WESCO INTERNATIONAL INC

Previous wording

We employ approximately 20,000 people, maintain relationships with more than 50,000 suppliers, and serve nearly 150,000 customers worldwide. With millions of products, end-to-end supply chain services, and leading digital capabilities, we provide innovative solutions to meet customer needs across commercial and industrial businesses, contractors, government agencies, educational institutions, telecommunications providers, and utilities. Our innovative value-added solutions include supply chain management, logistics and transportation, procurement, warehousing and inventory management, as well as kitting and labeling, limited assembly of products and installation enhancement. We operate nearly 800 branches, warehouses and sales offices in approximately 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and global corporations.

Current wording

We employ approximately 20,000 people, maintain relationships with more than 35,000 suppliers, and serve nearly 140,000 customers worldwide. With millions of products, end-to-end supply chain services, and leading digital capabilities, we provide innovative solutions to meet customer needs across commercial and industrial businesses, contractors, government agencies, educational institutions, telecommunications providers, utilities, and technology companies. 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 operate more than 700 sites, including distribution centers, fulfillment centers, and sales offices, in approximately 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and global corporations.

Previous wording

Income from operations was $1,406.4 million for 2023, compared to $1,438.1 million for 2022, a decrease of $31.7 million, or 2.2%. Income from operations as a percentage of net sales was 6.3% for the current year, compared to 6.7% for the prior year. Income from operations for 2023 includes merger-related and integration costs of $55.4 million, restructuring costs of $16.7 million, and accelerated trademark amortization expense of $1.6 million. Adjusted for these items, income from operations was 6.6% of net sales in 2023. For 2022, income from operations was 7.1% of net sales, as adjusted for merger-related and integration costs of $67.4 million and accelerated trademark amortization expense of $9.8 million. For 2023, income from operations declined compared to the prior year due to higher cost of goods sold as a percentage of net sales, higher salaries and benefits due to wage inflation and increased headcount, including the impact of the Rahi Systems acquisition, as well as an increase in volume-related costs such as commissions and marketing costs. The costs to operate our facilities also unfavorably affected income from operations. In addition, digital transformation initiatives contributed to higher expenses in 2023. These negative factors were partially offset by sales growth as well as the realization of integration synergies and a reduction to incentive compensation expense.

Current wording

Income from operations was $1.2 billion for 2024, compared to $1.4 billion for 2023, a decrease of 13.0%. Income from operations as a percentage of net sales was 5.6% for the current year, compared to 6.3% for the prior year. Income from operations for 2024 includes digital transformation costs of $24.9 million, 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, restructuring costs of $12.1 million, and excise taxes on excess pension plan assets of $4.9 million. Adjusted for these amounts, income from operations was 5.9% of net sales in 2024. For 2023, income from operations was 6.6% of net sales, as adjusted for digital transformation costs of $36.1 million, merger-related and integration costs of $19.3 million, restructuring costs of $16.7 million, and accelerated trademark amortization of $1.6 million. For the year ended December 31, 2024, income from operations declined compared to the prior year due to a decline in sales, an increase in costs to operate our facilities and an increase in IT costs. These factors were partially offset by a decrease in professional services and consulting fees.

Previous wording

Investing activities primarily included $92.3 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.

Current wording

Investing activities primarily included $354.9 million in proceeds from the divestiture of the WIS business, net of cash transferred, partially offset by $221.3 million paid in the aggregate to acquire Ascent, the entroCIM business (“entroCIM”), and Independent Electric Supply Inc. (“IES”), net of cash acquired, and $94.7 million of capital expenditures mostly consisting of internal-use computer software and information technology hardware to support our digital transformation initiatives, as well as equipment and leasehold improvements to support our global network of locations.

Previous wording

As of December 31, 2023, we had $736.0 million in total available borrowing capacity under our Revolving Credit Facility and $75.0 million of available borrowing capacity under our Receivables Facility. The Revolving Credit Facility and the Receivables Facility mature in March 2027 and March 2025, respectively. As of December 31, 2023, 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 December 31, 2024, we had $1.2 billion in total available borrowing capacity under our Revolving Credit Facility and $100.0 million of available borrowing capacity under our Receivables Facility. The Revolving Credit Facility and the Receivables Facility both mature in March 2027.

