WESCO_1999AR

> WESCO International, Inc. 1999 Annual Review

WESCO International, Inc. (NYSE: WCC) is centers, and employs 5,800 people. Its diverse customer base
a leading distributor of electrical products, includes a broad range of industrial companies; contractors for
other maintenance, repair and operating industrial, commercial and residential projects; utilities; and
(MRO) supplies and procurement outsourcing commercial, institutional and governmental customers. WESCO
services. Headquartered in Pittsburgh, markets over 200,000 products to more than 100,000 customers
Pennsylvania, WESCO operates over 340 throughout the world with a strong emphasis in North America.
full-service branches and five distribution Net sales were $3.4 billion in 1999.

> financial highlights
1999 1998 1997
(In millions)
Net sales $3,025.4 $2,594.8
$3,420.1
Gross profit 537.7 463.9
612.9
107.82
Income from operations 80.1
125.0
Interest & other expenses 55.2 20.1
66.5
52.62
Income before income taxes and extraordinary item 60.0
58.5
EBITDA1 122.6 91.4
145.3
Working capital 115.6 336.3
199.0
Long-term debt (including current portion) 595.8 295.2
426.4
Stockholders’ equity (142.6) 184.5
117.3
1 Income from operations plus depreciation, amortization and recapitalization costs
2 Excludes recapitalization costs of $51.8 million

Copies of Forms 10-K and 10-Q may be requested through our web site (www.wescodist.com) or by contacting Investor Relations.

WESCO International, Inc.
1

99 99 15.1%
99
$3,420 $145

98 98
$3,025 98 $123 14.7%

97 97
$2,595 10.7%
97 $91

96 10.8%
96
96
$2,275 $79

$1,857
95 95
$63 11.9%
95

EBITDA1 (In millions)
NET SALES (In millions) RETURN ON INVESTED CAPITAL

>dear shareholder
It is a great pleasure to provide WESCO’s first publicly issued Annual Review. This 1999 report covers a period
of major accomplishments, increasing momentum and unparalleled corporate interest by our customers in
procurement, distribution and logistics.

Watershed Year for WESCO International, Inc.
WESCO continued a six-year string of record annual sales and operating earnings that dates back to our separation, via a leveraged buyout,
from Westinghouse Electric Corporation in 1994. Sales growth of 13% and continued productivity gains led to an operating earnings increase
of 16%. The compounded annual growth rates for sales and EBITDA for the past five years were 16% and 37%, respectively.

Early in 1999 we were added to the annual list of Fortune 500 companies, entering the list at 485 with a profitability ranking of 432. In May,
WESCO completed its initial public offering and began trading on the New York Stock Exchange under the symbol “WCC.” The initial offering
strengthened our financial position, increased awareness and visibility of our company and assured financing capacity for continued growth
and expansion.

2

Financial Results
Net sales for 1999 reached $3.4 billion, an increase over 1998 of $395 million or 13%. To put this into perspective, if a separate company
generated $400 million in total sales, it would rank among the 15 largest electrical wholesale distributors in the United States. EBITDA
increased to $145.3 million, up 18.5% or $22.7 million from the prior year. Net income, excluding the effects of a $10.5 million extraordi-
nary charge associated with our refinancing, was $35.1 million and diluted earnings per share was $0.75. Return on invested capital was
15.1% and return on equity was 21%.

WESCO’s management and Board of Directors are confident in the value of our franchise and prospects for continued profitable growth.
In late 1999, the Board authorized a $25 million share repurchase program. Through the end of February 2000, approximately two million
shares had been acquired under this program. We believe that this program will create value for all of our shareholders.

Operating Strategy
WESCO has an extensive distribution infrastructure and an ability to deliver industrial,
contractor and commercial project materials and supplies to virtually any local market
in North America. Our large, technically oriented sales and service organization is
deployed in local markets to provide dedicated personal attention and immediate
response to customers’ product information, re-supply or special procurement needs.

We’ve developed a service approach that combines detailed customer familiarity and
high touch local attention with special information systems support and high levels of
coordination for companies with multiple divisions or multiple locations. This effective
combination of local and national support is a defining characteristic of our operating
strategy, and a powerful differentiator between WESCO and other distributors. We initially
applied this targeted national accounts marketing program to large, heavy industry manu-
facturing firms. Over the last several years, we have been able to successfully apply similar
marketing and sales support programs to other industries including utilities, financial
institutions and telecommunications firms.

Growth Opportunities
WESCO’s growth model consists of internally developed sales opportunities and growth through acquisition.
Our sales organization is effective and highly productive, generating sales per employee 50% higher than the
industry average. During 1999 we continued to push for higher productivity by investing in sales force and sales
management training, and development of information systems tools that help target sales opportunities. We
also continued the development of process methodologies that support and speed customer implementation
and roll-out schedules for multi-site national accounts and integrated supply programs.

Throughout 1999 we added National Accounts sales personnel to
cover new market segments including multi-site retailers, financial
institutions, energy service companies and governmental agencies.
This year we are continuing this sales force expansion to give
increased coverage to the telecommunications industry and
national electrical contracting firms.

Integrated Supply programs represent a high growth market for
WESCO. In an integrated supply arrangement, WESCO assumes
operational responsibility for electrical supplies and virtually all
other categories of maintenance and operating supplies and
services. We expect continued growth in this important service
category as companies of all types are showing interest in improved
procurement processes as a major cost savings opportunity.

