diluted share for the ~~current nine month period~~first quarter of 2021 and 2020 was ~~$3.17.~~$1.43 and $0.91, respectively.

~~As further discussed below,~~Beginning in 2020, and continuing through the ~~third~~first quarter of ~~2020,~~2021, the COVID-19 pandemic ~~has~~ had a significant impact on our business and ~~negatively~~adversely impacted our results of operations. ~~We expect these negative impacts~~There continues to ~~continue for~~be significant uncertainties associated with the ~~remainder~~COVID-19 pandemic, including with respect to the economic reopening plans and possible resurgence of COVID, including new variants of the ~~year,~~virus in various global geographies, and ~~potentially longer, depending on~~the availability of effective treatments and vaccines. As the duration and severity of the COVID-19 ~~pandemic.~~pandemic remain uncertain and cannot be predicted, there is significant uncertainty as to the ultimate impact it will have on our business and our results of operations and financial condition. Events and factors relating to the COVID-19 pandemic include limitations on the ability of our suppliers to manufacture or procure the products we sell or to meet delivery requirements and commitments; disruptions to our global supply chains; limitations on the ability of our employees to perform their work due to travel or other restrictions; limitations on the ability of carriers to deliver our products to our customers; limitations on the ability of our customers to conduct their business and purchase our products and services, or pay us on a timely basis; and disruptions to our customers’ purchasing patterns.

~~We are taking actions in~~ In response to the COVID-19 ~~pandemic. 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. To date,~~customers and accordingly, we have taken actions to maintain the continuity of our ~~branch locations have remained operational consistent with governmental and public health authority directives.~~operations in response to the pandemic. Beginning in March 2020, and continuing ~~throughout~~through the ~~third~~first quarter of 2021, we have taken, and continue to take, actions to reduce costs consistent with the expected decline in demand, ~~including reductions in administrative expenses, payroll and benefits,~~ and other spending across the ~~company. Given the ongoing uncertainty regarding the duration and scope of the COVID-19 pandemic, we are continuing to monitor the situation~~Company.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

We have experienced, and may ~~take further actions in light of future developments.~~

~~We will work~~continue to ~~prepare our business to respond to the needs~~experience, reduced customer demand for certain of our ~~customers. While many~~products and services, including delays or cancellations of ~~the areas in which we operate had eased~~ongoing or ~~lifted restrictions during the~~anticipated projects due to our clients’, suppliers’ and other third ~~quarter, some of these restrictions have been re-imposed in the wake of resurgences of COVID-19 cases.~~parties’ diminished financial conditions. We cannot predict the timeframe for recovery of our customer’s demand for our products and services. The 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 control, including the duration and scope of the crisis, ~~future government actions~~the availability of effective treatments and vaccines, imposition of protective public safety measures, and the overall impact of the COVID-19 pandemic on the global economy and capital ~~markets, among other factors, all of which remain highly uncertain and unpredictable~~.markets.

Cash Flow

We generated ~~$418.9~~$120.5 million of operating cash flow for the first ~~nine~~three months of ~~2020. Investing~~2021. Cash provided by operating activities included ~~$3,707.6~~net income of $59.2 million and adjustments to ~~fund~~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 ~~portion~~net gain of $8.9 million resulting from the ~~merger with Anixter,~~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,~~Statements. Operating cash flow also included changes in assets and ~~$42.6 million~~liabilities of ~~capital expenditures. Financing~~$30.1 million.

Investing activities ~~were comprised of $2,815.0~~included $54.1 million of net proceeds from the ~~issuance~~Canadian divestitures and $10.2 million of ~~senior unsecured notes to finance a portion~~capital expenditures.

Financing activities were comprised of the ~~merger with Anixter,~~redemption of our $500.0 million aggregate principal amount of 5.375% Senior Notes due 2021 (the "2021 Notes"), borrowings and repayments of ~~$980.3~~$713.6 million and ~~$655.7~~$488.6 million, respectively, related to our ~~prior and new~~ revolving credit ~~facilities,~~facility (the "Revolving Credit Facility"), as well as borrowings and repayments of ~~$865.0~~$243.0 million and ~~$390.0~~$248.0 million, respectively, related to our accounts receivable securitization ~~facility.~~facility (the "Receivables Facility"). Financing activities for the first ~~nine~~three months of ~~2020~~2021 also included net repayments related to our various international lines of credit of approximately ~~$8.3 million.~~

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

$8.5 million, and $14.4 million of dividends paid to holders of our Series A Preferred Stock.

Financing Availability

On June 22, 2020, in connection with the Merger, we entered into a $1,100 million revolving credit facility (the “Revolving Credit Facility”), as a replacement of our existing revolving credit facility entered into on September 26, 2019. Also concurrent with the completion of the Merger, we amended our accounts receivable securitization facility (the “Receivables Facility”). As of ~~September 30, 2020,~~March 31, 2021, we had ~~$727.5~~$686.9 million in total available borrowing capacity under our Revolving Credit Facility, which was comprised of ~~$599.3~~$298.7 million of availability under the U.S. sub-facility and ~~$128.2~~$388.2 million of availability under the Canadian sub-facility. Available borrowing capacity under our Receivables Facility was ~~$135.0~~$214.0 million. The Revolving Credit Facility and the Receivables Facility mature in June 2025 and June 2023, respectively.

Critical Accounting Policies and Estimates

We adopted Accounting Standards Update ~~(ASU) 2016-13,~~("ASU") 2019-12, ~~Financial Instruments—Credit Losses~~Income Taxes (Topic ~~326)~~740): ~~Measurement of Credit Losses on Financial Instruments, effective January 1, 2020.~~

~~We adopted ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to~~Simplifying the ~~Disclosure Requirements~~Accounting for ~~Fair Value Measurement~~Income Taxes, in the first quarter of ~~2020.~~

~~We adopted~~2021. The adoption of this ASU ~~2018-15,~~ ~~Intangibles—Goodwill~~did not have a material impact on our consolidated financial statements and ~~Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, in the first quarter of 2020.~~notes thereto.

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

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Results of Operations

~~Third~~First Quarter of ~~2020~~2021 versus ~~Third~~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
September 30
2020 2019
Net sales 100.0 % 100.0 %
Cost of goods sold (excluding depreciation and amortization) 81.0 81.4
Selling, general and administrative expenses 13.6 13.5
Depreciation and amortization 1.2 0.7
Income from operations 4.3 4.4
Interest expense, net 1.8 0.7
Other, net — —
Income before income taxes 2.5 3.7
Income tax expense 0.6 0.7
Net income attributable to WESCO International, Inc. 1.9 3.0
Preferred stock dividends 0.3 —
Net income attributable to common stockholders 1.6 % 3.0 %

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~


	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	%

Net Sales

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

Three Months Ended
(In thousands) September 30, 2020 September 30, 2019 Growth (Decline)
EES $ 1,653,726 $ 1,250,079 32.3 %
CSS 1,388,791 235,921 488.7 %
UBS 1,099,284 662,110 66.0 %
Total net sales $ 4,141,801 $ 2,148,110 92.8 %


	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 ~~$4.1~~$4.0 billion for the ~~third~~first quarter of 2021 compared to $2.0 billion for the first quarter of 2020, ~~compared to $2.1 billion for the third quarter of 2019,~~ an increase of ~~92.8% due to~~105.3%. The increase primarily reflects the merger with Anixter that was completed on June 22, 2020, ~~partially offset by~~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 billed during the ~~weakened demand impact from~~quarter, was above 1.0 at the ~~COVID-19 pandemic.~~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 ~~third~~first quarter of 2021, compared to $1.1 billion for the first quarter of 2020, ~~compared to $1.3 billion for the third quarter of 2019,~~ an increase of ~~32.3%~~54.4%. In addition to the impact of the merger, the increase reflects growth in our construction and original equipment manufacturer businesses due to improving economic conditions and strong demand.

