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WESCO. Richard Heyse, Vice President & Chief Financial Officer WESCO Distribution, Inc. Safe Harbor Statement.
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WESCO Richard Heyse, Vice President & Chief Financial Officer WESCO Distribution, Inc.
Safe Harbor Statement Note: All statements made herein that are not historical facts should be considered as “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, debt level, changes in general economic conditions, fluctuations in interest rates, increases in raw materials and labor costs, levels of competition and other factors described in detail in Form 10-K for WESCO International, Inc. for the year ended December 31, 2008 and any subsequent filings with the Securities & Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such.
Fortune 500 Company headquartered in Pittsburgh, PA Over 6,300 employees including 2,300 sales personnel 380 Locations Consistent strategy of market share growth: Local market penetration with national programs Accretive acquisitions Operational excellence and LEAN Leading Provider of: National Account Programs Integrated Supply Services OEM Direct Materials and Services Electric Utility Distribution Grid Solutions Industry-leading cost structure International operations and global sourcing capabilities WESCO Profile Extra-Effort Company Market Leader …an industry leader
WESCO Evolution Captive Distribution Arm of Westinghouse Growth Strategy Deployed Recessionand Recovery GrowthAccelerates SevereRecession 1922-1994 1994-2001 2001-2003 2004-2008 2008-2009 • LBO in 1994 by management and Clayton, Dublier & Rice • ~$1.5 Billion in sales • ~175 Branches in U.S. and Canada • ~85% non-residential construction • Limited supply relationships other than Westinghouse • Sales grew to $3.7B • 25 acquisitions • Expanded geographic footprint • Diversified end-markets and supplier base • Launched National Accounts Program • Launched Integrated Supply • Leveraged recapitalization 1998 • IPO 1999 • Severe industry downturn • High financial leverage • Suspended acquisition program • Strong free cash flow generation • Invested in sales and marketing programs • Launched LEAN • 11 quarters of double digit sales growth • Sales grew to $6.1B • Invested in sales capacity expansion • Restarted acquisition program • 7 acquisitions with $1.1 B sales • Product category expansion • Improved capital structure • Expanded marketing programs • Expanded LEAN • Significant cost reduction actions taken • Record free cash flow generation • Strengthened capital structure • Accelerating LEAN and extending to customers • International expansion • Investing in attractive growth verticals and geographies …from captive distributor to global supply chain company
Thousands of electrical and industrial product manufacturers Over 10,000 electrical and industrial distributors Top five distributors have 26% share of electrical distribution industry in U.S. 75+% of electrical products get to market through distribution Continuing industry consolidation Market Opportunity Large, Fragmented Market Value of Distribution $600B Construction, MRO, and OEM Markets SUPPLIERS CUSTOMERS • Sales • Marketing • Delivery • Service • Procurement • Warehousing • Logistics Management MRO Market Trends Benefit WESCO • Scale • Global sourcing • Value-creating solutions • Enhanced interdependence …large, fragmented market with trends favorable to WESCO
WESCO – A Total Supply Chain Solutions Provider …beyond electrical and traditional distribution
115,000 active customers Majority of Fortune 500 companies are our customers 1,000,000 different products shipped annually, with 250,000 in stock 19,000 suppliers WESCO Market Mix and Product Portfolio Markets and Customers Products and Suppliers Distribution Equipment Wire, Cable & Conduit Data Communication 13% 20% 16% 39% 12% 6% 11% Controls & Motors 34% 39% 10% GeneralSupplies Lighting & Controls Note: Percentages based on 2008 Sales …diverse market, customer base, product lines, and suppliers
WESCO’s LEAN Journey 2003 and beyond Customer Focus LEAN: The process of continuously eliminating waste across the business and value chain • 2003 launch • Initial focus on sales and warehousing • Centralized LEAN team • 3,300+ Kaizen events • Enterprise-wide results • Leader in applying LEAN to supply chain • A competitive differentiator Maintenance and Production Support Safety and Security Green and Sustainability …continuous improvement culture founded on LEAN
WESCO Today vs. Last Downturn Note: Percentages based on 2008 Sales …bigger, more diversified and more profitable with a stronger capital structure
Target sales and marketing initiatives on attractive verticals Sell complete set of products to all customers and service all their locations Expand product and service portfolio and capabilities Expand internationally Grow faster than the market plus acquisitions Maintain industry-leading cost position Expand operating profit Provide superior return on invested capital Generate strong operating cash flow through the cycle WESCO Growth Strategy & Financial Objectives Growth Strategy Long Term Financial Objectives Markets & Customers Geography Products & Suppliers …focused on shareholder value creation
National Accounts and Integrated Supply EPCs andNational Contractors International Government • Fortune 1000 focus • Sell all WESCO products and services • Capture new customers and expand with current customers • Maintain 100% National Account renewal rate • Electrical plus data communications • National Accounts model • Construction project management • LEAN applications to construction life cycle • Migrate from National to Global accounts • Invest and take share in Canada • Expand global footprint (China, Dubai, Australia) • Broaden geographic reach in Mexico • Aligned WESCO government resources into one team • Expanded government sales resources • Dedicated stimulus team established Utility DataCommunications Lighting Healthcare and Education • Expand scope of supply and value proposition to Investor Owned Utilities • Grow share in Public Power • Grow high voltage business serving transmission, substation and alternative energy markets • Leverage WESCO National Accounts position and geographic footprint • Data centers (data plus electrical products) • Targeted marketing initiatives (secure networking, security, etc.) • Invest and take share in lighting • Marketing and sales initiatives focused on lighting solutions • Dedicated region resources coupled with a focused set of lighting branches • Use LEAN Value Creation toolset as a differentiator • Target major metropolitan markets with a density of healthcare institutions • Expand agreementswith Group Purchasing Organizations and Integrated Delivery Networks WESCO Growth Engines …aggressively targeting attractive opportunities during the downturn
Invest in WESCO • Market leader with low business risk profile • Organic sales growth faster than market • Proven business model uniquely positioned in large, fragmented market • Operational excellence culture focused on LEAN • Solid ROIC performance and excellent cash conversion results • Proven acquirer in a consolidating industry …strong company, excellent value creation opportunity