Wesco International, Inc. · NYSE:WCC
Wesco International — Investor Day (August 2010)
70 slides from Wesco International's investor day presentation, Aug 10, 2010
Slide 1: WESCO Investor Day, August 10, 2010
WESCO INVESTOR DAY | TUESDAY, AUGUST 10,
Slide 2: John Engel, President and Chief Executive Officer
WESCO International, Inc. John Engel President and Chief Executive Officer
Slide 3: Safe Harbor Statement
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 cau
Slide 4: Agenda
Agenda 12:00 p.m. Registration 1:00 p.m. WESCO Overview John Engel, President and Chief Executive Officer 1:30 p.m. Financial Results and Expectations Richard Heyse, Vice President and Chief Financial Officer 2:00 p.m. Profitable Growth Agenda Steve Van Oss, Senior Vice President and Chief Operating
Slide 5: WESCO Profile
WESCO Profile Fortune 500 electrical and industrial distribution and supply chain services company headquartered in Pittsburgh, PA Over 6,200 employees including 2,300 sales personnel 380 locations A leading provider of: Global account programs Integrated supply services OEM direct materials and ser
Slide 6: WESCO Evolution
WESCO Evolution ....to diversified global supply chain solutions provider Captive Distribution Arm of Westinghouse 1922-1994 Recession 2001-2003 Recovery and Growth 2004-2008 Growth Returns 2010-Future Growth Strategy Deployed 1994-2001 $6.0B $4.6B $1.5B $3.7B $3.3B 1st Half $2.4B Severe Recession 2
Slide 7: Captive Distributor to Diversified Portfolio
Captive Distributor (1922-1994) 175 branches in U.S. and Canada with over 80% non-residential construction market exposure and limited supply relationships other than Westinghouse WESCO Portfolio Markets & Customers Construction Non-Residential Residential Non-Residential Residential CIG Government
Slide 8: Market Opportunity
Market Opportunity ....large, fragmented market with trends favorable to WESCO Large, Fragmented Market Value of Distribution Procurement Warehousing Logistics Management Increased scale Global sourcing Outsourcing Enhanced interdependence Financial strength and liquidity Sales Marketing Delivery Se
Slide 9: WESCO Growth Strategy
WESCO Growth Strategy Deliver profitable growth in core markets Drive, deliver and sustain operational excellence through LEAN and One WESCO Expand Enrich M&A Agenda 6 Service Excellence 9 Sourcing and Pricing Effectiveness 8 Talent Management 10 Markets & Customers Geographies Products & Suppliers
Slide 10: Growth Agenda
Growth Agenda Expand Geographies 1 Customers 2 Focus Markets 3 I Enrich New Markets 5 Products & Services 4 II Drive M&A Agenda 6 III ....take share in core markets while expanding through acquisitions EPCs & Contractors Global Accounts & Integrated Supply Government Healthcare & Education Internati
Slide 11: Priorities: Six Key Initiatives
Priorities: Six Key Initiatives Priorities: Six Key Initiatives Priorities: Six Key Initiatives Marketing Leadership Demand creation programs Brand management Dedicated specialists Sales Management LEAN Initiative for Sales Sales, territory and account management Solution selling and sales training
Slide 12: WESCO's LEAN Journey
WESCO's LEAN Journey ....continuous improvement culture founded on LEAN LEAN Overview Customer Focus LEAN: The process of continuously eliminating waste across the business and value chain Solution Categories Supplier Customer WESCO LEAN deployed across the value stream... ....positively impacting t
Slide 13: The "One WESCO" Mantra
The "One WESCO" Mantra Value Proposition for... Customers: emphasizes the full range of products, services, and solutions Suppliers: emphasizes the market share gains to be made by supporting the Power of WESCO initiatives Employees: emphasizes the rationale for and benefits of working as one team w
Slide 14: WESCO Financial Objectives
WESCO Financial Objectives Grow faster than the market plus acquisitions Maintain industry-leading cost structure Expand operating profit and margins Provide superior return on invested capital Generate strong operating cash flow through the cycle ....focused on shareholder value creation Targeting
Slide 15: Financial Results and Expectations
Financial Results and Expectations Richard Heyse Vice President and Chief Financial Officer
Slide 16: Shareholder Value Creation