3

The rapid development of e-commerce has raised the interest level in procurement and logistics to an all-time high. We’ve launched and
staffed a new organizational unit to support e-commerce programs with existing customers and develop new markets through alliances
and technology partnerships with leading trade exchanges and e-portals. The foundation for these new e-commerce partnerships consists
of an expanded electronic catalog, Internet-based purchasing applications and fully integrated linkages to our order management and
fulfillment capabilities.

Acquisition Growth
The continued expansion of our business base and geographical coverage through carefully targeted acquisitions
remains a top priority. In 1999, WESCO completed the acquisition of four regional distributors in the northeast
and southern United States. These additions to our distribution network enhanced our position in serving key
construction, industrial MRO and industrial OEM markets with electrical and automation products. Early in 2000,
we further strengthened our factory automation and control capabilities through the acquisition of Control
Corporation of America (CCA), a Virginia-based provider of engineered solutions for industrial automation systems.

Moving Forward
We will continue to invest in strategic growth initiatives, enhancement of our Integrated Supply platform, ongoing
expansion of our National Accounts Marketing programs, advanced technologies to improve our services and
ongoing acquisition and consolidation efforts.

With the support of our Board and shareholders, and the dedicated efforts of our employees, we look forward
to a future of continued growth and profitability.

Roy W. Haley
Chairman and Chief Executive Officer

March 20, 2000

WESCO is a sales and service company, and meeting customer needs is our
primary focus. Our business processes begin with an ongoing effort to understand
and anticipate customer requirements for products, services and internal systems
coordination. Customer needs determine what products we source, what services
we provide and the pace of geographic expansion into new sales and service
> customer focus locations.

WESCO’s extra effort attitude has earned national recognition within the distribution industry, and
delivered proven results to the marketplace. Because of our “insights on evolving customer needs, and
the changes distributors and their vendors must make to satisfy those needs”, WESCO was recognized
by Electrical Wholesaling (May 1999) as one of the 10 most influential forces affecting the electrical
wholesaling and distribution industry in the 90s.

WESCO serves a diversified customer base
of more than 100,000 businesses of all
sizes, providing a broad range of electrical
products, other maintenance, repair and
operating (MRO) supplies and related
value-added services. Major markets
include commercial and industrial firms,
contractors, governmental agencies, insti-
tutions, telecommunications businesses
and utilities.

4

As these customers reengineer, consolidate and automate their procurement and
supply-chain business functions, we continually enhance our service capabilities to
meet increasingly rigorous requirements for improved efficiencies and cost reductions.

WESCO is particularly skilled at serving large, sophisticated, multi-location customers
through an effective coordination of local and national process improvement initiatives.
We have a proven track record in implementing total cost reduction programs with
documented bottom-line savings for customers in a wide range of industries.

Because of WESCO’s work with leading industrial firms
and large contractors, we have been selected for a variety
of e-commerce pilot programs and beta testing processes
for advanced Internet-based procurement technologies.
We regularly use opportunities such as these as a catalyst
for improved services or increased productivity that can
benefit all of our customers.

WESCO markets more than 200,000 high-quality products including electrical and data communications
products, industrial automation equipment, spare parts and production support materials from over
20,000 sources worldwide. The product roster is growing daily, and WESCO is working hard to be a key
source of product information for selection alternatives, safety features, new applications and product
life cycle innovations. By using on-site trade shows, in-plant product reviews, product demonstrations
and sample use programs, WESCO is a single source of current product information for our customers.
We also provide complete support for virtually all product segments, including customized delivery,
technical assistance, application development and training.

Our ongoing supply relationships with leading manufacturers,
producers and service providers ensure an enormous range of
available products, and, if WESCO doesn’t stock a particular item,
> quality products
it can readily be located, sourced and delivered . . . around the block,
or around the world.

5

To better serve global customers and to support our strategy of growing with our customers
in multiple markets, WESCO launched a new business unit in 1999 primarily geared toward
serving the energy industry. With procurement centers in Aberdeen, Houston and Singapore,
WESCO now offers worldwide 24-hour customer support, efficient multi-national service
and a broad product line including such items as safety equipment, pressure gauges,
welding and cutting tools and thermal clothing. In 1999, WESCO served customer sites
in more than 30 countries.

Continuous expansion of our product line,
well beyond the traditional base of electric
supplies, is a key strategy in providing cus-
tomer access to products and information
that can improve operations and reduce operating costs. As an example of that strategy, WESCO has formed
a unique “partnership” with 3M Corporation to dramatically expand our product offering and make innovative
products and the latest technology readily available to our customers. This powerful combination of innovative
3M products—including abrasives, adhesives, safety equipment, communications and packaging supplies—
and WESCO’s continuing focus on customer needs and product applications creates new opportunities in value
engineering and process improvement for all WESCO customers.

Responsible, dependable service is an integral part of maintaining and building our
customer base at WESCO. Dedicated staffing and personal attention to customer
requirements provides strong support for schedule compliance, productivity and cost
reduction goals. This long-standing commitment to service excellence encompasses
much more than a wealth of product information and timely product delivery. It also
means that we can enhance the procurement process for our customers through
integrated supply systems, e-commerce and creative, cost-effective sourcing solutions
any hour, every day.

