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  1. 1. The challenges of 2001 have served as a catalyst for sharpening our business strategy and improving our competitive position. 2001 Annual Report & Form 10-K
  2. 2. Corporate Profile WESCO International, Inc. (NYSE: WCC) is a leading distributor of electrical construction products and electrical and industrial maintenance, repair and operating (MRO) supplies, and is the nation’s largest provider of integrated supply services. Headquartered in Pittsburgh, Pennsylvania, the company employs approximately 5,700 people, maintains relationships with 24,000 suppliers, and serves more than 100,000 customers worldwide. Major markets include commercial and industrial firms, contractors, governmental agencies, educa- tional institutions, telecommunications businesses and utilities. WESCO operates five fully automated distribution centers and over 350 full-service branches in North America and selected international markets, providing a local presence for area customers and a global network to serve multi-location businesses and multi-national corporations.
  3. 3. TO OUR SHAREHOLDERS, EMPLOYEES AND FRIENDS 2001 was a difficult year for the Country and for our Company. Every major market WESCO serves was adversely affected by the weak economy, and we experienced deteriorating demand as the year progressed. We were also challenged by decreased pricing in key, high volume commodities, a record level of
  4. 4. Letter to our Shareholders continued bankruptcies and bad debts, and the need to inventories and conserved cash through reductions take multiple cost-cutting actions in response in capital spending. Lower operating costs and to lower revenues. higher productivity became a major priority early in the year, and expenses were systematically Against this backdrop, the “extra effort” that decreased through multiple stages of staff reduc- characterizes WESCO’s employees has been extra- tions and discretionary cost elimination initiatives. ordinary. Because of their dedication and resolve, Through a combination of attrition and workload WESCO has made significant progress during this rebalancing, we reduced our staffing level by 10% problematic time. We’ve broadened our customer to reposition our cost structure relative to revenue base, increased our market share, and set new generation. All costs associated with these adjust- records in negotiating major national accounts and ments are reflected in 2001 operations, and we alliance agreements that ensure our current and expect to realize the benefit of a lower cost structure future status as a preferred supplier. We reduced as we move into 2002. expenses, contained capital expenditures, and paid down debt. Although our 2001 financial performance Financial Structure was disappointing, we were able to diminish the During 2001 and early 2002, we took a number of negative impact of reduced market demand, and important steps to improve our capital structure we have significantly strengthened our Company and financing flexibility. In August we completed for the long term. We have improved our capital the issuance of $100 million of Senior Subordinated structure, maintained our operating efficiency, Notes and reduced our outstanding obligations and positioned WESCO for accelerated growth under our revolving credit facility. The seven-year and increasing shareholder value as the economy term on the new notes provided the company with stabilizes and recovers. stable, longer-term financing commitments at a competitive cost. Operating Results Total sales revenue in 2001 was $3.7 billion, a decrease Capitalizing on the company’s favorable asset of $223 million or 5.7% from the prior year. Excluding structure, we have replaced our revolving credit the effects of acquisitions completed in 2000 and facility with a new asset-backed facility supported 2001, the year-over-year sales decline was 8.6%. by inventory and certain accounts receivable. This The gross margin rate for 2001 was unchanged. Net new facility provides improved access and liquidity, income was $20.2 million, compared with $33.4 mil- increased operating flexibility and rates that are lion in 2000. Diluted earnings per share were $0.43 comparable to our prior facility. Additional flexibility for the period, as compared to $0.70 for the prior is available for acquisition financing and for share year. Operating cash flow for 2001 was a record or bond repurchase opportunities. WESCO’s overall $161 million and was generated through profitable rate on all interest-bearing obligations for 2001 was operations and reduced levels of accounts receivable 6.7%, and this competitive market rate demonstrates and inventory. Debt was reduced by more than the quality of our assets and our ability to access $80 million including a reduction in our receivables multiple forms of financing. securitization facility. Strategies for Growth Customer-based activity levels – as measured by The challenges of 2001 have served as a catalyst order processing, delivery and invoicing transactions for sharpening our business strategy and improving – declined less than 2% when compared with 2000. our competitive position. We are building on our Although order volume and the workload associated core strengths as a large, branch-based wholesaler with processing, picking, packing, and shipping and distributor of electrical products and related remained nearly constant, the revenue value per supplies and services, and as the industry leader in transaction declined, as customers drove down customer service and low-cost operations. We have developed a large, profitable, and highly diversified business base by supplying a wide range of critical components for all types of construction, facilities maintenance, and machinery power and control application. We have strong positions in multiple market and customer segments, and we believe that 2 WESCO INTERNATIONAL, INC. 2001 Annual Report
  5. 5. IMPROVING POSITION competitive With new distribution channels, broader geographic reach, full capabilities in integrated supply, and continuously increasing market share, WESCO is strategically positioned for accelerated growth and profitability.
