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WESCO INTERNATIONAL INC - Quarter Report: 2021 June (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     

Commission File Number: 001-14989
WESCO International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 25-1723342
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
225 West Station Square Drive
Suite 700
 15219
Pittsburgh,Pennsylvania(Zip Code)
(Address of principal executive offices)
(412) 454-2200
(Registrant's telephone number, including area code)
Not applicable.
(Former name, former address and former fiscal year, if changed since last report)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of ClassTrading Symbol(s)Name of Exchange on which registered
Common Stock, par value $.01 per shareWCCNew York Stock Exchange
Depositary Shares, each representing a 1/1,00th interest in a share of Series A Fixed-Rate Reset Cumulative Perpetual Preferred StockWCC PR ANew York Stock Exchange
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 No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of August 5, 2021, 50,374,291 shares of common stock, $0.01 par value, of the registrant were outstanding.



WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

Table of Contents
 Page
PART I—FINANCIAL INFORMATION 
 
PART II—OTHER INFORMATION
 


1


WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The interim financial information required by this item is set forth in the unaudited Condensed Consolidated Financial Statements and Notes thereto in this Quarterly Report on Form 10-Q, as follows:
Page

2


WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(unaudited)
As of
AssetsJune 30,
2021
December 31,
2020
Current assets:  
Cash and cash equivalents$287,891 $449,135 
Trade accounts receivable, net of allowance for expected credit losses of $36,288 and $23,909 in 2021 and 2020, respectively
2,842,187 2,466,903 
Other accounts receivable266,835 239,199 
Inventories2,436,522 2,163,831 
Prepaid expenses and other current assets162,312 187,910 
Total current assets5,995,747 5,506,978 
Property, buildings and equipment, net of accumulated depreciation of $339,295 and $312,106 in 2021 and 2020, respectively
384,232 399,157 
Operating lease assets 510,513 534,705 
Intangible assets, net2,020,538 2,065,495 
Goodwill3,223,511 3,187,169 
Other assets164,538 131,637 
Assets held for sale— 55,073 
    Total assets$12,299,079 $11,880,214 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable$2,192,782 $1,707,329 
Accrued payroll and benefit costs220,049 198,535 
Short-term debt and current portion of long-term debt, net of debt issuance costs of $2,217 and $1,039 in 2021 and 2020, respectively
366,965 528,830 
Other current liabilities 522,160 552,301 
Total current liabilities3,301,956 2,986,995 
Long-term debt, net of debt discount and debt issuance costs of $78,278 and $87,142 in 2021 and 2020, respectively
4,303,124 4,369,953 
Operating lease liabilities391,608 414,889 
Deferred income taxes488,710 488,261 
Other noncurrent liabilities288,680 278,010 
Liabilities held for sale— 5,717 
    Total liabilities$8,774,078 $8,543,825 
Commitments and contingencies (Note 11)
Stockholders’ equity:  
Preferred stock, $.01 par value; 20,000,000 shares authorized, no shares issued or outstanding
— — 
Preferred stock, Series A, $.01 par value; 25,000 shares authorized, 21,612 shares issued and outstanding in 2021 and 2020
— — 
Common stock, $.01 par value; 210,000,000 shares authorized, 67,919,962 and 67,596,515 shares issued, and 50,298,404 and 50,064,985 shares outstanding in 2021 and 2020, respectively
680 676 
Class B nonvoting convertible common stock, $.01 par value; 20,000,000 shares authorized, 4,339,431 issued and no shares outstanding in 2021 and 2020, respectively
43 43 
Additional capital1,953,653 1,942,810 
Retained earnings2,750,665 2,601,662 
Treasury stock, at cost; 21,960,989 and 21,870,961 shares in 2021 and 2020, respectively
(947,698)(938,335)
Accumulated other comprehensive loss(225,074)(263,134)
Total WESCO International, Inc. stockholders' equity3,532,269 3,343,722 
Noncontrolling interests(7,268)(7,333)
    Total stockholders’ equity3,525,001 3,336,389 
    Total liabilities and stockholders’ equity$12,299,079 $11,880,214 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)
(unaudited)
 Three Months EndedSix Months Ended
June 30June 30
2021202020212020
Net sales$4,595,790 $2,086,706 $8,637,267 $4,055,353 
Cost of goods sold (excluding depreciation and amortization)3,630,633 1,692,931 6,861,074 3,285,179 
Selling, general and administrative expenses699,581 359,750 1,336,157 659,143 
Depreciation and amortization46,704 18,755 87,913 34,848 
Income from operations218,872 15,270 352,123 76,183 
Interest expense, net67,590 61,270 137,963 77,862 
Other income, net(802)(687)(3,609)(807)
Income (loss) before income taxes152,084 (45,313)217,769 (872)
Provision for income taxes32,800 (10,854)39,331 (587)
Net income (loss)119,284 (34,459)178,438 (285)
Less: Net income (loss) attributable to noncontrolling interests89 47 65 (185)
Net income (loss) attributable to WESCO International, Inc.119,195 (34,506)178,373 (100)
Less: Preferred stock dividends14,352 1,276 28,704 1,276 
Net income (loss) attributable to common stockholders$104,843 $(35,782)$149,669 $(1,376)
Other comprehensive income (loss):
Foreign currency translation adjustments21,219 42,734 38,060 (51,117)
Comprehensive income (loss) attributable to common stockholders$126,062 $6,952 $187,729 $(52,493)
Earnings (loss) per share attributable to common stockholders
Basic$2.09 $(0.84)$2.98 $(0.03)
Diluted$2.02 $(0.84)$2.89 $(0.03)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Six Months Ended
 June 30
20212020
Operating activities:  
Net income (loss)$178,438 $(285)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization87,913 34,848 
Stock-based compensation expense13,179 9,527 
Amortization of debt discount and debt issuance costs9,197 2,058 
Gain on divestitures, net (Note 4)(8,927)— 
Other operating activities, net3,365 (4,079)
Deferred income taxes(2,959)1,062 
Changes in assets and liabilities:
Trade accounts receivable, net(372,287)29,302 
Other accounts receivable (25,394)20,476 
Inventories(268,272)55,431 
Other current and noncurrent assets(14,291)(28,078)
Accounts payable474,918 (83,085)
Accrued payroll and benefit costs1,911 1,701 
Other current and noncurrent liabilities26,004 93,810 
Net cash provided by operating activities102,795 132,688 
Investing activities:
Capital expenditures(20,191)(27,163)
Acquisition payments (Note 4)— (3,708,325)
Proceeds from divestitures (Note 4)54,346 — 
Other investing activities, net(1,801)7,533 
Net cash provided by (used in) investing activities32,354 (3,727,955)
Financing activities:
Repayments of short-term debt, net(10,763)(10,526)
Repayment of 5.375% Senior Notes due 2021 (Note 8)(500,000)— 
Proceeds from issuance of long-term debt1,557,827 4,391,782 
Repayments of long-term debt(1,282,842)(580,619)
Payments for taxes related to net-share settlement of equity awards(12,433)(2,025)
Payment of dividends(28,704)— 
Debt issuance costs(1,849)(79,490)
Other financing activities, net(10,918)(6,115)
Net cash (used in) provided by financing activities(289,682)3,713,007 
Effect of exchange rate changes on cash and cash equivalents(6,711)(3,420)
Net change in cash and cash equivalents(161,244)114,320 
Cash and cash equivalents at the beginning of period449,135 150,902 
Cash and cash equivalents at the end of period$287,891 $265,222 
Supplemental disclosures:
Cash paid for interest$128,211 $29,828 
Cash paid for income taxes$40,883 $9,894 
Right-of-use assets obtained in exchange for new operating lease liabilities$56,748 $73,137 
The accompanying notes are an integral part of the condensed consolidated financial statements.
5