Previous wording

Goodwill and indefinite-lived intangible assets are tested for impairment annually as of October 1, or more frequently if triggering events occur, indicating that their carrying values may not be recoverable. We test for goodwill impairment on a reporting unit level. We performed our annual impairment tests of goodwill and indefinite-lived intangible assets during the fourth quarter of 2023 by assessing qualitative factors to determine whether it was more likely than not that the fair values of our reporting units and indefinite-lived intangible assets were less than their respective carrying amounts. As a result of this assessment, we determined that it was more likely than not that the fair values of our reporting units and indefinite-lived intangible assets continued to exceed their respective carrying amounts and, therefore, a quantitative impairment test was not necessary.

Current wording

We will perform a quantitative impairment test if we bypass the qualitative assessment, or if based on the qualitative assessment, it is more likely than not that the fair value of each reporting unit or indefinite-lived intangible asset is less than the carrying amount. For the year ended December 31, 2024, we elected to bypass the qualitative assessments and performed annual quantitative impairment tests of goodwill and indefinite-lived intangible assets during the fourth quarter of 2024 by comparing the fair values of our reporting units and indefinite-lived intangible assets to their carrying values. As a result of these assessments, we determined that the fair values of our reporting units and indefinite-lived intangible assets continue to exceed their respective carrying amounts.

Previous wording

The determination of fair value involves significant management judgment, particularly as it relates to the underlying assumptions and factors around future expected operating margins and discount rate. Management applies its best judgment when assessing the reasonableness of financial projections. Fair values are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results.

Current wording

The determination of fair value involves significant management judgment, particularly as it relates to the underlying assumptions and factors around future expected revenues, operating margins and discount rate. We performed sensitivity analyses around certain of these assumptions in order to assess the reasonableness of the assumptions and resulting estimated fair values. Management applies its best judgment when assessing the reasonableness of financial projections. Fair values are sensitive to changes in underlying assumptions and factors, and as a result there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible assets impairment tests will prove to be an accurate prediction of future results.

Previous wording

Liabilities for defined benefit pension plans are particularly sensitive to changes in the discount rate. At the end of each fiscal year, we determine the discount rate to measure our defined benefit pension plan liabilities at their present value. The discount rate reflects the current rate at which the defined benefit pension plan liabilities could be effectively settled at the end of the year. This rate is estimated using a yield curve based on corporate bond data, which we believe is consistent with observable market conditions and industry standards for developing spot rate curves. The consolidated weighted-average discount rate used to measure the projected benefit obligation of all plans was 4.4% and 4.6% at December 31, 2023 and 2022, respectively. As a sensitivity measure, the effect of a 50-basis-point decline in the assumed discount rate would result in no change in the expense for 2024, and an increase in our projected benefit obligations at December 31, 2023 of $31.0 million. The impact of a 50-basis-point increase in the assumed discount rate would result in a decrease in the expense for 2024 of approximately $1.0 million, and a decrease in our projected benefit obligations at December 31, 2023 of $29.0 million. Changes in the expected long-term rate of return on plan assets and assumptions relating to the employee workforce are less likely to have a material impact on the measurement of defined benefit pension plan liabilities.

Current wording

Liabilities for defined benefit pension plans are particularly sensitive to changes in the discount rate. At the end of each fiscal year, we determine the discount rate to measure our defined benefit pension plan liabilities at their present value. The discount rate reflects the current rate at which the defined benefit pension plan liabilities could be effectively settled at the end of the year. This rate is estimated using a yield curve based on corporate bond data, which we believe is consistent with observable market conditions and industry standards for developing spot rate curves. The consolidated weighted-average discount rate used to measure the projected benefit obligation of all plans was 4.8% and 4.4% at December 31, 2024 and 2023, respectively. As a sensitivity measure, the effect of a 50-basis-point decline in the assumed discount rate would result in no change in the expense for 2025, and an increase in our projected benefit obligations at December 31, 2024 of $21.0 million. The impact of a 50-basis-point increase in the assumed discount rate would result in a decrease in the expense for 2025 of approximately $2.0 million, and a decrease in our projected benefit obligations at December 31, 2024 of $19.0 million. Changes in the expected long-term rate of return on plan assets and assumptions relating to the employee workforce are less likely to have a material impact on the measurement of defined benefit pension plan liabilities.

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; 2023 had one less workday compared to 2022.