Shareholder Value Creation Total Shareholder Return (CAGR 2003 to July 2010) Consistent and Sustainable Long-Term Shareholder Returns 30% 20% 10% 0 WESCO Anixter Fastenal Grainger Russell 2000 S&P 500 23.7% 10.8% 12.2% 15.9% 2.4% - -0.1% - -10
Slide 17: Performance Since Last Downturn
Performance Since Last Downturn Operating Profit Net Sales Free Cash Flow Per Share EPS Diluted $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 0 $ Billions $ Millions $- 0 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 EPS Diluted $- 0 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 2003 2004 2005 2006 2007 2008 2009 $- 0 $50 $
Slide 18: Improving Capital Structure
2003 2004 2005 2006 2007 2008 2009 June 2010 6 3.7 3.5 2.9 3.1 3.1 4.2 3.7 Improving Capital Structure Over $575 million of free cash flow generated ($13.30+/share) over last 10 quarters. Primary use was debt reduction. Current liquidity in excess of $550M Good access to capital markets, staggered m
Slide 19: Cash Flow Management
Cash Flow Management ....will maintain discipline while funding growth First Use Support organic growth at greater than market rates Second Use Fund accretive acquisitions to supplement organic growth Third Use Reduce financial leverage Fourth Use If Debt to EBITDA ratio is sustained below 2.0, retu
Slide 20: Productivity Gains and Operating Leverage
Productivity Gains and Operating Leverage ....driven by industry-leading cost structure and LEAN Last Expansion Cycle (2003-2006) Current Recession/Recovery Cycle (2008 - June 2010)
Slide 21: 2010 First Half Results
2010 First Half Results 1st Half Sales -3% in Q1 versus prior year +9% in Q2 versus prior year Operating Margin 3.3% in Q1 4.1% in Q2 EPS $0.44 in Q1 $0.60 in Q2 Stock Price Up 25% ....demonstrate strong operating leverage July sales per workday up 11% versus prior year
Slide 22: LEAN, IT, and One WESCO Initiatives
LEAN, IT, and One WESCO Initiatives LEAN principles applied across the business Sales, operations, and administration Focus on eliminating waste and transfer of best practices IT capabilities provide a competitive advantage Numerous IT system enhancements are underway Customer Relationship Managemen
Slide 23: End Market Key Indicators
End Market Key Indicators End Market 2009 End Market Composition Key Market Drivers / Indicators Current Momentum WESCO Competitive Differentiators Industrial 40% Global Accounts OEM Integrated Supply General Industry Industrial Production Blue Chip Customers Global Accounts Integrated Supply OEM Di
Slide 24: 2010 2nd Half Expectations
2010 2nd Half Expectations ....as economic recovery continues in 2nd half 2nd Half Expectations Sales Up 10+% in Q3 and Q4 versus prior year Gross Margins Above 1st half of 19.5% SG&A Seasonally stable Operating Margins Above 2nd quarter of 4.1% Tax Rate Maintained within 28 to 30% Expect further fi
Slide 25: 2011 Outlook Assumptions
2011 Outlook Assumptions End market demand remains solid with exception of non-residential construction Industrial growth continues U.S. non-residential contractor demand projected to begin recovery phase by 2012 Utility expected to enter recovery phase Stimulus projects should provide continued gro
Slide 26: 2013 Expectations and Assumptions
2013 Expectations and Assumptions Return to 2008 sales levels by 2013 based on the following assumptions GDP driven demand of 2-3% per year Cyclical recovery demand growth of 2-3% per year Growth initiatives of 1-2% per year M&A of 2-3% per year Operating margin expansion of 50 to 70 basis points pe
Slide 27: 2013 Expectations and Assumptions
2013 Expectations and Assumptions 2009 Actual 2013 Expectation Sales $4.6B $6.2B+ Operating Margin 3.1% 6%+ Net Income $106M $200M+ EPS - Diluted $2.46 $4.00+* ROIC % 8.1% 15%+ Leverage Ratio 4.2 2.0 to 3.5 *Utilizes diluted share count of 50 million Targeting 20-25% Annual Net Income Growth
Slide 28: Profitable Growth Agenda
Profitable Growth Agenda Steve Van Oss Senior Vice President and Chief Operating Officer
Slide 29: Growth Agenda
Growth Agenda Expand Geographies 1 Customers 2 Focus Markets 3 I Enrich New Markets 5 Products & Services 4 II Drive M&A Agenda 6 III ....take share in core markets while expanding through acquisitions EPCs & Contractors Global Accounts & Integrated Supply Government Healthcare & Education Internati
Slide 30: Growth Engines - Market Trends