CSS reported net sales of ~~$1.4~~$1.3 billion for the ~~third~~first quarter of 2021, compared to $223.7 million for the first quarter of 2020, ~~compared to $235.9 million for the third quarter of 2019,~~ an increase of ~~488.7%~~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 ~~third~~first quarter of 2021, compared to $630.5 million for the first quarter of 2020, ~~compared to $662.1 million for the third quarter of 2019,~~ an increase of ~~66.0%~~69.7%. Along with the impact of the merger, the increase reflects growth in our utility and broadband businesses, partially offset by lower sales from integrated supply programs due to the disruption caused by the COVID-19 pandemic.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Cost of Goods Sold

Cost of goods sold for the ~~third~~first quarter of 2021 was $3.2 billion compared to $1.6 billion for the first quarter of 2020, ~~was $3.4~~an increase of $1.6 billion ~~compared to $1.7 billion for~~reflecting the ~~third quarter~~merger with Anixter. Cost of ~~2019, and gross profit was $785.5 million and $400.2 million, respectively. As~~goods sold as a percentage of net sales ~~cost of goods sold~~ was ~~81.0% and 81.4%~~79.9% for the ~~third~~first quarter of ~~2020 and 2019, respectively. Cost~~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 as a percentage of net sales for the ~~third~~first quarter of ~~2020 was 80.4% excluding the effect of merger-related fair value adjustments of $28.0 million.~~2021 by 20 basis points.

Selling, General and Administrative Expenses

SG&A expenses for the ~~third~~first quarter of ~~2020~~2021 totaled ~~$562.0~~$636.6 million versus ~~$290.9~~$299.4 million for the ~~third~~first quarter of ~~2019.~~2020. As a percentage of net sales, SG&A expenses were ~~13.6%~~15.8% and ~~13.5%~~15.2%, respectively. The increase in SG&A expenses of $337.2 million, or 112.6%, primarily reflects the impact of the merger with ~~Anixter and related transaction costs,~~Anixter. In addition, as described below, SG&A payroll expenses were higher in the current quarter, partially offset by ~~the effect of cost reduction actions taken~~lower travel, entertainment and similar expenses due to restrictions imposed on non-essential business travel in response to the ~~unfavorable business conditions caused by 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 ~~merger-related transaction costs of $14.2 million and a gain on sale of an operating branch in the U.S. of $19.8 million,~~these amounts, SG&A expenses were ~~$567.6~~$599.2 million, or ~~13.7%~~14.8% of net sales, for the ~~third~~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 ~~third~~first quarter of ~~2020~~2021 of ~~$375.5~~$423.7 million increased by ~~$172.7~~$220.1 million compared to the same period in ~~2019~~2020 primarily due to the merger with Anixter. Excluding the impact of the merger, SG&A payroll expenses were ~~down $20.1~~up $4.9 million due to ~~lower salaries and wages,~~higher variable compensation expense and benefit costs, ~~resulting from~~partially offset by lower salaries and wages due to the realization of synergies and structural cost ~~reduction actions.~~takeout actions related to merger activities.

Depreciation and Amortization

Depreciation and amortization ~~for the third quarter of 2020 was $45.5~~increased $25.1 million ~~compared~~ to ~~$15.6~~$41.2 million for the ~~third~~first quarter of ~~2019. The third~~2021, compared to $16.1 million for the first quarter of ~~2020~~2020. The first quarter of 2021 includes ~~$17.9~~$15.6 million attributable to the amortization of identifiable intangible assets acquired in the merger with Anixter.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

Income from Operations

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


		Three Months Ended September 30, 2020											Three Months Ended March 31, 2021
(In thousands)	(In thousands)	EES		CSS		UBS		Corporate		Total		(In thousands)	EES		CSS		UBS		Corporate		Total
Income from operations	Income from operations	$	105,508	$	89,634	$	74,092	$	(91,139)	$	178,095	Income from operations	$	100,111	$	73,964	$	87,030	$	(127,854)	$	133,251

		Three Months Ended September 30, 2019											Three Months Ended March 31, 2020
(In thousands)	(In thousands)	EES		CSS		UBS		Corporate		Total		(In thousands)	EES		CSS		UBS		Corporate		Total
Income from operations	Income from operations	$	72,007	$	10,555	$	43,811	$	(32,640)	$	93,733	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, 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 restrictions imposed on non-essential business travel in response to the COVID-19 pandemic.

EES reported operating profit of ~~$105.5~~$100.1 million for the ~~third~~first quarter of 2021, compared to $43.3 million for the first quarter of 2020, an increase of $56.8 million. In addition to the favorable factors impacting the overall business, as described 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 ~~$72.0 million for~~ the ~~third quarter of 2019.~~prior year.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

CSS reported operating profit of ~~$89.6~~$74.0 million for the ~~third~~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 ~~$10.6 million for~~ the ~~third quarter of 2019.~~prior year.

UBS reported operating profit of ~~$74.1~~$87.0 million for the ~~third~~first quarter of 2021, compared to $41.8 million for the first quarter of 2020, ~~compared to $43.8 million for~~an increase of $45.2 million. The increase reflects the ~~third quarter of 2019.~~favorable factors impacting the overall business, as described above, combined with the benefit from the aforementioned gain on the Canadian divestitures.

Interest Expense, net

~~Interest~~Net interest expense ~~net~~ totaled ~~$74.5~~$70.4 million for the ~~third~~first quarter of ~~2020,~~2021, compared to ~~$14.3~~$16.6 million for the ~~third~~first quarter of ~~2019.~~2020. The increase in interest expense was driven by financing activity related to the Anixter merger.

Other, net

Other non-operating ~~expenses~~income ("other, net") totaled ~~$0.8~~$2.8 million for the ~~third~~first quarter of ~~2020,~~2021, compared to ~~$0.8~~$0.1 million for the ~~third~~first quarter of ~~2019.~~2020.

Income Taxes

Income tax expense totaled ~~$24.3~~$6.5 million for the ~~third~~first quarter of ~~2020,~~2021, compared to ~~$15.9~~$10.3 million in last year's comparable period, and the effective tax rate was ~~23.3%~~9.9% and ~~19.8%~~23.1%, respectively. The ~~higher~~lower effective tax rate in the current quarter iswas primarily due to ~~costs incurred~~a discrete income tax benefit of $8.3 million associated with a change in valuation allowance related to ~~complete~~foreign tax credit carryforwards, which impacted the ~~merger with Anixter.~~effective tax rate by approximately 12.7 percentage points.

