WESCO INTERNATIONAL INC

Previous wording

The UBS segment, with approximately 2,900 employees supporting customers primarily in the U.S. and Canada, provides products and services to investor-owned utilities, public power companies, including municipalities, as well as global service providers, wireless providers, broadband operators and the contractors that service these customers. The products sold into the utility and broadband markets include wire and cable, transformers, transmission and distribution hardware, switches, protective devices, connectors, lighting, conduit, fiber and copper cable, connectivity products, pole line hardware, racks, cabinets, safety and MRO products, and point-to-point wireless devices. The UBS segment also offers a complete set of service solutions to improve customer supply chain efficiencies. The UBS segment also includes Wesco’s integrated supply (“WIS”) business, which provides products and services to large industrial and commercial end-users to support their MRO spend. In the first quarter of 2024, Wesco entered into an agreement to sell the WIS business. The sale was completed on April 1, 2024.

Current wording

The UBS segment, with approximately 2,300 employees supporting customers primarily in the U.S. and Canada, provides products and services to investor-owned utilities, public power companies, including municipalities, as well as global service providers, wireless providers, broadband operators and the contractors that service these customers. The products sold into the utility and broadband markets include wire and cable, transformers, transmission and distribution hardware, switches, protective devices, connectors, lighting, conduit, fiber and copper cable, connectivity products, pole line hardware, racks, cabinets, safety and MRO products, and point-to-point wireless devices. The UBS segment also offers a complete set of service solutions to improve customer supply chain efficiencies. The UBS segment previously included Wesco’s integrated supply (“WIS”) business, which provided products and services to large industrial and commercial end-users to support their MRO spend. In the first quarter of 2024, Wesco entered into an agreement to sell the WIS business. The sale was completed on April 1, 2024.

Previous wording

Our financial results for the first three months of 2024 compared to the first three months of 2023 reflect a single-digit decline in sales driven by a decrease in volume, partially offset by the benefits of price inflation, as well as margin contraction, and higher payroll and payroll-related expenses and costs to operate our facilities, partially offset by lower professional services and consulting fees and transportation costs.

Current wording

Our financial results for the first six months of 2024 compared to the first six months of 2023 reflect a single-digit decline in sales driven by a decrease in volume partially offset by the benefits of price inflation in certain segments, as well as margin contraction, loss on abandonment of assets, and higher facilities and IT costs, partially offset by the gain recognized on the divestiture of our WIS business, lower professional services and consulting fees, transportation costs, and payroll and payroll-related expenses.

Previous wording

Net sales for the first three months of 2024 decreased $171.9 million, or 3.1%, over the corresponding prior year period. The decrease reflects estimated volume decline of approximately 4% driven primarily by a decrease in volume for the UBS segment, with less significant decreases in the CSS and EES segments. This negative factor was partially offset by the estimated impact of changes in price of approximately 1%, as well as the positive impact of fluctuations in foreign exchange rates of 0.1%. Cost of goods sold as a percentage of net sales was 78.7% and 78.1% for the first three months of 2024 and 2023, respectively. The unfavorable increase of 60 basis points reflects a shift in sales mix, lower supplier volume rebates, inventory adjustments, and lower cash discounts.

Current wording

Net sales for the first six months of 2024 decreased $437.7 million, or 3.9%, over the corresponding prior year period. The decrease reflects estimated volume decline of approximately 4% driven primarily by a decrease in volume for the UBS segment, with less significant decreases in the CSS and EES segments, as well as the decrease from the divestiture of the WIS business of 1.8%, and the negative impact of fluctuations in foreign exchange rates of 0.1%. These negative factors were partially offset by the estimated impact of changes in price of approximately 2%. Cost of goods sold as a percentage of net sales was 78.4% and 78.2% for the first six months of 2024 and 2023, respectively. The unfavorable increase of 20 basis points reflects a shift in sales mix, lower supplier volume rebates, inventory adjustments, and lower cash discounts.

Previous wording

Income from operations was $263.0 million for the first three months of 2024 compared to $346.4 million for the first three months of 2023, a decrease of $83.4 million, or 24.1%. Income from operations as a percentage of net sales was 4.9% for the current three-month period, compared to 6.3% for the first three months of the prior year. Income from operations for the first three months of 2024 includes restructuring costs of $8.0 million, digital transformation costs of $6.1 million, and excise taxes on excess pension plan assets of $4.8 million. Adjusted for these amounts, income from operations was 5.3% of net sales for the first three months of 2024. For the first three months of 2023, income from operations was 6.6% of net sales, as adjusted for merger-related and integration costs of $11.2 million, and digital transformation costs of $8.3 million. For the three months ended March 31, 2024, income from operations declined compared to the prior year due to a decline in sales and higher cost of goods sold as a percentage of net sales, as well as higher salaries due to wage inflation and an increase in costs to operate our facilities, primarily due to rental cost increases. These negative factors were partially offset by a decrease in professional services and consulting fees and volume-related costs such as transportation.