For WESCO’s 5,800 employees, that commitment means an “extra effort” for every customer and every order.
And nowhere is that effort better illustrated than in a crisis situation. Because many of our customers operate
around-the-clock, operational disruptions, even small ones, can be disastrous. But in any emergency, WESCO
>exceptional service is there to ensure rapid deployment of equipment, parts and technical services.

6

When Chevron’s refinery in Pascagoula, Mississippi was severely damaged by
Hurricane Georges, WESCO was one of the first suppliers invited into the plant to
assist with needs assessment. The 17-hour storm disabled or put out of service
approximately 8,000 pieces of instrumentation, equipment and machinery.
WESCO responded immediately with temporary power and lighting, cleaning
supplies and testing equipment, and then committed additional resources to
help in the full restoration, matching Chevron’s 14-hours-a-day, seven-days-a-
week recovery work schedule.

When severe storms cut through the East Coast service areas of the PECO and GPU
energy companies leaving more than 400,000 customers without power, WESCO again
demonstrated its emergency response capabilities, expediting delivery of materials
and services so that power could be quickly restored. And when a West Coast refinery
fire caused millions of dollars of damage, the 24-hour-a-day availability and solutions-
focused product sourcing of WESCO’s local branch and our ability to mobilize our
manufacturing partners were instrumental in bringing the refinery back on line.

This quick response, “always-on-call” attitude permeates the company’s entire branch
network, and solidifies our reputation as “the extra effort people.”

Customer focus, exceptional service, quality products and effective
technology are critical success factors, but only part of the customer-
satisfaction equation. The job isn’t finished until the right products are
delivered to the right place at the right time. And when those products
support industrial processes or construction-related projects, on-time
delivery becomes the critical factor. A lower cost means little if facilities
>superior logistics are idled or personnel lack materials to do their job. Motivated people . . .
superior logistics . . . broad inventory stocking . . . superb sourcing . . .
This is how WESCO delivers results.

WESCO operates five fully automated distribution centers in
North America and a network of more than 340 full-service
branch locations, providing same-day or next-day delivery of
supplies, spare parts and critical project materials. Local,
time-sensitive deliveries are routinely made to plants and
construction sites in line with customer specifications and
just-in-time requirements. And, in some cases, storeroom
inventories are maintained or supply trailers are moved
on-site to ensure immediate product availability.

7

In 1999, the company’s geographical coverage was significantly enhanced by four acquisitions: Coghlin
Electric, serving New England; Industrial Electric Supply, operating in Alabama and Georgia; Liberty
Electric Supply in New York City; and Whitehill Lighting and Supplies in central Pennsylvania. These new
additions have enhanced the company’s presence in growth markets, expanded our business base and
strengthened service and delivery capabilities. We also extended our reach into international markets by
adding full-service branch operations or special purpose sourcing and procurement offices in Scotland,
the Balkans, Mexico, Singapore and Toyko.

Disciplined, precise order fulfillment and continuous performance improvement are top priorities
at WESCO. Operating standards are continuously evaluated, and an unrelenting commitment to
quality is reflected by successful ISO certification. In 1999, another 13 separate ISO 9002 quality
certificates were awarded to the company’s branch operations and distribution centers, and
since 1996, more than 100 branches have become separately ISO registered, certified and
continuously audited.

On-time delivery demands on-hand inventories, a company-
wide dedication to service and logistical excellence and a
knack for problem solving and quick action. Getting renovation
materials to the top of a skyscraper, power cabling to a remote
mining site or critical components to a multi-workstation
assembly line clearly demands “extra effort.” But that kind
of performance is “business as usual” at WESCO.

WESCO has been in business as a wholesale electrical distributor for more than 75 years. WESCO is a key link in the
supply chain that gets products from manufacturers to contractors, maintenance personnel and installers. The Company:
Develops continuous supply links with numerous manufacturers and service providers
■

Stocks products locally for quick access to a wide range of equipment, supplies and operational support materials
■

Maintains trained sales and purchasing staff for professional product information, technical expertise and
■

product evaluation
Makes timely deliveries to plant sites and job locations
■

Coordinates schedules and tracks progress for customer engineered product applications or special purchases
■

of maintenance or repair parts

Products
Sales
WESCO markets more than 200,000 high-quality products through its standard product
In 1999, WESCO’s 5,800 employees were
offering, and many more are available through specialized sourcing capabilities. Some of
responsible for generating and supporting
the most common products include:
annual product sales of approximately
$3.4 billion. Products sold included more Equipment to control and monitor electrical power for industrial, commercial,
■

than 100,000 of those most commonly utility and residential locations
recognized and used in industrial and Control and automation equipment used to monitor production and enhance
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construction applications. productivity for discrete and process manufacturing firms
Wiring systems for all ranges of power and all types of connections
■

Lighting products and energy control solutions that enhance productivity, cost
■

effectiveness and environmental compliance
Data communications products and systems used for wiring networks that provide
■

> WESCO at-a-glance voice, data and video connectivity
General contractor and industrial tools, supplies and operational support materials
■

8

Markets
WESCO serves a wide range of markets, including:
Industrial processors and manufacturers of all types of products and equipment
■

Industrial, commercial and residential contractors
■

Investor-owned utilities, municipal power authorities and rural electric cooperatives
■

Data communication and premise wiring contractors, installers and systems integrators
■