  6. 6. Letter to our Shareholders continued our number one position in integrated supply services, Our integrated supply capabilities and supporting national accounts preferred supplier programs, and technology represent one of the very few fully distribution services to power utility customers was functional, fully operational, electronic commerce enhanced in 2001. These leading positions provide and Internet-based trade exchanges operating in a solid platform for future growth and profitability. industry today. Each day we support thousands of Despite current economic conditions, the electrical product inquiries and requests from authorized and industrial supply industries in which we operate requisitioners in our large customer accounts who are fundamentally sound, and they offer significant access products and services from thousands of sup- opportunities for both internally-generated and pliers. In 2001, we greatly increased our capabilities acquisition-based growth in the years ahead. through major advances in our Internet-accessible procurement and storeroom management systems. Internal Growth These new systems were instrumental in this year’s With electrical products as our core, WESCO has expansion of integrated supply programs into Europe, numerous opportunities for increasing the range of and they will play a key role in achieving a faster products we offer by building and/or adding new ramp-up to full potential as we add new integrated channels of product and service distribution. In 2001, supply customers. we expanded our customer communications through the continued development of electronic and paper- Another growth engine for WESCO is our National based product/service catalogs, and enhanced our Accounts Program. In 2001, we added more than e-commerce and Internet-based customer service 30 new, high-profile customers to our client roster capabilities with tools and methodologies to support and are now supplying approximately 800 of their integration with our customers’ business systems. operating locations and affiliates in the United A range of 2001 accomplishments included: States, Canada, Mexico, and Puerto Rico. Potential future electrical product sales at targeted levels • Introduction of new e-Commerce sites for of implementation for these new customers are our automation/controls business and our estimated to be in excess of $100 million annually. Canadian operations; • Development of numerous customized electronic In addition, we successfully expanded our National catalogs for large-volume customers in a variety Accounts programs in the healthcare market with of industries; a contract award from one of the largest healthcare • Further development of WESCOExpress, a new, group purchasing organizations in the United States. centralized fulfillment unit that provides exceptional While we have had a long-standing service presence service for customers with many small or remote with local and regional hospitals and health systems, operating units, and those with occasional or this purchasing group represents approximately unpredictable demand; 30% of the nation’s community hospitals and health • Renewed emphasis on telesales, direct systems, and offers a new avenue for future growth. marketing, and targeted product sales promotion programs; and, Low-cost Operations • Expanded programs of multi-site trade shows WESCO holds a low-cost position in the electrical featuring new products and cost saving ideas. and industrial products distribution business due to our streamlined operating structure and focus on The most significant product/service channel we’ve productivity. Industry data, independently compiled added over the past four years is integrated supply – by the National Association of Electrical Distributors a supply chain solution that helps customers simplify (NAED) and other commodity-oriented industry asso- their procurement and replenishment of electrical ciations, has consistently positioned WESCO as a and non-electrical spare parts, maintenance items, low-cost firm with high levels of personnel produc- and operating supplies. tivity. In 2001, for example, our sales per employee were $648,000, equaling an output per person signi- ficantly greater than the most recently reported industry average of $363,000 sales per employee. 4 WESCO INTERNATIONAL, INC. 2001 Annual Report
  7. 7. CATALYSTf or our STRATEGY From the challenges of 2001, WESCO has emerged as a stronger and more flexible company, with a proven business model designed for efficiency, profitability, and increased value for shareholders.
  8. 8. Letter to our Shareholders continued To further improve productivity, we have developed Outlook a variety of additional measurements and new It is encouraging that recent economic reports and monitoring and control systems. We are continually forecasts indicate the economy is stabilizing and working to reduce transaction and overall handling recovery is on the way. This is definitely good news, costs and to reduce general operating expenses at but the reported improvements are coming after 18 each location. In addition, we expect to continue to consecutive months of decline affecting our major invest the majority of our annual capital expenditures markets, and meaningful increases in customer in information technology projects that provide sales demand in industrial and construction markets won’t leverage, operating efficiencies, and increased happen as quickly as we’d like. We expect market operating controls. conditions to remain challenging throughout 2002, with continued pressure on sales volume, pricing, Acquisitions and margins. We will continue to adjust our opera- Since 1995, WESCO has had a continuing program tions and work to protect our low-cost position, of selective acquisitions, and has acquired 25 com- making systematic incremental cost reductions panies that have contributed approximately $1.4 billion as necessary. in sales as estimated at the time of acquisition. Our recent acquisitions were executed for the purposes The actions we’ve taken in 2001 have made WESCO of expanding our geographical presence and prod- a stronger and more flexible company. We are well uct/service capability in supporting electric and gas positioned to serve our growing customer base and utility companies as well as contractors who special- to achieve improved profitability and increased value ize in these market segments. In 2000, we completed for shareholders as economic conditions improve. acquisitions of a utility-focused distributor serving We believe that the industries we serve are sound, the Alabama, Georgia, and Tennessee market areas, resilient, and poised to rebound, and we are confi- and a specialty distributor primarily serving utilities dent in the strength of our business model to create and specialty contractors in the Western United long-term customer relationships and substantial States. In March 2001, we completed the acquisition growth opportunities. of Herning Enterprises, Inc., whose ten branch locations serve utility and telecommunications For 2002, our priorities and action plans focus on the contractors in Arizona, California, Utah, basics. We are a sales driven organization, and we Washington, and other West Coast states. will continue to invest in initiatives that result in new or expanded customer relationships. We will find Even though the pace has slowed, acquisitions will new and more effective ways to enhance produc- continue to be part of WESCO’s long-term growth tivity and improve our low operating cost position. strategy. We anticipate improved opportunities to And, we intend to generate positive cash flow and increase penetration in key geographical markets use the proceeds to reduce debt. and selectively add to our product and service capabilities as a result of current market conditions. With the continued support of our employees, our customers and suppliers, and our shareholders, we look forward to significant improvements in 2002, and to a bright future ahead. Roy W. Haley Chairman and Chief Executive Officer 6 WESCO INTERNATIONAL, INC. 2001 Annual Report
