Wesco International Inc: Form 10-Q for the period ended Sep 30, 2024

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and WESCO International, Inc.’s audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The matters discussed herein may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. Certain of these risks are set forth in Item 1A of WESCO International, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as well as WESCO International, Inc.’s other reports filed with the Securities and Exchange Commission (the “SEC”). In this Item 2, “Wesco” refers to WESCO International, Inc., and its subsidiaries and its predecessors unless the context otherwise requires. References to “we,” “us,” “our” and the “Company” refer to Wesco and its subsidiaries.

In addition to the results provided in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), our discussion and analysis of financial condition and results of operations includes certain non-GAAP financial measures, which are defined further below. These financial measures include organic sales growth, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted EBITDA margin, financial leverage, adjusted selling, general and administrative expenses, adjusted income from operations, adjusted other non-operating expense (income), adjusted provision for income taxes, adjusted income before income taxes, adjusted net income, adjusted net income attributable to WESCO International, Inc., adjusted net income attributable to common stockholders, and adjusted earnings per diluted share. We believe that these non-GAAP measures are helpful to users of our financial statements as they provide a better understanding of our financial condition and results of operations on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude items impacting comparability of results, allowing users to more easily compare our financial performance from period to period. Management uses certain non-GAAP financial measures in its evaluation of the performance of the Company’s operating segments and in the determination of incentive compensation. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

Company Overview

Wesco, headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and supply chain solutions.

We employ approximately 20,000 people, maintain relationships with more than 50,000 suppliers, and serve nearly 150,000 customers worldwide. With millions of products, end-to-end supply chain services, and leading digital capabilities, we provide innovative solutions to meet customer needs across commercial and industrial businesses, contractors, government agencies, educational institutions, telecommunications providers, utilities and technology companies. Our innovative value-added solutions include supply chain management, logistics and transportation, procurement, warehousing and inventory management, as well as kitting and labeling, limited assembly of products and installation enhancement. We operate nearly 800 branches, warehouses and sales offices in approximately 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and global corporations.

We have operating segments comprising three strategic business units consisting of Electrical & Electronic Solutions (“EES”), Communications & Security Solutions (“CSS”) and Utility & Broadband Solutions (“UBS”). These operating segments are equivalent to our reportable segments. The following is a description of each of our reportable segments and their business activities.

Electrical & Electronic Solutions

The EES segment, with approximately 6,700 employees supporting customers in more than 50 countries, supplies a broad range of products and solutions primarily to the construction, industrial, and original equipment manufacturer (“OEM”) markets. The product portfolio in this business includes a broad range of electrical equipment and supplies, automation and connected devices (the “Internet of Things” or “IoT”), security, lighting, wire and cable, safety, and maintenance, repair and operating (“MRO”) products from industry-leading manufacturing partners. The EES service portfolio includes contractor solutions to improve project execution, direct and indirect manufacturing supply chain optimization programs, lighting and renewables advisory services, and digital and automation solutions to improve safety and productivity.

Communications & Security Solutions

The CSS segment, with approximately 4,300 employees supporting customers in more than 50 countries, is a global leader in the network infrastructure and security markets. CSS sells products directly to end-users or through various channels including data communications contractors, security, network, professional audio/visual and systems integrators. In addition to the core network infrastructure and security portfolio, CSS has a broad offering of safety and energy management solutions. CSS products are often combined with supply chain services to increase efficiency and productivity, including installation enhancement, project deployment, advisory and IoT and digital services.

Utility & Broadband Solutions

The UBS segment, with approximately 2,300 employees supporting customers primarily in the U.S. and Canada, provides products and services to investor-owned utilities, public power companies, including municipalities, as well as global service providers, wireless providers, broadband operators and the contractors that service these customers. The products sold into the utility and broadband markets include wire and cable, transformers, transmission and distribution hardware, switches, protective devices, connectors, lighting, conduit, fiber and copper cable, connectivity products, pole line hardware, racks, cabinets, safety and MRO products, and point-to-point wireless devices. The UBS segment also offers a complete set of service solutions to improve customer supply chain efficiencies. The UBS segment previously included Wesco’s integrated supply (“WIS”) business, which provided products and services to large industrial and commercial end-users to support their MRO spend. In the first quarter of 2024, Wesco entered into an agreement to sell the WIS business. The sale was completed on April 1, 2024.

Overall Financial Performance

Our financial results for the first nine months of 2024 compared to the first nine months of 2023 reflect a single-digit decline in sales driven by a decrease in volume partially offset by the benefits of price inflation in certain segments. Additionally, financial results were impacted by a loss on abandonment of assets, higher facilities and IT costs and higher payroll and payroll-related expenses, partially offset by the gain recognized on the divestiture of our WIS business, as well as lower professional services and consulting fees.

Net sales for the first nine months of 2024 decreased $592.7 million, or 3.5%, over the corresponding prior year period. The decrease reflects estimated volume decline of approximately 3% driven primarily by a decrease in volume for the UBS segment, with a less significant decrease in the EES segment, partially offset by an increase in the CSS segment. Other negative factors include the decrease from the divestiture of the WIS business of 2.3% and the negative impact of fluctuations in foreign exchange rates of 0.2%. These negative factors were partially offset by the favorable impact from the number of workdays of 0.5% and by the estimated impact of changes in price of approximately 2%. Cost of goods sold as a percentage of net sales was 78.3% for the current and prior year nine-month period.

Income from operations was $922.1 million for the first nine months of 2024 compared to $1,090.7 million for the first nine months of 2023, a decrease of $168.6 million, or 15.5%. Income from operations as a percentage of net sales was 5.7% for the current nine-month period, compared to 6.4% for the first nine months of the prior year. Income from operations for the first nine months of 2024 includes a loss on abandonment of assets of $17.8 million as a result of the write-off of certain capitalized cloud computing arrangement implementation costs relating to a third-party developed operations management software product that will no longer be utilized, digital transformation costs of $17.5 million, restructuring costs of $9.5 million, and excise taxes on excess pension plan assets of $4.8 million. Adjusted for these amounts, income from operations was 6.0% of net sales for the first nine months of 2024. For the first nine months of 2023, income from operations was 6.8% of net sales, as adjusted for digital transformation costs of $28.5 million, merger-related and integration costs of $16.9 million, restructuring costs of $15.4 million, and accelerated trademark amortization of $1.2 million. For the nine months ended September 30, 2024, income from operations declined compared to the prior year due to a decline in sales, as well as an increase in costs to operate our facilities, an increase in IT costs and higher payroll and payroll-related expenses. These negative factors were partially offset by a decrease in professional services and consulting fees.