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; 2024 had two more workdays compared to 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 2023 totaled $3.3 billion versus $3.0 billion for 2022, an increase of 7.0%. As a percentage of net sales, SG&A expenses were 14.5% and 14.2% for 2023 and 2022, respectively. SG&A expenses for 2023 and 2022 include merger-related and integration costs of $55.4 million and $67.4 million, respectively. SG&A expenses for 2023 also include $16.7 million of restructuring costs. Adjusted for merger-related and integration costs, and restructuring costs, SG&A expenses for 2023 were 14.2% of net sales for 2023 and 13.9% of net sales for 2022.

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 2024 totaled $3,306.2 million versus $3,256.0 million for 2023, an increase of 1.5%. As a percentage of net sales, SG&A expenses were 15.2% and 14.5% for 2024 and 2023, respectively. SG&A expenses for 2024 include $24.9 million of digital transformation costs, a $17.8 million loss on abandonment of assets, $12.1 million of restructuring costs, and $4.9 million of excise taxes on excess pension plan assets. SG&A expenses for 2023 include digital transformation costs of $36.1 million, merger-related and integration costs of $19.3 million, and restructuring costs of $16.7 million. Adjusted for digital transformation costs, the loss on abandonment of assets, restructuring costs, and excise taxes on excess pension plan assets, SG&A expenses for 2024 were 14.9% of net sales for 2024. Adjusted for digital transformation costs, merger-related and integration costs, and restructuring costs, SG&A expenses for 2023 were 14.2% of net sales.

Previous wording

SG&A payroll and payroll-related expenses for 2023 of $2.1 billion increased by $89.4 million compared to 2022 as a result of higher salaries and benefits due to wage inflation and increased headcount, including the impact of the Rahi Systems acquisition, partially offset by the impact of headcount reductions taken at the end of the second quarter of 2023. This increase in payroll and payroll-related expenses also includes an increase in sales commissions of $31.9 million and a reduction to incentive compensation expense of $98.3 million.

Current wording

SG&A payroll and payroll-related expenses for 2024 of $2,049.5 million decreased by $2.9 million compared to 2023.

Previous wording

Net interest expense totaled $389.3 million for 2023 compared to $294.4 million for 2022. The increase of $94.9 million, or 32.2%, reflects higher borrowings and an increase in variable interest rates.

Current wording

Net interest expense totaled $364.9 million for 2024 compared to $389.3 million for 2023. The decrease of $24.4 million, or 6.3%, primarily reflects lower borrowings, the redemption of the 2025 Notes in the second quarter of 2024, and a decrease in variable interest rates.

Previous wording

Other non-operating expense totaled $25.1 million for 2023 compared to $7.0 million for 2022. Due to fluctuations in the U.S. dollar against certain foreign currencies, particularly the Argentine Peso and the Egyptian Pound, a net foreign currency exchange loss of $22.9 million was recognized for 2023 compared to a net loss of $19.9 million for 2022. We recognized net costs of $0.2 million and net benefits of $14.8 million associated with the non-service cost components of net periodic pension cost (benefit) for 2023 and 2022, respectively. The year-over-year change was primarily due to a decrease in expected return on plan assets and an increase in interest cost. Other non-operating expense for 2023 includes net pension settlement cost of $2.8 million primarily related to the partial settlement of the Company's pension plan in the U.S., partially offset by pension settlement gains related to other plans. Adjusted for this amount, other non-operating expense was $22.3 million for 2023.

Current wording

Other non-operating income totaled $92.7 million for 2024 compared to expense of $25.1 million for 2023. In 2024, we completed the divestiture of our WIS business and recognized a gain from the sale of $122.2 million. Due to fluctuations in the U.S. dollar against certain foreign currencies, we recognized a net foreign currency exchange loss of $25.5 million for 2024 compared to a net loss of $22.9 million for 2023. Adjusted for the gain on the divestiture of our WIS business, a $3.6 million loss on termination of a business arrangement, and $2.5 million of pension settlement cost related to the final settlement of the Anixter Inc. Pension Plan, other non-operating expense was $23.4 million for 2024. Other non-operating expense for 2023 includes net pension settlement cost of $2.8 million primarily related to the partial settlement of the Anixter Inc. Pension Plan, partially offset by pension settlement gains related to other plans. Adjusted for this amount, other non-operating expense was $22.3 million for 2023.