  9. 9. Net Sales (in millions) 97 $2,595 98 $3,025 99 $3,424 00 $3,881 01 $3,658 1 EBITDA (in millions) 97 $91 98 $123 99 $145 00 $160 01 $126 Return on Invested Capital 97 10.7% 98 14.7% 99 15.1% 00 14.8% 01 12.0% Income from operations plus depreciation, amortization, 1 restructuring charge and recapitalization costs 7
  10. 10. Financial Highlights 2001 2000 1999 Year Ended December 31 (in millions) Net sales $ 3,658.0 $ 3,881.1 $ 3,423.9 Gross profit 643.5 684.1 616.6 Income from operations 95.3 125.4 125.0 Interest and other expenses 62.0 68.7 66.5 Income before income taxes and extraordinary item 33.3 56.7 58.5 EBITDA1 126.4 159.8 145.3 Working capital 188.6 229.8 199.0 Long-term debt (including current portion) 452.0 483.3 426.4 Stockholders’ equity 144.7 125.0 117.3 Income from operations plus depreciation, amortization, restructuring charge and recapitalization costs 1 8 WESCO INTERNATIONAL, INC. 2001 Annual Report
  11. 11. 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, 2001 or [ X ] 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 (I.R.S. Employer incorporation or organization) Identification No.) Commerce Court 15219 Four Station Square, Suite 700 (Zip Code) 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 [ X ] 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 state- ments incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of February 28, 2002, 40,237,162 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 the aggregate market value of the voting shares held by non-affiliates of the registrant was approximately $99.9 million based on the February 28, 2002 closing price on the New York Stock Exchange for such stock. Documents Incorporated by Reference: Part III of this Form 10-K incorporates by reference portions of the registrant’s Proxy Statement. 9
  12. 12. WESCO International, Inc. December 31, 2001 Table of Contents Part I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Part II Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . 27 Item 7a. Quantitative and Qualitative Disclosures About Market Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Item 8. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. . . . . . . . . 36 Part III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Index to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 10 WESCO INTERNATIONAL, INC. 2001 Form 10-K
  13. 13. PART I Item 1. Industry Overview The electrical distribution industry serves customers in a number of markets including the industrial, com- Business mercial, construction and utility markets. Electrical In this Annual Report on Form 10-K, “WESCO” refers distributors, such as us, provide logistical and tech- to WESCO International, Inc., and its subsidiaries nical services for customers by bundling together and its predecessors unless the context otherwise a wide range of products typically required for the requires. References to “we,” “us,” “our” and the construction and maintenance of electrical supply “Company” refer to WESCO and its subsidiaries. networks, including wire, lighting, distribution and Our subsidiaries include WESCO Distribution, Inc. control equipment and a wide variety of electrical (“WESCO Distribution”) and WESCO Distribution supplies. This distribution channel enables customers Canada, Inc. (“WESCO Canada”), both of which to efficiently access a broad range of products and are wholly-owned by WESCO. has the capacity to deliver value-added services. Customers are increasingly demanding that distri- The Company butors provide a broader and more complex package of services as they seek to outsource non-core With sales of almost $3.7 billion in 2001, we are functions and achieve documented cost savings in a leading North American provider of electrical purchasing, inventory and supply chain management. construction products and electrical and industrial maintenance, repair and operating supplies, com- Electrical Distribution. The U.S. electrical distribution monly referred to as “MRO.” We are the second industry had sales of approximately $73 billion in largest distributor in the estimated $73 billion 2001. While overall weakness in the current eco- U.S. electrical distribution industry, and the largest nomic environment has contributed to recent sales provider of integrated supply services. Our inte- declines, industry growth has averaged 6% per year grated supply solutions and outsourcing services from 1985 to 2001. This expansion has been driven are designed to fulfill a customer’s industrial MRO by general economic growth, increased use of elec- procurement needs through a highly automated, trical products in businesses and industries, new proprietary electronic procurement and inventory products and technologies, and customers who are replenishment system. This allows our customers to seeking to more efficiently purchase a broad range consolidate suppliers and reduce their procurement of products and services from a single point of con- and operating costs. We have over 350 branches tact, thereby eliminating the costs and expenses of and five distribution centers located in 48 states, purchasing directly from manufacturers or multiple nine Canadian provinces, Puerto Rico, Mexico, sources. The U.S. electrical distribution industry Guam, the United Kingdom, Nigeria, Singapore is also highly fragmented. The four national distri- and Venezuela. We serve over 100,000 customers butors, including WESCO, account for less than 20% worldwide, offering over 1,000,000 products from of estimated total industry sales. over 24,000 suppliers. Our diverse customer base includes a wide variety of industrial companies; Integrated Supply. The market for integrated supply contractors for industrial, commercial and residen- services has more than doubled from $5 billion in tial projects; utility companies; and commercial, 1997 to over $10 billion in 2000, an increase of 27% institutional and governmental customers. Our lead- per year. Recent projections estimate that the inte- ing market positions, extensive geographic reach, grated supply market will reach $18.4 billion by 2004. broad product and service offerings and acquisition Growth is being driven by the desire of large indus- program have enabled us to significantly increase trial companies to reduce operating expenses by our net sales and improve our financial performance. implementing comprehensive third-party programs, which outsource the cost-intensive procurement, We have acquired 25 companies since August stocking and administrative functions associated 1995, representing annual sales of approximately with the purchase and consumption of MRO sup- $1.4 billion. Our internal growth, combined with plies. For our customers, these costs can account acquisitions, have increased our net sales and for over 50% of the total costs for MRO products earnings before interest, taxes, depreciation, and services. The total potential in the United States amortization and restructuring charges at com- for integrated supply services, measured as all pur- pounded annual growth rates of 12% and 23%, chases of industrial MRO supplies and services, is respectively, between 1994 and 2001. currently estimated to be approximately $260 billion. 11