Cash Flow

Operating cash flow for the first nine months of 2024 was $824.6 million. Net cash provided by operating activities included net income of $553.5 million and non-cash adjustments to net income totaling $66.3 million, which primarily comprised depreciation and amortization of $137.6 million, stock-based compensation expense of $19.6 million, a loss on abandonment of assets of $17.8 million and amortization of debt discount and debt issuance costs of $12.2 million, partially offset by a gain of $122.2 million, resulting from the divestiture of our WIS business, as described in Note 4, “Acquisitions and Divestitures”. Operating cash flow was positively impacted by net changes in assets and liabilities of $204.8 million, which primarily comprised an increase in accounts payable of $478.0 million, primarily due to the timing of payments to suppliers, as well as inventory purchases, partially offset by an increase in trade accounts receivable of $217.9 million due to the timing of receipts from customers. Operating cash flow was also negatively impacted by the payment of management incentive compensation earned in 2023, which resulted in a cash outflow of approximately $50.5 million in the first nine months of 2024, which was partially offset by the accrual of management incentive compensation earned in the current year.

Investing activities primarily included $354.9 million in proceeds from the divestiture of the WIS business, net of cash transferred, partially offset by $70.4 million of capital expenditures mostly consisting of internal-use computer software and information technology hardware to support our digital transformation initiatives, as well as equipment and leasehold improvements to support our global network of locations, and $41.7 million paid in the aggregate to acquire the entroCIM business (“entroCIM”) and Independent Electric Supply Inc. (“IES”), net of cash acquired.

Financing activities primarily comprised the redemption of our $1,500.0 million aggregate principal amount of 7.125% Senior Notes due 2025 (the “2025 Notes”), and proceeds of $900.0 million and $850.0 million related to the issuance of our 6.375% Senior Notes due 2029 (the “2029 Notes”) and our 6.625% Senior Notes due 2032 (the “2032 Notes” and, together with the 2029 Notes, the “2029 and 2032 Notes”), respectively. Additionally, financing activities comprised net repayments of $468.0 million related to our revolving credit facility (the “Revolving Credit Facility”), net repayments of $100.0 million related to our accounts receivable securitization facility (the “Receivables Facility”), and payment of total debt issuance costs of $26.6 million related to the issuance of the 2029 and 2032 Notes and amendments to the Revolving Credit Facility and Receivables Facility. The first nine months of 2024 also included $375.0 million of common stock repurchases, $61.4 million and $43.1 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively, and $26.2 million of payments for taxes related to the exercise and vesting of stock-based awards.

Financing Availability

As of September 30, 2024, we had $1.2 billion in total available borrowing capacity under our Revolving Credit Facility and $100.0 million of available borrowing capacity under our Receivables Facility. The Revolving Credit Facility and the Receivables Facility both mature in March 2027.

Results of Operations

Third Quarter of 2024 versus Third Quarter of 2023

Net Sales

The following table sets forth net sales and organic sales growth for the periods presented:

(In millions)

Note: Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, fluctuations in foreign exchange rates and number of workdays from the reported percentage change in consolidated net sales. Workday impact represents the change in the number of operating days period-over-period after adjusting for weekends and public holidays in the United States; the third quarter of 2024 had one more workday compared to the third quarter of 2023.

Net sales were $5.5 billion for the third quarter of 2024 compared to $5.6 billion for the third quarter of 2023, a decrease of 2.7%. Adjusting for the decrease from the divestiture of the WIS business of 3.5%, the unfavorable impact from fluctuations in foreign exchange rates of 0.2%, and the favorable impact from the number of workdays of 1.6%, organic sales for the third quarter of 2024 declined by 0.6%, reflecting an approximately 2% decline in volume, driven by declines in the EES and UBS segments, partially offset by a volume increase in the CSS segment, and the impact of changes in price, which favorably impacted consolidated organic sales by approximately 2%.

Cost of Goods Sold

Cost of goods sold for the third quarter of 2024 was $4.3 billion compared to $4.4 billion for the third quarter of 2023, a decrease of $0.1 billion. Cost of goods sold as a percentage of net sales was 77.9% and 78.4% for the third quarter of 2024 and 2023, respectively. The favorable decrease of 50 basis points primarily reflects the impact from the divestiture of the WIS business.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses primarily include payroll and payroll-related costs, shipping and handling, travel and entertainment, facilities, utilities, information technology expenses, professional and consulting fees, credit losses, gains (losses) on the sale, disposal, or abandonment of property and equipment, as well as real estate and personal property taxes. SG&A expenses for the third quarter of 2024 totaled $831.1 million versus $796.4 million for the third quarter of 2023, an increase of $34.7 million, or 4.4%. As a percentage of net sales, SG&A expenses were 15.1% and 14.1% for the third quarter of 2024 and 2023, respectively. SG&A expenses for the third quarter of 2024 include $5.4 million of digital transformation costs and $0.5 million of restructuring costs. SG&A expenses for the third quarter of 2023 include $12.9 million of digital transformation costs, $5.6 million of restructuring costs, and $2.1 million of merger-related and integration costs. Adjusted for digital transformation costs and restructuring costs, SG&A expenses were $825.2 million, or 15.0% of net sales, for the third quarter of 2024. Adjusted for digital transformation costs, restructuring costs, and merger-related and integration costs, SG&A expenses were $775.8 million, or 13.7% of net sales, for the third quarter of 2023.

SG&A payroll and payroll-related expenses for the third quarter of 2024 of $520.1 million increased by $13.5 million compared to the same period in 2023 as a result of an increase of $9.6 million in commissions and incentives and a $9.6 million increase in benefits, partially offset by a decrease in other payroll expenses of $3.3 million, primarily driven by a reduction in long-term incentive plan expense.

SG&A expenses not related to payroll and payroll-related costs for the third quarter of 2024 were $311.0 million, an increase of $21.2 million compared to the same period in 2023, which primarily reflects higher costs to operate our facilities of $7.0 million, higher transportation costs of $4.5 million, higher employee expenses of $3.3 million, and higher IT costs of $3.2 million.

Income from Operations

Income from operations was $335.6 million for the third quarter of 2024 compared to $380.5 million for the third quarter of 2023. The decrease of $44.9 million, or 11.8%, reflects a decrease in sales due to volume declines and an increase in SG&A expenses as described above, partially offset by lower cost of goods sold as a percentage of net sales, as described above.