Net Income and Earnings per Share

Net income for the ~~third~~first quarter of ~~2020~~2021 was ~~$80.0~~$59.2 million, compared to net income of ~~$64.3~~$34.2 million for the ~~third~~first quarter of ~~2019.~~2020.

Net loss ~~of $0.6 million and $0.2 million was~~ attributable to noncontrolling interests was less than $0.1 million for the ~~third~~first quarter of ~~2020 and 2019, respectively.~~2021, compared to $0.2 million for the first quarter of 2020.

Preferred stock dividends expense of ~~$14.5~~$14.4 million for the ~~third~~first quarter of ~~2020~~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 common stockholders were ~~$66.2~~$44.8 million and ~~$1.31~~$0.87 per diluted share, respectively, for the ~~third~~first quarter of ~~2020,~~2021, compared with $34.4 million and $0.82 per diluted share, respectively, for the first quarter of 2020. Adjusted for merger-related costs, the 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 ~~of $64.5~~attributable to common stockholders for the three months ended March 31, 2021 were $74.1 million and ~~$1.52 per diluted share, respectively, for the third quarter of 2019.~~$1.43, respectively. Adjusted for merger-related costs and ~~fair value adjustments, gain on sale of an operating branch in the U.S.~~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, respectively, for the ~~third quarter of 2020 was $1.66.~~

three months ended March 31,

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

2020.

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

Three Months Ended
Adjusted Income from Operations: September 30, 2020 September 30, 2019
(In thousands)
Income from operations $ 178,095 $ 93,733
Merger-related costs 14,175 —
Merger-related fair value adjustments 28,019 —
Gain on sale of asset (19,816) —
Adjusted income from operations $ 200,473 $ 93,733

Three Months Ended
Adjusted Provision for Income Taxes: September 30, 2020 September 30, 2019
(In thousands)
Provision for income taxes $ 24,294 $ 15,886
Income tax effect of adjustments to income from operations(1)
4,923 —
Adjusted provision for income taxes $ 29,217 $ 15,886

~~(1)~~ ~~The adjustments to income from operations have been tax effected at a rate of 22%.~~


	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

3227

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Three Months Ended
Adjusted Earnings per Diluted Share: September 30, 2020 September 30, 2019
(In thousands, except per share data)
Adjusted income from operations $ 200,473 $ 93,733
Interest expense, net 74,540 14,306
Other, net (777) (798)
Adjusted income before income taxes 126,710 80,225
Adjusted provision for income taxes 29,217 15,886
Adjusted net income 97,493 64,339
Net loss attributable to noncontrolling interests (640) (156)
Adjusted net income attributable to WESCO International, Inc. 98,133 64,495
Preferred stock dividends 14,511 —
Adjusted net income attributable to common stockholders $ 83,622 $ 64,495
Diluted shares 50,487 42,378
Adjusted earnings per diluted share $ 1.66 $ 1.52


	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: ~~Income~~For the three months ended March 31, 2021, income from operations, the provision for income taxes and earnings per diluted share ~~for~~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 ~~September 30,~~March 31, 2020, ~~are~~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 ~~fair value adjustments, gain on sale of an operating branch in the U.S.~~interest, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

3328

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 September 30, 2020															Three Months Ended March 31, 2021
(In thousands)	(In thousands)	EES			CSS			UBS			Corporate		Total			(In thousands)	EES			CSS			UBS			Corporate		Total
Net income attributable to common stockholders	Net income attributable to common stockholders	$	107,192		$	90,585		$	73,924		$	(205,534)	$	66,167		Net income attributable to common stockholders	$	100,629		$	73,594		$	87,013		$	(216,410)	$	44,826
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	(270)			—			—			(370)		(640)			Net loss attributable to noncontrolling interests	(75)			—			—			51		(24)
Preferred stock dividends	Preferred stock dividends	—			—			—			14,511		14,511			Preferred stock dividends	—			—			—			14,352		14,352
Income tax expense		—			—			—			24,294		24,294
Provision for income taxes																Provision for income taxes	—			—			—			6,531		6,531
Interest expense, net	Interest expense, net	—			—			—			74,540		74,540			Interest expense, net	—			—			—			70,373		70,373
Depreciation and amortization	Depreciation and amortization	10,411			18,536			7,550			8,979		45,476			Depreciation and amortization	10,563			16,293			5,210			9,143		41,209
EBITDA	EBITDA	$	117,333		$	109,121		$	81,474		$	(83,580)	$	224,348		EBITDA	$	111,117		$	89,887		$	92,223		$	(115,960)	$	177,267
Other, net	Other, net	(1,414)			(951)			168			1,420		(777)			Other, net	(443)			370			17			(2,751)		(2,807)
Stock-based compensation expense(1)	Stock-based compensation expense(1)	141			6			77			5,778		6,002			Stock-based compensation expense(1)	1,351			425			340			2,577		4,693
Merger-related costs	Merger-related costs	—			—			—			14,175		14,175			Merger-related costs	—			—			—			46,322		46,322
Merger-related fair value adjustments		11,695			12,344			3,980			—		28,019
Gain on sale of asset		(19,816)			—			—			—		(19,816)
Net gain on Canadian divestitures																Net gain on Canadian divestitures	—			—			(8,927)			—		(8,927)
Adjusted EBITDA	Adjusted EBITDA	$	107,939		$	120,520		$	85,699		$	(62,207)	$	251,951		Adjusted EBITDA	$	112,025		$	90,682		$	83,653		$	(69,812)	$	216,548
Adjusted EBITDA margin %	Adjusted EBITDA margin %	6.5		%	8.7		%	7.8		%			6.1		%	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.																(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 September 30, 2019															Three Months Ended March 31, 2020
(In thousands)	(In thousands)	EES			CSS			UBS			Corporate		Total			(In thousands)	EES			CSS			UBS			Corporate		Total
Net income attributable to common stockholders	Net income attributable to common stockholders	$	72,163		$	10,555		$	43,811		$	(62,034)	$	64,495		Net income attributable to common stockholders	$	43,446		$	9,946		$	41,785		$	(60,770)	$	34,407
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	(156)			—			—			—		(156)			Net loss attributable to noncontrolling interests	(232)			—			—			—		(232)
Income tax expense		—			—			—			15,886		15,886
Provision for income taxes																Provision for income taxes	—			—			—			10,266		10,266
Interest expense, net	Interest expense, net	—			—			—			14,306		14,306			Interest expense, net	—			—			—			16,592		16,592
Depreciation and amortization	Depreciation and amortization	7,171			1,811			3,396			3,234		15,612			Depreciation and amortization	6,876			1,841			3,521			3,855		16,093
EBITDA	EBITDA	$	79,178		$	12,366		$	47,207		$	(28,608)	$	110,143		EBITDA	$	50,090		$	11,787		$	45,306		$	(30,057)	$	77,126
Other, net	Other, net	(798)			—			—			—		(798)			Other, net	(120)			—			—			—		(120)
Stock-based compensation expense	Stock-based compensation expense	279			19			58			4,070		4,426			Stock-based compensation expense	1,079			156			293			3,098		4,626
Merger-related costs																Merger-related costs	—			—			—			4,608		4,608
Adjusted EBITDA	Adjusted EBITDA	$	78,659		$	12,385		$	47,265		$	(24,538)	$	113,771		Adjusted EBITDA	$	51,049		$	11,943		$	45,599		$	(22,351)	$	86,240
Adjusted EBITDA margin %	Adjusted EBITDA margin %	6.3		%	5.2		%	7.1		%			5.3		%	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 ~~adjustments associated with the merger with Anixter, and~~net gain on the sale of ~~an operating branch~~WESCO's legacy utility and data communications businesses in ~~the U.S.~~Canada. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.

