1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD from ______ to ______ Commission file number 001-14989 WESCO INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 25-1723345 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) COMMERCE COURT FOUR STATION SQUARE, SUITE 700 PITTSBURGH, PENNSYLVANIA 15219 (412) 454-2200 (Address of principal executive offices) (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for at least the past 90 days. Yes _X_ No ___. As of October 31, 1999, WESCO International, Inc. had 43,189,649 shares and 4,653,131 shares of common stock and Class B common stock outstanding, respectively.
2 WESCO INTERNATIONAL, INC. AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS <TABLE> <CAPTION> Page - ------------------------------------------------------------------------------------------------------------------- <S> <C> PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of December 31, 1998 and September 30, 1999 (unaudited) 2 Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 1998 and 1999 (unaudited) 3 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1998 and 1999 (unaudited) 4 Notes to Condensed Consolidated Financial Statements (unaudited) 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 19 PART II - OTHER INFORMATION ITEM 2. Changes in Securities and Use of Proceeds 19 ITEM 6. Exhibits and Reports on Form 8-K 19 Signatures 20 - ------------------------------------------------------------------------------------------------------------------- </TABLE> 1
3 WESCO INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> DECEMBER 31 SEPTEMBER 30 Dollars in thousands, except par values 1998 1999 - -------------------------------------------------------------------------------------------------------------------------- (UNAUDITED) <S> <C> <C> ASSETS CURRENT ASSETS: Cash and cash equivalents $ 8,093 $ 31,812 Trade accounts receivable, net of allowance for doubtful accounts of $8,082 and $7,489 in 1998 and 1999, respectively 181,511 207,497 Other accounts receivable 22,265 24,242 Inventories 343,764 387,210 Income taxes receivable 7,329 3,445 Prepaid expenses and other current assets 2,892 4,678 Deferred income taxes 16,217 15,452 --------------------------------- Total current assets 582,071 674,336 Property, buildings and equipment, net 107,596 113,398 Goodwill and other intangibles, net of accumulated amortization of $10,163 and $16,564 in 1998 and 1999, respectively 234,049 252,272 Other assets 26,806 12,024 --------------------------------- Total assets $ 950,522 $ 1,052,030 ================================= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 378,590 $ 435,830 Accrued payroll and benefit costs 19,614 11,098 Current portion of long-term debt 16,592 2,391 Other current liabilities 51,671 37,587 --------------------------------- Total current liabilities 466,467 486,906 Long-term debt 579,238 420,952 Other noncurrent liabilities 7,040 6,990 Deferred income taxes 18,832 23,073 --------------------------------- Total liabilities 1,071,577 937,921 Commitments and contingencies Redeemable Class A common stock, $.01 par value; 4,901,902 issued and outstanding in 1998 (redemption value of redeemable common stock and vested options of $130,267 in 1998) 21,506 -- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 20,000,000 shares authorized, no shares issued -- -- Common stock, $.01 par value; 210,000,000 shares authorized, 25,209,817 and 43,111,236 shares issued and outstanding in 1998 and 1999, respectively 252 431 Class B nonvoting convertible common stock, $.01 par value; 20,000,000 shares authorized, 4,653,131 issued and outstanding in 1998 and 1999 46 46 Additional capital 326,783 564,944 Retained earnings (deficit) (468,220) (450,505) Accumulated other comprehensive income (loss) (1,422) (807) --------------------------------- Total stockholders' equity (142,561) 114,109 --------------------------------- Total liabilities and stockholders' equity $ 950,522 $ 1,052,030 ================================= </TABLE> The accompanying notes are an integral part of the condensed consolidated financial statements. 2
4 WESCO INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 In thousands, except share data 1998 1999 1998 1999 - ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Sales, net $ 777,701 $903,216 $ 2,219,456 $ 2,544,782 Cost of goods sold 639,847 746,860 1,821,616 2,092,632 -------------------------------------------------------------- Gross profit 137,854 156,356 397,840 452,150 Selling, general and administrative expenses 105,697 113,034 310,804 338,659 Depreciation and amortization 3,851 5,082 10,179 14,810 Recapitalization costs -- -- 51,800 -- -------------------------------------------------------------- Income from operations 28,306 38,240 25,057 98,681 Interest expense, net 13,119 10,683 29,599 37,474 Other expenses 3,674 4,692 6,244 14,239 -------------------------------------------------------------- Income (loss) before income taxes and extraordinary item 11,513 22,865 (10,786) 46,968 Provision (benefit) for income taxes (14,925) 9,108 (27,618) 18,746 -------------------------------------------------------------- Income before extraordinary item 26,438 13,757 16,832 28,222 Extraordinary item, net of tax benefits of $6,711 (Note 4) -- -- -- (10,507) -------------------------------------------------------------- Net income $ 26,438 $ 13,757 $ 16,832 $ 17,715 ============================================================== Basic earnings per share: Income before extraordinary item $ 0.77 $ 0.29 $ 0.40 $ 0.68 Extraordinary item -- -- -- (0.25) -------------------------------------------------------------- Net income $ 0.77 $ 0.29 $ 0.40 $ 0.43 ============================================================== Diluted earnings per share: Income before extraordinary item $ 0.65 $ 0.27 $ 0.35 $ 0.62 Extraordinary item -- -- -- (0.23) -------------------------------------------------------------- Net income $ 0.65 $ 0.27 $ 0.35 $ 0.39 ============================================================== </TABLE> The accompanying notes are an integral part of the condensed consolidated financial statements. 3