Interest Expense, net

Net interest expense totaled $86.5 million for the third quarter of 2024 compared to $98.5 million for the third quarter of 2023. The decrease of $12.0 million, or 12.1%, primarily reflects lower borrowings and a decrease in variable interest rates.

Other (Income) Expense, net

Other non-operating income totaled $24.9 million for the third quarter of 2024 compared to expense of $3.7 million for the third quarter of 2023. During the third quarter, we finalized the divestiture of our WIS business and recognized an additional gain from the sale of $19.3 million. Due to fluctuations in the U.S. dollar against certain foreign currencies, we recognized a net foreign currency exchange gain of $2.5 million for the third quarter of 2024 compared to a net loss of $1.4 million for the third quarter of 2023. We recognized net benefits of $2.4 million and $0.2 million associated with the non-service cost components of net periodic pension cost (benefit) for the three months ended September 30, 2024 and 2023, respectively. The non-service cost components of net periodic pension benefit for the third quarter of 2024 includes income of $2.2 million as a result of the finalization of the liabilities transferred as part of the settlement of the Anixter Inc. Pension Plan. Adjusted for the gain on the divestiture of our WIS business as well as the pension settlement cost reduction, other non-operating income was $3.4 million for the third quarter of 2024.

Income Taxes

The provision for income taxes was $69.3 million for the third quarter of 2024 compared to $44.3 million for the corresponding quarter of the prior year, resulting in effective tax rates of 25.3% and 15.9%, respectively. The higher effective tax rate for the third quarter of 2024 is due to lower discrete income tax benefits resulting from the exercise and vesting of stock-based awards as compared to the prior year. The corresponding quarter of the prior year also reflected discrete income tax benefits relating to the reversal of the valuation allowance against Brazilian deferred tax assets and 2022 U.S. federal return-to-provision adjustments.

Net Income and Earnings per Share

Net income and earnings per diluted share attributable to common stockholders were $189.9 million and $3.81, respectively, for the third quarter of 2024 compared to $219.0 million and $4.20, respectively, for the third quarter of 2023. Adjusted for digital transformation costs, restructuring costs, the additional gain recognized on the divestiture of the WIS business, the pension settlement cost reduction, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $178.1 million and $3.58, respectively, for the three months ended September 30, 2024. Adjusted for digital transformation costs, restructuring costs, merger-related and integration costs, accelerated trademark amortization expense, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $234.4 million and $4.49, respectively, for the three months ended September 30, 2023.

Adjusted EBITDA

Adjusted EBITDA, a non-GAAP financial measure, was $398.1 million for the third quarter of 2024, compared to $457.0 million for the third quarter of 2023. Adjusted EBITDA decreased $58.9 million, or 12.9% year-over-year. The decrease primarily reflects the $155.0 million decrease in net sales and a $34.7 million increase in SG&A expenses, partially offset by a corresponding decrease in cost of goods sold of $145.7 million, as described above. Included in the increase in SG&A expenses was cloud computing arrangement amortization of $3.8 million, partially offset by the lack of merger-related and integration costs in the third quarter of 2024 compared to $2.1 million in the third quarter of 2023, as well as a year-over-year decrease in digital transformation and restructuring costs of $7.5 million and $5.1 million, respectively.

Segment Results

The following is a discussion of the financial results of our operating segments comprising three strategic business units consisting of EES, CSS and UBS for the three months ended September 30, 2024. As further described below and in Note 14, “Business Segments” of our Notes to the unaudited Condensed Consolidated Financial Statements, the performance of our operating segments is based on net sales, adjusted EBITDA, and adjusted EBITDA margin percentage. Adjusted EBITDA and adjusted EBITDA margin percentage are non-GAAP financial measures.

Electrical & Electronic Solutions

(In millions)

EES reported net sales of $2,151.2 million for the third quarter of 2024 compared to $2,190.7 million for the third quarter of 2023, a decrease of $39.5 million, or 1.8%. Adjusting for the unfavorable impact from fluctuations in foreign exchange rates of 0.5% and the favorable impact from the number of workdays of 1.6%, EES organic sales for the third quarter of 2024 declined by 2.9%, reflecting volume declines of approximately 6%, primarily as a result of declines in the construction and industrial businesses. The decline in volume was partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 3%.

EES reported adjusted EBITDA of $186.3 million for the third quarter of 2024, or 8.7% of net sales, compared to $191.5 million for the third quarter of 2023, or 8.7% of net sales. Adjusted EBITDA decreased $5.2 million, or 2.7% year-over-year. The decrease primarily reflects the $39.5 million decline in net sales, as described above, offset by a decrease in cost of goods sold of $49.4 million, which is inclusive of higher supplier volume rebates of approximately $6.1 million. SG&A expenses increased $15.2 million as compared to the prior year, which was primarily attributed to an increase in commissions and incentives of $6.9 million, an increase in salaries of $6.1 million, and an increase in transportation costs of $4.5 million.

Communications & Security Solutions

(In millions)

CSS reported net sales of $1,955.1 million for the third quarter of 2024 compared to $1,778.0 million for the third quarter of 2023, an increase of $177.1 million, or 10.0%. Adjusting for the unfavorable impact from fluctuations in foreign exchange rates of 0.1% and the favorable impact from the number of workdays of 1.6%, CSS organic sales for the third quarter of 2024 grew by 8.5%, primarily reflecting volume growth in the data center solutions and security solutions businesses. Changes in price did not have a material impact on the year-over-year growth in CSS organic sales.

CSS reported adjusted EBITDA of $175.2 million for the third quarter of 2024, or 9.0% of net sales, compared to $175.5 million for the third quarter of 2023, or 9.9% of net sales. Adjusted EBITDA decreased $0.3 million, or 0.2% year-over-year. The decrease primarily reflects an increase in cost of goods sold of $155.2 million and an increase in SG&A expenses of $22.7 million, partially offset by the $177.1 million increase in net sales, as described above. The increase in SG&A expenses is primarily attributed to increased salaries of $6.4 million, increased commissions and incentives of $5.5 million, driven by higher sales volume, a $2.5 million increase in transportation costs consistent with higher sales, and higher costs to operate our facilities of $2.1 million, which includes an increase in rents.