  14. 14. Competitive Strengths Extensive Distribution Network. Our distribution network consists of over 350 branches and five dis- Market Leadership. Our ability to manage large tribution centers located in 48 states, nine Canadian construction projects and complex multi-site plant provinces, Puerto Rico, Mexico, Guam, the United maintenance programs and procurement projects Kingdom, Nigeria and Singapore. This extensive that require special sourcing, technical advice, network, which would be extremely difficult and logistical support and locally based service has expensive to duplicate, allows us to: enabled us to establish leadership positions in our principal markets. We have utilized these skills to • maintain local customer service, technical generate significant revenues in industries with support, and sales coverage; intensive use of electrical and MRO products, • tailor branch products and services to local including: electrical contracting, utilities, original customer needs; equipment manufacturing, process manufacturing • offer multi-site distribution capabilities to and other commercial, institutional and govern- large customers and national accounts; and mental entities. We have also been able to extend • provide same-day deliveries. our position within these industries to expand our customer base. Low Cost Operator. Our competitive position has been enhanced by our low cost position, which Value-added Services. We are a leader in providing is based on: a wide range of services and procurement solutions that draw on our product knowledge, supply and • extensive use of automation and technology; logistics expertise and systems capabilities, enabling • centralization of functions such as purchasing our customers to reduce supply chain costs and and accounting; improve efficiency. These programs include: • strategically located distribution centers; • National Accounts – we coordinate product • purchasing economies of scale; and supply and materials management activities for • incentive programs that increase productivity MRO supplies for customers with multiple loca- and encourage entrepreneurship. tions who seek purchasing leverage through a single electrical products provider; Our low cost position enables us to generate a • Integrated Supply – we design and implement significant amount of cash flow as the capital invest- programs that enable our customers to signifi- cantly reduce the number of MRO suppliers they ment required to maintain our business is low. This use through services that include highly auto- cash flow is available for debt reduction, strategic mated, proprietary electronic procurement and acquisitions and continued investment in the growth inventory replenishment systems and on-site of the business. materials management and logistics services; and • Major Projects – we have a dedicated team of Business Strategy experienced construction management personnel to service the needs of the top engineering and Our objective is to be the leading provider of construction firms which specialize in major electrical products and other MRO supplies and projects such as airport expansions, stadiums services to companies in North America and and healthcare facilities. selected international markets. In achieving this leadership position, our goal is to grow earnings Broad Product Offering. We provide our customers at a faster rate than sales by focusing on margin with a broad product selection consisting of over enhancement and continuous productivity improve- 1,000,000 electrical, industrial and data communi- ment. Our growth strategy leverages our existing cations products sourced from over 24,000 suppliers. strengths and focuses on developing new initiatives Our broad product offering enables us to meet and programs. virtually all of a customer’s electrical product and other MRO requirements. 12 WESCO INTERNATIONAL, INC. 2001 Form 10-K
  15. 15. Enhance our Leadership Position in Electrical Focus on Major Projects. We are increasing our Distribution. We intend to leverage our extensive focus on large construction, renovation and market presence and brand equity in the WESCO institutional projects. We seek to secure new name to further our leadership position in electrical major projects contracts through: distribution. We are focusing our sales and market- • active national marketing of our demonstrated ing on existing industries where we are expanding project management capabilities; our product and service offerings as well as target- • further development of relationships with ing new clients, both within industries we currently leading regional and national contractors serve and in new markets which provide significant and engineering firms; growth opportunities. Markets where we believe • close coordination with national account such opportunities exist include retail, education, customers on their major project requirements; and financial services and health care. We are the • offering an integrated supply service approach second largest electrical distributor in the United to contractors for major projects. States and, through our value-added products and services, we believe we have become the industry Extend Our Leadership Position in Integrated Supply. leader in serving several important and growing We are the largest provider of integrated supply markets including: services for MRO goods and services in the United • industrial customers with large, complex plant States. We provide a full complement of outsourcing maintenance operations, many of which require solutions, focusing on improving the supply chain a national multi-site service solution for their management process for our customers’ indirect electrical distribution product needs; purchases. Our integrated supply programs replace • large contractors for major industrial and the traditional multi-vendor, resource-intensive pro- commercial construction projects; curement process with a single, outsourced, fully • the electric utility industry; and automated process capable of managing all MRO • manufacturers of factory-built homes, recreational and related service requirements. Our solutions vehicles and other modular structures. range from timely product delivery to assuming full responsibility for the entire procurement function. Grow National Accounts Programs. From 1994 Our customers include some of the largest industrial through 2001, revenue from our national accounts companies in the United States. We intend to expand program increased in excess of 11% annually. We our leadership position as the largest integrated will continue to invest in the expansion of this pro- supply service provider by: gram. Through our national accounts program, we • continuing to tailor our proven and profitable coordinate electrical MRO procurement and pur- business model to the scale and scope of our chasing activities primarily for large industrial and customers’ operations; commercial companies across multiple locations. • maximizing the use of our highly automated We have well-established relationships with over proprietary information systems; 300 companies, providing us with a recurring base • leveraging established relationships with our of revenue through multi-year agreements. Our large industrial customer base, especially among objective is to continue to increase revenue gener- existing national account customers who could ated through our national accounts program by: benefit from our integrated supply model; and • being a low cost provider of integrated • offering existing national account customers new supply services. products, more services and additional locations; • extending certain established national account We intend to utilize these competitive strengths relationships to include integrated supply; and to increase our integrated supply sales to both • expanding our customer base by leveraging our new and existing customers, including our existing existing industry expertise in markets we currently serve as well as entering into new markets. national account customers. 13