Growth Engines - Market Trends 2010 End Markets WESCO vs. End Markets 2010 End Markets WESCO vs. End Markets EPCs & Contractors Government Healthcare & Education International Utility Data Communications & Security Global Accounts & Integrated Supply Lighting & Sustainability
Slide 31: Growth Engines - Priorities
Growth Engines - Priorities Priorities Current State Opportunity Data Communications & Security Fortune 1000 focus Sell all WESCO products and services Capture new customers and expand with current customers Maintain customer renewal rate Leverage WESCO Global Accounts position and geographic footpr
Slide 32: Growth Engines - Priorities
Growth Engines - Priorities Priorities Current State Opportunity One team of WESCO government resources Expand government sales resources Dedicated stimulus team in place Expand scope of supply and value proposition to Investor Owned Utilities Grow share in Public Power Grow high voltage business se
Slide 33: Growth Engines - Priorities
Growth Engines - Priorities Priorities Current State Opportunity Sell electrical plus data communications Apply Global Accounts model to contractors Enhanced construction project management services Implement LEAN across construction life cycle Use LEAN Value Creation toolset as a differentiator Tar
Slide 34: Growth Engines - Priorities
Growth Engines - Priorities Priorities Current State Opportunity Invest and take share Dedicated region resources coupled with focused sets of lighting branches Marketing and sales initiatives focused on lighting and sustainability solutions Continue migration from National to Global Accounts Invest
Slide 35: Sales Capacity Expansion
Sales Capacity Expansion 2,300 inside and outside sales personnel Highly productive sales force Capacity expansion for continuous double-digit organic growth: GDP 2-3% Productivity 2-3% Personnel additions 4%+ 900,000 800,000 700,000 600,000 500,000 400,000 300,000 2001-2003 Average 2008-2009 Averag
Slide 36: Priorities: Six Key Initiatives
Priorities: Six Key Initiatives Priorities: Six Key Initiatives Priorities: Six Key Initiatives Marketing Leadership Demand creation programs Brand management Dedicated specialists Sales Management LEAN Initiative for Sales Sales, territory and account management Solution selling and sales training
Slide 37: Marketing and LEAN Programs
Marketing and LEAN Programs Marketing ... Demand Creation LEAN for Sales ... Sales Execution Perpetual Sales Development Joint Calls Supplier Sales Planning System Pipeline Management Solution Selling Daily Rally for Sales Daily Branch Team Meeting New Business Opportunities Quotation Status Review
Slide 38: Voice of the Customer
Voice of the Customer Understanding of customer needs and business priorities Suite of value-add solutions Deploy to address customer needs Search for Savings Event Hands-on, intensive "process walk" to pinpoint improvement opportunities Customize LEAN Solutions Kaizen Application of LEAN to provide
Slide 39: Sourcing and Pricing Initiatives
Sourcing and Pricing Initiatives Sourcing Pricing PRIORITIES Customer-specific price negotiations Category management Volume leveraging Inventory optimization Increase utilization of preferred suppliers PRIORITIES Price increase management Customer rebate management INITIATIVES Expanded use of speci
Slide 40: WESCO's Acquisition Strategy
$500B+ WESCO's Acquisition Strategy ....adds capabilities, revenues, and profits Current Acquisition Environment Highly fragmented industry Many profitable niches Primarily privately owned Generational change We are building on our track record of 33 acquisitions which added $2.5B in acquired revenu
Slide 41: Global Accounts and Integrated Supply
Global Accounts and Integrated Supply Kevin Kerby Vice President, Global Accounts and Marketing
Slide 42: Global Accounts and Integrated Supply
Global Accounts and Integrated Supply Fortune 1000 focus Sell all WESCO products and services Capture new customers and expand with current customers Maintain customer renewal rate Global Accounts & Integrated Supply Providing Solutions for Sophisticated Customers Extensive products and services Bro
Slide 43: Opportunity Pipeline
Opportunity Pipeline Target Identification Discovery Meetings Proposals Negotiations WESCO Wins Current Customers (Expansion) New Customers (Prospects) Target Identification Discovery Meetings Proposals Negotiations $700M+ $570M+ $530M+ $200M+ 1 2 3 4 Total $2.0B+ 4-Stage Process ....record pipeline