5 WESCO INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 In thousands 1998 1999 - --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> OPERATING ACTIVITIES: Net income $ 16,832 $ 17,715 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary item, net of tax benefit -- 10,507 Recapitalization costs 40,500 -- Depreciation and amortization 10,179 14,810 Accretion of original issue and amortization of purchase discounts 4,513 4,154 Amortization of debt issuance costs and interest rate caps 1,276 929 Gain on sale of property, buildings and equipment (478) (240) Deferred income taxes (24,989) 5,006 Changes in assets and liabilities, excluding the effects of acquisitions: Sale of trade accounts receivable 274,245 60,000 Trade and other receivables (33,728) (78,328) Inventories 1,280 (34,403) Other current and noncurrent assets (4,174) 9,236 Accounts payable 22,878 59,129 Accrued payroll and benefit costs (10,224) (8,516) Other current and noncurrent liabilities 572 10,705 ----------------------------- Net cash provided by operating activities 298,682 70,704 INVESTING ACTIVITIES: Capital expenditures (8,942) (16,299) Proceeds from the sale of property, buildings and equipment 1,189 323 Advances to / repayments from affiliates -- 8,667 Acquisitions, net of cash acquired (163,960) (58,611) ----------------------------- Net cash used by investing activities (171,713) (65,920) FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 935,311 559,616 Repayments of long-term debt (687,519) (726,023) Debt issuance costs (10,570) (2,103) Recapitalization costs (27,674) -- Repurchase of common stock and options (654,462) -- Proceeds from issuance of common stock and exercise of options 330,098 187,445 Proceeds from contributed capital 5,806 -- ----------------------------- Net cash provided (used) by financing activities (109,010) 18,935 ----------------------------- Net change in cash and cash equivalents 17,959 23,719 Cash and cash equivalents at the beginning of period 7,620 8,093 ----------------------------- Cash and cash equivalents at the end of period $ 25,579 $ 31,812 ============================= </TABLE> The accompanying notes are an integral part of the condensed consolidated financial statements. 4
6 WESCO INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. ORGANIZATION WESCO International, Inc. and its subsidiaries (collectively, "WESCO"), headquartered in Pittsburgh, Pennsylvania, is a full-line distributor of electrical supplies and equipment and is a provider of integrated supply procurement services. WESCO is engaged principally in one line of business-the sale of electrical products and maintenance, repair and operating supplies. WESCO currently operates branch locations in the United States, Canada, Mexico, Puerto Rico, Guam, Singapore and the United Kingdom. Subsequent to the completion in June 1998 of a leveraged recapitalization, WESCO was substantially owned by an investor group led by affiliates of The Cypress Group L.L.C. ("Cypress") with WESCO's management retaining the remaining interest. On May 17, 1999, WESCO completed an initial public offering of 11,183,750 shares of common stock at $18.00 per share (see Note 3). 2. ACCOUNTING POLICIES Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of WESCO and all of its subsidiaries and have been prepared in accordance with Rule 10-01 of the Securities and Exchange Commission. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in WESCO's 1998 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The unaudited condensed consolidated balance sheet as of September 30, 1999, the unaudited condensed consolidated statements of operations for the three months and nine months ended September 30, 1998 and 1999, and the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 1998 and 1999, in the opinion of management, have been prepared on the same basis as the audited consolidated financial statements and include all adjustments necessary for the fair presentation of the results of the interim periods. All adjustments reflected in the condensed consolidated financial statements are of a normal recurring nature. Results for the interim periods presented are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts have been reclassified in order to conform to the current period presentation. Recent Accounting Pronouncement In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, as amended, is required to be adopted by WESCO as of January 1, 2001, although early adoption is permitted. This statement requires the recognition of the fair value of any derivative financial instrument on the balance sheet. Changes in fair value of the derivative and, in certain instances, changes in the fair value of an underlying hedged asset or liability, are recognized through either income or as a component of other comprehensive income. Management does not expect this statement will have a material impact on the results of operations or financial position of WESCO. 3. INITIAL PUBLIC OFFERING On May 17, 1999, WESCO completed its initial public offering of 11,183,750 shares of common stock ("Offering") at $18.00 per share. In connection with the Offering, certain employee rights to require WESCO to repurchase outstanding redeemable common stock were terminated and approximately $31.5 million of convertible notes were converted into common stock. Proceeds from the Offering (after deducting Offering costs) totaling $187.6 million and borrowings of approximately $65 million were used to redeem all of the 11.125% senior discount notes ($62.8 million), to repay the revolving credit and term loan facilities ($188.8 million). 5
7 In connection with the Offering, on April 11, 1999, the Board of Directors approved a 57.8 to one stock split effected in the form of a stock dividend of WESCO's common stock. The Board of Directors also reclassified the Class A common stock into common stock, increased the authorized common stock to 210,000,000 shares and the authorized Class B common stock to 20,000,000 shares and authorized 20,000,000 shares of $.01 par preferred stock, all effective May 11, 1999. In this report, all share and per share data have been restated to reflect the stock split. 4. EXTRAORDINARY ITEM In the second quarter of 1999, WESCO (i) entered into a new $400 million revolving credit facility and terminated its existing term loans and revolving facility; (ii) terminated its existing accounts receivable securitization program and entered into a new accounts receivable securitization program; and (iii) retired all of its outstanding 11.125% senior discount notes. In conjunction with these transactions, approximately $8.9 million of deferred financing charges were written off and redemption costs of $8.3 million were incurred to redeem the 11.125% senior discount notes. These transactions resulted in an extraordinary loss of $10.5 million, net of income tax benefits of $6.7 million. 5. RECAPITALIZATION On June 5, 1998, WESCO repurchased and retired 61,862,068 shares of common stock held by certain shareholders for net consideration of approximately $653.5 million ("Equity Consideration"). In addition, WESCO repaid approximately $379.1 million of then outstanding indebtedness, and sold 29,604,351 shares of common stock to an investor group led by affiliates of Cypress representing approximately 88.7% of WESCO for an aggregate cash consideration of $318.1 million ("Cash Equity Contribution") (collectively, "Recapitalization"). Existing management retained approximately an 11.3% interest in WESCO after the Recapitalization. WESCO funded the Equity Consideration and the repayment of indebtedness from proceeds of the Cash Equity Contribution, issuance of approximately $351 million of senior subordinated and senior discount notes, a $170 million credit facility and the sale of approximately $250 million of accounts receivable. Given the 11.3% retained ownership, the transaction was treated as a recapitalization for financial reporting purposes and, accordingly, the historical bases of WESCO's assets and liabilities were not affected. In connection with the Recapitalization, WESCO recorded a one-time charge of $51.8 million related to investment banking fees of $13.8 million, compensation charges of $11.3 million associated with one-time bonuses paid to certain members of management, transaction fees of $9.5 million paid to Cypress, compensation charges of $6.2 million associated with the cash settlement of certain stock options, compensation charges of $4.1 million associated with the acceleration of vesting of one former executive's stock options issued at a discount and other non-capitalized transaction fees and expenses amounting to $6.9 million. 