Adjusted EBITDA for EES was ~~$107.9~~$112.0 million for the ~~third~~first quarter of ~~2020,~~2021, or 6.5% of net sales, compared to ~~$78.7~~$51.0 million for the ~~third~~first quarter of ~~2019,~~2020, or ~~6.3%~~4.6% of net sales.

Adjusted EBITDA for CSS was ~~$120.5~~$90.7 million for the ~~third~~first quarter of ~~2020,~~2021, or ~~8.7%~~7.3% of net sales, compared to ~~$12.4~~$11.9 million for the ~~third~~first quarter of ~~2019,~~2020, or ~~5.2%~~5.3% of net sales.

Adjusted EBITDA for UBS was ~~$85.7~~$83.7 million for the ~~third~~first quarter of ~~2020,~~2021, or 7.8% of net sales, compared to ~~$47.3~~$45.6 million for the ~~third~~first quarter of ~~2019,~~2020, or ~~7.1%~~7.2% of net sales.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Nine Months Ended September 30, 2020 versus Nine Months Ended September 30, 2019~~

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

Nine Months Ended
September 30
2020 2019
Net sales 100.0 % 100.0 %
Cost of goods sold (excluding depreciation and amortization) 81.0 81.0
Selling, general and administrative expenses 14.9 14.1
Depreciation and amortization 1.0 0.7
Income from operations 3.1 4.2
Interest expense, net 1.9 0.8
Other, net — —
Income before income taxes 1.2 3.4
Income tax expense 0.3 0.7
Net income attributable to WESCO International, Inc. 0.9 2.7
Preferred stock dividends 0.2 —
Net income attributable to common stockholders 0.8 % 2.7 %

~~Net Sales~~

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

Nine Months Ended
(In thousands) September 30, 2020 September 30, 2019 Growth (Decline)
EES $ 3,811,498 $ 3,626,423 5.1 %
CSS 1,953,967 681,087 186.9 %
UBS 2,431,689 1,951,955 24.6 %
Total net sales $ 8,197,154 $ 6,259,465 31.0 %

Net sales were $8.2 billion for the first nine months of 2020 compared to $6.3 billion for the first nine months of 2019, an increase of 31.0% due to the merger with Anixter that was completed on June 22, 2020, partially offset by the weakened demand impact from the COVID-19 pandemic.

~~EES reported net sales of $3.8 billion for the first nine months of 2020, compared to $3.6 billion for the first nine months of 2019, an increase of 5.1%.~~

~~CSS reported net sales of $2.0 billion for the first nine months of 2020, compared to $681.1 million for the first nine months of 2019, an increase of 186.9%.~~

~~UBS reported net sales of $2.4 billion for the first nine months of 2020, compared to $2.0 billion for the first nine months of 2019, an increase of 24.6%.~~

~~Cost of Goods Sold~~

Cost of goods sold for the first nine months of 2020 was $6.6 billion, compared to $5.1 billion for the first nine months of 2019. As a percentage of net sales, cost of goods sold was 81.0% for for the first nine months of 2020 and 2019. Cost of goods sold as a percentage of net sales for the first nine months of 2020 was 80.7% excluding the effect of merger-related fair value adjustments of $28.0 million.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Selling, General and Administrative Expenses~~

SG&A expenses for the first nine months of 2020 totaled $1.2 billion versus $883.2 million for the first nine months of 2019. As a percentage of net sales, SG&A expenses were 14.9% and 14.1%, respectively. The increase in SG&A expenses primarily reflects the impact of the merger with Anixter and related transaction costs, partially offset by the effect of cost reduction actions taken in response to the unfavorable business conditions caused by the COVID-19 pandemic. Adjusted for merger-related transaction costs of $92.1 million and a gain on sale of an operating branch in the U.S. of $19.8 million, SG&A expenses were $1.1 billion, or 14.0% of net sales, for the first nine months of 2020.

SG&A payroll expenses for first nine months of 2020 of $805.9 million increased by $192.9 million compared to the same period in 2019 primarily due to the merger with Anixter. Excluding the impact of the merger, SG&A payroll expenses were down $41.2 million due to lower salaries and wages, variable compensation expense and benefit costs resulting from cost reduction actions.

~~Depreciation and Amortization~~

Depreciation and amortization for the first nine months of 2020 was $80.3 million, compared to $46.0 million for the first nine months of 2019. The first nine months of 2020 includes $20.5 million attributable to the amortization of identifiable intangible assets acquired in the merger with Anixter.

~~Income from Operations~~

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

Nine Months Ended September 30, 2020
(In thousands) EES CSS UBS Corporate Total
Income from operations $ 194,643 $ 127,502 $ 167,651 $ (235,518) $ 254,278
Nine Months Ended September 30, 2019
(In thousands) EES CSS UBS Corporate Total
Income from operations $ 198,774 $ 32,501 $ 134,431 $ (103,297) $ 262,409

~~EES reported operating profit of $194.6 million for the first nine months of 2020, compared to $198.8 million for the first nine months of 2019.~~

~~CSS reported operating profit of $127.5 million for the first nine months of 2020, compared to $32.5 million for the first nine months of 2019.~~

~~UBS reported operating profit of $167.7 million for the first nine months of 2020, compared to $134.4 million for the first nine months of 2019.~~

~~Interest Expense, net~~

Interest expense, net totaled $152.3 million for the first nine months of 2020, compared to $49.3 million for the first nine months 2019. The increase in interest expense was driven by financing activity related to the Anixter merger.

~~Other, net~~

~~Other non-operating expenses ("other, net") totaled $1.5 million for the first nine months of 2020, compared to $1.4 million for the first nine months of 2019.~~

~~Income Taxes~~

Income tax expense was $23.7 million for the first nine months of 2020, compared to $45.0 million in last year's comparable period, and the effective tax rate was 22.9% and 21.0%, respectively. The higher effective tax rate in the current period is primarily due to costs incurred to complete the merger with Anixter.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Net Income and Earnings per Share~~

~~Net income for the first nine months of 2020 was $79.8 million, compared to $169.5 million for the first nine months of 2019.~~

~~Net loss of $0.8 million was attributable to noncontrolling interests for the first nine months of 2020 and 2019.~~

Preferred stock dividends expense of $15.8 million for the first nine months of 2020 relates to the fixed-rate reset cumulative perpetual preferred stock, Series A, that was issued in connection with the merger.

Net income and earnings per diluted share attributable to common stockholders were $64.8 million and $1.44 per diluted share, respectively, for the first nine months of 2020, compared with net income and earnings per diluted share of $170.3 million and $3.88 per diluted share, respectively, for the first nine months of 2019. Adjusted for merger-related costs and fair value adjustments, gain on sale of an operating branch in the U.S. and the related income tax effects, earnings per diluted share for the current six month period was $3.17.