Current wording

Income from operations was $586.5 million for the first six months of 2024 compared to $710.2 million for the first six months of 2023, a decrease of $123.7 million, or 17.4%. Income from operations as a percentage of net sales was 5.4% for the current six-month period, compared to 6.3% for the first six months of the prior year. Income from operations for the first six months of 2024 includes a loss on abandonment of assets of $17.8 million as a result of the write-off of certain capitalized cloud computing arrangement implementation costs relating to a third-party developed operations management software product that will no longer be utilized, digital transformation costs of $12.1 million, restructuring costs of $9.0 million, and excise taxes on excess pension plan assets of $4.8 million. Adjusted for these amounts, income from operations was 5.8% of net sales for the first six months of 2024. For the first six months of 2023, income from operations was 6.7% of net sales, as adjusted for digital transformation costs of $15.6 million, merger-related and integration costs of $14.8 million, restructuring costs of $9.8 million, and accelerated trademark amortization of $0.8 million. For the six months ended June 30, 2024, income from operations declined compared to the prior year due to a decline in sales and higher cost of goods sold as a percentage of net sales, as well as an increase in costs to operate our facilities, primarily due to rental cost increases and an increase in IT costs. These negative factors were partially offset by a decrease in professional services and consulting fees, volume-related costs such as transportation, and lower payroll and payroll-related expenses.

Previous wording

Operating cash flow for the first three months of 2024 was $746.3 million. Net cash provided by operating activities included net income of $116.1 million and non-cash adjustments to net income totaling $70.1 million, which primarily consisted of depreciation and amortization of $45.5 million, stock-based compensation expense of $10.1 million, amortization of debt discount and debt issuance costs of $4.1 million, pension settlement cost of $5.5 million, and deferred income taxes of $5.2 million. Operating cash flow was positively impacted by net changes in assets and liabilities of $560.1 million, which primarily consisted of an increase in accounts payable of $620.9 million, primarily due to the impact of a system conversion, the timing of inventory purchases, and a bank holiday at the end of the quarter that delayed payments, partially offset by an increase in trade accounts receivable of $116.1 million due to the timing of receipts from customers. These cash inflows were partially offset by the payment of management incentive compensation earned in 2023, which resulted in a cash outflow of approximately $49.2 million in the first three months of 2024, which was partially offset by the accrual of management incentive compensation earned in the current year.

Current wording

Operating cash flow for the first six months of 2024 was $522.5 million. Net cash provided by operating activities included net income of $348.9 million and non-cash adjustments to net income totaling $32.1 million, which primarily comprised depreciation and amortization of $91.6 million, a loss on abandonment of assets of $17.8 million, stock-based compensation expense of $12.8 million, amortization of debt discount and debt issuance costs of $8.8 million, a loss recognized on the extinguishment of debt of $6.8 million, and pension settlement cost of $5.5 million, partially offset by a gain of $102.9 million, resulting from the divestiture of our WIS business, as described in Note 4, “Acquisitions and Divestitures”. Operating cash flow was positively impacted by net changes in assets and liabilities of $141.6 million, which primarily comprised an increase in accounts payable of $341.9 million, primarily due to the timing of inventory purchases and payments to suppliers, partially offset by an increase in trade accounts receivable of $258.8 million due to the timing of receipts from customers. These cash inflows were partially offset by the payment of management incentive compensation earned in 2023, which resulted in a cash outflow of approximately $50.4 million in the first six months of 2024, which was partially offset by the accrual of management incentive compensation earned in the current year.

Previous wording

Investing activities primarily included $20.4 million of capital expenditures mostly consisting of internal-use computer software and information technology hardware to support our digital transformation initiatives, as well as equipment and capital leases and leasehold improvements to support our global network of branches, warehouses and sales offices.

Current wording

Investing activities primarily included $334.2 million in proceeds from the divestiture of the WIS business, net of cash transferred, partially offset by $41.2 million of capital expenditures mostly consisting of internal-use computer software and information technology hardware to support our digital transformation initiatives, as well as equipment and leasehold improvements to support our global network of branches, warehouses and sales offices, and $30.1 million paid to acquire entroCIM.

Previous wording

Financing activities primarily consisted of proceeds of $900.0 million and $850.0 million related to the issuance of the 2029 Notes and 2032 Notes, respectively, net repayments of $953.0 million related to our revolving credit facility (the “Revolving Credit Facility”), net repayments of $912.0 million related to our accounts receivable securitization facility (the “Receivables Facility”), and payment of total debt issuance costs of $26.6 million related to the issuance of the 2029 and 2032 Notes and amendments to the Revolving Credit Facility and Receivables Facility. The first three months of 2024 also included $50.0 million of common stock repurchases, $25.2 million of payments for taxes related to the exercise and vesting of stock-based awards, and $20.9 million and $14.4 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively.

Current wording

Financing activities primarily comprised the redemption of our $1,500.0 million aggregate principal amount of 7.125% Senior Notes due 2025 (the “2025 Notes”), proceeds of $900.0 million and $850.0 million related to the issuance of our 6.375% Senior Notes due 2029 (the “2029 Notes”) and our 6.625% Senior Notes due 2032 (the “2032 Notes” and, together with the 2029 Notes, the “2029 and 2032 Notes”), respectively. Additionally, financing activities comprised net repayments of $328.0 million related to our revolving credit facility (the “Revolving Credit Facility”), net repayments of $40.0 million related to our accounts receivable securitization facility (the “Receivables Facility”), and payment of total debt issuance costs of $26.6 million related to the issuance of the 2029 and 2032 Notes and amendments to the Revolving Credit Facility and Receivables Facility. The first six months of 2024 also included $350.0 million of common stock repurchases, $41.2 million and $28.7 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively, and $26.0 million of payments for taxes related to the exercise and vesting of stock-based awards.