6. ACCOUNTS RECEIVABLE SECURITIZATION In June 1999, WESCO and certain of its subsidiaries terminated its previous accounts receivable securitization program and entered into a new $350 million accounts receivable securitization program ("Receivables Facility") with another financial institution, as modified in September 1999. Under the Receivables Facility, WESCO sells, on a continuous basis, to WESCO Receivables Corporation, a wholly-owned, special purpose subsidiary ("SPC") an undivided interest in all eligible accounts receivable. The SPC sells to a third-party conduit all the receivables while maintaining a subordinated interest, in the form of overcollateralization, in a portion of the receivables. WESCO has agreed to continue servicing the sold receivables for the financial institution at market rates; accordingly, no servicing asset or liability has been recorded. 6
8 As of December 31, 1998 and September 30, 1999, securitized accounts receivable totaled $360.1 million and $412.7 million, respectively, of which the subordinated retained interest was $84.1 million and $75.5 million, respectively. Accordingly, $276.0 million and $337.2 million of accounts receivable balances were removed from the consolidated balance sheets at December 31, 1998 and September 30, 1999. Net proceeds from the transactions totaled $274.2 million in the first nine months of 1998 and $60.0 million in the first nine months of 1999. Costs associated with the Receivables Facility totaled $6.2 million in the first nine months of 1998, and $14.2 million in the first nine months of 1999. These amounts are recorded as other expenses in the condensed consolidated statement of operations and are primarily related to the discount and loss on the sale of accounts receivables, partially offset by related servicing revenue. 7. LONG-TERM DEBT The following table sets forth WESCO's outstanding indebtedness. <TABLE> <CAPTION> DECEMBER 31 SEPTEMBER 30 In thousands 1998 1999 -------------------------------------------------------------------------------- <S> <C> <C> Revolving credit facility $ -- $128,328 Senior subordinated notes (1) 289,194 290,055 Term loans 169,500 -- Prior revolving facility 42,450 -- Senior discount notes (2) 52,071 -- Other 42,615 4,960 ---------------------------- 595,830 423,343 Less current portion (16,592) (2,391) ---------------------------- Total $579,238 $420,952 -------------------------------------------------------------------------------- </TABLE> (1) Net of original issue discount and purchase discount of $918 and $9,888, respectively, at December 31, 1998 and $845 and $9,100, respectively, at September 30, 1999. (2) Net of original issue discount and purchase discount of $33,266 and $1,664, respectively. During the second quarter of 1999, WESCO completed the Offering and, as discussed below, refinanced the majority of its long-term debt facilities. As a result of these transactions, the term loans and the senior discount notes were repaid, the prior revolving facility was refinanced and certain convertible notes were converted into WESCO common stock. The term loans and prior revolving facility borrowings were made pursuant to a credit agreement entered into by and between WESCO and certain financial institutions. This credit agreement provided for term loan facilities in an aggregate principal amount of $270 million and a $100 million revolving credit facility. This facility provided variable-rate borrowings tied to market indices plus applicable borrowing margins. The senior discount notes with an aggregate principal amount of $87 million and a stated rate of 11.125% were issued with an original issue discount ("OID") of $36.5 million that was being accreted over the period ending June 1, 2003. Revolving Credit Facility On June 29, 1999, WESCO Distribution, Inc. entered into a new $400 million revolving credit facility with a consortium of financial institutions. The revolving credit facility, which matures in June 2004, consists of up to $365 million of revolving loans denominated in US dollars and a Canadian sublimit totaling $35 million. Borrowings under the revolving credit facility are collateralized by substantially all the assets, excluding real property, of WESCO Distribution, Inc. and are guaranteed by WESCO International, Inc. and certain subsidiaries. 7
9 Borrowings bear rates of interest equal to various indices, at WESCO's option plus a borrowing margin. At September 30, 1999, the interest rate on revolving credit facility borrowings was 6.81%. A commitment fee of 30 to 50 basis points per annum is due on unused portions of the revolving credit facility. Capitalized debt issuance costs related to the new revolving credit facility were approximately $1.8 million and are being amortized to interest expense on a straight-line basis, which does not differ materially from the effective-interest method, over the life of the credit agreement. The revolving credit facility contains various restrictive covenants that, among other things, include limitations on (i) dividend payments or certain other restricted payments or investments; (ii) the incurrence of additional indebtedness and guarantees or issuance of additional stock; (iii) creation of liens; (iv) mergers, consolidation or sales of substantially all of WESCO's assets; (v) certain transactions among affiliates; (vi) payments by certain subsidiaries to WESCO; and (vii) capital expenditures. In addition, the agreements require WESCO to meet certain leverage, working capital and interest coverage ratios. 8. LONG-TERM INCENTIVE PLAN On April 26, 1999, the Board of Directors approved the Long-Term Incentive Plan ("LTIP"). The LTIP provides for stock participation in the form of options, restricted stock awards and performance awards by certain key employees of WESCO. The LTIP covers a maximum of 6,936,000 shares of WESCO's common stock. The exercise price is determined by the Compensation Committee of the Board of Directors. 