The following tables reconcile income from operations, provision for income taxes and earnings per diluted share to adjusted net income from operations, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:

Nine Months Ended
Adjusted Income from Operations: September 30, 2020 September 30, 2019
(In thousands)
Income from operations $ 254,278 $ 262,409
Merger-related costs 92,127 —
Merger-related fair value adjustments 28,019 —
Gain on sale of asset (19,816) —
Adjusted income from operations $ 354,608 $ 262,409

Nine Months Ended
Adjusted Provision for Income Taxes: September 30, 2020 September 30, 2019
(In thousands)
Provision for income taxes $ 23,707 $ 44,970
Income tax effect of adjustments to income from operations(1)
22,073 —
Adjusted provision for income taxes $ 45,780 $ 44,970

~~(1)~~ ~~The adjustments to income from operations have been tax effected at a rate of 22%.~~

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

Nine Months Ended
Adjusted Earnings per Diluted Share: September 30, 2020 September 30, 2019
(In thousands, except per share data)
Adjusted income from operations $ 354,608 $ 262,409
Interest expense, net 152,281 49,293
Other, net (1,463) (1,359)
Adjusted income before income taxes 203,790 214,475
Adjusted provision for income taxes 45,780 44,970
Adjusted net income 158,010 169,505
Net loss attributable to noncontrolling interests (825) (824)
Adjusted net income attributable to WESCO International, Inc. 158,835 170,329
Preferred stock dividends 15,787 —
Adjusted net income attributable to common stockholders $ 143,048 $ 170,329
Diluted shares 45,104 43,901
Adjusted earnings per diluted share $ 3.17 $ 3.88

Note: Income from operations, the provision for income taxes and earnings per diluted share for the nine months ended September 30, 2020 are adjusted to exclude merger-related costs and fair value adjustments, gain on sale of an operating branch in the U.S. and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~EBITDA and Adjusted EBITDA~~

~~The following tables reconcile net income attributable to common stockholders to EBITDA and adjusted EBITDA by segment, which are non-GAAP financial measures, for the periods presented:~~

Nine Months Ended September 30, 2020
(In thousands) EES CSS UBS Corporate Total
Net income attributable to common stockholders $ 196,665 $ 128,295 $ 167,483 $ (427,652) $ 64,791
Net loss attributable to noncontrolling interests (664) — — (161) (825)
Preferred stock dividends — — — 15,787 15,787
Income tax expense — — — 23,707 23,707
Interest expense, net — — — 152,281 152,281
Depreciation and amortization 24,638 24,393 15,153 16,140 80,324
EBITDA $ 220,639 $ 152,688 $ 182,636 $ (219,898) $ 336,065
Other, net (1,358) (793) 168 520 (1,463)
Stock-based compensation expense 849 54 221 14,405 15,529
Merger-related costs �� — — 92,127 92,127
Merger-related fair value adjustments 11,695 12,344 3,980 — 28,019
Gain on sale of asset (19,816) — — — (19,816)
Adjusted EBITDA $ 212,009 $ 164,293 $ 187,005 $ (112,846) $ 450,461
Adjusted EBITDA margin % 5.6 % 8.4 % 7.7 % 5.5 %
Nine Months Ended September 30, 2019
(In thousands) EES CSS UBS Corporate Total
Net income attributable to common stockholders $ 199,598 $ 32,501 $ 134,431 $ (196,201) $ 170,329
Net loss attributable to noncontrolling interests (824) — — — (824)
Income tax expense — — — 44,970 44,970
Interest expense, net — — — 49,293 49,293
Depreciation and amortization 21,343 5,453 10,118 9,121 46,035
EBITDA $ 220,117 $ 37,954 $ 144,549 $ (92,817) $ 309,803
Other, net (1,359) — — — (1,359)
Stock-based compensation expense 837 57 173 13,174 14,241
Adjusted EBITDA $ 219,595 $ 38,011 $ 144,722 $ (79,643) $ 322,685
Adjusted EBITDA margin % 6.1 % 5.6 % 7.4 % 5.2 %

Note: EBITDA and Adjusted EBITDA 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, costs and adjustments associated with the merger with Anixter, and gain on sale of an operating branch in the U.S.

~~Adjusted EBITDA for EES was $212.0 million for the first nine months of 2020, or 5.6% of net sales, compared to $219.6 million for the first nine months of 2019, or 6.1% of net sales.~~

~~Adjusted EBITDA for CSS was $164.3 million for the first nine months of 2020, or 8.4% of net sales, compared to $38.0 million for the first nine months of 2019, or 5.6% of net sales.~~

~~Adjusted EBITDA for UBS was $187.0 million for the first nine months of 2020, or 7.7% of net sales, compared to $144.7 million for the first nine months of 2019, or 7.4% of net sales.~~

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Liquidity and Capital Resources

Total assets, total liabilities and total stockholders' equity were $11.9 billion, $8.5 billion and ~~$5.0~~$3.4 billion at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively. Total liabilities were $8.7 billion and $2.8 billion at September 30,~~ 2020, ~~and December 31, 2019, respectively. Total stockholders' equity was $3.2 billion and $2.3 billion at September 30, 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 ~~September 30, 2020,~~March 31, 2021, we had ~~$727.5~~$686.9 million in available borrowing capacity under our Revolving Credit Facility and ~~$135.0~~$214.0 million in available borrowing capacity under our Receivables Facility, which combined with available cash of ~~$212.6~~$136.5 million, provided liquidity of ~~$1.1~~$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 ~~September 30, 2020,~~March 31, 2021, approximately ~~75%~~69% of our debt portfolio was comprised of fixed rate debt.

~~In connection with~~As described in Note 8, "Debt" of our Notes to the ~~Merger,~~unaudited Condensed Consolidated Financial Statements, on January 14, 2021 (the “Redemption Date”), we ~~obtained debt financing comprised of senior unsecured notes in~~redeemed the $500 million aggregate principal amount of ~~$2.8 billion,~~our 2021 Notes at a ~~new senior secured asset-based~~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 available cash, as well as borrowings under our accounts receivable securitization and revolving credit ~~facility in aggregate principal amount of $1.1 billion, and an amended account receivable securitization facility with a purchase limit up to $1.0 billion. Prior to the completion of~~facilities.

Since the merger with Anixter, we ~~also simultaneously entered into tender offers~~have used cash and consent solicitations with respect to Anixter's 5.50% Senior Notes due 2023 and 6.00% Senior Notes due 2025 (collectively, the "Anixter Senior Notes"). Upon the expiration and settlement of the tender offers and consent solicitations, approximately $63 million in aggregate principal amount of the Anixter Senior Notes remain outstanding.