  16. 16. existing electrical sales force has been trained to Gain Share in Key Local Markets. Significant sell data communications products resulting in sig- opportunities exist to gain local market share, since nificant new data and electrical projects with large many local markets are highly fragmented. We commercial banks, schools and telecommunications intend to increase our market share in key geo- service providers. In addition, we have the platform graphic markets through a combination of increased to sell integrated lighting control and power distribu- sales and marketing efforts at existing branches, tion equipment in a single package for multi-site acquisitions that expand our product and customer specialty retailers, restaurant chains and department base and new branch openings. We intend to stores. These are strong growth markets where our leverage our existing relationships with preferred national accounts strategies and logistics infrastruc- suppliers to increase sales of their products in local ture provide significant benefits for our customers. markets through various initiatives, including sales promotions, cooperative marketing efforts, direct Leverage our e-Commerce and Information System participation by suppliers in national accounts imple- Capabilities. We conduct a significant amount of mentation, dedicated sales forces and product business electronically. Our electronic transaction exclusivity. To promote growth, we have instituted management capabilities lower costs and shorten a compensation system for branch managers that cycle time in the supply chain process for us and encourages our branch managers to increase sales for our customers. We intend to continue to invest and optimize business activities in their local mar- in information technology to create more effective kets, including managing the sales force, configuring linkages with both customers and suppliers. inventories, targeting potential customers for mar- keting efforts and tailoring local service options. Expand our International Operations. Our international sales, the majority of which are in Canada, accounted Pursue Strategic Acquisitions. Since 1995, we have for approximately 11% of sales in 2001. We believe considered over 300 potential acquisitions and have that there is significant additional demand for our completed and successfully integrated 25 acquisi- products and services outside the United States and tions, which represent annual sales of approximately Canada. Many of our multinational domestic cus- $1.4 billion. We believe that the highly fragmented tomers are seeking distribution, integrated supply nature of the electrical and industrial MRO distri- and project management solutions globally. Our bution industry will continue to provide us with approach to international operations is consistent acquisition opportunities. In our disciplined approach with our domestic philosophy. We follow our estab- toward acquisitions, potential acquisitions are lished customers and pursue business that we evaluated based on a variety of financial, strategic believe utilizes and extends our existing capabilities. and operational criteria, including their ability to: This strategy of working through well-developed • better serve our existing customers; customer and supplier relationships significantly reduces risks and provides the opportunity to estab- • offer expansion into key growth markets; lish a profitable business. We have five locations in • add new product or service capabilities; Mexico, headquartered in Tlalnepantla that serve • support new and existing national accounts; all of metropolitan Mexico City and the Federal • strengthen relationships with important District and the states of Mexico, Morelos and manufacturers; and Hidalgo. We continue to pursue growth opportunities • meet well-defined financial criteria including in existing locations such as Aberdeen, Scotland and return on investment and earnings accretion. London, England, which support our sales efforts in Europe and the former Soviet Union. We have an Expand Product and Service Offerings. We continue operation in Nigeria to serve West Africa, an office to build on our demonstrated ability to introduce new in Caracas, Venezuela to serve the Northern portion products and services to meet existing customer of South America, and an office in Singapore to demands and capitalize on new market opportuni- support our sales to customers in Asia. We are ties. As the market for data and electrical products working toward forming strategic alliances in critical converge, we have integrated our data communica- markets, where appropriate. tions efforts into our core electrical business. Our 14 WESCO INTERNATIONAL, INC. 2001 Form 10-K
  17. 17. Acquisition and Integration Program Products and Services Our strategic acquisition program has been an Products important element in our objective to be the leader in Our network of branches and distribution centers the markets we serve. We have completed 25 acqui- stock over 215,000 product stock keeping units sitions since August 1995, representing total annual (“SKUs”). Each branch tailors its inventory to meet sales of approximately $1.4 billion. Our philosophy the needs of the customers in its local market, typi- toward growth includes a continuous evaluation to cally stocking approximately 4,000 to 8,000 SKUs. Our determine whether a particular opportunity, capabili- integrated supply business allows our customers to ty or customer need is best developed internally or access over 1,000,000 products for direct shipment. purchased through a strategic acquisition. We have Representative products that we sell include: a business development department that consists of a small team of professionals who locate, evaluate • Electrical Supplies. Fuses, terminals, connectors, and negotiate all aspects of any acquisition, with boxes, fittings, tools, lugs, tape and other particular emphasis on compatibility of management MRO supplies. philosophy and strategic fit. We believe that the • Industrial Supplies. Cutting and other tools, highly fragmented nature of the electrical distribution abrasives, filters and safety equipment. industry will continue to provide us with acquisition • Distribution. Circuit breakers, transformers, opportunities. We will continue to utilize our strong switchboards, panelboards and busway. internal capabilities to selectively evaluate the • Lighting. Lamps, fixtures and ballasts. strategic and financial benefits from potential acqui- sitions that complement our customers’ overall • Wire and Conduit. Wire, cable, metallic and non-metallic conduit. supply needs, including those in the electrical distri- bution, integrated supply and other non-electrical • Control, Automation and Motors. Motor control devices, drives, programmable logic controllers, distribution industries. The Company expects that pushbuttons and operator interfaces. future acquisitions will be financed out of available internally generated funds, additional debt and the • Data Communications. Premise wiring, patch panels, terminals and connectors. issuance of equity securities. However, our ability to make acquisitions will be subject to our compli- ance with certain conditions under the terms of our We purchase products from a diverse group of over new revolving credit facility. See Part II, Item 7. – 24,000 suppliers. In 2001, our ten largest suppliers “Management’s Discussion and Analysis of Financial accounted for approximately 34% of our purchases. Condition and Results of Operations – Liquidity and The largest of these was Eaton Corporation, through Capital Resources” for a further description of the its Cutler-Hammer division, accounting for approxi- new revolving credit facility. mately 14% of total purchases. No other supplier accounted for more than 5% of total purchases. WESCO Acquisition History Our supplier relationships are important to us, Branch Annual providing access to a wide range of products, Year Acquisitions Locations Sales 1 technical training and sales and marketing support. (Dollars in millions) We have preferred supplier agreements with 1995 2 2 $ 47 approximately 150 of our suppliers and purchase 1996 7 67 418 approximately 65% of our stock inventory pursuant 1997 2 9 52 to these agreements. Consistent with industry 1998 6 21 608 practice, most of our agreements with suppliers, 1999 4 5 70 including both distribution agreements and preferred 2000 3 17 92 supplier agreements, are terminable by either party 2001 1 10 112 on 60 days’ notice or less. Total 25 131 $ 1,399 Represents our estimate of annual sales of acquired businesses 1 at the time of acquisition, based on our review of internal and/or audited statements of the acquired business. 15