Utility & Broadband Solutions

(In millions)

UBS reported net sales of $1,383.1 million for the third quarter of 2024 compared to $1,675.7 million for the third quarter of 2023, a decrease of $292.6 million, or 17.5%. Adjusting for the decrease from the divestiture of the WIS business of 11.7%, the unfavorable impact from fluctuations in foreign exchange rates of 0.2%, and the favorable impact from the number of workdays of 1.6%, UBS organic sales for the third quarter of 2024 declined by 7.2%, reflecting volume declines of approximately 9%, primarily as a result of declines in the utility and broadband businesses. The decline in volume was partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 1%.

UBS reported adjusted EBITDA of $156.5 million for the third quarter of 2024, or 11.3% of net sales, compared to $196.4 million for the third quarter of 2023, or 11.7% of net sales. Adjusted EBITDA decreased $39.9 million, or 20.3% year-over-year. The decrease primarily reflects the $292.6 million decline in net sales, as described above, partially offset by a decrease in cost of goods sold of $251.5 million, which is inclusive of higher inventory adjustments of $3.4 million as well as lower supplier volume rebates of $6.9 million. SG&A expenses decreased $1.0 million as compared to the prior year.

The following tables reconcile net income attributable to common stockholders to adjusted EBITDA and adjusted EBITDA margin % by segment, which are non-GAAP financial measures, for the periods presented:

(In millions)

(In millions)

Note: Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. For the three months ended September 30, 2024, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization before other non-operating expenses (income), non-cash stock-based compensation expense, digital transformation costs, cloud computing arrangement amortization, and restructuring costs. For the three months ended September 30, 2023, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization before other non-operating expenses (income), non-cash stock-based compensation expense, digital transformation costs, restructuring costs, and merger-related and integration costs. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.

The following tables reconcile selling, general and administrative expenses, income from operations, other non-operating (income) expense, provision for income taxes and earnings per diluted share to adjusted selling, general and administrative expenses, adjusted income from operations, adjusted other non-operating (income) expense, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:

(In millions)

(1) Digital transformation costs include costs associated with certain digital transformation initiatives.

(2) Restructuring costs include severance costs incurred pursuant to an ongoing restructuring plan.

(3) Merger-related and integration costs include integration and professional fees associated with the integration of Wesco and Anixter, as well as advisory, legal, and separation costs associated with the merger between the two companies.

(4) Accelerated trademark amortization represents additional amortization expense resulting from changes in the estimated useful lives of certain legacy trademarks that have migrated to our master brand architecture.

(5) Reduction to pension settlement cost represents income of $2.2 million as a result of the finalization of the liabilities transferred as part of the settlement of the Company's U.S. pension plan.

(6) The adjustments to income from operations and other (income) expense, net have been tax effected at rates of approximately 24% and 27% for the three months ended September 30, 2024 and 2023, respectively.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

(In millions, except per share data)

Note: For the three months ended September 30, 2024, SG&A expenses, income from operations, other non-operating (income) expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude digital transformation costs, restructuring costs, the gain recognized on the divestiture of the WIS business, the reduction to pension settlement cost, and the related income tax effects. For the three months ended September 30, 2023, SG&A expenses, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude digital transformation costs, restructuring costs, merger-related and integration costs, accelerated trademark amortization expense, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023

Net Sales

The following table sets forth net sales and organic sales growth for the periods presented:

(In millions)

Note: Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, fluctuations in foreign exchange rates and number of workdays from the reported percentage change in consolidated net sales. Workday impact represents the change in the number of operating days period-over-period after adjusting for weekends and public holidays in the United States; the first nine months of 2024 had one more workday compared to the first nine months of 2023.

Net sales were $16.3 billion for the first nine months of 2024 compared to $16.9 billion for the first nine months of 2023, a decrease of 3.5%. Adjusting for the decrease from the divestiture of the WIS business of 2.3%, the unfavorable impact from fluctuations in foreign exchange rates of 0.2%, and the favorable impact from the number of workdays of 0.5%, organic sales for the first nine months of 2024 declined by 1.5%, reflecting an approximately 3% decline in volume, driven by declines in the EES and UBS segments, partially offset by a volume increase in the CSS segment, and the impact of changes in price, which favorably impacted consolidated organic sales by approximately 2%.

Cost of Goods Sold

Cost of goods sold for the first nine months of 2024 was $12.8 billion compared to $13.2 billion for the first nine months of 2023, a decrease of $0.4 billion. Cost of goods sold as a percentage of net sales was 78.3% for the first nine months of 2024 and 2023.

Selling, General and Administrative Expenses

SG&A expenses primarily include payroll and payroll-related costs, shipping and handling, travel and entertainment, facilities, utilities, information technology expenses, professional and consulting fees, credit losses, gains (losses) on the sale, disposal, or abandonment of property and equipment, as well as real estate and personal property taxes. SG&A expenses for the first nine months of 2024 totaled $2,488.9 million versus $2,445.8 million for the first nine months of 2023, an increase of $43.1 million, or 1.8%. As a percentage of net sales, SG&A expenses were 15.3% and 14.5% for the first nine months of 2024 and 2023, respectively. SG&A expenses for the first nine months of 2024 include a $17.8 million loss on abandonment of assets, $17.5 million of digital transformation costs, $9.5 million of restructuring costs, and $4.8 million of excise taxes on excess pension plan assets. SG&A expenses for first nine months of 2023 include $28.5 million of digital transformation costs, $16.9 million of merger-related and integration costs, and $15.4 million of restructuring costs. Adjusted for the loss on abandonment of assets, digital transformation costs, restructuring costs, and excise taxes on excess pension plan assets, SG&A expenses were $2,439.3 million, or 14.9% of net sales, for the first nine months of 2024. Adjusted for digital transformation costs, merger-related and integration costs, and restructuring costs, SG&A expenses were $2,385.0 million, or 14.1% of net sales, for the first nine months of 2023.

SG&A payroll and payroll-related expenses for the first nine months of 2024 of $1,550.8 million increased by $8.5 million compared to the same period in 2023 primarily as a result of higher salaries of $6.9 million due to wage inflation, partially offset by the impact of headcount reduction actions taken at the end of the second quarter of 2023 and the impact of the divestiture of the WIS business. Additional factors include an increase to commissions and incentive compensation expenses of $18.7 million, and an increase to benefit expenses of $8.9 million. These increases were partially offset by a decrease in other payroll expenses of $16.1 million, primarily driven by a reduction in long-term incentive plan expense, as well as a decrease of $9.9 million in temporary labor expense.