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except shares)
(unaudited)
Accumulated Other
   Class BSeries A Retained  Comprehensive
 Common StockCommon StockPreferred StockAdditionalEarningsTreasury StockNoncontrollingIncome
AmountSharesAmountSharesAmountSharesCapital(Deficit)AmountSharesInterests(Loss)
Balance, December 31, 2020$676 67,596,515 $43 4,339,431 $— 21,612 $1,942,810 $2,601,662 $(938,335)(21,870,961)$(7,333)$(263,134)
Exercise of stock-based awards
165,641 (38)(1,421)(15,330)
Stock-based compensation expense
5,954 
Tax withholding related to vesting of restricted stock units and retirement of common stock
— (35,289)(2,209)(617)
Noncontrolling interests(24)
Net income attributable to WESCO
59,178 
Preferred stock dividends(14,352)
Translation adjustments16,841 
Balance, March 31, 2021$678 67,726,867 $43 4,339,431 $— 21,612 $1,946,517 $2,645,871 $(939,756)(21,886,291)$(7,357)$(246,293)
Exercise of stock-based awards
194,615 (1)(7,942)(74,698)
Stock-based compensation expense
7,225 
Tax withholding related to vesting of restricted stock units and retirement of common stock
— (1,520)(88)(49)
Noncontrolling interests89 
Net income attributable to WESCO119,195 
Preferred stock dividends(14,352)
Translation adjustments21,219 
Balance, June 30, 2021$680 67,919,962 $43 4,339,431 $— 21,612 $1,953,653 $2,750,665 $(947,698)(21,960,989)$(7,268)$(225,074)

The accompanying notes are an integral part of the condensed consolidated financial statements.




6

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except shares)
(unaudited)
Accumulated Other
   Class BSeries A Retained  Comprehensive
 Common StockCommon StockPreferred StockAdditionalEarningsTreasury StockNoncontrollingIncome
AmountSharesAmountSharesAmountSharesCapital(Deficit)AmountSharesInterests(Loss)
Balance, December 31, 2019$593 59,308,018 $43 4,339,431 $— — $1,039,347 $2,530,429 $(937,157)(21,850,356)$(6,812)$(367,772)
Exercise of stock-based awards
105,620 (39)79 2,020 
Stock-based compensation expense
4,626 
Tax withholding related to vesting of restricted stock units and retirement of common stock
— (31,680)(2,297)761 
Noncontrolling interests(232)
Net income attributable to WESCO
34,407 
Translation adjustments(93,851)
Balance, March 31, 2020$594 59,381,958 $43 4,339,431 $— — $1,041,637 $2,565,597 $(937,078)(21,848,336)$(7,044)$(461,623)
Exercise of stock-based awards
— 30,665 — (437)(10,858)
Stock-based compensation expense
4,901 
Tax withholding related to vesting of restricted stock units and retirement of common stock
— (652)(37)27 
Capital stock issuance82 8,150,228 — 21,612 886,740 
Noncontrolling interests47 
Net loss attributable to WESCO(34,506)
Preferred stock dividends(1,276)
Translation adjustments42,734 
Balance, June 30, 2020$676 67,562,199 $43 4,339,431 $— 21,612 $1,933,241 $2,529,842 $(937,515)(21,859,194)$(6,997)$(418,889)

The accompanying notes are an integral part of the condensed consolidated financial statements.
7