Slide 44: Significant Growth Potential
Significant Growth Potential Petrochemical Government OEM materials Contractors Utilities Metals and Mining Food Processing Aerospace and Defense Pulp and Paper Healthcare and Education Electrical and Electronics Integrators and e-Commerce Commercial and Retail Transportation Key Verticals Business
Slide 45: Customer Engagement
Customer Engagement Extending our lead through... Target Audience Mission Centralized lead generation and qualification CPO, CIO New customer acquisition Global account managers with vertical market and customer account focus CPO, CFO, CIO, VP Operations Existing customer penetration and C-level rel
Slide 46: Market Trends & Drivers
Market Trends & Drivers Industrial and Electrical MRO Direct Materials (OEM) Capital Projects #1 provider of MRO Outsourcing Product line expansion Expanding global footprint WESCO OEM centers of excellence Industry leading Lean Value Creation team Expanding global footprint Dedicated WESCO EPC Sale
Slide 47: Success Stories - Industrial
Petrochemical Company: Going Global Success Stories - Industrial Diversified Manufacturer: Addressing All Spend Comprehensive electrical MRO coverage Broad geographic footprint (North America, Australia, Asia, Africa) Participating in large capital projects leveraging WESCO project technology while
Slide 48: Success Stories - Integrated Supply
Fortune 50: Strategic Outsourcing Solution 17-year customer - providing global supply chain outsourcing (North America, Asia, Europe) WESCO personnel on site at plants Industrial MRO spend processed utilizing WESCO technology platform Best in class supply chain processes drive year over year cost sa
Slide 49: Global Accounts and Integrated Supply Summary
Global Accounts and Integrated Supply Summary WESCO is the leader in developing and deploying global supply chain solutions for indirect material, direct material, and capital spend projects Customers are increasingly seeking partners to help them improve performance in their non-core supply chain c
Slide 50: Government
Government Ben Albu Manager, Business Development
Slide 51: Government and Stimulus
Providing federal, state and local government customers with the entire suite of WESCO products and services Data communications Electrical products Maintenance, repair and operating supplies Security Utility products Electronic and electromechanical Government and Stimulus Attractive Market Compreh
Slide 52: Government Trends Favor WESCO
Government Trends Favor WESCO WESCO's Position Government Market Trends Recovery Act projects are ramping up (building renovations, lighting retrofits, and new construction) Increased energy efficiency, renewable, and alternative energy programs, incentives, and mandates Launched the WESCO Stimulus
Slide 53: Government Priorities and Initiatives
Government Priorities and Initiatives Business development Marketing and WESCO government brand Sales capability and capacity Target programs (stimulus and BRAC) One WESCO Government Team Five Key Initiatives Execution Plan ....opportunity to deliver consistent double-digit sales growth Lead Generat
Slide 54: Five Key Government Initiatives
Five Key Government Initiatives Business Development Marketing and Brand Sales Capacity and Capability Over 2000 qualified government sales leads per year Contributing ~$250M+ to the sales pipeline Integrated Government marketing teams Clearly defined value propositions Solution selling kits $390M a
Slide 55: Success Stories - Advanced IT Application
Success Stories - Advanced IT Application Project Details WESCO providing electrical and data communications solutions WESCO customer awarded task order to provide engineering, procurement, installation, cutover, and testing services in support of the Command, Control, Communications, Computers and
Slide 56: Success Stories - Renewable Energy
Success Stories - Renewable Energy Project Details WESCO providing entire solar product offering: Solar Modules Inverters PV Fuses Software Disconnects and Metering PV Cable PV Connectors Anchors Enclosures Conduit Grounding Location: Monterrey, CA 600 multi-family unit PV solar installation Stimulu