SG&A expenses not related to payroll and payroll-related costs for the first nine months of 2024 were $938.1 million, an increase of $34.6 million compared to the same period in 2023, which primarily reflects an increase of $21.6 million in other income and deductions, driven by the loss on abandonment of assets, higher costs to operate our facilities of $21.6 million, an increase of $11.2 million in IT costs, and an increase of $6.6 million in taxes. These increases were partially offset by a $16.5 million decrease in professional service and consulting fees, including decreases in merger-related and integration costs and costs related to digital transformation initiatives, and a decrease of $6.2 million in transportation costs due to the decrease in sales volume noted above.

Income from Operations

Income from operations was $922.1 million for the first nine months of 2024 compared to $1,090.7 million for the first nine months of 2023. The decrease of $168.6 million, or 15.5%, reflects a decrease in sales due to volume declines, and higher SG&A expenses, as described above.

Interest Expense, net

Net interest expense totaled $279.8 million for the first nine months of 2024 compared to $292.3 million for the first nine months of 2023. The decrease of $12.5 million, or 4.3%, primarily reflects lower borrowings, partially due to the redemption of the 2025 Notes in the second quarter of 2024, and a decrease in variable interest rates.

Other (Income) Expense, net

Other non-operating income totaled $99.3 million for the first nine months of 2024 compared to expense of $14.6 million for the first nine months of 2023. In the first nine months of 2024, we completed the divestiture of our WIS business and recognized a gain from the sale of $122.2 million. Additionally, in the first nine months of 2024, we recognized a $3.8 million loss on termination of a business arrangement. Due to fluctuations in the U.S. dollar against certain foreign currencies, we recognized a net foreign currency exchange loss of $18.2 million for the first nine months of 2024 compared to a net loss of $14.6 million for the first nine months of 2023. We recognized net costs of $3.2 million and net benefits of $0.9 million associated with the non-service cost components of net periodic pension cost (benefit) for the nine months ended September 30, 2024 and 2023, respectively. The year-over-year increase in net periodic pension costs was due to pension settlement cost to recognize unrealized losses previously reported as a component of other comprehensive income (loss) related to the benefit obligation of the Anixter Inc. Pension Plan as a result of the final settlement of the plan in the first quarter of 2024. Adjusted for the gain on the divestiture of our WIS business, the loss on termination of a business arrangement, and the $3.3 million pension settlement cost described above, other non-operating expense was $15.8 million for the first nine months of 2024.

Income Taxes

The provision for income taxes was $188.1 million for the first nine months of 2024 compared to $160.2 million in last year's comparable period, resulting in effective tax rates of 25.4% and 20.4%, respectively. The higher effective tax rate for the first nine months of 2024 is due to lower discrete income tax benefits resulting from the exercise and vesting of stock-based awards as compared to the prior year period. The prior year period also reflected discrete income tax benefits relating to the reversal of the valuation allowance against Brazilian deferred tax assets and 2022 U.S. federal return-to-provision adjustments.

Net Income and Earnings per Share

Net income and earnings per diluted share attributable to common stockholders were $509.1 million and $10.02, respectively, for the first nine months of 2024 compared to $580.5 million and $11.08, respectively, for the first nine months of 2023. Adjusted for the loss on abandonment of assets, digital transformation costs, restructuring costs, excise taxes on excess pension plan assets, the gain recognized on the divestiture of the WIS business, the loss on termination of a business arrangement, pension settlement cost, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $461.0 million and $9.07, respectively, for the first nine months of 2024. Adjusted for digital transformation costs, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $625.7 million and $11.94, respectively, for the first nine months of 2023.

Adjusted EBITDA

Adjusted EBITDA, a non-GAAP financial measure, was $1,138.6 million for the first nine months of 2024 compared to $1,320.0 million for the first nine months of 2023. Adjusted EBITDA decreased $181.4 million, or 13.7% year-over-year. The decrease primarily reflects the $592.7 million decrease in net sales, and a $43.1 million increase in SG&A expenses, partially offset by a corresponding decrease in cost of goods sold of $468.4 million, as described above. Included in the increase in SG&A expenses were the loss on abandonment of assets of $17.8 million, cloud computing arrangement amortization of $9.7 million, and excise taxes on excess pension plan assets of $4.8 million, partially offset by the lack of merger-related and integration costs in the first nine months of 2024 compared to $16.9 million in the first nine months of 2023, as well as a year-over-year decrease in digital transformation and restructuring costs of $11.0 million and $5.9 million, respectively.

Segment Results

Electrical & Electronic Solutions

(In millions)

EES reported net sales of $6,423.1 million for the first nine months of 2024 compared to $6,526.1 million for the first nine months of 2023, a decrease of $103.0 million, or 1.6%. Adjusting for the unfavorable impact from fluctuations in foreign exchange rates of 0.3% and the favorable impact from the number of workdays of 0.5%, EES organic sales for the first nine months of 2024 declined by 1.8%, reflecting volume declines of approximately 4%, primarily as a result of a decline in the construction business. The decline in volume was partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 3%.

EES reported adjusted EBITDA of $547.0 million for the first nine months of 2024, or 8.5% of net sales, compared to $563.5 million for the first nine months of 2023, or 8.6% of net sales. Adjusted EBITDA decreased $16.5 million, or 2.9% year-over-year. The decrease primarily reflects the $103.0 million decrease in net sales, as described above, partially offset by a corresponding decrease in cost of goods sold of $90.6 million, which is inclusive of lower supplier volume rebates of approximately $4.2 million. SG&A expenses increased $3.6 million as compared to the prior year, which was primarily attributed to an increase in commissions and incentives of $13.6 million, and an increase in transportation costs of $2.3 million, partially offset by a decrease in benefits of $7.4 million and a decrease in bad debt expense of $5.5 million.

Communications & Security Solutions

(In millions)

CSS reported net sales of $5,491.1 million for the first nine months of 2024 compared to $5,360.9 million for the first nine months of 2023, an increase of $130.2 million, or 2.4%. Adjusting for the unfavorable impact from fluctuations in foreign exchange rates of 0.1% and the favorable impact from the number of workdays of 0.5%, CSS organic sales for the first nine months of 2024 grew by 2.0%, primarily as a result of growth in the data center solutions business, partially offset by volume declines in the security solutions and enterprise network infrastructure businesses. Changes in price did not have a material impact on the year-over-year increase in CSS organic sales.