  18. 18. Services lower administrative expenses. Our solutions range In conjunction with product sales, we offer customers from just-in-time fulfillment to assuming full respon- a wide range of services and procurement solutions sibility for the entire procurement function for all that draw on our product and supply management indirect purchases. We believe that customers will expertise and systems capabilities. These services increasingly seek to utilize us as an “integrator,” include national accounts programs, integrated responsible for selecting and managing the supply supply programs and major project programs. We of a wide range of MRO and OEM products. are responding to the needs of our customers, Major projects. We have a major projects group, particularly those in processing and manufacturing comprised of our most experienced construction industries. To more efficiently manage the MRO management personnel, which focuses on serving process on behalf of our customers, we offer a the complex needs of North America’s largest range of supply management services, including: engineering and construction firms and the top 50 • outsourcing of the entire MRO purchasing process; U.S. electrical contractors on a multi-regional basis. These contractors typically specialize in building • providing technical support for manufacturing process improvements using state-of-the-art industrial sites, water treatment plants, airport automated solutions; expansions, healthcare facilities, correctional institutions and new sports stadiums. • implementing inventory optimization programs; • participating in joint cost savings teams; Markets and Customers • assigning our employees as on-site support personnel; We have a large base of approximately 100,000 • recommending energy-efficient product customers diversified across our principal markets. upgrades; and While two customers each accounted for almost • offering safety and product training for 3% of 2001 sales, no other customer accounted for customer employees. more than 2% of 2001 sales. Industrial customers. Sales to industrial customers, National accounts programs. The typical national which include numerous manufacturing and process account customer is a Fortune 500 industrial company, industries, and original equipment manufacturers a large utility or other major customer, in each (“OEMs”) accounted for approximately 42% of our case with multiple locations. Our national accounts sales in 2001. programs are designed to provide customers with total supply chain cost reductions by coordinating MRO products are needed to maintain and upgrade purchasing activity for MRO supplies across multiple the electrical and communications networks at all locations. Comprehensive implementation plans industrial sites. Expenditures are greatest in the establish jointly managed teams at the local and heavy process industries, such as food processing, national level to prioritize activities, identify key pulp and paper and petrochemical. Typically, electri- performance measures and track progress against cal MRO is the first or second ranked product objectives. We involve our preferred suppliers early category by purchase value for total MRO require- in the implementation process, where they can ments for an industrial site. Other MRO product contribute expertise and product knowledge to categories include, among others, lubricants, pipe, accelerate program implementation and the achieve- valves and fittings, fasteners, cutting tools and ment of cost savings and process improvements. power transmission products. Integrated supply programs. Our integrated supply OEM customers incorporate electrical components programs offer customers a variety of services to and assemblies into their own products. OEMs support their objectives for improved supply chain typically require a reliable, high volume supply of management. We integrate our personnel, product a narrow range of electrical items. Customers in this and distribution expertise, electronic technologies segment are particularly service and price sensitive and service capabilities with the customer’s own due to the volume and the critical nature of the internal resources to meet particular service product used, and they also expect value-added requirements. Each integrated supply program is services such as design and technical support, uniquely configured to deliver a significant reduction just-in-time supply and electronic commerce. in the number of MRO suppliers, reduce total pro- curement costs, improve operating controls and 16 WESCO INTERNATIONAL, INC. 2001 Form 10-K
  19. 19. Electrical contractors. Sales to electrical contractors Distribution centers. To support our branch network, accounted for approximately 35% of our sales in we have five distribution centers located in the 2001. These customers range from large contractors United States and Canada, including facilities located for major industrial and commercial projects, the near Pittsburgh, Pennsylvania, serving the Northeast customer types we principally serve, to small resi- and Midwest United States; near Reno, Nevada, dential contractors, which represent a small portion serving the Western United States; near Memphis, of our sales. Electrical products purchased by Tennessee, serving the Southeast and Central United electrical sub-contractors typically account for States; near Montreal, Quebec, serving Eastern approximately 40% to 50% of their installed project and Central Canada; and near Vancouver, British cost, and, therefore, accurate cost estimates and Columbia, serving Western Canada. competitive material costs are critical to a contrac- Our distribution centers add value for our branches tor’s success in obtaining profitable projects. and customers through the combination of a broad Utilities. Sales to utilities accounted for approximately and deep selection of inventory, on-line ordering, 17% of our sales in 2001. This market includes large same day shipment and central order handling and investor-owned utilities, rural electric cooperatives fulfillment. Our distribution center network reduces and municipal power authorities. We provide our the lead-time and improves the reliability of our sup- utility customers with power line products and an ply chain, giving us a distinct competitive advantage extensive range of supplies to meet their MRO and in customer service. Additionally, the distribution capital projects needs. Full materials management centers reduce the time and cost of supply chain and procurement outsourcing arrangements are activities through automated replenishment and also important in this market as cost pressures and warehouse management systems, and economies deregulation cause utility customers to streamline of scale in purchasing, inventory management, purchasing and inventory control practices. administration and transportation. Commercial, institutional and governmental Sales Organization customers (“CIG”). Sales to CIG customers accounted General sales force. Our general sales force is for approximately 6% of our sales in 2001. This frag- based at the local branches and comprises approxi- mented market includes schools, hospitals, property mately 2,200 of our employees, almost half of management firms, retailers and government agen- whom are outside sales representatives and the cies of all types. Through our WR Controls Division, remainder are