Previous wording

As of March 31, 2024, we had $1.7 billion in total available borrowing capacity under our Revolving Credit Facility and $846.8 million of available borrowing capacity under our Receivables Facility. The Revolving Credit Facility and the Receivables Facility both mature in March 2027. As of March 31, 2024, we also had $8.2 million of borrowing capacity available under our international lines of credit that did not directly reduce availability under the Revolving Credit Facility.

Current wording

As of June 30, 2024, we had $1.1 billion in total available borrowing capacity under our Revolving Credit Facility and $40.0 million of available borrowing capacity under our Receivables Facility. The Revolving Credit Facility and the Receivables Facility both mature in March 2027. As of June 30, 2024, we also had $8.2 million of borrowing capacity available under our international lines of credit that did not directly reduce availability under the Revolving Credit Facility.

Previous wording

Note: Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, fluctuations in foreign exchange rates and number of workdays from the reported percentage change in consolidated net sales. Workday impact represents the change in the number of operating days period-over-period after adjusting for weekends and public holidays in the United States; there was no change in the number of workdays in the first quarter of 2024 compared to the first quarter of 2023.

Current wording

Note: Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, fluctuations in foreign exchange rates and number of workdays from the reported percentage change in consolidated net sales. Workday impact represents the change in the number of operating days period-over-period after adjusting for weekends and public holidays in the United States; there was no change in the number of workdays in the second quarter of 2024 compared to the second quarter of 2023.

Previous wording

Selling, general and administrative (“SG&A”) expenses primarily include payroll and payroll-related costs, shipping and handling, travel and entertainment, facilities, utilities, information technology expenses, professional and consulting fees, credit losses, gains (losses) on the sale of property and equipment, as well as real estate and personal property taxes. SG&A expenses for the first quarter of 2024 totaled $829.4 million versus $817.7 million for the first quarter of 2023, an increase of $11.7 million, or 1.4%. As a percentage of net sales, SG&A expenses were 15.5% and 14.8% for the first quarter of 2024 and 2023, respectively. SG&A expenses for the first quarter of 2024 include $8.0 million of restructuring costs, $6.1 million of digital transformation costs, and $4.8 million of excise taxes on excess pension plan assets. SG&A expenses for the first quarter of 2023 include merger-related and integration costs of $11.2 million and digital transformation costs of $8.3 million. Adjusted for digital transformation costs, restructuring costs, and excise taxes on excess pension plan assets, SG&A expenses were $810.5 million, or 15.1% of net sales, for the first quarter of 2024. Adjusted for merger-related and integration costs and digital transformation costs, SG&A expenses were $798.2 million, or 14.5% of net sales, for the first quarter of 2023.

Current wording

Selling, general and administrative (“SG&A”) expenses primarily include payroll and payroll-related costs, shipping and handling, travel and entertainment, facilities, utilities, information technology expenses, professional and consulting fees, credit losses, gains (losses) on the sale, disposal, or abandonment of property and equipment, as well as real estate and personal property taxes. SG&A expenses for the second quarter of 2024 totaled $828.4 million versus $831.7 million for the second quarter of 2023, a decrease of $3.3 million, or 0.4%. As a percentage of net sales, SG&A expenses were 15.1% and 14.5% for the second quarter of 2024 and 2023, respectively. SG&A expenses for the second quarter of 2024 include a $17.8 million loss on abandonment of assets, $6.1 million of digital transformation costs, and $0.9 million of restructuring costs. SG&A expenses for the second quarter of 2023 include $9.8 million of restructuring costs, $7.3 million of digital transformation costs, and $3.6 million of merger-related and integration costs. Adjusted for the loss on abandonment of assets, digital transformation costs, and restructuring costs, SG&A expenses were $803.6 million, or 14.7% of net sales, for the second quarter of 2024. Adjusted for restructuring costs, digital transformation costs, and merger-related and integration costs, SG&A expenses were $811.0 million, or 14.1% of net sales, for the second quarter of 2023.

Previous wording

SG&A payroll and payroll-related expenses for the first quarter of 2024 of $524.1 million increased by $11.9 million compared to the same period in 2023 as a result of higher salaries of $22.9 million due to wage inflation, partially offset by the impact of headcount reductions taken at the end of the second quarter of 2023. This increase in salaries is partially offset by a decrease in other payroll expenses of $9.1 million, primarily driven by a reduction in long-term incentive plan expense.

Current wording

SG&A payroll and payroll-related expenses for the second quarter of 2024 of $506.6 million decreased by $16.9 million compared to the same period in 2023 as a result of a decrease in other payroll expenses of $12.6 million, primarily driven by a reduction in long-term incentive plan expense, as well as lower salaries of $7.8 million due to the impact of headcount reductions taken at the end of the second quarter of 2023 and from the divestiture of the WIS business, partially offset by wage inflation. These decreases in other payroll expenses and salaries are partially offset by an increase of $6.7 million in commissions and incentives.

Previous wording

Net income and earnings per diluted share attributable to common stockholders were $101.4 million and $1.95, respectively, for the first quarter of 2024 compared to $182.7 million and $3.48, respectively, for the first quarter of 2023. Adjusted for restructuring costs, digital transformation costs, excise taxes on excess pension plan assets, pension settlement cost, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $119.2 million and $2.30, respectively, for the three months ended March 31, 2024. Adjusted for merger-related and integration costs, digital transformation costs, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $196.9 million and $3.75, respectively, for the three months ended March 31, 2023.