Commercial, institutional and governmental entities including multi-site retailers,
■

financial institutions, schools and universities
Services
National Accounts Program. Dedicated to more than a dozen major industry segments, WESCO’s National Accounts team meets the complex service requirements
of multi-location customers, providing maximum efficiency and documented cost savings.
Integrated Supply. Focused on total procurement cost reduction and improved asset management, WESCO’s Integrated Supply programs provide a range of
outsourced procurement and materials management functions to better manage all indirect procurement, MRO supplies and related service requirements.
Major Projects. Through specialized product expertise, value-engineering skills and reliable materials management services, WESCO supports large, complex
construction projects — such as airports, industrial plant sites, correctional facilities and hospitals — for regional, national and international engineering and
construction firms.
E-commerce. WESCO uses advanced information technology — including online catalogs, electronic data entry and the Internet — to provide customer connectivity,
reduce costs and increase efficiencies in the procurement process. The Company’s e-commerce business unit is focused on the rapid e-enablement of existing
customers, and the development of new market segments through strategic relationships in the emerging B2B e-channel.

Distribution
Branch Network. Over 340 branch locations in North America, including branches in selected
international markets, provide a local presence for area customers and support a global
network serving larger multi-location businesses and multi-national corporations.
Distribution Centers. Five strategically located, fully automated distribution centers support
the branch network with a comprehensive inventory of more than 50,000 regularly stocked
items, online ordering capabilities, centralized order processing and same-day shipment.

10k
WESCO International, Inc.
1999

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 25-1723342
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

Commerce Court 15219
(Zip Code)
Four Station Square, Suite 700
Pittsburgh, Pennsylvania
(Address of principal executive offices)

(412) 454-2200
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Class Name of Exchange on which registered
Common Stock, par value $.01 per share New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

As of February 22, 2000, 41,366,440 shares of Common Stock, par value $.01 per share (“Common Stock”) and 4,653,131 shares of Class B Common
Stock, par value $.01 per share (“Class B Common Stock”) of the registrant were outstanding. The registrant estimates that as of February 22, 2000, the
aggregate market value of the voting shares held by non-affiliates of the registrant was approximately $152.1 million based on the closing price on the
New York Stock Exchange for such stock.

DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the registrant’s 2000 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

WESCO International, Inc. 1999 Form 10-K 9

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
December 31, 1999

PART I
Item 1. Business 3

Item 2. Properties 8

Item 3. Legal Proceedings 8

Item 4. Submission of Matters to a Vote of Security Holders 8

Executive Officers 9

PART II
Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters 10

Item 6. Selected Financial Data 11

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12

Item 7A. Quantitative and Qualitative Disclosures About Market Risks 16

Item 8. Financial Statements and Supplementary Data 16

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 16

PART III
Item 10. Directors and Executive Officers of the Registrant 17

Item 11. Executive Compensation 17

Item 12. Security Ownership of Certain Beneficial Owners and Management 17

Item 13. Certain Relationships and Related Transactions 17

PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 18

Signatures 20

Index to Consolidated Financial Statements 21

WESCO International, Inc. 1999 Form 10-K
10

> PART I

ITEM 1. BUSINESS Integrated Supply
Demand for Integrated Supply services is growing rapidly, as more
In this Annual Report on Form 10-K, “WESCO” refers to WESCO International,
companies realize they can lower costs by outsourcing their MRO procure-
Inc., and its subsidiaries and its predecessors unless the context otherwise
ment and related services. Since the customer’s costs of procuring high
requires. References to “we,” “us,” “our” and the “Company” refer to
volumes of low dollar value MRO supplies can be over 50% of the cost of
WESCO and its subsidiaries. Our subsidiaries include WESCO Distribution,
the products, such improvements can be significant. The total market for
Inc. (“WESCO Distribution”) and WESCO Distribution—Canada, Inc.
MRO industrial supplies is approximately $250 billion. Within that market,
(“WESCO Canada”), both of which are wholly-owned by WESCO.
Integrated Supply is projected to grow from approximately $5 billion in
sales from 1997 to $11 billion in 2000, or 30% per year.
Overview
With sales of over $3.4 billion in 1999, we are a leading provider of Our Business Strategy
electrical products and other industrial MRO supplies and services in
Our objective is to be the leading provider of electrical products and other
North America. We are the second largest distributor in the $78 billion
MRO supplies and services to companies in North America and selected
U.S. electrical distribution industry, which has grown at a compounded
international markets. In achieving this leadership position, our goal
annual rate of 7% over the last 15 years. We are also a provider of
is to grow earnings at a faster rate than sales by focusing on continuous
Integrated Supply services. Our Integrated Supply solutions and out-
productivity improvement. Our growth strategy leverages our existing
sourcing services fulfill all of a customer’s industrial MRO procurement
strengths and focuses on developing new initiatives and programs.
needs through a highly automated, proprietary electronic procurement and
inventory replenishment system. Demand for Integrated Supply services Enhance Our Leadership Position in Electrical Distribution. We
has increased approximately 90% annually since 1994, and the total U.S. intend to leverage our extensive market presence and brand equity in the
market potential, measured as all purchases of industrial MRO supplies WESCO name to further our leadership position in electrical distribution.
and services, is estimated to be $250 billion. We are the second largest electrical distributor in the U.S. and, through
our value-added products and services, we believe we have become the
We have over 340 branches and five distribution centers strategically
industry leader in serving several important and growing markets including:
located in 48 states, nine Canadian provinces, Puerto Rico, Mexico, Guam,
the United Kingdom, the Balkans and Singapore. We serve over 130,000 industrial customers with large, complex plant maintenance operations,
■

customers worldwide, offering over 1,000,000 products from over 23,000 some of which require a national multi-site service solution for their
suppliers. Our diverse customer base includes a wide variety of industrial electrical distribution product needs;
companies; contractors for industrial, commercial and residential large contractors for major industrial and commercial construction
■

projects; utility companies; and commercial, institutional and govern- projects;
mental customers.
the electric utility industry; and
■