~~We used~~ the net proceeds from the ~~issuance~~divestiture of ~~senior unsecured notes, together with borrowings under the new senior secured asset-based revolving credit facility~~WESCO's legacy utility and ~~amended accounts receivable securitization facility, as well as existing~~data communications businesses in Canada to reduce our debt, net of cash, ~~on hand to consummate the merger. For the third quarter of 2020, we reduced our outstanding indebtedness~~ by approximately ~~$193~~$534 million. Over the next several quarters, it is expected that excess liquidity will be directed primarily at debt reduction and merger-related integration 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, ~~was 5.3 as of September 30, 2020,~~ on a pro forma basis, was 4.9 as of March 31, 2021 and ~~2.6~~5.3 as of December 31, ~~2019, as reported.~~2020. In addition, we are in compliance with all covenants and restrictions contained in our debt agreements as of ~~September 30, 2020.~~March 31, 2021.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

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


		Pro Forma(1)		Reported			Pro Forma(1)
		Twelve Months Ended					Twelve Months Ended
(In millions of dollars, except ratio)	(In millions of dollars, except ratio)	September 30, 2020		December 31, 2019		(In millions of dollars, except ratio)	March 31, 2021		December 31, 2020
Net income attributable to WESCO International		$	264.1	$	223.4
Net income attributable to common stockholders						Net income attributable to common stockholders	$	90.3	$	115.6
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	(1.2)		(1.2)		Net loss attributable to noncontrolling interests	(0.3)		(0.5)
Preferred stock dividends	Preferred stock dividends	15.8		—		Preferred stock dividends	44.5		30.1
Income tax expense		40.1		59.9
Provision for income taxes						Provision for income taxes	39.6		55.7
Interest expense, net	Interest expense, net	216.7		64.2		Interest expense, net	292.9		255.8
Depreciation and amortization	Depreciation and amortization	145.5		62.1		Depreciation and amortization	161.5		153.5
EBITDA	EBITDA	681.0		408.4		EBITDA	628.5		610.2
Other, net	Other, net	2.4		0.6		Other, net	(4.8)		4.6
Stock-based compensation	Stock-based compensation	43.9		19.1		Stock-based compensation	30.3		34.7
Merger-related costs and fair value adjustments	Merger-related costs and fair value adjustments	166.8		3.1		Merger-related costs and fair value adjustments	245.6		206.7
Gain on sale of asset		(19.8)		—
Out-of-period adjustment						Out-of-period adjustment	18.9		18.9
Net gain on sale of asset and Canadian divestitures						Net gain on sale of asset and Canadian divestitures	(28.7)		(19.8)
Adjusted EBITDA	Adjusted EBITDA	$	874.3	$	431.2	Adjusted EBITDA	$	889.8	$	855.3

		As of					As of
		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Short-term borrowings and current debt		$	28.8	$	26.7
Short-term borrowings and current portion of long-term debt						Short-term borrowings and current portion of long-term debt	$	20.8	$	528.8
Long-term debt	Long-term debt	4,878.1		1,257.1		Long-term debt	4,592.7		4,370.0
Debt discount and debt issuance costs(2)	Debt discount and debt issuance costs(2)	92.3		8.8		Debt discount and debt issuance costs(2)	83.6		88.2
Fair value adjustments to Anixter Senior Notes due 2023 and 2025(2)	Fair value adjustments to Anixter Senior Notes due 2023 and 2025(2)	(1.8)		—		Fair value adjustments to Anixter Senior Notes due 2023 and 2025(2)	(1.5)		(1.7)
Total debt	Total debt	4,997.4		1,292.6		Total debt	4,695.6		4,985.3
Less: Cash and cash equivalents	Less: Cash and cash equivalents	352.2		150.9		Less: Cash and cash equivalents	303.9		449.1
Total debt, net of cash	Total debt, net of cash	$	4,645.2	$	1,141.7	Total debt, net of cash	$	4,391.7	$	4,536.2

Financial leverage ratio	Financial leverage ratio	5.3		2.6		Financial leverage ratio	4.9		5.3

(1)Pro forma ~~EBITDA and pro forma~~ adjusted EBITDA ~~for~~includes the ~~trailing twelve month period ended September 30, 2020 gives effect to~~financial results of WESCO's legacy utility and data communications businesses in Canada, which were divested in the ~~combination~~first quarter of ~~WESCO and Anixter as if it had occurred at~~2021 under a Consent Agreement with the ~~beginning~~Competition Bureau of ~~such period.~~Canada.

(2)Long-term debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and ~~include~~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, excluding debt discount, debt issuance costs and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the trailing twelve months EBITDA before foreign exchange and other non-operating expenses ("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 ana U.S. operating branch and WESCO's legacy utility and data communications businesses in ~~the U.S.~~Canada. Pro forma financial leverage ratio is calculated by dividing total debt, excluding debt discount and debt issuance costs, ~~and fair value adjustments,~~ net of cash, by pro forma adjusted EBITDA.

~~As a result~~ 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 ~~Tax Cuts and Jobs Act of 2017 (the "TCJA"), we reevaluated our intent and ability to repatriate foreign earnings.~~Consequently, during the years ended December 31, 2019 and 2018, we repatriated a portion of the previously taxed earnings attributable to our foreign operations. We continue to assert that the remaining undistributed earnings of our foreign subsidiaries, the majority of which were subject to the one-time tax imposed by the TCJA, are indefinitely reinvested. Upon any future repatriation, additional tax expense or benefit may be incurred; however, it is not practicable to determine the amount at such time.

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 indicated that the carrying value of goodwill and indefinite-lived intangible assets may not berespective trailing twelve month period.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

~~recoverable. Accordingly, we performed an interim test for impairment as~~Most of ~~March 31, 2020. There were no impairment losses identified as a result of this interim test.~~

~~As disclosed in Note 1~~the undistributed earnings of our ~~Notes~~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 the Tax Cuts and Jobs Act of 2017 ("TCJA"). Except for a portion of foreign earnings previously taxed in the U.S. that can effectively be distributed without further material U.S. or foreign taxation, we continue to assert that the ~~unaudited Condensed Consolidated Financial Statements, we identified new operating segments during the third quarter of 2020, which changed the composition~~undistributed earnings of our ~~reporting units. Accordingly, we reassigned goodwill to~~foreign subsidiaries are indefinitely reinvested. To the new reporting units using a relative fair value allocation approach. We performed a goodwill impairment test immediately before and after we reorganized our reporting structure. Goodwill was tested for impairment on a reporting unit level andextent the evaluation involved comparing the fair value of each reporting unit to its carrying value. The fair values of the reporting units were determined using a combination of a discounted cash flow analysis and market multiples. In performing the quantitative assessments, management 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 market participants' cost of capital. There were no impairment losses identified as a result of these tests.

~~Although all~~earnings of our reporting units have fair values that currently exceed the respective carrying values, the EES reporting unit with goodwill of $809.9 million had an estimated fair value that exceeded its respective carrying value by less than 10%. The determination of fair value of the reporting units involves significant management judgment, particularly as it relates to the underlying assumptions and factors around expected operating margins and discount rate.

~~Due to the ongoing uncertainty surrounding the current macroeconomic environment and conditions~~foreign subsidiaries are distributed in the ~~markets in which we operate, as well as the risk~~form of dividends, such earnings may be subject to additional taxes. We believe that we ~~may not fully realize~~are able to maintain a sufficient level of liquidity for our domestic operations and commitments without incurring any material tax cost ~~savings, operating synergies or revenue improvement as a result of~~to repatriate cash held by our acquisition of Anixter, there can be no assurance that the fair values of our reporting units will exceed their carrying values in the future, and that goodwill and indefinite-lived intangible assets will be fully recoverable.foreign subsidiaries.