CSS reported adjusted EBITDA of $453.2 million for the first nine months of 2024, or 8.3% of net sales, compared to $510.5 million for the first nine months of 2023, or 9.5% of net sales. Adjusted EBITDA decreased $57.3 million, or 11.2% year-over-year. The decrease reflects an increase in cost of goods sold of $157.2 million, which is inclusive of an increase in inventory adjustments of $8.3 million, and an increase in SG&A expenses of $31.3 million, partially offset by an increase in net sales of $130.2 million, as described above. The increase in SG&A expenses is primarily attributed to increased commissions and incentives of $8.9 million, higher salaries of $6.6 million, higher costs to operate our facilities of $5.4 million, which includes an increase in rents and the opening of a new facility, and higher benefits expense of $2.3 million.

Utility & Broadband Solutions

(In millions)

UBS reported net sales of $4,404.9 million for the first nine months of 2024 compared to $5,024.8 million for the first nine months of 2023, a decrease of $619.9 million, or 12.3%. Adjusting for the decrease from the divestiture of the WIS business of 7.9% and the favorable impact from the number of workdays of 0.5%, UBS organic sales for the first nine months of 2024 declined by 4.9%, reflecting volume declines of approximately 7%, primarily as a result of declines in the utility and broadband businesses. The decline in volume was partially offset by the impact of changes in price, which favorably impacted organic sales by approximately 2%.

UBS reported adjusted EBITDA of $499.4 million for the first nine months of 2024, or 11.3% of net sales, compared to $572.7 million for the first nine months of 2023, or 11.4% of net sales. Adjusted EBITDA decreased $73.3 million, or 12.8% year-over-year. The decrease primarily reflects the $619.9 million decrease in net sales, as described above, partially offset by a corresponding decrease in cost of goods sold of $535.0 million. SG&A expenses decreased $11.5 million as compared to the prior year, which was primarily attributed to a decrease in commissions and incentives of $12.4 million, driven by lower sales volume and the impact of the WIS divestiture, a decrease in transportation costs of $3.2 million, driven by lower sales volume, partially offset by higher costs to operate our facilities of $7.7 million.

The following tables reconcile net income attributable to common stockholders to adjusted EBITDA and adjusted EBITDA margin % by segment, which are non-GAAP financial measures, for the periods presented:

(In millions)

37

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

(In millions)

Note: Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. For the nine months ended September 30, 2024, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization before other non-operating expenses (income), non-cash stock-based compensation expense, loss on abandonment of assets, digital transformation costs, cloud computing arrangement amortization, restructuring costs and excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan. For the nine months ended September 30, 2023, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization before other non-operating expenses (income), non-cash stock-based compensation expense, digital transformation costs, merger-related and integration costs, and restructuring costs. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.

The following tables reconcile selling, general and administrative expenses, income from operations, other non-operating (income) expense, provision for income taxes and earnings per diluted share to adjusted selling, general and administrative expenses, adjusted income from operations, adjusted other non-operating (income) expense, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:

(In millions)

(1) Loss on abandonment of assets represents the write-off of certain capitalized cloud computing arrangement implementation costs relating to a third-party developed operations management software product in favor of an application with functionality that better suits the Company’s operations.

(2) Digital transformation costs include costs associated with certain digital transformation initiatives.

(3) Restructuring costs include severance costs incurred pursuant to an ongoing restructuring plan.

(4) Excise taxes on excess pension plan assets represent the excise taxes applicable to the excess pension plan assets following the final settlement of the Company's U.S. pension plan.

(5) Merger-related and integration costs include integration and professional fees associated with the integration of Wesco and Anixter, as well as advisory, legal, and separation costs associated with the merger between the two companies.

(6) Accelerated trademark amortization represents additional amortization expense resulting from changes in the estimated useful lives of certain legacy trademarks that have migrated to our master brand architecture.

(7) Loss on termination of business arrangement represents the loss recognized as a result of management's decision to terminate a business arrangement with a third party.

(8) Pension settlement cost represents expense related to the settlement of the Company's U.S. pension plan.

(9) The adjustments to income from operations and other (income) expense, net have been tax effected at a rate of approximately 27% for the nine months ended September 30, 2024 and 2023.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

(In millions, except per share data)

Note: For the nine months ended September 30, 2024, SG&A expenses, income from operations, other non-operating (income) expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude the loss on abandonment of assets, digital transformation costs, restructuring costs, excise taxes on excess pension plan assets, the gain recognized on the divestiture of the WIS business, the loss on termination of business arrangement, pension settlement cost, and the related income tax effects. For the nine months ended September 30, 2023, SG&A expenses, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude digital transformation costs, merger-related and integration costs, restructuring costs, accelerated trademark amortization expense, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

Liquidity and Capital Resources

Our liquidity needs generally arise from fluctuations in our working capital requirements, information technology investments, capital expenditures, acquisitions, the payment of dividends, and debt service obligations. As of September 30, 2024, we had approximately $1.2 billion in available borrowing capacity under our Revolving Credit Facility, after giving effect to outstanding letters of credit and certain borrowings under our international lines of credit, and $100.0 million of available borrowing capacity under our Receivables Facility, which combined with available cash of $370.0 million, provided liquidity of approximately $1.7 billion. Cash included in our determination of liquidity represents cash in certain deposit and interest-bearing investment accounts held in the United States and Canada. We monitor the depository institutions that hold our cash and cash equivalents on a regular basis, and we believe that we have placed our deposits with creditworthy financial institutions.

As described in Note 9, “Debt” of our Notes to the unaudited Condensed Consolidated Financial Statements, on March 7, 2024, Wesco Distribution issued $900 million aggregate principal amount of 2029 Notes and $850 million aggregate principal amount of 2032 Notes. We used the net proceeds from the issuance of the 2029 and 2032 Notes to redeem the $1,500 million aggregate principal amount of 2025 Notes on June 17, 2024. Prior to redeeming the 2025 Notes, we used the net proceeds from the 2029 and 2032 Notes temporarily to repay a portion of the amounts outstanding under our Receivables Facility and repaid all of the outstanding borrowings under our Revolving Credit Facility. We subsequently redrew under our Receivables Facility and our Revolving Credit Facility an aggregate amount sufficient to redeem the 2025 Notes.