We have acquired 21 companies since August 1995, representing annual manufacturers of factory-built homes, recreational vehicles and other
■

sales of approximately $1.2 billion. Combining strong internal growth with modular structures.
acquisitions, our net sales and earnings before interest, taxes, deprecia-
Grow National Programs. Since 1994, revenue from our National
tion and amortization (“EBITDA”) (as defined in Item 6 “Selected Financial
Accounts program has increased in excess of 15% annually. We will
Data”) have increased at a compounded annual growth rate of approxi-
continue to invest in the expansion of this program. Through our National
mately 16% and 37%, respectively, since 1994.
Accounts program, we coordinate electrical MRO procurement and pur-
chasing activities primarily for large industrial and commercial companies
Industry Overview
across multiple locations. We have well established relationships with
Electrical Distribution over 300 companies, providing us with a recurring base of revenue
With 1999 net sales estimated at $78 billion, the U.S. industry is large and through multi-year agreements. Our objective is to continue to increase
growing. The industry is also stable with compounded annual growth of revenue generated through our National Accounts program by:
7% since 1982, and it is projected to grow another 7% in 2000. The U.S.
increasing sales to existing National Account customers through new
■
electrical distribution industry is also highly fragmented. In 1998, the latest
products, more services and additional locations;
year for which data is available, the four national distributors, including
extending established National Account relationships to include
■
WESCO, accounted for less than 16% of estimated total industry sales.
Integrated Supply;
expanding our customer base by leveraging our existing expertise and
■

presence within the automotive, petrochemical, pulp and paper and
metals and mining industries; and
entering new industries such as multi-site retail, financial, commercial
■

and telecommunications.


In addition, through our Major Projects Group, we are increasing our focus Actively Pursue Strategic Acquisitions. We have completed 21 acquisi-
on large projects such as industrial sites, water treatment plants, airport tions since August 1995, which represent annual sales of over $1.2 billion.
expansions, healthcare facilities, correctional institutions and new sports We believe that the highly fragmented nature of the electrical and indus-
stadiums. We intend to secure new Major Projects contracts through: trial MRO distribution industry will provide us with a significant number
of acquisition opportunities. We utilize a disciplined approach toward
aggressive national marketing of our demonstrated project
■
acquisitions which includes well-defined strategic criteria and established
management capabilities;
targets for return on investment and earnings accretion.
further development of relationships with leading contractors and
■

Expand Product and Service Offerings. We intend to build on our
engineering firms;
demonstrated ability to introduce new products and services to meet
close coordination with National Accounts customers on their
■

customer demands and capitalize on market opportunities. For example,
renovation and new plant improvement projects; and
we will continue expanding our presence in the fast-growing data com-
comprehensive materials management services, involving a
■
munications market. We have significantly increased our focus on this
multi-commodity Integrated Supply approach to large projects.
market, generating sales of over $110 million in 1999, up from $52 million
in 1995. By utilizing a dedicated data communications sales team and
Extend Our Leadership Position in Integrated Supply. We are the
training our existing sales force to sell data communications products,
largest provider of Integrated Supply services for MRO goods and services
we intend to increase sales to new and existing customers. In addition,
in the United States. We provide a full complement of outsourcing
through a 1998 acquisition, we now have a platform to sell integrated
solutions, focusing on improving the supply chain management process
lighting control and power distribution equipment in a single package
for our customers’ indirect purchases. Our Integrated Supply programs
for multi-site specialty retailers, restaurant chains and department stores.
replace the traditional multi-vendor, resource-intensive procurement
This is a well-defined and attractive growth market where our marketing
process with a single, outsourced, fully automated process capable of
programs and logistics infrastructure provide measurable benefits for
managing all MRO and related service requirements. Our solutions range
renovation, new construction and ongoing maintenance activities.
from timely product delivery to assuming full responsibility for the entire
procurement function. Our customers include some of the largest
Leverage Our E-Commerce and Information System Capabilities.
industrial companies in the United States. Competitive strengths of
We conduct a significant amount of business electronically and continue
our Integrated Supply business include:
to invest in information technology to create tighter linkages with both
customers and suppliers and to lower costs and shorten cycle time in the
a proven and profitable business model highly adaptable to the
■

supply chain process for our customers and ourselves by:
scale of our customers’ operations;
low operating costs;
■
conducting business transactions electronically; we routinely process
■

highly automated proprietary information systems; and
■
customer orders, shipping notices, supplier purchase orders and funds
transfer electronically with our trading partners; in our Integrated
established relationships with a large industrial customer base.
■