Current wording

Net income and earnings per diluted share attributable to common stockholders were $217.7 million and $4.28, respectively, for the second quarter of 2024 compared to $178.7 million and $3.41, respectively, for the second quarter of 2023. Adjusted for the loss on abandonment of assets, digital transformation costs, restructuring costs, the gain recognized on the divestiture of the WIS business, the loss on termination of a business arrangement, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $163.5 million and $3.21, respectively, for the three months ended June 30, 2024. Adjusted for restructuring costs, digital transformation costs, merger-related and integration costs, accelerated trademark amortization expense, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $194.3 million and $3.71, respectively, for the three months ended June 30, 2023.

Previous wording

The following tables reconcile selling, general and administrative expenses, income from operations, other non-operating expense, provision for income taxes and earnings per diluted share to adjusted selling, general and administrative expenses, adjusted income from operations, adjusted other non-operating expense, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:

Current wording

The following tables reconcile selling, general and administrative expenses, income from operations, other non-operating (income) expense, provision for income taxes and earnings per diluted share to adjusted selling, general and administrative expenses, adjusted income from operations, adjusted other non-operating (income) expense, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:

Previous wording

(6)The adjustments to income from operations have been tax effected at a rate of approximately 27% for the three months ended March 31, 2024 and 2023.

Current wording

(7)The adjustments to income from operations have been tax effected at a rate of approximately 27% for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Net sales were $5.4 billion for the first quarter of 2024 compared to $5.5 billion for the first quarter of 2023, a decrease of 3.1%. Adjusting for the favorable impact from fluctuations in foreign exchange rates of 0.1%, organic sales for the first quarter of 2024 declined by 3.2%, reflecting an approximately 4% decline in volume, driven by declines in all three segments, partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 1%.

Current wording

Net sales were $10.8 billion for the first six months of 2024 compared to $11.3 billion for the first six months of 2023, a decrease of 3.9%. Adjusting for the decrease from the divestiture of the WIS business of 1.8%, and the unfavorable impacts from fluctuations in foreign exchange rates of 0.1%, organic sales for the first six months of 2024 declined by 2.0%, reflecting an approximately 4% decline in volume, driven by declines in all three segments, partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 2%.

Previous wording

Cost of goods sold for the first quarter of 2024 was $4.2 billion compared to $4.3 billion for the first quarter of 2023, a decrease of $0.1 billion. Cost of goods sold as a percentage of net sales was 78.7% and 78.1% for the first quarter of 2024 and 2023, respectively. The unfavorable increase of 60 basis points reflects a shift in sales mix, lower supplier volume rebates due to the decrease in inventory purchases as a result of the lower sales volume noted above, inventory adjustments, and lower cash discounts.

Current wording

Cost of goods sold for the first six months of 2024 was $8.5 billion compared to $8.8 billion for the first six months of 2023, a decrease of $0.3 billion. Cost of goods sold as a percentage of net sales was 78.4% and 78.2% for the first six months of 2024 and 2023, respectively. The unfavorable increase of 20 basis points reflects a shift in sales mix, lower supplier volume rebates due to the decrease in inventory purchases as a result of the lower sales volume noted above, higher inventory adjustments, and lower cash discounts, partially offset by the impact from the divestiture of the WIS business.

Previous wording

SG&A expenses not related to payroll and payroll-related costs for the first quarter of 2024 were $305.3 million, a decrease of $0.2 million compared to the same period in 2023, which primarily reflects a decrease of $8.9 million in professional service and consulting fees, including decreases in merger-related and integration costs and costs related to digital transformation initiatives, and a decrease of $7.3 million in transportation costs due to the decrease in sales volume noted above. These decreases were partially offset by higher costs to operate our facilities of $7.9 million, higher information technology costs of $4.8 million, and an increase of $4.2 million in taxes, due to the excise taxes on excess pension assets in the first quarter of 2024.

Current wording

SG&A expenses not related to payroll and payroll-related costs for the first six months of 2024 were $627.1 million, an increase of $13.4 million compared to the same period in 2023, which primarily reflects an increase of $18.5 million in other income and deductions, driven by the loss on abandonment of assets, higher costs to operate our facilities of $14.7 million, an increase of $8.0 million in IT costs, and an increase of $5.3 million in taxes. These increases were partially offset by a $13.4 million decrease in professional service and consulting fees, including decreases in merger-related and integration costs and costs related to digital transformation initiatives, and a decrease of $10.7 million in transportation costs due to the decrease in sales volume noted above.

Previous wording

Income from operations was $263.0 million for the first quarter of 2024 compared to $346.4 million for the first quarter of 2023. The decrease of $83.4 million, or 24.1%, reflects a decrease in sales due to volume declines, higher cost of goods sold as a percentage of net sales, and higher SG&A expenses, as described above.

Current wording

Income from operations was $586.5 million for the first six months of 2024 compared to $710.2 million for the first six months of 2023. The decrease of $123.7 million, or 17.4%, reflects a decrease in sales due to volume declines, higher cost of goods sold as a percentage of net sales, and higher SG&A expenses, as described above.