Previous wording

The provision for income taxes was $225.9 million for 2023 compared to $274.5 million for 2022, resulting in effective tax rates of 22.8% and 24.2%, respectively. The effective tax rate for both the current year and the prior year were favorably impacted by the tax benefits related to the exercise and vesting of stock-based awards and reductions in the valuation allowance recorded against certain deferred tax assets. The lower effective tax rate in the current year is due primarily to higher tax benefits from stock-based compensation deductions and foreign tax credit utilization as compared to the prior year.

Current wording

The provision for income taxes was $231.6 million for 2024 compared to $225.9 million for 2023, resulting in effective tax rates of 24.4% and 22.8%, respectively. The higher effective tax rate is primarily due to a valuation allowance being recorded against certain deferred tax assets in the current year.

Previous wording

Net income and earnings per diluted share attributable to common stockholders were $708.1 million and $13.54, respectively, for 2023 compared to $803.1 million and $15.33, respectively, for 2022. Adjusted for merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, net pension settlement cost, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $763.6 million and $14.60, respectively, for the year ended December 31, 2023. Adjusted for 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 $860.1 million and $16.42, respectively, for the year ended December 31, 2022.

Current wording

Net income and earnings per diluted share attributable to common stockholders were $660.2 million and $13.05, respectively, for 2024 compared to $708.1 million and $13.54, respectively, for 2023. Adjusted for digital transformation costs, the loss on abandonment of assets, restructuring costs, excise taxes on excess pension plan assets, the gain recognized on the divestiture of the WIS business, the loss on termination of a business arrangement, pension settlement cost, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $618.6 million and $12.23, respectively, for the year ended December 31, 2024. Adjusted for digital transformation costs, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, net pension settlement cost, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $763.6 million and $14.60, respectively, for the year ended December 31, 2023.

Previous wording

Adjusted EBITDA, a non-GAAP financial measure, was $1,705.3 million for 2023 compared to $1,725.6 million for 2022. Adjusted EBITDA decreased $20.3 million, or 1.2% year-over-year. The decrease primarily reflects the $211.8 million increase in SG&A expenses, as well as the increase in cost of goods sold of $782.7 million, partially offset by the $1.0 billion increase in net sales, as described above. Included in the increase in SG&A expenses was restructuring costs of $16.7 million, partially offset by a decrease in merger-related and integration costs of $12.0 million.

Current wording

Adjusted EBITDA, a non-GAAP financial measure, was $1.5 billion for 2024 compared to $1.7 billion for 2023. Adjusted EBITDA decreased 11.5% year-over-year. The decrease primarily reflects the $566.4 million decrease in net sales, and a $50.2 million increase in SG&A expenses, as described above, partially offset by a corresponding decrease in cost of goods sold of $435.3 million.

Previous wording

The following is a discussion of the financial results of our operating segments comprising three strategic business units consisting of EES, CSS and UBS for the year ended December 31, 2023. As further described below and in Note 16, “Business Segments” of our Notes to the Consolidated Financial Statements, the performance of our operating segments is based on net sales, adjusted EBITDA, and adjusted EBITDA margin percentage. Adjusted EBITDA and adjusted EBITDA margin percentage are non-GAAP financial measures.

Current wording

The following is a discussion of the financial results of our operating segments comprising three strategic business units consisting of EES, CSS and UBS for the year ended December 31, 2024. As further described below and in Note 16, “Business Segments” of our Notes to Consolidated Financial Statements, the performance of our operating segments is based on net sales, adjusted EBITDA, and adjusted EBITDA margin percentage. Adjusted EBITDA and adjusted EBITDA margin percentage are non-GAAP financial measures.

Previous wording

EES reported net sales of $8.6 billion for 2023 compared to $8.8 billion for 2022, a decrease of 2.4%. Adjusting for the unfavorable impact from fluctuations in foreign exchange rates of 0.6% and the number of workdays of 0.4%, EES organic sales for 2023 declined 1.4%, reflecting volume declines of approximately 2%, primarily as a result of declines in construction and original equipment manufacturers, partially offset by continued positive momentum in industrial and the benefits of selling the broader company portfolio (“cross selling”). In addition, a transfer of certain customer accounts to the CSS segment negatively impacted organic net sales for EES by approximately 2%. These negative factors were partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 3%.

Current wording

EES reported net sales of $8.5 billion for 2024 compared to $8.6 billion for 2023, a decrease of 0.7%. Adjusting for the unfavorable impact from fluctuations in foreign exchange rates of 0.5% and the favorable impact from the number of workdays of 0.8%, EES organic sales for 2024 declined 1.0%, reflecting volume declines of approximately 2%, primarily as a result of a decline in the original equipment manufacturer business. The decline in volume was partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 1%.