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


1. ORGANIZATION
WESCO International, Inc. ("WESCO International") and its subsidiaries (collectively, “WESCO” or the "Company"), headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and supply chain solutions.
The Company has operating segments that are organized around three strategic business units consisting of Electrical & Electronic Solutions ("EES"), Communications & Security Solutions ("CSS") and Utility & Broadband Solutions ("UBS").
2. ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of WESCO have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). The unaudited condensed consolidated financial information should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in WESCO’s 2020 Annual Report on Form 10-K as filed with the SEC on March 1, 2021. The Condensed Consolidated Balance Sheet at December 31, 2020 was derived from the audited Consolidated Financial Statements as of that date, but does not include all of the disclosures required by accounting principles generally accepted in the United States of America.
The unaudited Condensed Consolidated Balance Sheet as of June 30, 2021, the unaudited Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), the unaudited Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2021 and 2020, and the unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, respectively, in the opinion of management, have been prepared on the same basis as the audited Consolidated Financial Statements and include all adjustments necessary for the fair statement of the results of the interim periods presented herein. All adjustments reflected in the unaudited condensed consolidated financial information are of a normal recurring nature unless indicated. The results for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year.
Prior to the completion of its merger with Anixter International Inc. ("Anixter") on June 22, 2020, as described in Note 4, "Acquisitions and Disposals", WESCO had four operating segments that had been aggregated as one reportable segment. Effective on the date of acquisition, the Company added Anixter as a separate reportable segment for the quarterly period ended June 30, 2020. At the beginning of the third quarter of 2020, the Company identified new operating segments organized around three strategic business units consisting of EES, CSS and UBS. These operating segments are equivalent to the Company's reportable segments. The operating segments in the respective periods were determined in accordance with the manner in which WESCO's chief operating decision maker ("CODM") reviewed financial information during those periods. The financial information used by the CODM to evaluate the performance of the Company's operating segments is disclosed in Note 13, "Business Segments". The applicable comparative financial information reported in the Company's previously issued interim financial statements for the three and six months ended June 30, 2020 has been recast in this Quarterly Report on Form 10-Q to conform to the basis of the new segments.
Reclassifications
For the three and six months ended June 30, 2020, $0.7 million and $0.8 million, respectively, of other non-operating income has been reclassified from "net interest and other" to "other income, net" in the unaudited Condensed Consolidated Statements of Loss and Comprehensive Loss. For the six months ended June 30, 2020, stock-based compensation of $9.5 million and amortization of debt discount and debt issuance costs of $2.1 million have been reclassified from other operating activities in the unaudited Condensed Consolidated Statement of Cash Flows. These reclassifications have been made to conform to the current period presentation.
8

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

Change in Estimates
During the second quarter of 2021, the Company established a new corporate brand strategy that will result in migrating certain legacy WESCO sub-brands to a master brand architecture. The Company accounts for the trademarks associated with these sub-brands as intangible assets. As of December 31, 2020, $39.1 million of the trademarks impacted by the master brand strategy had indefinite lives and $9.5 million had remaining estimated useful lives ranging from 3 to 8 years. The Company continually evaluates whether events or circumstances have occurred that would require a change to the estimated useful lives of indefinite-lived and definite lived intangible assets. When such a change is warranted, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Accordingly, during the second quarter of 2021, the Company changed the estimated useful lives of the trademarks affected by the new corporate brand strategy to coincide with the expected period of time to migrate such sub-brands to the master brand architecture. The Company assigned remaining estimated useful lives to these trademarks, including those that previously had indefinite lives, ranging from less than one year to 5 years. The Company assessed these intangible assets for impairment prior to amortizing them over their revised estimated remaining useful lives. No impairment losses were identified as a result of these tests.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles of Accounting Standards Codification Topic 740, Income Taxes, and simplifies other aspects of accounting for income taxes. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company adopted this ASU in the first quarter of 2021. The adoption of this guidance did not have a material impact on the consolidated financial statements and notes thereto presented herein.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact related to the replacement of London Interbank Offered Rate (LIBOR) and whether the Company will elect the adoption of the optional guidance.
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to WESCO’s financial position, results of operations or cash flows.
3. REVENUE
WESCO distributes products and provides services to customers globally in various end markets within its business segments. The segments, which consist of EES, CSS and UBS operate in the United States, Canada and various other international countries.
The following tables disaggregate WESCO’s net sales by segment and geography for the periods presented:
Three Months EndedSix Months Ended
 June 30June 30
(In thousands)2021202020212020
EES$1,923,011 $1,043,294 $3,643,824 $2,157,766 
CSS1,461,120 341,470 2,711,735 565,185 
UBS1,211,659 701,942 2,281,708 1,332,402 
Total by segment$4,595,790 $2,086,706 $8,637,267 $4,055,353 
9

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

Three Months EndedSix Months Ended
 June 30June 30
(In thousands)2021202020212020
United States$3,318,311 $1,587,063 $6,248,747 $3,065,557 
Canada 703,135 352,719 1,310,887 730,134 
Other International(1)
574,344 146,924 1,077,633 259,662 
Total by geography(2)
$4,595,790 $2,086,706 $8,637,267 $4,055,353 
(1)    No individual other international country's net sales are material.
(2)    WESCO attributes revenues from external customers to individual countries on the basis of point of sale.
In accordance with certain contractual arrangements, WESCO receives payment from its customers in advance and recognizes such payment as deferred revenue. Revenue for advance payment is recognized when the performance obligation has been satisfied and control has transferred to the customer, which is generally upon shipment. Deferred revenue is usually recognized within a year or less from the date of the customer’s advance payment. At June 30, 2021 and December 31, 2020, $43.0 million and $24.3 million, respectively, of deferred revenue was recorded as a component of other current liabilities in the Condensed Consolidated Balance Sheets.
WESCO’s revenues are adjusted for variable consideration, which includes customer volume rebates, returns, and discounts. WESCO measures variable consideration by estimating expected outcomes using analysis and inputs based upon historical data as well as current and forecasted information. Variable consideration is reviewed by management on a monthly basis and revenue is adjusted accordingly. Variable consideration reduced revenue for the three months ended June 30, 2021 and 2020 by approximately $112.4 million and $31.7 million, respectively, and by approximately $217.8 million and $54.9 million for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021 and December 31, 2020, the Company's estimated product return obligation was $39.6 million and $38.9 million, respectively.
Shipping and handling activities are recognized in net sales when they are billed to the customer. WESCO has elected to recognize shipping and handling costs as a fulfillment cost. Shipping and handling costs recorded as a component of selling, general and administrative expenses totaled $62.7 million and $20.9 million for the three months ended June 30, 2021 and 2020, respectively, and $116.0 million and $38.9 million for the six months ended June 30, 2021 and 2020, respectively.
4. ACQUISITIONS AND DISPOSALS
Anixter International Inc.
On June 22, 2020, WESCO completed its acquisition of Anixter, a Delaware corporation. Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020 (the “Merger Agreement”), by and among Anixter, WESCO and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of WESCO (“Merger Sub”), Merger Sub was merged with and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a wholly owned subsidiary of WESCO. On June 23, 2020, Anixter merged with and into Anixter Inc., with Anixter Inc. surviving to become a wholly owned subsidiary of WESCO.
The Company used the net proceeds from the issuance of senior unsecured notes, borrowings under its revolving credit and accounts receivable securitization facilities, as well as cash on hand, to finance the acquisition of Anixter and related transaction costs.
At the effective time of the Merger, each outstanding share of common stock of Anixter (subject to limited exceptions) was converted into the right to receive (i) $72.82 in cash, (ii) 0.2397 shares of common stock of WESCO, par value $0.01 per share (the “WESCO Common Stock”) and (iii) 0.6356 depositary shares, each representing a 1/1,000th interest in a share of newly issued fixed-rate reset cumulative perpetual preferred stock of WESCO, Series A, with a $25,000 stated amount per whole preferred share and an initial dividend rate equal to 10.625%.
Anixter was a leading distributor of network and security solutions, electrical and electronic solutions, and utility power solutions with locations in over 300 cities across approximately 50 countries, and 2019 annual sales of more than $8 billion. The Merger brought together two companies with highly compatible capabilities and characteristics. The combination of WESCO and Anixter created an enterprise with scale and should afford the Company the opportunity to digitize its business, and expand its services portfolio and supply chain offerings.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