Cash Flow

Operating Activities. Net cash generated from operations for the first ~~nine~~three months of ~~2020~~2021 totaled ~~$418.9~~$120.5 million, compared with net cash provided by operating activities of ~~$116.7~~$31.5 million for the first ~~nine~~three months of ~~2019.~~2020. Operating activities included net income of ~~$79.8~~$59.2 million and adjustments to net income totaling ~~$70.3 million.~~$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 ~~nine~~three months of ~~2020~~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 ~~$122.6 million, an increase in accounts payable of $80.5~~$40.5 million, a decrease in ~~inventories~~other accounts receivable of ~~$77.7 million, an increase in accrued payroll and benefit costs of $25.9~~$7.6 million, and a decrease in ~~trade accounts receivable~~other current and noncurrent assets of ~~$3.6~~$17.1 million. Primary uses of cash in the first ~~nine~~three months of ~~2020 included:~~2021 included an increase in ~~prepaid expenses and other assets~~inventories of ~~$26.7 million; and,~~$124.8 million to support increased customer demand, an increase in ~~other~~trade accounts receivable of ~~$14.7~~$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 ~~nine~~three months of ~~2019~~2020 totaled ~~$116.7~~$31.5 million, which included net income of ~~$169.5~~$34.2 million and adjustments to net income totaling ~~$61.5~~$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 ~~nine~~three months of ~~2019~~2020 included ~~an increase~~a decrease in ~~accounts payable~~inventories of ~~$46.9~~$37.8 million, a decrease in other accounts receivable of ~~$15.5~~$19.2 million, and an increase in other current and noncurrent liabilities of ~~$4.4~~$7.4 million. Primary uses of cash in the first ~~nine~~three months of ~~2019 included:~~2020 included an increase in trade accounts receivable of ~~$122.9 million;~~$53.9 million, a decrease in accrued payroll and benefit costs of ~~$36.1 million; an increase~~$19.0 million, a decrease in ~~prepaid expenses and other assets~~accounts payable of ~~$20.7 million;~~$10.9 million, and an increase in ~~inventories~~other current and noncurrent assets of ~~$1.5~~$3.1 million.

Investing Activities. Net cash ~~used in~~provided by investing activities for the first ~~nine~~three months of ~~2020~~2021 was ~~$3,723.9~~$44.5 million, compared with ~~$53.5~~$110.3 million of net cash used during the first ~~nine~~three months of ~~2019.~~2020. Included in the first ~~nine~~three months of ~~2020~~2021 was ~~$3,707.6~~$54.1 million ~~to fund a portion~~ of net proceeds from the ~~merger with Anixter,~~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. ~~During~~Included in the first ~~nine~~three months of ~~2019, we made payments~~2020 was a $100.0 million termination fee associated with the acquisition of ~~$27.7 million~~Anixter, as described in Note 4, "Acquisitions and Disposals" of our Notes to ~~acquire Sylvania Lighting Solutions ("SLS").~~the unaudited Condensed Consolidated Financial Statements. Capital expenditures were ~~$42.6~~$10.2 million for the ~~nine~~three month period ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$30.3~~$15.8 million for the ~~nine~~three month period ended ~~September 30, 2019.~~March 31, 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 ~~nine~~three months of ~~2020 was $3,507.3~~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 ~~$18.1~~our Revolving Credit Facility, as well as borrowings and repayments of $243.0 million ~~of net cash used in financing~~and $248.0 million, respectively, related to our Receivables Facility. Financing activities for the first ~~nine~~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 ~~nine~~three months of 2020, financing activities consisted of ~~$2,815.0 million of net proceeds from the issuance of senior unsecured notes to finance a portion of the merger with Anixter,~~ borrowings and repayments of ~~$980.3~~$360.5 million and ~~$655.7~~$260.5 million, respectively, related to our prior ~~and amended~~ revolving credit ~~facilities,~~facility, as well as borrowings and repayments of ~~$865.0~~$225.0 million and ~~$390.0~~$40.0 million, respectively, related to ~~the Receivables Facility.~~our prior accounts receivable securitization facility. Financing activities for the first ~~nine~~three months of 2020 also included net repayments related to our various international lines of credit of approximately ~~$8.3~~$0.4 million. ~~Additionally, the Company paid $79.9 million of debt issuance costs associated with financing the merger with Anixter.~~

During the first nine months of 2019, financing activities consisted of borrowings and repayments of $625.4 million and $662.4 million, respectively, related to the then outstanding revolving credit facility, borrowings and repayments of $480.0 million and $265.0 million, respectively, related to the then outstanding accounts receivable securitization facility, and repayments of $24.8 million to pay off our Term Loan Facility. Financing activities for the first nine months of 2019 also included net repayments related to our various international lines of credit of approximately $4.8 million. Additionally, financing activities for the first nine months of 2019 included the repurchase of $152.7 million of the Company's common

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~stock, of which $150.0 million was pursuant to an accelerated stock repurchase transaction under the share repurchase plan announced on December 13, 2017 and amended on October 31, 2018.~~

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 ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, pricing related to inflation did not have a material impact on our sales.

Seasonality

Our operating results are not significantly affected by seasonal factors. Sales during the first and fourth quarters are usually affected by a reduced level of activity due to the impact of weather on projects. Sales typically increase beginning in March, with slight fluctuations per month through October. During periods of economic expansion or contraction, our sales by quarter have varied significantly from this pattern.

Guarantor Financial Statements

WESCO Distribution (the ~~“Issuer��~~“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 “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 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 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 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 Guarantors. Therefore, the 2024 Notes and the guarantee of the Guarantors (the “Guarantee”) are effectively subordinated to the liabilities of the non-Guarantor Subsidiaries.

The Guarantee constitutes a senior obligation of the Guarantors, ranking pari passu in right of payment with all other senior obligations of the Guarantors, including obligations under other unsubordinated indebtedness. The Guarantee is effectively subordinated to all existing and future obligations incurred by the Guarantors that are secured by liens on any property or assets of the 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 Guarantors that are, by their terms, subordinated in right of payment to the Guarantee.

The 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 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

~~WESCO INTERNATIONAL, INC. AND SUBSIDIARIES~~

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.