Previous wording

Other non-operating expense totaled $21.6 million for the first quarter of 2024 compared to $10.1 million for the first quarter of 2023. Due to fluctuations in the U.S. dollar against certain foreign currencies, we recognized a net foreign currency exchange loss of $17.4 million for the first quarter of 2024 compared to a net loss of $9.5 million for the first quarter of 2023. We recognized net costs of $5.9 million and net benefits $0.3 million associated with the non-service cost components of net periodic pension cost (benefit) for the three months ended March 31, 2024 and 2023, respectively. Net costs associated with the non-service cost components of net periodic pension cost (benefit) for the first quarter of 2024 includes pension settlement cost of $5.5 million to recognize unrealized losses previously reported as a component of other comprehensive income (loss) related to the benefit obligation of the Anixter Inc. Pension Plan as a result of the final settlement of the plan. Adjusted for this amount, other non-operating expense was $16.1 million for the first quarter of 2024.

Current wording

Other non-operating income totaled $74.3 million for the first six months of 2024 compared to expense of $10.9 million for the first six months of 2023. In the first six months of 2024, we completed the divestiture of our WIS business and recognized a gain from the sale of $102.9 million. Additionally, in the first six months of 2024, we recognized a $3.8 million loss on termination of a business arrangement. Due to fluctuations in the U.S. dollar against certain foreign currencies, we recognized a net foreign currency exchange loss of $20.7 million for the first six months of 2024 compared to a net loss of $13.2 million for the first six months of 2023. We recognized net costs of $5.5 million and net benefits $0.7 million associated with the non-service cost components of net periodic pension cost (benefit) for the six months ended June 30, 2024 and 2023, respectively. The year-over-year increase in net periodic pension costs was due to pension settlement cost to recognize unrealized losses previously reported as a component of other comprehensive income (loss) related to the benefit obligation of the Anixter Inc. Pension Plan as a result of the final settlement of the plan in the first quarter of 2024. Adjusted for the gain on the divestiture of our WIS business, the loss on termination of a business arrangement, and the $5.5 million pension settlement cost described above, other non-operating expense was $19.3 million for the first six months of 2024.

Previous wording

The provision for income taxes was $30.9 million for the first quarter of 2024 compared to $44.1 million for the corresponding quarter of the prior year, resulting in effective tax rates of 21.0% and 18.3%, respectively. The higher effective tax rate in the current quarter is due to lower discrete income tax benefits resulting from the exercise and vesting of stock-based awards as compared to the prior year period.

Current wording

The provision for income taxes was $118.7 million for the first six months of 2024 compared to $115.9 million in last year's comparable period, resulting in effective tax rates of 25.4% and 22.9%, respectively. The higher effective tax rate for the first six months of 2024 is due to lower discrete income tax benefits resulting from the exercise and vesting of stock-based awards as compared to the prior year period.

Previous wording

Adjusted EBITDA, a non-GAAP financial measure, was $340.4 million for the first quarter of 2024, compared to $420.7 million for the first quarter of 2023. Adjusted EBITDA decreased $80.3 million, or 19.1% year-over-year. The decrease primarily reflects the $171.9 million decrease in net sales and a $11.7 million increase in SG&A expenses, partially offset by a corresponding decrease in cost of goods sold of $101.3 million, as described above. Included in the increase in SG&A expenses are restructuring costs of $8.0 million, cloud computing arrangement amortization of $2.9 million, and excise taxes on excess pension plan assets of $4.8 million, partially offset by the lack of merger-related and integration costs in the first quarter of 2024 compared to $11.2 million in the first quarter of 2023, as well as a year-over-year decrease in digital transformation costs of $2.2 million.

Current wording

Adjusted EBITDA, a non-GAAP financial measure, was $740.5 million for the first six months of 2024 compared to $863.0 million for the first six months of 2023. Adjusted EBITDA decreased $122.5 million, or 14.2% year-over-year. The decrease primarily reflects the $437.7 million decrease in net sales, and a $8.4 million increase in SG&A expenses, partially offset by a corresponding decrease in cost of goods sold of $322.7 million, as described above. Included in the increase in SG&A expenses were the loss on abandonment of assets of $17.8 million, cloud computing arrangement amortization of $5.9 million, and excise taxes on excess pension plan assets of $4.8 million, partially offset by the lack of merger-related and integration costs in the first six months of 2024 compared to $14.8 million in the first six months of 2023, as well as a year-over-year decrease in digital transformation and restructuring costs of $3.5 million and $0.8 million, respectively.

Previous wording

CSS reported net sales of $1,670.1 million for the first quarter of 2024 compared to $1,732.0 million for the first quarter of 2023, a decrease of $61.9 million, or 3.6%. Adjusting for the favorable impact from fluctuations in foreign exchange rates of 0.1%, CSS organic sales for the first quarter of 2024 declined by 3.7%, reflecting volume declines of approximately 4%, primarily as a result of declines in security solutions and enterprise network infrastructure, partially offset by growth in data center solutions. Changes in price did not have a material impact on the year-over-year decline in CSS organic sales.

Current wording

CSS reported net sales of $3,536.0 million for the first six months of 2024 compared to $3,582.9 million for the first six months of 2023, a decrease of $46.9 million, or 1.3%. Adjusting for the unfavorable impact from fluctuations in foreign exchange rates of 0.1%, CSS organic sales for the first six months of 2024 declined by 1.2%, primarily as a result of volume declines in the security solutions and enterprise network infrastructure businesses, partially offset by growth in the data center solutions business. Changes in price did not have a material impact on the year-over-year decline in CSS organic sales.