The total fair value of consideration transferred for the Merger consisted of the following:
(In thousands)
Cash portion attributable to common stock outstanding$2,476,010 
Cash portion attributable to options and restricted stock units outstanding87,375 
Fair value of cash consideration2,563,385 
Common stock consideration313,512 
Series A preferred stock consideration573,786 
Fair value of equity consideration887,298 
Extinguishment of Anixter obligations, including accrued and unpaid interest1,247,653 
Total purchase consideration$4,698,336 
Supplemental cash flow disclosure related to acquisitions:
Cash paid for acquisition$3,811,038 
Less: Cash acquired(103,463)
Cash paid for acquisition, net of cash acquired$3,707,575 
The Merger was accounted for as a business combination with WESCO acquiring Anixter in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Under the acquisition method of accounting, the purchase consideration was allocated to the identified assets acquired and liabilities assumed based on their respective acquisition date fair value, with any excess allocated to goodwill. The fair value estimates were based on income, market and cost valuation methods using primarily unobservable inputs developed by management, which are categorized as Level 3 in the fair value hierarchy. Specifically, the fair values of the identified trademark and customer relationship intangible assets were estimated using the relief-from-royalty and multi-period excess earnings methods, respectively. Significant inputs used to value these identifiable intangible assets included projected revenues and expected operating margins, customer attrition rates, discount rates, royalty rates, and applicable income tax rates. The excess purchase consideration recorded to goodwill is not deductible for income tax purposes, and has been assigned to the Company's reportable segments based on their relative fair values, as disclosed in Note 5, "Goodwill and Intangible Assets". The resulting goodwill is primarily attributable to Anixter's workforce, significant cross-selling opportunities in additional geographies, enhanced scale, and other operational efficiencies.
During the second quarter of 2021, the Company finalized its allocation of the purchase consideration to the respective fair values of assets acquired and liabilities assumed in the acquisition of Anixter. As the Company obtained additional information during the measurement period (one year from the acquisition date), it recorded adjustments to its preliminary estimates of fair value, which are presented in the table below. The net impact of these adjustments was an increase to goodwill of $13.4 million in the second quarter of 2021 and $16.4 million since the Company's initial estimate.
11

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

The following table sets forth the allocation of the purchase consideration to the respective fair value of assets acquired and liabilities assumed for the acquisition of Anixter:
Preliminary Fair Value EstimatesMeasurement Period AdjustmentsFinal Purchase Price Allocation
Assets(In thousands)
Cash and cash equivalents$103,463 $— $103,463 
Trade accounts receivable1,309,894 (8,928)1,300,966 
Other accounts receivable116,386 — 116,386 
Inventories1,424,768 (14,906)1,409,862 
Prepaid expenses and other current assets53,462 14,202 67,664 
Property, buildings and equipment215,513 (3,792)211,721 
Operating lease assets262,238 18,047 280,285 
Intangible assets1,832,700 5,365 1,838,065 
Goodwill1,367,981 16,356 1,384,337 
Other assets114,258 25,589 139,847 
Total assets$6,800,663 $51,933 $6,852,596 
Liabilities
Accounts payable$920,163 $(1,239)$918,924 
Accrued payroll and benefit costs69,480 — 69,480 
Short-term debt and current portion of long-term debt13,225 — 13,225 
Other current liabilities221,574 12,745 234,319 
Long-term debt77,822 (205)77,617 
Operating lease liabilities200,286 17,017 217,303 
Deferred income taxes392,165 (15,111)377,054 
Other noncurrent liabilities207,612 38,726 246,338 
Total liabilities$2,102,327 $51,933 $2,154,260 
Fair value of net assets acquired, including goodwill and intangible assets$4,698,336 $— $4,698,336 
The following table sets forth the identifiable intangible assets and their estimated weighted-average useful lives:
Identifiable Intangible AssetsEstimated
Fair Value
Weighted-Average Estimated Useful Life in Years(1)
(In thousands)
Customer relationships$1,098,900 19
Trademarks735,000 Indefinite
Non-compete agreements4,165 2
Total identifiable intangible assets$1,838,065 
(1)    During the three months ended December 31, 2020, the Company recorded measurement period adjustments to the estimated useful lives initially assigned to customer relationships, which resulted in income of $6.4 million.
12