The following tables present summarized financial information for WESCO International, 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
		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets	Assets					Assets
Current assets	Current assets	$	2,266,563	$	582,075	Current assets	$	2,369,262	$	2,259,748
Due from non-guarantor subsidiaries	Due from non-guarantor subsidiaries	298,927		465,012		Due from non-guarantor subsidiaries	298,508		277,957
Total current assets	Total current assets	2,565,490		1,047,087		Total current assets	2,667,770		2,537,705
Noncurrent assets	Noncurrent assets	3,652,213		484,552		Noncurrent assets	3,338,955		3,368,247
Total assets	Total assets	$	6,217,703	$	1,531,639	Total assets	$	6,006,725	$	5,905,952
Liabilities	Liabilities					Liabilities
Current liabilities	Current liabilities	$	1,277,697	$	445,075	Current liabilities	$	1,440,047	$	1,821,835
Due to non-guarantor subsidiaries	Due to non-guarantor subsidiaries	1,910,000		3,133,326		Due to non-guarantor subsidiaries	2,319,889		2,046,613
Total current liabilities	Total current liabilities	3,187,697		3,578,401		Total current liabilities	3,759,936		3,868,448
Noncurrent liabilities	Noncurrent liabilities	4,846,438		1,067,486		Noncurrent liabilities	4,376,826		4,169,639
Total liabilities	Total liabilities	$	8,034,135	$	4,645,887	Total liabilities	$	8,136,762	$	8,038,087


Summarized Statement of Income (Loss)
(In ~~thousands of dollars)~~thousands)
(unaudited)
	~~Nine~~Three Months Ended
	~~September 30, 2020~~March 31, 2021
Net sales(1)	$	~~4,004,366~~2,253,878
Gross profit(1)	~~728,675~~438,544
Net loss	$	~~(110,754)~~(49,616)

(1) Includes ~~$27.2~~$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

All statements made herein that are not historical facts should be considered as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements 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, statements regarding ~~the process to divest the legacy WESCO Utility and Datacom businesses in Canada, including the expected length of the process,~~ 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 and financial performance, and other statements identified by words such as "anticipate," "plan," "believe," "estimate," "intend," "expect," "project," "will" and similar words, phrases or expressions. These forward-looking statements are based on current expectations and beliefs of WESCO's management, as well as assumptions made by, and information currently available to, WESCO's management, current market trends and market conditions and involve risks and uncertainties, many of which are 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. Accordingly, you should not place undue reliance on such statements.

Those risks, uncertainties and assumptions include the risk of any unexpected costs or expenses resulting from the 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 combined company to retain customers and retain and hire key personnel and maintain relationships with its suppliers, customers and other business relationships and on its operating results and business generally, or the risk that problems may arise in successfully integrating the businesses of the companies, ~~or that the combined company could be required to divest one or more businesses,~~ which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the 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 the combined company's business, results of operations and financial conditions, ~~the risk that the divestiture of the legacy WESCO Utility and Datacom businesses in Canada may take longer than expected~~ and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond each company's control. Additional factors that could cause results to differ materially from those described above can be found in WESCO's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 and WESCO's other reports filed with the SEC.

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.

On June 22, 2020, the Company completed the acquisition of Anixter International Inc. ("Anixter"), which operated under its own set of systems and internal controls. During the quarterly period ended September 30, 2020, management transitioned certain of Anixter’s processes to the Company’s internal control environment. The Company will continue the process of integrating internal controls over financial reporting during the first year of this business combination.

There were no ~~other~~ changes in the Company’s internal control over financial reporting that occurred during the quarterly period ended ~~September 30, 2020,~~March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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.~~

Our business and operations have been and will continue to be adversely affected by the COVID-19 pandemic, and the duration and extent to which it will affect our business, financial condition, results of operations, cash flows, liquidity, and stock price remains uncertain.

The global COVID-19 pandemic has created significant disruption to the broader economies, financial markets, workforces, business environment, and our suppliers and customers. It began to adversely affect our business, results of operations, and financial condition late in the first quarter of 2020 and is continuing, and the effects include lost or delayed revenue to us. The pandemic has caused significant disruptions to our business due to, among other things, reduced transportation, restrictions on travel, disruptions to our suppliers and global supply chain, the impact on our customers and their demand for our products and services and ability to pay for them, as well as temporary closures of facilities. Some of the actions we have taken in response to the COVID-19 pandemic, such as implementing remote working arrangements, may also create increased vulnerability to cybersecurity incidents and other risks.

The duration and extent to which the COVID-19 pandemic will continue to impact our business, results of operations, and financial condition depends on many evolving factors and future developments for which there is significant uncertainty, such as the severity and transmission rate of the virus, governmental, business and individuals' actions taken in response, the development and availability of effective treatment or vaccines, the extent and effectiveness of containment actions, as well as the matters noted above. In addition, the COVID-19 pandemic may continue to adversely affect many of our suppliers’ and customers' businesses and operations, including the ability of our suppliers to manufacture or obtain the products we sell or to meet delivery requirements and commitments, and our customers’ demand for our products and services and the ability to pay for them, all of which could adversely affect our sales and results of operations.

While we are supporting essential businesses and our branch locations have remained operational consistent with existing governmental and public health authority directives to date, there is significant uncertainty as to what steps we may need to take in response to the pandemic in the future (including in response to any new health and safety measures or restrictions), and what impact they will have on our business and operations. For example, some areas lifted restrictions only to impose further restrictions in the wake of increases in COVID-19 cases. 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. Due to the uncertainty of COVID-19, we will continue to assess the situation, including the impact of governmental regulations or restrictions that might be imposed or re-imposed in response to the pandemic. If we are unable to appropriately respond to or manage the impact of these events, our business and results of operations may be adversely affected.

In addition, the impact of COVID-19 on macroeconomic conditions has adversely affected and may continue to affect the functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, and interest rates. Even after the COVID-19 pandemic subsides, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has or may occur. The long-term financial and economic impacts of the COVID-19 pandemic may continue for a significant period and cannot be reliably quantified or estimated at this time due to the uncertainty of these future developments.

Any of these events could materially adversely affect our business, financial condition, results of operations, cash flows, liquidity and stock price, 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

~~Combining WESCO and Anixter may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the merger may not be realized.~~

On June 22, 2020, WESCO completed its acquisition of Anixter. The success of the merger, including anticipated benefits and cost savings, depends on the successful combination and integration of the companies’ businesses. It is possible that the integration process could result in the loss of key employees, higher than expected costs, diversion of management attention, the disruption of either company’s ongoing legacy businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with customers, suppliers and employees or to achieve the anticipated benefits and cost savings of the merger.

If we experience difficulties with the integration process, the anticipated benefits of the merger may not be realized or may take longer to realize than expected. These integration matters could have an adverse effect on us for an undetermined period. In addition, the actual cost savings of the merger could be less than anticipated.

WESCO has agreed to divest certain assets of the combined company, in accordance with the terms of a Consent Agreement dated August 6, 2020, between WESCO and the Competition Bureau of Canada. Under the Consent Agreement, WESCO has agreed to divest the legacy WESCO Utility and Datacom businesses in Canada. No assurances can be given that the divestiture of these businesses will be completed on favorable terms, in a short period of time, or without disruption to the business.

As of the acquisition date, Anixter had locations in approximately 50 countries to support its international operations. We may be subject to additional risks associated with owning and operating businesses in these foreign markets and jurisdictions, including those arising from import and export controls, foreign currency exchange rate changes, developments in political, regulatory or economic conditions impacting those operations, and different legal, tax, accounting and regulatory requirements.

~~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)


~~November 9, 2020~~May 7, 2021	By:	/s/ David S. Schulz
(Date)		David S. Schulz
		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)


	Awards	Weighted- Average Fair Value
Unvested at December 31, 2019	363,729	$	60.00
Granted	655,825	37.38
Vested	(80,486)	69.68
Forfeited	(8,364)	60.03
Unvested at September 30, 2020	930,704	$	43.23