Supply business, a large percentage of all transactions are electronic;
We intend to utilize these competitive strengths to increase our Integrated
creating tighter linkages to both customers and suppliers through the
■
Supply sales to both new and existing customers, including our existing
use of technological advances, including an ability to order over the
National Account customers.
Internet and through electronic catalogs, bar-coding and electronic
Gain Share in Key Local Markets. Significant opportunities exist to gain funds transfer;
local market share, since many local markets are highly fragmented. We providing low cost, highly functional processing of a full-range of our
■

intend to increase our market share in key geographic markets through a business operations such as customer service, inventory, logistics
combination of increased sales and marketing efforts at existing branches, management, accounting and administrative support; and
acquisitions to expand our product and customer base and new branch
analyzing market potential, sales performance and cost of doing
■

openings. Furthermore, we intend to leverage our existing relationships
business by branch, customer, product, sales representative and
with preferred suppliers to increase sales of their products in local mar-
shipment type enabling us to work with customers to streamline
kets through various initiatives, including sales promotions, cooperative
activities and reduce costs.
marketing efforts, direct participation by suppliers in National Accounts
Expand Our International Operations. Our international sales, the
implementation, dedicated sales forces and product exclusivity. To promote
majority of which are in Canada, accounted for 11% of sales in 1999. We
growth, we have instituted a compensation system for branch managers
believe that there is significant additional demand for our products and
based on sales and profit increases and efficient working capital manage-
services outside the U.S. and Canada. Many of our multinational domestic
ment at the branch level. Our compensation system encourages our
customers are seeking distribution, Integrated Supply and project manage-
branch managers to increase sales and optimize business activities in
ment solutions globally. Our approach to international operations is
their local markets, including managing the sales force, configuring
consistent with our domestic philosophy. We follow our established cus-
inventories, targeting potential customers for marketing efforts and tailoring
tomers and will only pursue business that we believe utilizes and extends
local service options.
our existing capabilities. This strategy of working through well-developed
customer and supplier relationships reduces risks and provides the

12

Products and Services
opportunity to establish a profitable business. We have recently opened
offices in Aberdeen, Scotland and London, England to support our sales
Products. Our network of branches and distribution centers stock over
efforts in Europe, Africa and the former Soviet Union, and an office in
215,000 product stock keeping units (“SKUs”). Each branch tailors its
Singapore to support our sales in Asia. We also opened two sales offices
inventory to meet the needs of the customers in its local market, typically
in Mexico in 1999 to augment the selling effort of the two full service
stocking approximately 4,000 to 8,000 SKUs. Our Integrated Supply
branches opened in 1998.
business allows our customers to access over 1,000,000 products for
direct shipment.
Acquisition and Integration Program
Representative products that we sell include:
Our strategic acquisition program is an important element in our objective
to be the leader in the markets we serve. Our philosophy towards growth Supplies: Fuses, terminals, connectors, boxes, fittings, tools, lugs,
■

includes a continuous evaluation to determine whether a particular tape and other MRO supplies
opportunity, capability or customer need is best developed internally
Distribution Equipment: Circuit breakers, transformers, switchboards,
■
or purchased through a strategic acquisition. We believe that the highly
panelboards and busway
fragmented nature of the electrical distribution industry will continue
Lighting: Lamps (light bulbs), fixtures and ballasts
■
to provide us with a significant number of acquisition opportunities.
Wire and Conduit: Wire, cable, metallic and non-metallic conduit
■
We continue to evaluate potential acquisitions, including those in the
Control, Automation and Motors: Motor control devices, drives,
electrical distribution industry, the Integrated Supply market and other ■

programmable logic controllers, pushbuttons and operator interfaces
non-electrical distributors that would complement our customers’ overall
supply needs. We have completed 21 acquisitions since August 1995, Data Communications: Premise wiring, patch panels, terminals,
■

representing total annual sales of over $1.2 billion. connectors
WESCO Acquisition History (dollars in millions) We purchase products from a diverse group of over 23,000 suppliers. In
1999, the ten largest suppliers accounted for approximately 35% of our
Annual Sales1
Year Acquisitions Branch Locations
purchases. The largest of these was Eaton Corporation, through its Cutler-
1995 2 2 $ 47
Hammer division, accounting for approximately 13% of total purchases.
1996 7 67 418 No other supplier accounted for more than 5%.
1997 2 9 52
Our supplier relationships are important to us, providing access to a wide
1998 6 21 608
range of products, technical training and sales and marketing support.
1999 4 5 70
We have preferred supplier agreements with approximately 150 of our
Total 21 104 $1,195
suppliers and purchase approximately 60% of our stock inventory pur-
1Represents our estimate of annual sales of acquired businesses at the time of acquisition, based on
suant to these agreements. Consistent with industry practice, most of our
our review of internal and/or audited statements of the acquired business.
agreements with suppliers, including both distribution agreements and
preferred supplier agreements, are terminable by either party on no more
In February 2000, WESCO completed its acquisition of certain assets and
than 60 days’ notice.
assumed certain liabilities of Control Corporation of America (“CCA”),
headquartered in Richmond, Virginia, for approximately $15 million. CCA,
Services. In conjunction with product sales, we offer customers a wide
an electrical distributor specializing in industrial automation solutions,
range of services and procurement solutions that draw on our product and
reported net sales of approximately $50 million in 1999. This acquisition
supply management expertise and systems capabilities. These services
will be accounted for under the purchase method of accounting.
include National Accounts programs, Integrated Supply programs and
Major Project programs. We are responding to the needs of our customers,
Our business development department consists of a small team of profes-
particularly those in processing and manufacturing industries. To more
sionals who locate, evaluate and negotiate all aspects of any acquisition,
efficiently manage the MRO process on behalf of our customers, we offer
with particular emphasis on compatibility of management philosophy and
a range of supply management services, including:
strategic fit. Since 1995, we have considered over 270 potential acquisi-
tions. We initially evaluate potential acquisitions based on their ability to:
outsourcing of the entire MRO purchasing process;
■