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

The results of operations of Anixter are included in the unaudited condensed consolidated financial statements beginning on June 22, 2020, the acquisition date. For the three and six months ended June 30, 2021, the condensed consolidated statements of income include $2.5 billion and $4.6 billion of net sales, respectively, and $166.2 million and $271.6 million of income from operations, respectively, for Anixter. For the three and six months ended June 30, 2020, the condensed consolidated statements of loss include $221.9 million of net sales and $18.4 million of income from operations for Anixter. For the three months ended June 30, 2021 and 2020, the Company incurred costs related to the merger of $37.7 million and $73.3 million, respectively, which primarily consist of advisory, legal, integration, separation and other costs. For the six months ended June 30, 2021 and 2020, such costs were $84.0 million and $78.0 million, respectively. These costs are included in selling, general and administrative expenses for all periods presented.
Pro Forma Financial Information
The following unaudited pro forma financial information presents combined results of operations for the periods presented, as if the Company had completed the Merger on January 1, 2019. The unaudited pro forma financial information includes adjustments to amortization and depreciation for intangible assets and property, buildings and equipment, adjustments to interest expense for the additional indebtedness incurred to complete the acquisition (including the amortization of debt discount and issuance costs), transaction costs, change in control and severance costs, dividends accrued on the Series A preferred stock, compensation expense associated with the WESCO phantom stock unit awards described in Note 9, "Employee Benefit Plans", as well as the respective income tax effects of such adjustments. For the three and six months ended June 30, 2020, adjustments totaling $61.5 million and $11.3 million, respectively increased the unaudited pro forma net income attributable to common stockholders. The unaudited pro forma financial information does not reflect any cost savings, operating synergies or revenue enhancements that WESCO may achieve as a result of its acquisition of Anixter, the costs to integrate the operations of WESCO and Anixter or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements. The unaudited pro forma financial information presented below is not necessarily indicative of consolidated results of operations of the combined business had the acquisition occurred at the beginning of the respective periods, nor is it necessarily indicative of future results of operations of the combined company.
Three Months EndedSix Months Ended
(In thousands)June 30,
2020
June 30,
2020
Pro forma net sales(1)
$3,705,913 $7,746,260 
Pro forma net income attributable to common stockholders(1)
32,493 52,373 
(1)    The Company reported pro forma net sales and pro forma net income attributable to common stockholders for the three and six months ended June 30, 2020 in the Notes to Condensed Consolidated Financial Statements of its Quarterly Report on Form 10-Q for the period ended June 30, 2020 of $3,678.5 million and $7,691.3 million, respectively, and $29.4 million and $47.4 million, respectively. These amounts excluded the financial results of WESCO's legacy utility and data communications businesses in Canada, which were divested in the first quarter of 2021 under a Consent Agreement with the Competition Bureau of Canada, as described below.
Canadian Divestitures
On August 6, 2020, the Company entered into a Consent Agreement with the Competition Bureau of Canada regarding the merger with Anixter. Under the Consent Agreement, the Company was required to divest certain legacy WESCO utility and data communications businesses in Canada. In February 2021, the Company completed such divestitures for cash consideration totaling $54.3 million. The Company recognized a net gain from the sale of these businesses of $8.9 million, which is reported as a component of selling, general and administrative expenses for the six months ended June 30, 2021. These sales fulfilled the Company’s divestiture commitments under the Consent Agreement and the net cash proceeds were used to repay debt.

13

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

5. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table sets forth the changes in the carrying value of goodwill:
 Six Months Ended
June 30, 2021
EES
CSSUBSTotal
(In thousands)
Beginning balance January 1(1)
$853,456 $1,115,500 $1,218,213 $3,187,169 
Adjustments to goodwill for acquisitions (Note 4)(2)
5,254 8,602 85 13,941 
Foreign currency exchange rate changes12,334 1,438 8,629 22,401 
Ending balance June 30
$871,044 $1,125,540 $1,226,927 $3,223,511 
(1)    The beginning balance excludes $26.1 million of goodwill that was classified as held for sale on the UBS segment as of December 31, 2020 and disposed in the first quarter of 2021 as part of the divestitures disclosed in Note 4, "Acquisitions and Disposals".
(2)    Includes the effect on goodwill of the adjustments to the assets acquired and liabilities assumed in the merger with Anixter since their initial measurement, as described in Note 4, "Acquisitions and Disposals".
Intangible Assets
The components of intangible assets are as follows:
June 30, 2021December 31, 2020
Life (in years)
Gross Carrying Amount (1)
Accumulated Amortization (1)
Net Carrying Amount
Gross Carrying Amount (1)
Accumulated Amortization (1)
Net Carrying Amount
Intangible assets:(In thousands)
TrademarksIndefinite$795,926 $— $795,926 $833,793 $— $833,793 
Customer relationships(2)
10 - 20
1,439,769 (271,054)1,168,715 1,434,554 (227,585)1,206,969 
Distribution agreements(2)
10 - 19
29,212 (21,884)7,328 29,212 (21,040)8,172 
Trademarks(2)
Less than 1 - 15
64,047 (17,434)46,613 24,898 (11,415)13,483 
Non-compete agreements
2 - 5
4,374 (2,418)1,956 4,462 (1,384)3,078 
$2,333,328 $(312,790)$2,020,538 $2,326,919 $(261,424)$2,065,495 
(1)    Excludes the original cost and related accumulated amortization of fully-amortized intangible assets.
(2)    The net carrying amount as of December 31, 2020 excluded $1.0 million of trademarks, $3.3 million of customer relationships and $1.4 million of distribution agreements that were classified as held for sale and disposed in the first quarter of 2021 as part of the divestitures disclosed in Note 4, "Acquisitions and Disposals".
Amortization expense related to intangible assets totaled $27.1 million and $10.1 million for the three months ended June 30, 2021 and 2020, respectively, and $48.7 million and $18.6 million for the six months ended June 30, 2021 and 2020, respectively. For the three and six months ended June 30, 2021, amortization expense includes $5.0 million resulting from the changes in estimated useful lives of certain legacy WESCO trademarks that are migrating to the Company's master brand architecture, as described in Note 2, "Accounting Policies".
14