Previous wording

Note: Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of our performance and ability to meet debt service requirements. 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 restructuring 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 the year ended December 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, loss on abandonment of assets, cloud computing arrangement amortization, restructuring costs and excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan. For the year ended December 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, 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

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

(2)Restructuring costs include severance costs incurred pursuant to an ongoing restructuring plan.

Current wording

(3)Restructuring costs include severance costs incurred pursuant to an ongoing restructuring plan.

Previous wording

(1)Merger-related and integration costs include integration and professional fees associated with the integration of Wesco and Anixter, including digital transformation costs, as well as advisory, legal, and separation costs associated with the merger between the two companies.

Current wording

(5)Merger-related and integration costs include integration and professional fees associated with the integration of Wesco and Anixter, as well as advisory, legal, and separation costs associated with the merger between the two companies.

Previous wording

(3)Accelerated trademark amortization represents additional amortization expense resulting from changes in the estimated useful lives of certain legacy trademarks that are migrating to our master brand architecture.

Current wording

(6)Accelerated trademark amortization represents additional amortization expense resulting from changes in the estimated useful lives of certain legacy trademarks that have migrated to our master brand architecture.

Previous wording

(4)Pension settlement cost represents expense related to the partial settlement of the Company's pension plan in the U.S., partially offset by pension settlement gains related to other plans.

Current wording

(8)For the year ended December 31, 2024, pension settlement cost represents expense related to the settlement of the Company’s U.S. pension plan. For the year ended December 31, 2023, pension settlement cost represents expense related to the partial settlement of the Company’s U.S. pension plan, partially offset by pension settlement gains related to other plans.

Previous wording

(5)The adjustments to income from operations for the years ended December 31, 2023 and 2022 have been tax effected at rates of 27.5% and 26.1%, respectively.

Current wording

(9)The adjustments to income from operations and other (income) expense, net for the years ended December 31, 2024 and 2023 have been tax effected at rates of 26.2% and 27.5%, respectively.

Previous wording

Note: For the year ended December 31, 2023, 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 merger-related and integration costs, restructuring costs, accelerated amortization expense associated with migrating to our master brand architecture, net pension settlement cost primarily related to the partial settlement of the Company's pension plan in the U.S., partially offset by pension settlement gains related to other plans, and the related income tax effects. For the year ended December 31, 2022, 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, accelerated trademark amortization expense associated with migrating to our master brand architecture, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

Current wording

Note: For the year ended December 31, 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 digital transformation costs, the loss on abandonment of assets, 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 year ended December 31, 2023, 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, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, pension settlement cost, 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 December 31, 2023, we had $736.0 million 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 $75.0 million in available borrowing capacity under our Receivables Facility, which combined with available cash of $250.1 million, provided liquidity of $1.1 billion. Cash included in our determination of liquidity represents cash in certain deposit and interest-bearing investment accounts. We monitor the depository institutions that hold our cash and cash equivalents on a regular basis, and we believe that we have placed our deposits with creditworthy financial institutions.

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 December 31, 2024, we had approximately $1.2 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 $100.0 million of available borrowing capacity under our Receivables Facility, which combined with available cash of $383.0 million, provided liquidity of approximately $1.7 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

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 and 2022. 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, and the Federal Reserve reduced its benchmark interest rate by a total of 100 basis points in the second half of 2024. Future interest rate changes would raise or lower the rates we pay on our variable rate debt and would contribute to fluctuations in interest expense versus prior periods.

Previous wording

At December 31, 2023, approximately 53% 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.

Current wording

At December 31, 2024, approximately 60% 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 debt reduction, digital transformation initiatives, returning capital to shareholders through the payment of dividends and our existing share repurchase authorization, 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 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 2.8x as of December 31, 2023 and 2.9x as of December 31, 2022.

Current wording

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

Previous wording

(1)Merger-related and integration costs include integration and professional fees associated with the integration of Wesco and Anixter, including digital transformation costs, as well as advisory, legal, and separation costs associated with the merger between the two companies.

Current wording

(1)Merger-related and integration costs include integration and professional fees associated with the integration of Wesco and Anixter, as well as advisory, legal, and separation costs associated with the merger between the two companies.