We regularly review our mix of fixed versus variable rate debt, and we may, from time to time, issue or retire borrowings and/or refinance existing debt in an effort to mitigate the impact of interest rate and foreign exchange rate fluctuations, and to maintain a cost-effective capital structure consistent with our anticipated capital requirements. Economic conditions contributed to increases in interest rates during 2023; however, interest rates have remained stable in 2024, and the Federal Reserve reduced its benchmark interest rate by 50 basis points at the end of the third quarter. Future interest rate changes would raise or lower the rates we pay on our variable rate debt and would contribute to fluctuations in interest expense versus prior periods.

As of September 30, 2024, approximately 61% of our debt portfolio consisted of fixed rate debt. We believe our capital structure has an appropriate mix of fixed versus variable rate debt and secured versus unsecured instruments.

Over the next several quarters, we expect that our excess liquidity will be directed primarily at returning capital to shareholders through our existing share repurchase authorization, the payment of dividends, debt reduction, digital transformation initiatives, potential acquisitions and related integration activities, and/or the potential redemption of Series A Preferred Stock in 2025. We expect to maintain sufficient liquidity through our credit facilities and cash balances. We believe cash provided by operations and financing activities will be adequate to cover our operational and business needs for at least the next twelve months.

We communicate on a regular basis with our lenders regarding our financial and working capital performance, and liquidity position. We were in compliance with all financial covenants and restrictions contained in our debt agreements as of September 30, 2024.

We also measure our ability to meet our debt obligations based on our financial leverage ratio, which was 2.9x as of September 30, 2024 and 2.8x as of December 31, 2023.

The following table sets forth our financial leverage ratio, which is a non-GAAP financial measure, for the periods presented:

(In millions, except ratios)

(1) Merger-related and integration costs include integration and professional fees associated with the integration of Wesco and Anixter, as well as advisory, legal, and separation costs associated with the merger between the two companies.

(2) Restructuring costs include severance costs incurred pursuant to an ongoing restructuring plan.

(3) Digital transformation costs include costs associated with certain digital transformation initiatives, which have historically been included in merger-related and integration costs in prior years.

(4) Excise taxes on excess pension plan assets represent the excise taxes applicable to the excess pension plan assets following the final settlement of the Company's U.S. pension plan.

(5) Loss on abandonment of assets represents the write-off of certain capitalized cloud computing arrangement implementation costs relating to a third-party developed operations management software product in favor of an application with functionality that better suits the Company’s operations.

(6) Cloud computing arrangement amortization consists of expense recognized in selling, general and administrative expenses for capitalized implementation costs for cloud computing arrangements to support our digital transformation initiatives.

(7) Debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Note: Financial leverage ratio is a non-GAAP measure of the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt discount, debt issuance costs and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the trailing twelve months EBITDA before other non-operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, restructuring costs, digital transformation costs, excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan, loss on abandonment of assets, and cloud computing arrangement amortization.

Most of the undistributed earnings of our foreign subsidiaries have been taxed in the U.S. under either the one-time tax imposed on the deemed repatriation of undistributed foreign earnings (the “transition tax”), or the global intangible low-taxed income tax regime imposed by the Tax Cuts and Jobs Act of 2017. However, the distribution of earnings by our foreign subsidiaries in the form of dividends, or otherwise, may be subject to additional taxation. We believe that we are able to maintain sufficient liquidity for our domestic operations and commitments without repatriating cash from our foreign subsidiaries. Therefore, we continue to assert that the remaining undistributed earnings of our foreign subsidiaries are indefinitely reinvested.

We finance our operating and investing needs primarily with borrowings under our Revolving Credit Facility and Receivables Facility, as well as uncommitted lines of credit entered into by certain of our foreign subsidiaries to support local operations, some of which are overdraft facilities. The Revolving Credit Facility has a borrowing limit of $1,725 million and the purchase limit under the Receivables Facility is $1,550 million. As of September 30, 2024, we had $485.0 million outstanding on the Revolving Credit Facility and $1,450.0 million outstanding under the Receivables Facility. The maximum borrowing limits of our international lines of credit vary by facility and range between $0.6 million and $10.0 million. Our international lines of credit generally are renewable on an annual basis and certain facilities are fully and unconditionally guaranteed by Wesco Distribution. Accordingly, certain borrowings under these lines directly reduce availability under our Revolving Credit Facility. As of September 30, 2024, we had $0.8 million outstanding under our international lines of credit.

For information regarding amendments to the Receivables Facility and Revolving Credit Facility as well as disclosure of our debt instruments, including our outstanding indebtedness as of September 30, 2024, see Note 9, “Debt” of our Notes to the unaudited Condensed Consolidated Financial Statements.

An analysis of cash flow for the first nine months of 2024 and 2023 follows:

Operating Activities

Net cash provided by operating activities for the first nine months of 2024 totaled $824.6 million, compared to $423.9 million for the first nine months of 2023. Net cash provided by operating activities for the first nine months of 2024 included net income of $553.5 million and non-cash adjustments to net income totaling $66.3 million, which primarily comprised depreciation and amortization of $137.6 million, stock-based compensation expense of $19.6 million, a loss on abandonment of assets of $17.8 million, amortization of debt discount and debt issuance costs of $12.2 million, a loss recognized on the extinguishment of debt of $6.8 million, and pension settlement cost of $3.3 million, partially offset by a gain of $122.2 million, resulting from the divestiture of our WIS business, as described in Note 4, “Acquisitions and Divestitures”.

Other sources of cash in the first nine months of 2024 included an increase in accounts payable of $478.0 million primarily due the timing of inventory purchases and payment to suppliers, an increase in other current and noncurrent liabilities of $103.2 million, primarily due to increases in accrued interest payable, deferred revenue, federal income taxes payable and operating lease liabilities, and a decrease in other accounts receivable of $28.1 million. Additionally, an increase in other tax receivables and an increase in supplier price agreement receivables contributed to net operating cash flow. Primary uses of cash in the first nine months of 2024 included an increase in trade accounts receivable of $217.9 million due to the timing of receipts from customers, an increase in other current and noncurrent assets of $127.7 million primarily due to increases in capitalized costs associated with developing cloud computing arrangements, supplier prepayments and federal income taxes receivable, as well as an increase in inventories of $85.0 million.

Net cash provided by operating activities for the first nine months of 2023 totaled $423.9 million, which included net income of $623.6 million and non-cash adjustments to net income totaling $190.1 million, which primarily comprised depreciation and amortization of $136.4 million, stock-based compensation expense of $34.7 million and amortization of debt discount and debt issuance costs of $11.1 million.