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

The following table sets forth the remaining estimated amortization expense for intangible assets for the next five years and thereafter:
For year ending December 31,(In thousands)
2021$70,996 
202293,064 
202383,704 
202481,224 
202578,089 
Thereafter817,535 

6. STOCK-BASED COMPENSATION
WESCO sponsors a stock-based compensation plan. On May 27, 2021, the Company's stockholders approved the WESCO International, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”). The 2021 Plan is administered by the Compensation Committee of the Company's Board of Directors.
The 2021 Plan was designed to be the successor plan to all prior stock-based compensation plans. Accordingly, no new awards may be granted under the Company’s 1999 Long-Term Incentive Plan, as amended and restated (the “1999 Plan”) or any other prior plan. Awards outstanding under any such prior plans will remain in full force and effect under such plans according to their respective terms. To the extent that any such award is forfeited, terminates, expires or lapses without being exercised, or is settled for cash, the shares subject to such award not delivered will again be available for awards under the 2021 Plan.
The maximum number of shares of the Company’s common stock that may be granted pursuant to awards under the 2021 Plan is 2,150,000, less any shares issued under the 1999 Plan after March 31, 2021 and until the annual stockholders meeting in May 2021. If any award granted under the 2021 Plan is forfeited, terminates, expires or lapses instead of being exercised, or is settled for cash, the shares subject to such award will again be available for grant under the 2021 Plan. Shares delivered by participants or withheld by the Company to pay all or a portion of the exercise price or withholding taxes with respect to stock option or stock appreciation right awards will not again be available for issuance. Shares delivered by participants or withheld by the Company to satisfy applicable tax withholding obligations with respect to a full-value award (i.e., restricted shares or restricted stock units) will again be available for grant under the 2021 Plan.
WESCO’s stock-based employee compensation awards outstanding under the 1999 Plan are comprised of stock-settled stock appreciation rights, restricted stock units and performance-based awards. Compensation cost for all stock-based awards is measured at fair value on the date of grant and compensation cost is recognized, net of estimated forfeitures, over the service period for awards expected to vest. The fair value of stock-settled stock appreciation rights is determined using the Black-Scholes model. The fair value of restricted stock units and performance-based awards with performance conditions is determined by the grant-date closing price of WESCO’s common stock. The forfeiture assumption is based on WESCO’s historical employee behavior that is reviewed on an annual basis. No dividends are assumed. For stock-settled stock appreciation rights that are exercised and for restricted stock units and performance-based awards that vest, shares are issued out of WESCO's outstanding common stock.
Stock-settled stock appreciation rights vest ratably over a three-year period and terminate on the tenth anniversary of the grant date unless terminated sooner under certain conditions. Restricted stock unit awards granted in February 2020 and prior vest based on a minimum time period of three years. The special award described below vests in tranches. Restricted stock units awarded in 2021 vest ratably over a three-year period on each of the first, second and third anniversaries of the grant date. Vesting of performance-based awards is based on a three-year performance period, and the number of shares earned, if any, depends on the attainment of certain performance levels. Outstanding awards would vest upon the consummation of a change in control transaction and performance-based awards would vest at the target level.
On July 2, 2020, a special award of restricted stock units was granted to certain officers of the Company. These awards vest in tranches of 30% on each of the first and second anniversaries of the grant date and 40% on the third anniversary of the grant date, subject, in each case, to continued employment through the applicable anniversary date.
15

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

Performance-based awards granted in 2021, 2020 and 2019 were based on two equally-weighted performance measures: the three-year average growth rate of WESCO's net income and the three-year cumulative return on net assets.
During the three and six months ended June 30, 2021 and 2020, WESCO granted the following stock-settled stock appreciation rights, restricted stock units and performance-based awards at the following weighted-average fair values:

Three Months EndedSix Months Ended
June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Stock-settled stock appreciation rights granted3,398 — 139,592 262,091 
Weighted-average fair value$38.62 $— $33.19 $13.86 
Restricted stock units granted6,861 — 307,583 211,450 
Weighted-average fair value$86.91 $— $77.12 $48.32 
Performance-based awards granted3,020 — 122,812 158,756 
Weighted-average fair value$86.91 $— $76.76 $48.67 
The fair value of stock-settled stock appreciation rights was estimated using the following weighted-average assumptions:
Three Months EndedSix Months Ended
June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Risk free interest rate1.3 %n/a0.8 %1.4 %
Expected life (in years)7n/a75
Expected volatility42 %n/a41 %30 %
The risk-free interest rate is based on the U.S. Treasury Daily Yield Curve as of the grant date. The expected life is based on historical exercise experience and the expected volatility is based on the volatility of the Company's daily stock price over the expected life preceding the grant date of the award.
The following table sets forth a summary of stock-settled stock appreciation rights and related information for the six months ended June 30, 2021:
AwardsWeighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual Term (In years)
Aggregate
Intrinsic
Value
(In thousands)
Outstanding at December 31, 20202,161,556 $60.48   
     Granted139,592 77.05   
     Exercised(558,550)54.65  
     Forfeited(12,719)52.57   
Outstanding at June 30, 2021
1,729,879 63.76 5.9$69,154 
Exercisable at June 30, 2021
1,359,501 $64.73 5.1$53,041 
For the six months ended June 30, 2021, the aggregate intrinsic value of stock-settled stock appreciation rights exercised during such period was $24.9 million.