Previous wording

(3)Debt is presented in the Consolidated Balance Sheets net of debt discount and debt issuance costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Current wording

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

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 expense (income), non-cash stock-based compensation expense, merger-related and integration costs, and restructuring costs.

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 expense (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

The undistributed earnings of our foreign subsidiaries amounted to approximately $2,194.1 million at December 31, 2023. Most of these earnings have been taxed in the U.S. under either the one-time tax on the deemed repatriation of undistributed foreign earnings (the “transition tax”), or the global intangible low-taxed income (“GILTI”) tax regime imposed by the Tax Cuts and Jobs Act of 2017. We have elected to pay the transition tax in installments over an eight year period, which ends in 2026. As of December 31, 2023, our remaining liability for the transition tax was $53.8 million. We continue to assert that the remaining undistributed earnings of our foreign subsidiaries are indefinitely reinvested. The distribution of earnings by our foreign subsidiaries in the form of dividends, or otherwise, may be subject to additional taxation. We estimate that additional taxes of approximately $119.3 million would be payable upon the remittance of all previously undistributed foreign earnings as of December 31, 2023, based upon the laws in effect on that date. We believe that we are able to maintain sufficient liquidity for our domestic operations and commitments without repatriating cash from our foreign subsidiaries.

Current wording

The undistributed earnings of our foreign subsidiaries amounted to approximately $2,107.7 million at December 31, 2024. Most of these earnings have been taxed in the U.S. under either the one-time tax on the deemed repatriation of undistributed foreign earnings (the “transition tax”), or the global intangible low-taxed income (“GILTI”) tax regime imposed by the Tax Cuts and Jobs Act of 2017. We have elected to pay the transition tax in installments over an eight year period, which ends in 2026. As of December 31, 2024, our remaining liability for the transition tax was $37.7 million. We continue to assert that the remaining undistributed earnings of our foreign subsidiaries are indefinitely reinvested. The distribution of earnings by our foreign subsidiaries in the form of dividends, or otherwise, may be subject to additional taxation. We estimate that additional taxes of approximately $69.4 million would be payable upon the remittance of all previously undistributed foreign earnings as of December 31, 2024, based upon the laws in effect on that date. We believe that we are able to maintain sufficient liquidity for our domestic operations and commitments without repatriating cash from our foreign subsidiaries.

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 $1,625 million. As of December 31, 2023, we had $953.0 million and $1,550.0 million outstanding under the Revolving Credit Facility and Receivables Facility, respectively. The maximum borrowing limits of our international lines of credit vary by facility and range between $0.6 million and $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 December 31, 2023, 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 December 31, 2023, we had $1.0 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 December 31, 2024, we had $525.0 million outstanding on the Revolving Credit Facility and $1,450.0 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 $9.5 million. Our international lines of credit generally are renewable on an annual basis and certain facilities are fully and unconditionally guaranteed by Wesco Distribution. Accordingly, certain borrowings under these lines directly reduce availability under our Revolving Credit Facility. As of December 31, 2024, we had $0.6 million outstanding under our international lines of credit.

Previous wording

Net cash provided by operating activities for 2023 totaled $493.2 million, compared to $11.0 million of cash generated in 2022. Net cash provided by operating activities for 2023 included net income of $766.1 million and non-cash adjustments to net income totaling $235.8 million, which primarily consisted of depreciation and amortization of $181.3 million, stock-based compensation expense of $48.1 million, and amortization of debt discount and debt issuance costs of $14.8 million, partially offset by deferred income taxes of $7.9 million.

Current wording

Net cash provided by operating activities for 2024 totaled $1,101.2 million, compared to $493.2 million of cash generated in 2023. Net cash provided by operating activities for 2024 included net income of $719.4 million and non-cash adjustments to net income totaling $105.6 million, which primarily comprised depreciation and amortization, stock-based compensation expense, a loss on abandonment of assets, amortization of debt discount and debt issuance costs, and cloud computing arrangement amortization, partially offset by a gain resulting from the divestiture of our WIS business, as described in Note 5, “Acquisitions and Divestitures” and deferred income taxes.

Previous wording

Net cash provided by operating activities for 2022 totaled $11.0 million. Net cash provided by operating activities for 2022 included net income of $862.1 million and non-cash adjustments to net income totaling $243.1 million, which primarily consisted of depreciation and amortization of $179.0 million, stock-based compensation expense of $46.4 million, and amortization of debt discount and debt issuance costs of $15.2 million, partially offset by deferred income taxes of $1.2 million.