9. ACQUISITIONS On September 11, 1998, WESCO acquired substantially all the assets and assumed substantially all liabilities and obligations relating to the operations of Bruckner Supply Company, Inc. ("Bruckner"), a privately owned company headquartered in Port Washington, New York. Bruckner is a provider of integrated supply procurement and outsourcing activities for large industrial companies. Net sales totaled approximately $222 million in 1997. The following unaudited pro forma information assumes that the Bruckner acquisition had occurred as of January 1, 1998. Adjustments to arrive at the pro forma information include, among others, those related to acquisition financing, amortization of goodwill and the related tax effects of such adjustments at an assumed rate of 39%. <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED In thousands, except per share amounts SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 ---------------------------------------------------------------------------------- <S> <C> <C> Sales, net $825,580 $2,399,350 Net income 28,114 21,466 Basic earnings per share 0.82 0.52 Diluted earnings per share 0.70 0.49 ---------------------------------------------------------------------------------- </TABLE> The pro forma financial information does not purport to present what WESCO's results of operations would have been if the Bruckner acquisition had actually occurred as of January 1, 1998, or to project WESCO's results of operations for any future period. During 1999, WESCO purchased four electrical supply distributors with annual sales of approximately $70 million for an aggregate consideration of $24.4 million, resulting in goodwill of approximately $9.5 million. 8
10 10. EARNINGS PER SHARE The following tables set forth the details of basic and diluted earnings per share before extraordinary item: <TABLE> <CAPTION> THREE MONTHS ENDED SEPTEMBER 30 Dollars in thousands, except per share amounts 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Income before extraordinary item $26,438 $13,757 Interest on convertible debt 154 - ----------------------------- Earnings used in diluted earnings per share before extraordinary item $26,592 $13,757 ============================= Weighted average common shares outstanding used in computing basic earnings per share 34,219,334 47,737,465 Common shares issuable upon exercise of dilutive stock options 3,437,857 3,958,098 Assumed conversion of convertible debt 3,438,704 -- ----------------------------- Weighted average common shares outstanding and common share equivalents used in computing diluted earnings per share 41,095,895 51,695,563 ============================= Earnings per share before extraordinary item Basic $0.77 $0.29 Diluted 0.65 0.27 ---------------------------------------------------------------------------------- </TABLE> <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 Dollars in thousands, except per share amounts 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Income before extraordinary item $16,832 $28,222 Interest on convertible debt 251 595 ----------------------------- Earnings used in diluted earnings per share before extraordinary item $17,083 $28,817 ============================= Weighted average common shares outstanding used in computing basic earnings per share 41,599,635 41,461,797 Common shares issuable upon exercise of dilutive stock options 3,533,489 3,946,624 Assumed conversion of convertible debt 3,208,836 1,169,393 ----------------------------- Weighted average common shares outstanding and common share equivalents used in computing diluted earnings per share 48,341,960 46,577,814 ============================= Earnings per share before extraordinary item Basic $0.40 $0.68 Diluted 0.35 0.62 ---------------------------------------------------------------------------------- </TABLE> 9
11 11. COMPREHENSIVE INCOME The following tables set forth comprehensive income and its components: <TABLE> <CAPTION> THREE MONTHS ENDED SEPTEMBER 30 In thousands 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Net income $26,438 $13,757 Foreign currency translation adjustment (245) 98 --------------------------- Comprehensive income $26,193 13,855 ---------------------------------------------------------------------------------- <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 In thousands 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Net income $16,832 $17,715 Foreign currency translation adjustment (522) 615 --------------------------- Comprehensive income $16,310 $18,330 ---------------------------------------------------------------------------------- </TABLE> 12. CASH FLOW STATEMENT Supplemental cash flow information with respect to acquisitions was as follows: <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 In thousands 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Details of acquisitions Fair value of assets acquired $265,766 $31,096 Deferred acquisition payment -- 36,415 Fair value of liabilities assumed (55,564) (6,600) Notes issued to seller (46,242) (2,300) --------------------------- Cash paid for acquisitions $163,960 $58,611 ---------------------------------------------------------------------------------- </TABLE> Noncash investing and financing activities not reflected in the consolidated statement of cash flows for the nine months ended September 30, 1999, consisted of the conversion of $21.5 million related to the termination of the redemption feature for redeemable Class A common stock and the conversion of $31.5 million of convertible notes into WESCO common stock. 13. OTHER FINANCIAL INFORMATION In June 1998, WESCO Distribution, Inc. issued $300 million of 9 1/8% senior subordinated notes. The senior subordinated notes are fully and unconditionally guaranteed by WESCO International, Inc. on a subordinated basis to all existing and future senior indebtedness of WESCO International, Inc. Summarized financial information for WESCO Distribution, Inc. is as follows: <TABLE> <CAPTION> BALANCE SHEET DATA DECEMBER 31 SEPTEMBER 30 In thousands 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Current assets $582,071 $674,336 Noncurrent assets 368,451 377,694 Current liabilities 466,467 486,906 Long-term debt 527,167 420,952 Other noncurrent liabilities 25,872 30,063 Total liabilities and stockholder's equity 950,522 1,052,030 ---------------------------------------------------------------------------------- </TABLE> 10
12 <TABLE> <CAPTION> STATEMENT OF OPERATIONS DATA THREE MONTHS ENDED SEPTEMBER 30 In thousands 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Sales, net $777,701 $903,216 Gross profit 137,854 156,356 Income from operations 28,306 38,240 Net income 27,874 13,757 ---------------------------------------------------------------------------------- <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 In thousands 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Sales, net $2,219,456 $2,544,782 Gross profit 397,840 452,150 Income from operations 25,057 98,681 Net income 18,751 20,117 ---------------------------------------------------------------------------------- </TABLE> 14. SUBSEQUENT EVENT In November 1999, WESCO's board of directors authorized a stock repurchase program to purchase up to $25 million of WESCO common stock. WESCO's common stock may be purchased at management's discretion from time to time in open market transactions and the program may be discontinued at any time. 11