inside sales personnel. Outside sales we have a platform to sell integrated lighting control representatives are paid under a compensation and distribution equipment in a single package for structure which is heavily weighted towards com- multi-site specialty retailers, restaurant chains and missions. They are responsible for making direct department stores. customer calls, performing on-site technical support, generating new customer relations and developing Distribution Network existing territories. The inside sales force is a key Branch network. We have over 350 branches, of point of contact for responding to routine customer which approximately 290 are located in the United inquiries such as price and availability requests States, approximately 50 are located in Canada and and for entering and tracking orders. the remainder are located in Puerto Rico, Mexico, Guam, the United Kingdom, Nigeria, Singapore National accounts. Our national accounts sales and Venezuela. Over the last three years, we have force is comprised of an experienced group of sales opened approximately seven branches per year, executives who negotiate and administer contracts, principally to service national account customers. In coordinate branch participation and identify sales addition to consolidations in connection with acquisi- and service opportunities. National accounts man- tions, we occasionally close or consolidate existing agers’ efforts are aligned by targeted customer branch locations to improve operating efficiency. industries, including automotive, pulp and paper, petrochemical, steel, mining and food processing. 17
  20. 20. Data communications. Sales of premise cable, International Operations connectors, hardware, network electronics and To serve the Canadian market, we operate a network outside plant products are generated by our general of approximately 50 branches in nine provinces. sales force and a dedicated group of outside and Branch operations are supported by two distribution inside data communications sales representatives. centers located near Montreal and Vancouver. They are supported by a centralized customer With sales of approximately US$311 million, Canada service center and additional resources in product represented 8.5% of our total sales in 2001. The management, purchasing, inventory control and Canadian market for electrical distribution is con- sales management. siderably smaller than the U.S. market, with roughly US$3.0 billion in total sales in 2001, according to Major projects. Since 1995 our group of experienced industry sources. sales managers have targeted, on a national basis, the market for large construction projects with elec- We also have five locations in Mexico, headquartered trical material valued in excess of $1 million. Through in Tlalnepantla, that serve all of metropolitan Mexico the major projects group, we can meet the needs of City and the Federal District and the states of Mexico, contractors for complex construction projects such Morelos and Hidalgo. as new sports stadiums, industrial sites, water treat- ment plants, airport expansions, healthcare facilities We sell internationally through domestic export and correctional institutions. sales offices located within North America and sales offices in international locations. WESCO operations e-Commerce. We established our initial electronic are in Aberdeen, Scotland and London, England to catalog on the Internet in 1996. Since that time, we support sales efforts in Europe and the former Soviet have worked with a variety of large customers to Union. We have an operation in Nigeria to serve establish customized electronic catalogs for their use West Africa, an office in Caracas, Venezuela to in internal systems. Additionally, in 1999 we began a serve the Northern portion of South America, and process of providing electronic catalogs to multiple an office in Singapore to support our sales in Asia. e-commerce service providers, trade exchanges and All of the international locations have been estab- industry specific electronic commerce portals. Our lished to primarily serve WESCO’s growing list of e-business strategy is to serve existing customers by customers with global operations referenced under tailoring our catalog and Internet-based procurement National Accounts above. applications to their internal systems or through their preferred technology and trading exchange partner- Management Information Systems ships. We lead our industry in rapid e-implementation to customers’ procurement systems and provide Our corporate information system, WESNET, provides integrated procurement functionality using “punch- processing for a full range of our business operations, out” technology, a direct system to system link such as customer service, inventory and logistics with our customers. management, accounting and administrative support. The system utilizes decision support, executive infor- We continue to enhance “WESCOExpress,” a new mation system analysis and retrieval capabilities to direct ship fulfillment operation, responsible for provide extensive operational analysis and detailed supporting smaller customers and select national income statement and balance sheet variance and account locations. Customers can order over trend reporting at the branch level. The system 65,000 electrical and data communications products also provides activity-based costing capabilities for stocked in our warehouses through a centralized analyzing profitability by customer, sales represen- customer service center or over the Internet on tative and shipment type. Sales and margin trends WESCOdirect.com. We use a proactive telesales and variances can be analyzed by branch, customer, approach utilizing catalogs, direct mail, e-mail and product category, supplier or account representative. personal phone selling to provide a high level of customer service. In support of this initiative, we The WESNET system operates as a distributed recently introduced the WESCO Electrical Buyers network of fully functional operating units, and every Guide™, a comprehensive electrical catalog branch (other than our Bruckner Integrated Supply containing over 24,000 products from the top Division and certain newly acquired branches) 150 manufacturers in the electrical industry. utilizes its own computer system to support local business activities. All branch operations are 18 WESCO INTERNATIONAL, INC. 2001 Form 10-K
  21. 21. linked through a wide area network to centralized Employees information on inventory status in our distribution As of December 31, 2001, we had approximately centers as well as other branches and an increasing 5,700 employees worldwide, of which approximately number of on-line suppliers. Recent advances in 5,000 were located in the United States and approxi- WESNET capabilities make it possible to consolidate mately 700 in Canada and our other international administrative and procurement functions, and bring locations. Less than 5% of our employees are repre- systematic improvement through new pricing systems sented by unions. We believe our labor relations are and controls. generally good. We routinely process customer orders, shipping Intellectual Property notices, suppliers’ purchase orders, and funds trans- fer via EDI transactions with our trading partners. Our trade and service marks, including “WESCO,” Our e-Commerce strategy calls for more effective “the extra effort people ®” and the running man linkages to both customers and suppliers through design, are filed in the U.S. Patent and Trademark greater use of technological advances, including Office, the Canadian Trademark Office and the Internet and electronic catalogs, enhanced EDI and Mexican Instituto de la Propriedad Industrial. other innovative improvements. Environmental Matters Our integrated supply services are supported by our proprietary procurement and inventory management Our facilities and