Slide 57: Success Story - Stimulus Lighting Retrofits
Success Story - Stimulus Lighting Retrofits Project Details Amtrak was allocated $1.3B in ARRA capital funds $850M for infrastructure modernization WESCO has teamed with strategic suppliers to provide lighting and electrical solutions to Amtrak contractors across the U.S. Aligned around Amtrak's con
Slide 58: Success Stories - Global Logistics Solution
Success Stories - Global Logistics Solution Project Details Communication packages to support the infrastructure expansion of installations located in Afghanistan WESCO is providing secure networking equipment, inside and outside plant infrastructure, and communication hardware WESCO services includ
Slide 59: Government and Stimulus Summary
Government and Stimulus Summary Bringing the complete WESCO solution to government customers Differentiated via demand creation Using business development team as a sustainable competitive advantage Operating as One WESCO integrated team Continuing to invest in talent, capabilities, and partnerships
Slide 60: Data Communications and Security
Data Communications and Security David Bemoras Vice President and General Manager WESCO INVESTOR DAY | TUESDAY, AUGUST 10, 2010
Slide 61: Over $10B Market Opportunity
Over $10B market opportunity End markets served (direct to user or through contractor channel) Corporate end users Institutions Healthcare Service providers Government (local, state, and federal) Residential Utilities Data Communications and Security Attractive Market Data Communications & Security
Slide 62: Market Trends Favor WESCO
Market Trends Favor WESCO Data center capacity Increased Security Mobility and Accessibility Secure Networks Globalization Connected Real Estate Technology & Security demands will continue to stimulate investment across all market segments Our digital world is rapidly accelerating... Key IT Market T
Slide 63: Market Trends and Drivers
Market Trends and Drivers Bandwidth, power, cooling and space demands at all- time high Mobility, cloud computing and virtualization Reduce power and increase efficiency Camera coverage in metro areas is at an all-time high and growing Campus security concerns Customer demand for bundled IP security
Slide 64: Market Trends and Drivers
Market Trends and Drivers American Recovery and Reinvestment Act (ARRA) is the tip of the iceberg Base Realignment and Relocation Secure networks and government controlled data centers Fortune 1000 trying to consolidate total spend as economy recovers Customers looking for single partner to manage c
Slide 65: Go To Market Strategy
Go To Market Strategy Offense-minded, empowering, "play to win" culture Overlay resources (global accounts, government, utility, security) Utilizing the Power of WESCO Leading with proprietary value-added solutions: Geographic expansion Business development Expanding distribution logistics platform
Slide 66: Success Stories
Success Stories Global Media Conglomerate International Data Center Deployment National Colo Services Provider "One-Stop Shop" Execution Introduced in October 2009 Incumbent could not meet customer's needs International team collaboration Selected as global provider of choice "Aurora" data center co
Slide 67: Success Stories
Success Stories Global Software/Hardware Company New Branches Taking Share National Drug Store Chain The Power of "One WESCO" Salt Lake City opened in January, 2010 Began relationship after customer started looking for alternatives to long-time incumbent WESCO's value proposition was so strong that
Slide 68: Data Communications and Security Summary
Data Communications and Security Summary Market trends favorable for sustainable growth Aggressive geographic expansion plan well underway Original footprint of 27 branches in 2006 60+ branches by 2012 Strategic plan to follow U.S. based customers abroad Value-added services portfolio Expanding sale
Slide 69: Closing Remarks and Q&A
Closing Remarks and Q&A John Engel President and Chief Executive Officer
Slide 70: Invest in WESCO
Invest in WESCO Market leader with low business risk profile Proven business model well positioned in large, fragmented market Organic sales growth faster than market Operational excellence culture founded on LEAN Solid ROIC performance and excellent cash conversion results Proven acquirer in a cons