13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the information in the unaudited condensed consolidated financial statements and notes thereto included herein and WESCO International Inc.'s Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in its 1998 Annual Report on Form 10-K. GENERAL WESCO is a leading distributor of electrical products and other industrial MRO supplies and related services in North America. WESCO has over 340 branches and five distribution centers strategically located in 48 states, nine Canadian provinces, Puerto Rico, Guam, Mexico, the United Kingdom and Singapore. WESCO serves over 130,000 customers worldwide, offering over 1,000,000 products from over 23,000 suppliers. WESCO's diverse customer base includes a wide variety of industrial companies; contractors for industrial, commercial and residential projects; utility companies; and commercial, institutional and governmental customers. Approximately 90% of WESCO's net sales are generated from operations in the U.S., 9% from Canada and the remainder from other countries. RECENT DEVELOPMENTS Recent developments affecting the results of operations and financial position of WESCO include the following: Initial Public Offering. On May 17, 1999, WESCO completed its initial public offering of 11,183,750 shares of common stock ("Offering") at $18.00 per share. In connection with the Offering, certain employee rights to require WESCO to repurchase outstanding redeemable common stock were terminated and approximately $31.5 million of convertible notes were converted into common stock. Proceeds from the Offering (after deducting Offering costs) totaling $187.6 million and borrowings of approximately $65 million were used to redeem all of the senior discount notes ($62.8 million), to repay the revolving credit and term loan facilities ($188.8 million). Credit Refinancing. On June 29, 1999, WESCO Distribution, Inc. entered into a new $400 million revolving credit facility with a consortium of financial institutions. WESCO believes the new credit agreement provides greater financial flexibility and lower annual costs of financing than the previous credit agreement. In addition, WESCO entered into a new $350 million accounts receivable securitization program that provides for a larger amount of eligible accounts receivable and lower costs than the previous securitization program. In conjunction with these transactions, approximately $8.9 million of deferred financing charges were written off and redemption costs of $8.3 million were incurred to redeem the 11.125% senior discount notes. These transactions resulted in an extraordinary loss of $10.5 million, net of income tax benefits of $6.7 million. Acquisitions. During the first nine months of 1999, WESCO purchased four electrical supply distributors with annual sales of approximately $70 million for an aggregate consideration of $24.4 million, resulting in goodwill of approximately $9.5 million. 12
14 RESULTS OF OPERATIONS Third Quarter of 1999 versus Third Quarter of 1998 The following table sets forth the percentage relationship to net sales of certain items in WESCO's condensed consolidated statements of operations for the periods presented: <TABLE> <CAPTION> THREE MONTHS ENDED SEPTEMBER 30 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Sales, net 100.0% 100.0% Gross profit 17.7 17.3 Selling, general and administrative expenses 13.6 12.5 Depreciation and amortization 0.5 0.6 --------------------------- Income from operations 3.6 4.2 Interest expense 1.7 1.2 Other expense 0.4 0.5 --------------------------- Income before income taxes 1.5 2.5 Income taxes (1.9) 1.0 --------------------------- Net income 3.4% 1.5% ---------------------------------------------------------------------------------- </TABLE> Net Sales. Sales in the third quarter of 1999 increased by $125.5 million, or 16.1%, to $903.2 million compared with $777.7 million in the prior-year quarter, primarily due to sales attributable to acquired companies. Core business sales increased approximately 7% in the quarter-to-quarter comparison. The mix of direct shipment sales increased to approximately 46% in the third quarter of 1999 from 41% in the third quarter of 1998 as a result of the Bruckner acquisition completed in September 1998. Substantially all of Bruckner's sales are direct shipment. Gross Profit. Gross profit for the third quarter of 1999 increased by $18.5 million to $156.4 million from $137.9 million for the third quarter of 1998. Gross profit margin declined to 17.3% in the current-year quarter from 17.7% in the third quarter of 1998. Gross profit margin in 1999 includes the effect of an increase in direct shipment sales associated with the Bruckner acquisition. Direct ship gross margins are lower than those of other sales; however, operating profit margins are often higher, since the product handling and fulfillment costs associated with direct shipments are much lower. Excluding the effects of the Bruckner acquisition, gross profit margin was 17.8% for the third quarter of 1998 and 1999. Selling, General and Administrative Expenses. For the third quarter of 1999, selling, general and administrative ("SG&A") expenses increased $7.3 million, or 6.9%, to $113.0 million when compared to the third quarter of 1998. This increase was comprised of a $10.9 million increase in salaries, wages and commissions and a $6.2 million increase in certain other operating expenses such as travel, transportation, telephone and sales promotion. These increases were offset by a $5.5 million reduction in certain incentive-based compensation expenses and a $4.3 million reduction in certain discretionary benefits. Companies acquired since the beginning of the third quarter of 1998 added $8.3 million of the total increase in operating expenses. As a percent of sales, SG&A expenses declined to 12.5% compared with 13.6% in the prior year quarter. Depreciation and Amortization. Depreciation and amortization increased $1.2 million to $5.1 million reflecting higher amortization of goodwill from acquisitions and increases in property, buildings and equipment over the prior year. Income from Operations. Income from operations increased $9.9 million, or 35.1%, to $38.2 million in the third quarter of 1999, compared with $28.3 million in the prior-year quarter. The increase was primarily due to higher gross profit, partially offset by the increases in SG&A as explained above. 13