Current wording

Net cash provided by operating activities for 2023 totaled $493.2 million. Net cash provided by operating activities for 2023 included net income of $766.1 million and non-cash adjustments to net income totaling $235.8 million, which primarily comprised depreciation and amortization, stock-based compensation expense, and amortization of debt discount and debt issuance costs, partially offset by deferred income taxes.

Previous wording

Other sources of cash in 2023 included a decrease in trade accounts receivable of $52.2 million due to the timing of receipts from customers and a decrease in net sales in the fourth quarter of 2023 compared to the fourth quarter of the prior year and a decrease in other accounts receivable of $3.6 million due primarily to the collection of supplier volume rebates earned in 2022 in excess of income accrued during the current period, partially offset by an increase in value-added tax receivables. Primary uses of cash in 2023 included a decrease in accounts payable of $319.7 million primarily due to a reduction in inventory purchases in the fourth quarter, a decrease in accrued payroll and benefit costs of $92.3 million resulting primarily from the payment of management incentive compensation earned in 2022, partially offset by the accrual of management incentive compensation earned in the current year. Net operating cash flow was also negatively impacted by $68.4 million from an increase in inventories. Inventories grew at a slower rate than sales, as supply chain lead times have normalized. Uses of cash in 2023 also included an increase in other current and noncurrent assets of $60.6 million primarily due to an increase in capitalized costs associated with developing cloud computing arrangements to support our digital transformation initiatives, as well as a decrease in other current and noncurrent liabilities of $23.5 million.

Current wording

Other sources of cash in 2023 included a decrease in trade accounts receivable of $52.2 million due to the timing of receipts from customers and a decrease in net sales in the fourth quarter of 2023 compared to the fourth quarter of the prior year. Primary uses of cash in 2023 included a decrease in accounts payable of $319.7 million primarily due to a reduction in inventory purchases in the fourth quarter, a decrease in accrued payroll and benefit costs of $92.3 million resulting primarily from the payment of management incentive compensation earned in 2022, partially offset by the accrual of management incentive compensation earned in 2023. Net operating cash flow was also negatively impacted by $68.4 million from an increase in inventories. Inventories grew at a slower rate than sales, as supply chain lead times normalized. Uses of cash in 2023 also included an increase in other current and noncurrent assets of $60.6 million primarily due to an increase in capitalized costs associated with developing cloud computing arrangements to support our digital transformation initiatives, as well as a decrease in other current and noncurrent liabilities of $23.5 million.

Previous wording

Net cash used in investing activities in 2023 was $89.6 million, compared to $283.6 million in 2022. Included in 2023 were capital expenditures of $92.3 million which primarily consisted 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.

Current wording

Net cash provided by investing activities in 2024 was $40.4 million compared to $89.6 million used in investing activities in 2023. Included in 2024 were $354.9 million in proceeds from the divestiture of the WIS business, net of cash transferred, partially offset by $221.3 million paid to acquire Ascent, entroCIM, IES, net of cash acquired, as well as capital expenditures of $94.7 million compared to $92.3 million in 2023. Capital expenditures in 2024 and 2023 primarily comprised 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 distribution centers, fulfillment centers, and sales offices.

Previous wording

Financing activities primarily consisted of net repayments of $70.3 million related to our revolving credit facility (the “Revolving Credit Facility”) and the repayment of our $58.6 million aggregate principal amount of 5.50% Anixter Senior Notes due 2023, which matured on March 1, 2023, partially offset by net borrowings of $15.0 million related to our accounts receivable securitization facility (the “Receivables Facility”). Financing activities for 2023 also included $76.6 million and $57.4 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively, $75.0 million of common stock repurchases, and $68.3 million of payments for taxes related to the exercise and vesting of stock-based awards.

Current wording

During 2023, financing activities primarily comprised net repayments of $70.3 million related to our Revolving Credit Facility and the repayment of our $58.6 million aggregate principal amount of 5.50% Anixter Senior Notes due 2023, partially offset by net borrowings of $15.0 million related to our Receivables Facility. Financing activities for 2023 also included $76.6 million and $57.4 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively, $75.0 million of common stock repurchases, $68.3 million of payments for taxes related to the exercise and vesting of stock-based awards, and net repayments on our various international lines of credit of approximately $6.0 million.