better serve our existing customers;
■
providing manufacturing process improvements using
■

state-of-the-art automated solutions;
offer expansion into key growth markets;
■

implementing inventory optimization programs;
add new product or service capabilities; ■
■

participating in joint cost savings teams;
support new National Account customers; and ■
■

assigning our employees as on-site support personnel;
strengthen relationships with important manufacturers. ■
■

recommending energy-efficient product upgrades; and
■

offering safety and product training for customer employees.
■


National Accounts Programs. The typical National Accounts customer is Electrical Contractors. Sales to electrical contractors accounted for
a Fortune 500 industrial company, a large utility or other major customer, approximately 35% of our sales in 1999. These customers range from
in each case with multiple locations. Our National Accounts programs large contractors for major industrial and commercial projects, the
provide customers with total supply chain cost reductions by coordinating customer types we principally serve, to small residential contractors,
purchasing activity for MRO supplies across multiple locations. Compre- which represent a small portion of our sales. Electrical products pur-
hensive implementation plans establish jointly-managed teams at the chased by electrical sub-contractors typically account for approximately
local and national level to prioritize activities, identify key performance 40% to 50% of their installed project cost, and, therefore, accurate cost
measures and track progress against objectives. We involve our preferred estimates and competitive material costs are critical to a contractor’s
suppliers early in the implementation process, where they can contribute success in obtaining profitable projects.
expertise and product knowledge to accelerate program implementation
Utilities. Sales to utilities accounted for approximately 14% of our sales
and the achievement of cost savings and process improvements.
in 1999. This market includes large investor-owned utilities, rural electric
Integrated Supply Programs. Our Integrated Supply programs offer cooperatives and municipal power authorities. We provide our utility
customers a variety of services to support their objectives for improved customers with power line products and an extensive range of supplies
supply chain management. We integrate our personnel, product and dis- to meet their MRO and capital projects needs. Integrated Supply arrange-
tribution expertise, electronic technologies and service capabilities with ments are also important in this market as cost pressures and deregula-
the customer’s own internal resources to meet particular service require- tion cause utility customers to streamline procurement practices.
ments. Each Integrated Supply program is uniquely configured to deliver
Commercial, Institutional and Governmental Customers (“CIG”).
a significant reduction in the number of MRO suppliers, reduce total
Sales to CIG customers accounted for approximately 6% of our sales
procurement costs, improve operating controls and lower administrative
in 1999. This fragmented market includes schools, hospitals, property
expenses. Our solutions range from just-in-time fulfillment to assuming
management firms, retailers and government agencies of all types.
full responsibility for the entire procurement function for all indirect
Through a recent acquisition, we now have a platform to sell integrated
purchases. We believe that customers will increasingly seek to utilize us
lighting control and distribution equipment in a single package for
as an “integrator,” responsible for selecting and managing the supply
multi-site specialty retailers, restaurant chains and department stores.
of a wide range of MRO and OEM products.

Distribution Network
Major Projects. We have established a Major Projects Group, comprised
of our most experienced personnel, which focuses on serving the complex Branch Network. We have over 340 branches, of which approximately
needs of the top 50 U.S. electrical contractors on a multi-regional basis. 275 are located in the U.S., approximately 50 are located in Canada and
These contractors typically specialize in building industrial sites, water the remainder are located in Puerto Rico, Mexico, Guam, the United
treatment plants, airport expansions, healthcare facilities, correctional Kingdom, the Balkans and Singapore. Over the last three years, we have
institutions and new sports stadiums. opened approximately seven branches per year, principally to service
National Account customers. In addition to consolidations in connection
Markets and Customers with acquisitions, we occasionally close or consolidate existing branch
We have a large base of approximately 130,000 customers diversified locations to improve operating efficiency.
across our principal markets. While one customer accounted for approxi-
Distribution Centers. To support our branch network, we have five
mately 3% of 1999 sales, no other customer accounted for more than 1%.
distribution centers located in the United States and Canada, serving the
We are not dependent on any single customer.
Northeast and Midwest U.S.; near Reno, Nevada, serving the Western
Industrial Customers. Sales to industrial customers, which include U.S.; near Memphis, Tennessee, serving the Southeast and Central U.S.;
numerous manufacturing and process industries, and original equipment near Montreal, Quebec, serving Eastern and Central Canada; and near
manufacturers (“OEMs”) accounted for approximately 45% of our sales Vancouver, British Columbia, serving Western Canada.
in 1999.
Our distribution centers add value for our branches and customers through
MRO products are needed to maintain and upgrade the electrical and the combination of a broad and deep selection of inventory, on-line order-
communications networks at all industrial sites. Expenditures are greatest ing, same day shipment and central order handling and fulfillment. Our
in the heavy process industries, such as pulp and paper and petrochemi- distribution center network reduces the lead-time and improves the relia-
cal. Typically, electrical MRO is the first or second ranked product category bility of our supply chain, giving us a distinct competitive advantage in
by purchase value for total MRO requirements for an industrial site. Other customer service. Additionally, the distribution centers reduce the time
MRO product categories include, among others, lubricants; pipe, valves and cost of supply chain activities through automated replenishment and
and fittings; fasteners; and power transmission products. warehouse management systems, and economies of scale in purchasing,
inventory management, administration and transportation.
OEM customers incorporate electrical components and assemblies into
their own products. OEMs typically require a reliable, high volume supply
of a narrow range of electrical items. Customers in this segment are partic-
ularly service and price sensitive due to the volume and the critical nature
of the product used, and they also expect value-added services such as
design and technical support, just-in-time supply and electronic commerce.