15 Interest and Other Expense. Interest expense totaled $10.7 million for the third quarter of 1999, a decrease of $2.4 million from the same period in 1998. The decline primarily was due to lower outstanding debt related to the Offering as well as benefits resulting from the credit agreement refinancing. Other expense totaled $4.7 million and $3.7 million in the third quarter of 1999 and 1998, respectively, reflecting costs associated with the accounts receivable securitization. Income Taxes. Income tax expense totaled $9.1 million in the third quarter of 1999 and the effective tax rate was 39.8%. In the third quarter of 1998, income tax benefits totaled $14.9 million and the effective tax rate was 129.6%. The effective tax rate in the third quarter of 1998 was attributable to the proportion of certain nondeductible recapitalization costs and other nondeductible permanent differences relative to expected levels of operating income. The effective tax rates differ from the federal statutory rate primarily due to state income taxes and nondeductible expenses. Net Income. Net income and diluted earnings per share totaled $13.8 million and $0.27, respectively, for the third quarter of 1999, compared with $26.4 million, or $0.65 per diluted share, for the third quarter of 1998. The comparative results were affected by $14.9 million of income tax benefits recorded in 1998. Nine months ended September 30, 1999 versus Nine months ended September 30, 1998 The following table sets forth the percentage relationship to net sales of certain items in WESCO's condensed consolidated statements of operations for the periods presented: <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 1998 1999 ---------------------------------------------------------------------------------- <S> <C> <C> Sales, net 100.0% 100.0% Gross profit 17.9 17.8 Selling, general and administrative expenses 14.0 13.3 Depreciation and amortization 0.5 0.6 Recapitalization costs 2.3 -- --------------------------- Income from operations 1.1 3.9 Interest expense 1.3 1.5 Other expense 0.3 0.6 --------------------------- Income (loss) before income taxes and extraordinary item (0.5) 1.8 Income taxes (1.2) 0.7 --------------------------- Income before extraordinary item 0.7 1.1 Extraordinary item -- (0.4) --------------------------- Net income 0.7% 0.7% ---------------------------------------------------------------------------------- </TABLE> Net Sales. Sales in the first nine months of 1999 increased by $325.3 million, or 14.7%, to $2.5 billion compared with $2.2 billion in the prior-year period primarily due to sales attributable to acquired companies. Core business sales increased approximately 3% over the prior-year period. The mix of direct shipment sales increased to approximately 46% in the first nine months of 1999 from 40% in the first nine months of 1998 as a result of the Bruckner acquisition completed in September 1998. Substantially all of Bruckner's sales are direct shipment. Gross Profit. Gross profit for the first nine months of 1999 increased by $54.3 million to $452.2 million from $397.8 million for the first nine months of 1998. Gross profit margin was 17.8% and 17.9% in the first nine months of 1999 and 1998, respectively. Excluding the effects of the Bruckner acquisition, which has a higher proportion of lower-margin direct ship sales, gross profit margin increased to 18.4% from 18.0% in the prior-year period due to gross margin improvement initiatives. 14
16 Selling, General and Administrative Expenses. SG&A expenses increased $27.9 million, or 9.0%, to $338.7 million. This increase was substantially due to incremental expenses of companies acquired during 1998 and 1999 and, to a lesser extent, increased SG&A in WESCO's core business. These increases were partially offset by reductions in certain incentive-based compensation expenses and a reduction in certain discretionary benefits. As a percent of sales, SG&A expenses declined to 13.3% compared with 14.0% in the year-earlier period reflecting a lower relative cost structure associated with the Bruckner acquisition. Depreciation and Amortization. Depreciation and amortization increased $4.6 million to $14.8 million reflecting higher amortization of goodwill from acquisitions and increases in property, buildings and equipment over the prior-year period. Income from Operations. Income from operations increased $73.6 million to $98.7 million in the first nine months of 1999, compared with $25.1 million in the prior-year period. Excluding the nonrecurring recapitalization costs in 1998, operating income increased $21.8 million. The increase was primarily due to higher gross profit offset by increased operating costs as explained above. Interest and Other Expense. Interest expense totaled $37.5 million for the first nine months of 1999, an increase of $7.9 million over the same period in 1998. The increase was primarily due to the higher levels of borrowings associated with the recapitalization and acquisitions. Other expense totaled $14.2 million and $6.2 million in the first nine months of 1999 and 1998, respectively, reflecting costs associated with the accounts receivable securitization program which commenced in June 1998. Income Taxes. Income tax expense totaled $18.7 million in the first nine months of 1999 and the effective tax rate was 39.9%. In the first nine months of 1998, income tax benefits totaled $27.6 million and were primarily due to the one-time $51.8 million recapitalization costs recorded in the second quarter of 1998. The effective tax rate in the first nine months of 1998 was 256.1%. The effective tax rate for each interim period reflects management's estimate of the expected rate for the full year. The higher effective rate in 1998 was attributable to the proportion of certain nondeductible recapitalization costs and other nondeductible permanent differences relative to expected levels of operating income. Income Before Extraordinary Item and Net Income. For the first nine months of 1999, income before extraordinary item totaled $28.2 million, or $0.62 per diluted share, compared with $16.8 million, or $0.35 per diluted share, in the first nine months of 1998. The increases in the comparison are primarily due to revenue growth and nonrecurring recapitalization costs included in the 1998 results. Net income and diluted earnings per share totaled $17.7 million and $0.39, respectively, for the first nine months of 1999, compared with $16.8 million, or $0.35 per diluted share, for the first nine months of 1998. 15