operations are subject to federal, systems. These systems provide a fully integrated, state and local laws and regulations relating to envi- flexible supply chain platform that currently handles ronmental protection and human health and safety. over 95% of our integrated supply customers’ trans- Some of these laws and regulations may impose strict, actions electronically. Our configuration options joint and several liability on certain persons for the for a customer range from on-line linkages to the cost of investigation or remediation of contaminated customer’s business and purchasing systems, to properties. These persons may include former, current total replacement of a customer’s procurement and or future owners or operators of properties, and inventory management system for MRO supplies. persons who arranged for the disposal of hazardous substances. Our owned and leased real property may Competition give rise to such investigation, remediation and moni- toring liabilities under environmental laws. In addition, We operate in a highly competitive industry. We anyone disposing of certain products we distribute, compete directly with national, regional and local such as ballasts, fluorescent lighting and batteries, providers of electrical and other industrial MRO sup- must comply with environmental laws that regulate plies. Competition is primarily focused on the local certain materials in these products. service area, and is generally based on product line breadth, product availability, service capabilities We believe that we are in compliance with all and price. Another source of competition is buying material respects with applicable environmental groups formed by smaller distributors to increase laws. As a result, we will not make significant purchasing power and provide some cooperative capital expenditures for environmental control mat- marketing capability. While increased buying power ters either in the current year or in the near future. may improve the competitive position of buying groups locally, we believe these groups have not Forward Looking Information been able to compete effectively with us for national account customers due to the difficulty in coordinat- This Annual Report on Form 10-K contains various ing a diverse ownership group. During 1999 and 2000 “forward looking statements” within the meaning numerous special purpose Internet-based procure- of the Private Securities Litigation Reform Act of ment service companies, auction businesses, and 1995. These statements involve certain unknown trade exchanges were organized. Many of them risks and uncertainties, including, among others, targeted industrial MRO and contractor customers those contained in Item 1, “Business” and Item 7, of the type served by WESCO. We responded with “Management’s Discussion and Analysis of Financial our own e-Commerce capabilities and as of year-end Condition and Results of Operations.” When used 2000, business losses, if any, to competitors of this in this Annual Report on Form 10-K, the words type were minimal. We expect that numerous new competitors will develop over time as Internet-based enterprises become more established and refine their service capabilities. 19
  22. 22. Our debt service obligations have important “anticipates,” “plans,” “believes,” “estimates,” consequences, including the following: “intends,” “expects,” “projects” and similar expres- sions may identify forward looking statements, • a substantial portion of cash flow from our operations although not all forward looking statements contain will be dedicated to the payment of principal and such words. Such statements, including, but not interest on our indebtedness, thereby reducing the limited to, our statements regarding business stra- funds available for operations, future business tegy, growth strategy, productivity and profitability opportunities and acquisitions and other purposes enhancement, competition, new product and service and increasing our vulnerability to adverse general economic and industry conditions; introductions and liquidity and capital resources are based on management’s beliefs, as well as on • our ability to obtain additional financing in the assumptions made by, and information currently future may be limited; available to, management, and involve various risks • approximately $169 million of our indebtedness and uncertainties, some of which are beyond our is at variable rates of interest, which will make control. Our actual results could differ materially us vulnerable to increases in interest rates; from those expressed in any forward looking state- • we will be substantially more leveraged than ment made by or on our behalf. In light of these risks certain of our competitors, which might place us at a competitive disadvantage; and and uncertainties, there can be no assurance that the forward looking information will in fact prove • we may be hindered in our ability to adjust to be accurate. We have undertaken no obligation rapidly to changing market conditions. to publicly update or revise any forward looking statements, whether as a result of new information, Our ability to make scheduled payments of the future events or otherwise. principal of, or to pay interest on, or to refinance our indebtedness and to make scheduled payments Important factors that could cause actual results to under our operating leases or to fund planned capital differ materially from the forward looking statements expenditures or finance acquisitions will depend on we make are described below. All forward looking our future performance, which to a certain extent is statements attributable to us or persons working on subject to economic, financial, competitive and other our behalf are expressly qualified by the following factors beyond our control. There can be no assurance cautionary statements: that our business will continue to generate sufficient cash flow from operations in the future to service Our substantial amount of debt requires substantial our debt, make necessary capital expenditures or debt service obligations that could adversely affect meet other cash needs. If unable to do so, we may our ability to fulfill our obligations and could limit our be required to refinance all or a portion of our existing growth and impose restrictions on our business. debt, to sell assets or to obtain additional financing. There can be no assurance that any such refinancing We are and will continue to be significantly leveraged. or that any such sale of assets or additional financing As of December 31, 2001, we had $452.0 million of would be possible on terms reasonably favorable consolidated indebtedness and stockholders’ equity to us. See Part II, Item 7. – “Management’s Discussion of $144.7 million. We and our subsidiaries may incur and Analysis of Financial Condition and Results of additional indebtedness in the future, subject to Operations – Liquidity and Capital Resources.” certain limitations contained in the instruments governing our indebtedness. Accordingly, we will Restrictive debt covenants contained in our have significant debt service obligations. These revolving credit facility and the indenture to our amounts exclude WESCO’s accounts receivable senior subordinated notes could limit our ability securitization program, through which WESCO sells to take certain actions. accounts receivable to a third party conduit and removes these receivables from its consolidated The revolving credit facility and the indenture contain balance sheet. See Part II, Item 7. – “Management’s numerous financial and operating covenants that Discussion and Analysis of Financial Condition and will limit the discretion of our management with Results of Operation – Critical Accounting Policies.” respect to certain business matters. These covenants place significant restrictions on the ability of us and our subsidiaries. 20 WESCO INTERNATIONAL, INC. 2001 Form 10-K