16

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

The following table sets forth a summary of time-based restricted stock units and related information for the six months ended June 30, 2021:
AwardsWeighted-
Average
Fair
Value
Unvested at December 31, 2020
921,495 $43.15 
     Granted307,583 77.12 
     Vested(226,943)43.89 
     Forfeited(25,134)59.90 
Unvested at June 30, 2021
977,001 $53.23 

The following table sets forth a summary of performance-based awards for the six months ended June 30, 2021:
AwardsWeighted-
Average
Fair
Value
Unvested at December 31, 2020
305,269 $52.61 
     Granted122,812 76.76 
     Vested(22,371)62.34 
     Forfeited(27,802)59.87 
Unvested at June 30, 2021
377,908 $59.35 
Vesting of the 377,908 shares of performance-based awards in the table above is dependent upon the achievement of certain performance targets, including half that are dependent upon the three-year average growth rate of WESCO's net income and the other half that are based upon the three-year cumulative return on net assets. These awards are accounted for as awards with performance conditions; compensation cost is recognized over the performance period based upon WESCO's determination of whether it is probable that the performance targets will be achieved.
WESCO recognized $7.2 million and $4.9 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the three months ended June 30, 2021 and 2020, respectively. WESCO recognized $13.2 million and $9.5 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, there was $55.3 million of total unrecognized compensation expense related to non-vested stock-based compensation arrangements for all awards previously made of which approximately $14.8 million is expected to be recognized over the remainder of 2021, $23.9 million in 2022, $15.2 million in 2023 and $1.4 million in 2024.
7. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding during the periods. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average common shares and common share equivalents outstanding during the periods. The dilutive effect of common share equivalents is considered in the diluted earnings per share computation using the treasury stock method, which includes consideration of equity awards.
17

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

The following table sets forth the details of basic and diluted earnings (loss) per share:
Three Months EndedSix Months Ended
 June 30June 30
(In thousands, except per share data)2021202020212020
Net income (loss) attributable to WESCO International, Inc.$119,195 $(34,506)$178,373 $(100)
Less: Preferred stock dividends14,352 1,276 28,704 1,276 
Net income (loss) attributable to common stockholders$104,843 $(35,782)$149,669 $(1,376)
Weighted-average common shares outstanding used in computing basic earnings per share
50,243 42,683 50,184 42,260 
Common shares issuable upon exercise of dilutive equity awards
1,751 92 1,691 152 
Weighted-average common shares outstanding and common share equivalents, diluted51,994 42,775 51,875 42,412 
Weighted-average common shares outstanding and common share equivalents used in computing diluted earnings (loss) per share51,994 42,683 51,875 42,260 
Earnings (loss) per share attributable to common stockholders
Basic$2.09 $(0.84)$2.98 $(0.03)
Diluted$2.02 $(0.84)$2.89 $(0.03)
For the three and six months ended June 30, 2021, the computation of diluted earnings per share attributable to common stockholders excluded stock-based awards of approximately 0.1 million. For the three and six months ended June 30, 2020, the computation of diluted loss per share attributable to common stockholders excluded stock-based awards of approximately 3.0 million and 2.8 million, respectively. These amounts were excluded because their effect would have been antidilutive.
8. DEBT
The following table sets forth WESCO's outstanding indebtedness:
As of
June 30,
2021
December 31,
2020
(In thousands)
International lines of credit$17,967 $29,575 
Accounts Receivable Securitization Facility1,180,000 950,000 
Revolving Credit Facility295,000 250,000 
5.375% Senior Notes due 2021— 500,000 
5.50% Anixter Senior Notes due 202358,636 58,636 
5.375% Senior Notes due 2024350,000 350,000 
6.00% Anixter Senior Notes due 20254,173 4,173 
7.125% Senior Notes due 20251,500,000 1,500,000 
7.250% Senior Notes due 2028, less debt discount of $8,710 and $9,332 in 2021 and 2020, respectively
1,316,290 1,315,668 
Finance lease obligations18,501 17,931 
Total debt4,740,567 4,975,983 
Plus: Fair value adjustment to the Anixter Senior Notes1,306 1,650 
Less: Unamortized debt issuance costs(71,784)(78,850)
Less: Short-term debt and current portion of long-term debt(366,965)(528,830)
Total long-term debt$4,303,124 $4,369,953 