17 LIQUIDITY AND CAPITAL RESOURCES Total assets were approximately $1.1 billion and $1.0 billion at September 30, 1999 and December 31, 1998, respectively. In addition, stockholders' equity totaled $114.1 million at September 30, 1999, compared with a deficit of $142.6 million at December 31, 1998. The increase in stockholders' equity was primarily due to the Offering. The following table sets forth WESCO's outstanding indebtedness. <TABLE> <CAPTION> DECEMBER 31 SEPTEMBER 30 In millions 1998 1999 --------------------------------------------------------------------------------- <S> <C> <C> Revolving credit facility $ -- $128.3 Senior subordinated notes (1) 289.2 290.1 Term loans 169.5 -- Prior revolving facility 42.4 -- Senior discount notes (2) 52.1 -- Other 42.6 5.0 ----------------------------- 595.8 423.4 Less current portion (16.6) (2.4) ----------------------------- Total $579.2 $421.0 --------------------------------------------------------------------------------- </TABLE> (1) Net of original issue discount and purchase discount of $.9 and $9.9, respectively, at December 31, 1998 and $.8 and $9.1, respectively, at September 30, 1999. (2) Net of original issue discount and purchase discount of $33.2 and $1.7, respectively. During the second quarter of 1999, WESCO completed the Offering with net proceeds of $187.6 million, and, as discussed below, refinanced its credit agreement and accounts receivable securitization program. As a result of these transactions, the term loans and the senior discount notes were repaid, the prior revolving facility was refinanced and $31.5 million of convertible notes were converted into WESCO common stock. Revolving Credit Facility On June 29, 1999, WESCO Distribution, Inc. entered into a new $400 million revolving credit facility with a consortium of financial institutions. The revolving credit facility, which matures in June 2004, consists of up to $365 million of revolving loans denominated in US dollars and a Canadian sublimit totaling $35 million. Borrowings under the revolving credit facility are collateralized by substantially all the assets, excluding real property, of WESCO Distribution, Inc. and are guaranteed by WESCO International, Inc. and certain subsidiaries. Borrowings bear rates of interest equal to various indices, at WESCO's option plus a borrowing margin. At September 30, 1999, the interest rate on revolving credit facility borrowings was 6.81%. A commitment fee of 30 to 50 basis points per annum is due on unused portions of the revolving credit facility. The new credit agreement is expected to reduce WESCO's borrowing costs. The revolving credit facility contains various restrictive covenants that, among other things, impose limitations on (i) dividend payments or certain other restricted payments or investments; (ii) the incurrence of additional indebtedness and guarantees or issuance of additional stock; (iii) creation of liens; (iv) mergers, consolidation or sales of substantially all of WESCO's assets (v) certain transactions among affiliates; (vi) payments by certain subsidiaries to WESCO; and (vii) capital expenditures. In addition, the agreements require WESCO to meet certain leverage, working capital and interest coverage ratios. Accounts Receivable Securitization Program In June 1999, WESCO and certain of its subsidiaries terminated its previous accounts receivable securitization program and entered into a new $350 million accounts receivable securitization program ("Receivables Facility") with another financial institution as modified in September 1999. Under the Receivables Facility WESCO sells an undivided interest in all eligible accounts receivable. WESCO has agreed to continue servicing the sold receivables for the financial institution at market rates; accordingly, no servicing asset or liability has been recorded. 16
18 WESCO's liquidity needs arise from seasonal working capital requirements, capital expenditures, debt service obligations and acquisitions. An analysis of cash flows for the first nine months of 1999 and 1998 follows: Operating Activities. Cash provided by operating activities totaled $70.7 million in the first nine months of 1999, compared to $298.7 million a year ago. Cash provided by operations in the first nine months of 1999 and 1998 included proceeds of $60.0 million and $274.2 million, respectively, from the sale of accounts receivable in connection with the accounts receivable securitization program. Excluding this transaction, operating activities provided $10.7 million in 1999 and $24.5 million in 1998. On this basis, the period-to-period decline in operating cash flow was primarily due to increases in working capital. Investing Activities. Net cash used in investing activities was $65.9 million in the first nine months of 1999, compared to $171.7 million in the same period of 1998. Cash used for investing activities was higher in 1998 primarily due to amounts invested in business acquisitions. Capital expenditures for the first nine months of 1999 were $16.3 million compared to $9.4 million for first nine months of 1998 and were for computer equipment and software, branch and distribution center facility improvements, forklifts and delivery vehicles. The increase from the prior year was primarily due to the replacement of computer hardware at the branch locations. Financing Activities. Cash provided by financing activities totaled $18.9 million in the first nine months of 1999 primarily due to the Offering, offset, in part, by a net reduction in long-term debt. In the first nine months of 1998, cash used by financing activities totaled $109.0 million primarily reflecting the Recapitalization completed in June 1998. Management believes that cash generated from operations, together with amounts available under the credit agreement and the receivables facility, will be sufficient to meet WESCO's working capital, capital expenditures and other cash requirements for the foreseeable future. There can be no assurance, however, that this will be the case. Financing of acquisitions can be funded under the existing credit agreement and may, depending on the number and size of acquisitions, require the issuance of additional debt and equity securities. YEAR 2000 READINESS DISCLOSURE The Year 2000 issue concerns the ability of automated applications to process date-dependent processes, calculations and information by properly interpreting the year. The Year 2000 issue may potentially impact WESCO's business-critical computerized applications related to, among others, customer sales, service and invoicing, purchasing, inventory management, payroll, financing and financial accounting and reporting. In addition, other non business-critical systems and services may also be affected. WESCO has assembled an internal project team composed of information systems, operations, finance and executive personnel to: o assess the readiness of our systems, vendors and suppliers, third-party service providers, customers and financial institutions; o replace or correct through program changes all non-compliant applications; o develop remediation action plans for systems that may not be Year 2000 compliant; and o develop contingency plans in the event systems and services are not compliant. The readiness assessment phase of the project is complete and consisted of a detailed assessment and testing of substantially all internal computer systems, surveys of significant vendors and suppliers, service providers and customers. WESCO has received, or is seeking, documentation from many external parties, including its major suppliers, customers and service providers, indicating their Year 2000 readiness. Over the past three years, WESCO has invested approximately $6.0 million in new information systems to support the growth and diversity of its business. In addition to meeting this objective, Year 2000 compliance was also achieved in many systems. 17