Previous wording

UBS reported net sales of $1,580.9 million for the first quarter of 2024 compared to $1,654.8 million for the first quarter of 2023, a decrease of $73.9 million, or 4.5%. Adjusting for the favorable impact from fluctuations in foreign exchange rates of 0.1%, UBS organic sales for the first quarter of 2024 declined by 4.6%, reflecting volume declines of approximately 7%, primarily as a result of a decline in broadband, with a less significant decline in utility. The decline in volume was partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 3%.

Current wording

UBS reported net sales of $3,021.8 million for the first six months of 2024 compared to $3,349.1 million for the first six months of 2023, a decrease of $327.3 million, or 9.8%. Adjusting for the decrease from the divestiture of the WIS business of 6.0%, UBS organic sales for the first six months of 2024 declined by 3.8%, reflecting volume declines of approximately 7%, primarily as a result of declines in the utility and broadband businesses. The decline in volume was partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 3%.

Previous wording

Note: Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. For the three months ended March 31, 2024, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization before other non-operating expenses (income), non-cash stock-based compensation expense, digital transformation costs, restructuring costs, cloud computing arrangement amortization, and excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan. For the three months ended March 31, 2023, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization before other non-operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, and digital transformation costs. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.

Current wording

Note: Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. For thesix months ended June 30, 2024, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization before other non-operating expenses (income), non-cash stock-based compensation expense, loss on abandonment of assets, digital transformation costs, restructuring costs, cloud computing arrangement amortization, and excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan. For thesix months ended June 30, 2023, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization before other non-operating expenses (income), non-cash stock-based compensation expense, digital transformation costs, merger-related and integration costs, and restructuring costs. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.

Previous wording

(5)Pension settlement cost represents expense related to the final settlement of the Company's U.S. pension plan.

Current wording

(8)Pension settlement cost represents expense related to the partial settlement of the Company's U.S. pension plan.

Previous wording

Note: For the three months ended March 31, 2024, SG&A expenses, income from operations, other non-operating expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude digital transformation costs, restructuring costs, pension settlement cost and excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan, and the related income tax effects. For the three months ended March 31, 2023, SG&A expenses, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related and integration costs, digital transformation costs, and the related income tax effect. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

Current wording

Note: For the six months ended June 30, 2024, SG&A expenses, income from operations, other non-operating (income) expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude the loss on abandonment of assets, digital transformation costs, restructuring costs, excise taxes on excess pension plan assets, the gain recognized on the divestiture of the WIS business, the loss on termination of business arrangement, pension settlement cost, and the related income tax effects. For the six months ended June 30, 2023, SG&A expenses, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude digital transformation costs, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

Previous wording

Our liquidity needs generally arise from fluctuations in our working capital requirements, information technology investments, capital expenditures, acquisitions, the payment of dividends, and debt service obligations. As of March 31, 2024, we had approximately $1.7 billion in available borrowing capacity under our Revolving Credit Facility, after giving effect to outstanding letters of credit and certain borrowings under our international lines of credit, and $846.8 million of available borrowing capacity under our Receivables Facility, which combined with available cash of $678.8 million, provided liquidity of approximately $3.2 billion. Cash included in our determination of liquidity represents cash in certain deposit and interest-bearing investment accounts held in the United States and Canada. 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.

Current wording

Our liquidity needs generally arise from fluctuations in our working capital requirements, information technology investments, capital expenditures, acquisitions, the payment of dividends, and debt service obligations. As of June 30, 2024, we had approximately $1.1 billion in available borrowing capacity under our Revolving Credit Facility, after giving effect to outstanding letters of credit and certain borrowings under our international lines of credit, and $40.0 million of available borrowing capacity under our Receivables Facility, which combined with available cash of $434.5 million, provided liquidity of approximately $1.5 billion. Cash included in our determination of liquidity represents cash in certain deposit and interest-bearing investment accounts held in the United States and Canada. 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.

Previous wording

As described in Note 10, “Debt” of our Notes to the unaudited Condensed Consolidated Financial Statements, on March 7, 2024, Wesco Distribution issued $900 million aggregate principal amount of 6.375% senior notes due 2029 (the “2029 Notes”) and $850 million aggregate principal amount of 6.625% senior notes due 2032 (the “2032 Notes” and, together with the 2029 Notes, the “2029 and 2032 Notes”). We intend to use the net proceeds from the issuance of the 2029 and 2032 Notes to redeem all of our outstanding 7.125% senior notes due 2025 (the “2025 Notes”) on or after June 15, 2024 and for general corporate purposes. Prior to repaying the 2025 Notes, we used the net proceeds temporarily to repay a portion of the amounts outstanding under our Receivables Facility and repaid all of the outstanding borrowings under our Revolving Credit Facility. We intend to subsequently redraw under our Receivables Facility and Revolving Credit Facility in an aggregate amount sufficient to redeem the 2025 Notes.