14

Sales Organization International Operations
General Sales Force. Our general sales force is based at the local To serve the Canadian market, we operate a network of approximately
branches and comprises approximately 2,200 of our employees, almost 50 branches in nine provinces. Branch operations are supported by two
half of whom are outside sales representatives and the remainder are distribution centers located near Montreal and Vancouver. With sales of
inside sales personnel. Outside sales representatives, who have an average approximately US $288 million, Canada represented 8.4% of our total
of more than eight years of experience with us, are paid under a compen- sales in 1999. The Canadian market for electrical distribution is consider-
sation structure which is heavily weighted towards commissions. They are ably smaller than the U.S. market, with roughly US $2.7 billion in total
responsible for making direct customer calls, performing on-site technical sales in 1999, according to industry sources.
support, generating new customer relations and developing existing
We sell internationally through domestic export sales offices located
territories. The inside sales force is a key point of contact for responding
within North America and sales offices in international locations. We
to routine customer inquiries such as price and availability requests and
have recently opened offices in Aberdeen, Scotland; London, England
for entering and tracking orders.
and the Balkans to support our sales efforts in Europe, Africa and the
National Accounts. Our National Accounts sales force is comprised of former Soviet Union, and an office in Singapore to support our sales in
an experienced group of sales executives who negotiate and administer Asia. We also opened two sales offices in Mexico in 1999 to augment
contracts, coordinate branch participation and identify sales and service the selling effort of the two full service branches opened in 1998.
opportunities. National Accounts managers’ efforts are aligned by
Management Information Systems
targeted customer industries, including automotive, pulp and paper,
petrochemical, steel, mining and food processing. Our corporate information system, WESCOM, provides processing for a
full range of our business operations, such as customer service, inventory
Data Communications. Sales of data communications products are
and logistics management, accounting and administrative support. The
supported by a dedicated group of outside and inside sales representa-
system has been upgraded with decision support, executive information
tives who focus primarily on the premise wiring systems market. This
system analysis and retrieval capabilities to provide detailed income
team is supported by additional resources in the purchasing, inventory
statement and balance sheet variance and trend reporting at the branch
management, product training, product management and regional sales
level. The system also provides activity-based costing capabilities for
areas. We also have an organization that provides our general sales force
analyzing profitability by customer, sales representative and shipment
and customers with product training and industry-recognized certification
type. Sales and margin trends and variances can be analyzed by branch,
in data communications product installation.
customer, product category, supplier or account representative.
Major Projects. Since 1995 our group of experienced sales managers
The WESCOM system is fully distributed within WESCO, and every branch
target, on a national basis, the market for large construction projects
(other than EESCO and certain newly acquired branches) utilizes its own
with electrical material valued in excess of $1 million. Through the Major
computer system to support local business activities. Telecommunication
Projects Group, we can meet the needs of contractors for complex con-
links through a central system give each branch access to information
struction projects such as new sports stadiums, industrial sites, water
on inventory status in our distribution centers as well as other branches
treatment plants, airport expansions, healthcare facilities and correctional
and an increasing number of on-line suppliers. We have developed an
institutions.
upgraded version of the WESCOM system. This new version, WESNET, links
E-Commerce. We established our initial electronic catalog on the Internet all branch operations through our wide area network. EESCO operates its
in 1996. Since that time, we have worked with a variety of large customers own system which is linked to our central system. We intend to integrate
to establish customized electronic catalogs for their use in internal systems. EESCO into the WESNET system over the next eight to 10 months, which is
Additionally, in 1999 we began a process of providing electronic catalogs expected to improve efficiencies and operating controls and reduce costs
to multiple e-commerce service providers, trade exchanges and industry associated with operating dual systems.
specific electronic commerce portals. Our e-business strategy is to serve
We routinely process customer orders, shipping notices, suppliers’
existing customers by tailoring our catalog and Internet-based procure-
purchase orders, and funds transfer via EDI transactions with our trading
ment applications to their internal systems or through their preferred
partners. Our electronic commerce strategy calls for tighter linkages to
technology and trading exchange partnerships. Additionally, we will enter
both customers and suppliers through greater use of technological
into as many as 20 e-business partnerships with leading technology or
advances, including Internet and electronic catalogs, enhanced EDI
marketing oriented e-portals that target selected market segments.
and other innovative improvements.
Through these niche oriented marketing arrangements, we expect to
reach thousands of new customers who were previously not served Our Integrated Supply services are supported by our proprietary procure-
through WESCO’s sales force. ment and inventory management systems. These systems provide a fully
integrated, flexible supply chain platform that currently handles over
95% of our Integrated Supply customers’ transactions electronically.
Our configuration options for a customer range from on-line linkages to
the customer’s business and purchasing systems, to total replacement
of a customer’s procurement and inventory management system for
MRO supplies.


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