19 As of the date of this report, WESCO's information technology and non-information technology systems are Year 2000 compliant. Additional testing will continue through December 1999. The project team is also developing or enhancing contingency plans to minimize the potential adverse effect the Year 2000 issue could have on WESCO in the event business-critical systems and processes of WESCO or its suppliers or customers fail to be compliant. Such contingent plans include identifying alternative suppliers or service providers. Costs specifically associated with modifying WESCO's systems for Year 2000 compliance are expensed as incurred. Through September 30, 1999, such costs totaled approximately $3.0 million. Costs to be incurred in the remainder of 1999 to address Year 2000 problems are estimated to be insignificant. Such costs do not include normal system upgrades and replacements. Based on current information, WESCO believes that the most likely worst case scenario to result from a Year 2000 failure by WESCO, its suppliers or customers would be a temporary limitation in its ability to distribute electrical products from certain operating locations or provide integrated supply services to its customers. Based on its own efforts and information received from third parties, WESCO does not believe that Year 2000 issues are likely to result in significant operational problems or have a material adverse impact on its consolidated financial position, operations or cash flow. Nonetheless, failures of suppliers, third party vendors or customers resulting from Year 2000 issues could result in a short-term material adverse effect. INFLATION The rate of inflation, as measured by changes in the consumer price index, did not have a material effect on the sales or operating results of WESCO during the periods presented. However, inflation in the future could affect WESCO's operating costs. Price changes from suppliers have historically been consistent with inflation and have not had a material impact on WESCO's results of operations. SEASONALITY WESCO's operating results are affected by certain seasonal factors. Sales are typically at their lowest during the first quarter due to a reduced level of activity during the winter months. Sales increase during the warmer months beginning in March and continuing through November. Sales drop again slightly in December as the weather cools and also as a result of reduced level of activity during the holiday season. As a result, WESCO reports sales and earnings in the first quarter that are generally lower than that of the remaining quarters. FORWARD-LOOKING STATEMENTS From time to time in this report and in other written reports and oral statements, references are made to expectations regarding future performance of WESCO. When used in this context, the words "anticipates," "plans," "believes," "estimates," "intends," "expects," "projects" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Such statements including, but not limited to, WESCO's statements regarding its business strategy, growth strategy, productivity and profitability enhancement, new product and service introductions and liquidity and capital resources are based on management's beliefs, as well as on assumptions made by, and information currently available to, management, and involve various risks and uncertainties, certain of which are beyond WESCO's control. WESCO's actual results could differ materially from those expressed in any forward-looking statement made by or on behalf of WESCO. In light of these risks and uncertainties there can be no assurance that the forward-looking information will in fact prove to be accurate. Factors that might cause actual results to differ from such forward-looking statements include, but are not limited to, an increase in competition, the amount of outstanding indebtedness, the availability of appropriate acquisition opportunities, availability of key products, functionality of information systems, Year 2000 readiness, international operating environments and other risks that are described in WESCO's Annual Report on Form 10-K for the year ended December 31, 1998 which are incorporated by reference herein. WESCO has undertaken no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 18
20 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The information required relative to market risk has not been included, as it is not material to WESCO. PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On May 17, 1999, WESCO completed its initial public offering of 11,183,750 shares of common stock, $.01 par value, ("Offering") at $18.00 per share. In connection with the Offering, certain employee rights to require WESCO to repurchase outstanding redeemable common stock were terminated and approximately $31.5 million of convertible notes were converted into common stock. Proceeds from the Offering (after deducting Offering costs) totaling $187.6 million and borrowings of approximately $65 million were used to redeem all of the senior discount notes ($62.8 million) and to repay the revolving credit and term loan facilities ($188.8 million). All of the proceeds of the Offering have been applied and the Offering has terminated. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS The following exhibits are filed herewith. 10.1 Amended and Restated Receivables Purchase Agreement, dated as of September 28, 1999, among WESCO Receivables Corp., WESCO Distribution, Inc., and PNC Bank, N.A. 27.1 Financial Data Schedule Copies of these exhibits may be retrieved electronically at the Securities and Exchange Commission's home page at www.sec.gov. Exhibits will also be furnished without charge by writing to Steven A. Burleson, Vice President and Chief Financial Officer, Commerce Court, Four Station Square, Suite 700, Pittsburgh, Pennsylvania 15219. Requests may also be directed to (412) 454-2200. (b) REPORTS ON FORM 8-K None 19
21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on November 15, 1999 on its behalf by the undersigned thereunto duly authorized. WESCO International, Inc. and Subsidiaries By: /s/ Steven A. Burleson -------------------------------------- Steven A. Burleson Vice President and Chief Financial Officer 20
22 EXHIBIT INDEX <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION - -------------------------------------------------------------------------------- <S> <C> 10.1 Amended and Restated Receivables Purchase Agreement, dated as of September 28, 1999, among WESCO Receivables Corp., WESCO Distribution, Inc., and PNC Bank, N.A., filed herewith. Omitted schedules and exhibits will be provided supplementally to the Commission upon request. 27.1 Financial Data Schedule, filed herewith </TABLE> 21