Other sources of cash in the first nine months of 2023 included an increase in other current and noncurrent liabilities of $46.8 million and a decrease in other accounts receivable of $18.7 million due primarily to the collection of supplier volume rebates earned in 2022 in excess of income accrued during the first nine months of 2023, partially offset by an increase in value-added tax receivables. Primary uses of cash in the first nine months of 2023 included an increase in trade accounts receivable of $133.4 million due to the timing of receipts from customers, a decrease in accrued payroll and benefit costs of $120.9 million resulting primarily from management incentive compensation and a decrease in accounts payable of $86.5 million due to the timing of payments to suppliers. Net operating cash flow was also negatively impacted by an increase in inventories of $62.7 million. Inventories grew at a slower rate than sales, as supply chain lead times normalized. Uses of cash in the first nine months of 2023 also included an increase in other current and noncurrent assets of $51.8 million primarily due to an increase in capitalized costs associated with developing cloud computing arrangements.

Investing Activities

Net cash provided by investing activities for the first nine months of 2024 was $249.7 million compared to $61.2 million used in investing activities during the first nine months of 2023. Included in the first nine months of 2024 were $354.9 million in proceeds from the divestiture of the WIS business, net of cash transferred, partially offset by $41.7 million paid to acquire entroCIM and IES, net of cash acquired, as well as capital expenditures of $70.4 million compared to $63.6 million for the nine month period ended September 30, 2023. Capital expenditures in the first nine months of 2024 primarily comprised internal-use computer software and information technology hardware to support our digital transformation initiatives, as well as equipment and leasehold improvements to support our global network of branches, warehouses and sales offices.

Financing Activities

Net cash used in financing activities for the first nine months of 2024 was $874.3 million, compared to $253.4 million during the first nine months of 2023. During the first nine months of 2024, financing activities primarily comprised the redemption of our $1,500.0 million aggregate principal amount of 2025 Notes, proceeds of $900.0 million and $850.0 million related to the issuance of the 2029 Notes and 2032 Notes, respectively, net repayments of $468.0 million related to our Revolving Credit Facility, net repayments of $100.0 million related to our Receivables Facility, and payment of total debt issuance costs of $26.6 million related to the issuance of the 2029 and 2032 Notes and amendments to the Revolving Credit Facility and Receivables Facility. The first nine months of 2024 also included $375.0 million of common stock repurchases, $61.4 million and $43.1 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively, and $26.2 million of payments for taxes related to the exercise and vesting of stock-based awards.

During the first nine months of 2023, financing activities primarily comprised net borrowings of $15.0 million related to our Receivables Facility, net borrowings of $1.7 million related to our Revolving Credit Facility, and the repayment of our $58.6 million aggregate principal amount of 5.50% Anixter Senior Notes due 2023. The first nine months of 2023 also included $68.0 million of payments for taxes related to the exercise and vesting of stock-based awards, $57.6 million and $43.1 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively and $50.0 million of common stock repurchases.

Contractual Cash Obligations and Other Commercial Commitments

There were no material changes in our contractual obligations and other commercial commitments that would require an update to the disclosure provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Seasonality

Our operating results are not significantly affected by seasonal factors. Sales during the first and fourth quarters have historically been affected by a reduced level of activity due to the impact of weather on projects. Sales typically increase beginning in March, with slight fluctuations per month through October. During periods of economic expansion or contraction, our sales by quarter have varied significantly from this pattern.

Critical Accounting Estimates

There have been no significant changes to the critical accounting estimates disclosed in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Recent Accounting Standards

See Note 2, “Accounting Policies” of our Notes to the unaudited Condensed Consolidated Financial Statements for a description of recently adopted and recently issued accounting standards.

Forward-Looking Statements

All statements made herein that are not historical facts should be considered as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These statements include, but are not limited to, statements regarding business strategy, growth strategy, competitive strengths, productivity and profitability enhancement, competition, new product and service introductions, and liquidity and capital resources. Such statements can generally be identified by the use of words such as “anticipate,” “plan,” “believe,” “estimate,” “intend,” “expect,” “project,” and similar words, phrases or expressions or future or conditional verbs such as “could,” “may,” “should,” “will,” and “would,” although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations and beliefs of Wesco's management, as well as assumptions made by, and information currently available to, Wesco's management, current market trends and market conditions and involve risks and uncertainties, many of which are outside of Wesco's and Wesco's management's control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Important factors that could cause actual results or events to differ materially from those presented or implied in the forward-looking statements include, among others, the failure to achieve the anticipated benefits of, and other risks associated with, acquisitions, joint ventures, divestitures and other corporate transactions; the inability to successfully integrate acquired businesses; the impact of increased interest rates or borrowing costs; fluctuations in currency exchange rates; failure to adequately protect Wesco's intellectual property or successfully defend against infringement claims; the inability to successfully deploy new technologies, digital products and information systems or to otherwise adapt to emerging technologies in the marketplace, such as those incorporating artificial intelligence; failure to execute on our efforts and programs related to environmental, social and governance (ESG) matters; unanticipated expenditures or other adverse developments related to compliance with new or stricter government policies, laws or regulations, including those relating to data privacy, sustainability and environmental protection; the inability to successfully develop, manage or implement new technology initiatives or business strategies, including with respect to the expansion of e-commerce capabilities and other digital solutions and digitalization initiatives; disruption of information technology systems or operations; natural disasters (including as a result of climate change), health epidemics, pandemics and other outbreaks; supply chain disruptions; geopolitical issues, including the impact of the evolving conflicts in the Middle East and Russia/Ukraine; the impact of sanctions imposed on, or other actions taken by the U.S. or other countries against, Russia or China; the failure to manage the increased risks and impacts of cyber incidents or data breaches; and exacerbation of key materials shortages, inflationary cost pressures, material cost increases, demand volatility, and logistics and capacity constraints, any of which may have a material adverse effect on the Company's business, results of operations and financial condition. All such factors are difficult to predict and are beyond the Company's control. Additional factors that could cause results to differ materially from those described above can be found in Wesco's most recent Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission.

For a discussion of changes to the market risks that were previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, refer to Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and to Part II, Item 1A, “Risk Factors”.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures and internal control over financial reporting were effective as of the end of the period covered by this report.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarterly period ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors previously disclosed in Item 1A. to Part I of WESCO International, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and Item 1A. to Part II of Wesco's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024.