Current wording

As described in Note 9, “Debt” of our Notes to the unaudited Condensed Consolidated Financial Statements, on March 7, 2024, Wesco Distribution issued $900 million aggregate principal amount of 2029 Notes and $850 million aggregate principal amount of 2032 Notes. We used the net proceeds from the issuance of the 2029 and 2032 Notes to redeem the $1,500 million aggregate principal amount of 2025 Notes on June 17, 2024. Prior to redeeming the 2025 Notes, we used the net proceeds from the 2029 and 2032 Notes temporarily to repay a portion of the amounts outstanding under our Receivables Facility and repaid all of the outstanding borrowings under our Revolving Credit Facility. We subsequently redrew under our Receivables Facility and our Revolving Credit Facility an aggregate amount sufficient to redeem the 2025 Notes.

Previous wording

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. Economic conditions contributed to increases in interest rates during 2023, however, interest rates have remained stable in 2024. Further increases will raise the rates we pay on our variable rate debt and will contribute to higher interest expense versus prior periods.

Current wording

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. Economic conditions contributed to increases in interest rates during 2023, however, interest rates have remained stable in 2024. Further interest rate increases will raise the rates we pay on our variable rate debt and will contribute to higher interest expense versus prior periods.

Previous wording

As of March 31, 2024, approximately 87% of our debt portfolio consisted of fixed rate debt. As noted above, we used the net proceeds from our issuance of the 2029 and 2032 Notes to repay a portion of the amounts outstanding under our Receivables Facility and all of the outstanding borrowings under our Revolving Credit Facility, which are both variable rate facilities and we intend to subsequently redraw under our Receivables Facility and Revolving Credit Facility in an aggregate amount sufficient to redeem the 2025 Notes, which represents fixed rate debt. We believe our capital structure has an appropriate mix of fixed versus variable rate debt and secured versus unsecured instruments.

Current wording

As of June 30, 2024, approximately 58% of our debt portfolio consisted of fixed rate debt. We believe our capital structure has an appropriate mix of fixed versus variable rate debt and secured versus unsecured instruments.

Previous wording

Over the next several quarters, we expect that our excess liquidity will be directed primarily at returning capital to shareholders through our existing share repurchase authorization, debt reduction, digital transformation initiatives, the payment of dividends, or potential acquisitions and related integration activities. We expect to maintain sufficient liquidity through our credit facilities and cash balances. We believe cash provided by operations and financing activities will be adequate to cover our operational and business needs for at least the next twelve months.

Current wording

Over the next several quarters, we expect that our excess liquidity will be directed primarily at returning capital to shareholders through our existing share repurchase authorization, the payment of dividends, debt reduction, digital transformation initiatives, potential acquisitions and related integration activities, and/or the potential redemption of Series A Preferred Stock. We expect to maintain sufficient liquidity through our credit facilities and cash balances. We believe cash provided by operations and financing activities will be adequate to cover our operational and business needs for at least the next twelve months.

Previous wording

We also measure our ability to meet our debt obligations based on our financial leverage ratio, which was 2.6x as of March 31, 2024 and 2.8x as of December 31, 2023.

Current wording

We also measure our ability to meet our debt obligations based on our financial leverage ratio, which was 2.9x as of June 30, 2024 and 2.8x as of December 31, 2023.

Previous wording

(5)Cloud computing arrangement amortization consists of expense recognized in selling, general and administrative expenses for capitalized implementation costs for cloud computing arrangements to support our digital transformation initiatives.

Current wording

(6)Cloud computing arrangement amortization consists of expense recognized in selling, general and administrative expenses for capitalized implementation costs for cloud computing arrangements to support our digital transformation initiatives.

Previous wording

(6)Debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Current wording

(7)Debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Previous wording

Note: Financial leverage ratio is a non-GAAP measure of the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt discount, debt issuance costs and fair value adjustments, 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 other non-operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, digital transformation costs, restructuring costs, cloud computing arrangement amortization, and excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan.

Current wording

Note: Financial leverage ratio is a non-GAAP measure of the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt discount, debt issuance costs and fair value adjustments, 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 other non-operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, restructuring costs, digital transformation costs, excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan, loss on abandonment of assets, and cloud computing arrangement amortization.

Previous wording

Most of the undistributed earnings of our foreign subsidiaries have been taxed in the U.S. under either the one-time tax imposed on the deemed repatriation of undistributed foreign earnings (the “transition tax”), or the global intangible low-taxed income (“GILTI”) tax regime imposed by the Tax Cuts and Jobs Act of 2017. The distribution of earnings by our foreign subsidiaries in the form of dividends, or otherwise, may be subject to additional taxation. We believe that we are able to maintain sufficient liquidity for our domestic operations and commitments without repatriating cash from our foreign subsidiaries. Therefore, we continue to assert that the remaining undistributed earnings of our foreign subsidiaries are indefinitely reinvested.

Current wording

Most of the undistributed earnings of our foreign subsidiaries have been taxed in the U.S. under either the one-time tax imposed on the deemed repatriation of undistributed foreign earnings (the “transition tax”), or the global intangible low-taxed income tax regime imposed by the Tax Cuts and Jobs Act of 2017. The distribution of earnings by our foreign subsidiaries in the form of dividends, or otherwise, may be subject to additional taxation. We believe that we are able to maintain sufficient liquidity for our domestic operations and commitments without repatriating cash from our foreign subsidiaries. Therefore, we continue to assert that the remaining undistributed earnings of our foreign subsidiaries are indefinitely reinvested.

Previous wording

We finance our operating and investing needs primarily with borrowings under our Revolving Credit Facility and Receivables Facility, as well as uncommitted lines of credit entered into by certain of our foreign subsidiaries to support local operations, some of which are overdraft facilities. The Revolving Credit Facility has a borrowing limit of $1,725 million and the purchase limit under the Receivables Facility is $1,550 million. As of March 31, 2024, we had no balance outstanding on the Revolving Credit Facility and $638.0 million outstanding under the Receivables Facility. The maximum borrowing limits of our international lines of credit vary by facility and range between $0.6 million and $10.0 million. Our international lines of credit generally are renewable on an annual basis and certain facilities are fully and unconditionally guaranteed by Wesco Distribution. Accordingly, certain borrowings under these lines directly reduce availability under our Revolving Credit Facility. As of March 31, 2024, there was $8.2 million of borrowing capacity available under the international lines of credit that did not directly reduce availability under the Revolving Credit Facility. As of March 31, 2024, we had $0.8 million outstanding under our international lines of credit.

Current wording

We finance our operating and investing needs primarily with borrowings under our Revolving Credit Facility and Receivables Facility, as well as uncommitted lines of credit entered into by certain of our foreign subsidiaries to support local operations, some of which are overdraft facilities. The Revolving Credit Facility has a borrowing limit of $1,725 million and the purchase limit under the Receivables Facility is $1,550 million. As of June 30, 2024, we had $625.0 million outstanding on the Revolving Credit Facility and $1,510.0 million outstanding under the Receivables Facility. The maximum borrowing limits of our international lines of credit vary by facility and range between $0.6 million and $10.0 million. Our international lines of credit generally are renewable on an annual basis and certain facilities are fully and unconditionally guaranteed by Wesco Distribution. Accordingly, certain borrowings under these lines directly reduce availability under our Revolving Credit Facility. As of June 30, 2024, there was $8.2 million of borrowing capacity available under the international lines of credit that did not directly reduce availability under the Revolving Credit Facility. As of June 30, 2024, we had $0.7 million outstanding under our international lines of credit.

Previous wording

An analysis of cash flow for the first three months of 2024 and 2023 follows:

Current wording

An analysis of cash flow for the first six months of 2024 and 2023 follows:

Previous wording

Other sources of cash in the first three months of 2024 included an increase in accounts payable of $620.9 million primarily due to the impact of a system conversion, the timing of inventory purchases, and a bank holiday at the end of the quarter that delayed payments, a decrease in other accounts receivable of $78.9 million, due primarily to the collection of supplier volume rebates earned in 2023 in excess of income accrued during the current period, partially offset by an increase in sales tax and value-added tax receivables, and an increase in other current and noncurrent liabilities of $75.0 million, due to increases in accrued interest payable and deferred revenue, partially offset by a decrease in federal taxes payable. Net operating cash flow was also positively impacted by $5.5 million from a decrease in inventories. Primary uses of cash in the first three months of 2024 included an increase in trade accounts receivable of $116.1 million due to the timing of receipts from customers, an increase in other current and noncurrent assets of $60.1 million primarily due to excess pension plan assets, an increase in supplier prepayments, as well as capitalized costs associated with developing cloud computing arrangements to support our digital transformation initiatives, and a decrease in accrued payroll and benefit costs of $44.0 million resulting primarily from the payment of management incentive compensation earned in 2023, as well as a decrease in accrued sales incentives, partially offset by the accrual of management incentive compensation earned in the current year.

Current wording

Other sources of cash in the first six months of 2024 included an increase in accounts payable of $341.9 million primarily due the timing of inventory purchases and payment to suppliers, an increase in other current and noncurrent liabilities of $69.6 million, due to increases in accrued interest payable, deferred revenue, and federal income taxes payable, and a decrease in other accounts receivable of $60.7 million, due primarily to the collection of supplier volume rebates earned in 2023 in excess of income accrued during the current period. Additionally, a decrease in miscellaneous and other operating receivables, partially offset by an increase in sales tax and value-added tax receivables and an increase in supplier price agreement receivables, contributed to net operating cash flow. Net operating cash flow was also positively impacted by $18.9 million from a decrease in inventories. Primary uses of cash in the first six months of 2024 included an increase in trade accounts receivable of $258.8 million due to the timing of receipts from customers, and an increase in other current and noncurrent assets of $90.0 million primarily due to an increase in supplier prepayments, as well as capitalized costs associated with developing cloud computing arrangements to support our digital transformation initiatives, and an increase in federal income taxes receivable.

Previous wording

Net cash used in operating activities for the first three months of 2023 totaled $255.4 million, which included net income of $197.2 million and non-cash adjustments to net income totaling $71.6 million, which primarily consisted of depreciation and amortization of $44.4 million, stock-based compensation expense of $11.7 million, deferred income taxes of $11.6 million, and amortization of debt discount and debt issuance costs of $3.6 million.

Current wording

Net cash provided by operating activities for the first six months of 2023 totaled $62.2 million, which included net income of $389.6 million and non-cash adjustments to net income totaling $139.8 million, which primarily comprised depreciation and amortization of $91.3 million, stock-based compensation expense of $23.9 million, deferred income taxes of $16.2 million, and amortization of debt discount and debt issuance costs of $7.4 million.