18

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

Accounts Receivable Securitization Facility
On June 1, 2021, WESCO Distribution amended its accounts receivable securitization facility (the “Receivables Facility”) pursuant to the terms and conditions of a Third Amendment to the Fifth Amended and Restated Receivables Purchase Agreement (the “Receivables Amendment”), by and among WESCO Receivables Corp. (“WESCO Receivables”), WESCO Distribution, the various purchaser groups from time to time party thereto and PNC Bank, National Association, as Administrator. The Receivables Amendment amends the amended and restated receivables purchase agreement entered into on June 22, 2020 (the “Receivables Purchase Agreement”). The Receivables Amendment, among other things, increased the purchase limit under the Receivables Purchase Agreement from $1,200 million to $1,300 million, extended the maturity date from June 22, 2023 to June 21, 2024, decreased the LIBOR floor from 0.50% to 0.00% and decreased the interest rate spread from 1.20% to 1.15%. The commitment fee of the Receivables Facility remained unchanged.
Under the Receivables Facility, WESCO sells, on a continuous basis, an undivided interest in all domestic accounts receivable to WESCO Receivables, a wholly owned special purpose entity (the “SPE”). The SPE sells, without recourse, a senior undivided interest in the receivables to financial institutions for cash while maintaining a subordinated undivided interest in the receivables, in the form of overcollateralization. Since WESCO maintains control of the transferred receivables, the transfers do not qualify for “sale” treatment. As a result, the transferred receivables remain on the balance sheet, and WESCO recognizes the related secured borrowing. WESCO has agreed to continue servicing the sold receivables for the third-party conduits and financial institutions at market rates; accordingly, no servicing asset or liability has been recorded.
5.375% Senior Notes due 2021
In November 2013, WESCO Distribution issued $500 million aggregate principal amount of 5.375% Senior Notes due 2021 (the "2021 Notes") through a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The 2021 Notes were issued at 100% of par and were governed by an indenture (the “2021 Indenture”) entered into on November 26, 2013 between WESCO International and U.S. Bank National Association, as trustee. The 2021 Notes were unsecured senior obligations of WESCO Distribution and were guaranteed on a senior unsecured basis by WESCO International. The 2021 Notes had a stated interest rate of 5.375% per annum, payable semi-annually in arrears on June 15 and December 15 of each year. The 2021 Notes had a maturity date of December 15, 2021 and were redeemable in whole or in part at any time. The net proceeds of the 2021 Notes were used to prepay a portion of the U.S. sub-facility of the then outstanding term loan due 2019.
Under the terms of a registration rights agreement dated as of November 26, 2013 among WESCO Distribution, WESCO International and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the representative of the initial purchasers of the 2021 Notes, WESCO Distribution and WESCO International agreed to register under the Securities Act notes having terms identical in all material respects to the 2021 Notes (the “2021 Exchange Notes”) and to make an offer to exchange the 2021 Exchange Notes for the 2021 Notes. WESCO Distribution launched the exchange offer on June 12, 2014 and the exchange offer expired on July 17, 2014.
On December 15, 2020, WESCO Distribution exercised its right to redeem the entire $500 million aggregate principal amount of the 2021 Notes, and U.S. Bank, National Association, as trustee under the 2021 Indenture, issued a notice of redemption to registered holders of the 2021 Notes.
On January 14, 2021, WESCO Distribution redeemed the $500 million aggregate principal amount of the 2021 Notes at a redemption price equal to 100% of the principal amount plus accrued interest to, but not including, January 14, 2021. The redemption of the 2021 Notes was funded with available cash, as well as borrowings under the Company's accounts receivable securitization and revolving credit facilities. The Company recognized a loss of $1.0 million from the redemption of the 2021 Notes resulting from the the write-off of unamortized debt issuance costs, which is recorded as a component of interest expense, net in the Condensed Consolidated Statement of Income and Comprehensive Income for the six months ended June 30, 2021.
5.375% Senior Notes due 2024
In June 2016, WESCO Distribution issued $350 million aggregate principal amount of 5.375% Senior Notes due 2024 (the "2024 Notes") through a private offering exempt from the registration requirements of the Securities Act. The 2024 Notes were issued at 100% of par and are governed by an indenture (the “2024 Indenture”) entered into on June 15, 2016 among WESCO Distribution, as issuer, WESCO International, as parent guarantor, and U.S. Bank National Association, as trustee. The 2024 Notes are unsecured senior obligations of WESCO Distribution and are guaranteed on a senior unsecured basis by WESCO International. The 2024 Notes bear interest at a stated rate of 5.375% per annum, payable semi-annually in arrears on June 15 and December 15 of each year. The 2024 Notes mature on June 15, 2024. The Company used the net proceeds to redeem its 6.0% Convertible Senior Debentures due 2029.
19

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

Under the terms of a registration rights agreement dated as of June 15, 2016 among WESCO Distribution, as the issuer, WESCO International, as parent guarantor, and Goldman, Sachs & Co., as representative of the initial purchasers of the 2024 Notes, WESCO Distribution and WESCO International agreed to register under the Securities Act notes having terms identical in all material respects to the 2024 Notes (the “2024 Exchange Notes”) and to make an offer to exchange the 2024 Exchange Notes for the 2024 Notes. WESCO Distribution launched the exchange offer on December 28, 2016 and the exchange offer expired on January 31, 2017.
On June 2, 2021, WESCO Distribution exercised its right to redeem the entire $350 million aggregate principal amount of the 2024 Notes, and U.S. Bank, National Association, as trustee under the 2024 Indenture, issued a notice of redemption to registered holders of the 2024 Notes. The date fixed for the redemption of the 2024 Notes is July 2, 2021. Accordingly, the 2024 Notes are classified as a component of short-term debt and current portion of long-term debt in the Condensed Consolidated Balance Sheet as of June 30, 2021. The 2024 Notes will be redeemed at a redemption price equal to 101.344% of the principal amount of the 2024 Notes plus accrued interest on the 2024 Notes to, but not including, July 2, 2021.
9. EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
WESCO Distribution sponsors a defined contribution retirement savings plan for the majority of its U.S. employees. The Company matches contributions made by employees at an amount equal to 50% of participants' total monthly contributions up to 6% of eligible compensation. Contributions are made in cash and employees have the option to transfer balances allocated to their accounts into any of the available investment options. The Company may also make, subject to the Board of Directors' approval, a discretionary contribution to the defined contribution retirement savings plan covering U.S. participants if certain predetermined profit levels are attained.
WESCO Distribution Canada LP, a wholly-owned subsidiary of the Company, sponsors a defined contribution plan for certain Canadian employees. The Company makes contributions in amounts ranging from 3% to 5% of participants' eligible compensation based on years of continuous service.
Anixter Inc. sponsors a defined contribution plan covering all of its non-union U.S. employees (the "Anixter Employee Savings Plan"). The employer match for the Anixter Employee Savings Plan is equal to 50% of a participant's contribution up to 5% of the participant's compensation. Anixter Inc. will also make an annual contribution to the Anixter Employee Savings Plan on behalf of each active participant who is hired or rehired on or after July 1, 2015, or is not participating in the Anixter Inc. Pension Plan. The amount of the employer annual contribution is equal to either 2% or 2.5% of the participant’s compensation, as determined by the participant’s years of service. This contribution is in lieu of being eligible for the Anixter Inc. Pension Plan. Certain of Anixter Inc.'s foreign subsidiaries also have defined contribution plans. Contributions to these plans are based upon various levels of employee participation and legal requirements.
WESCO incurred charges of $16.1 million and $3.4 million for the three months ended June 30, 2021 and 2020, respectively, and $32.7 million and $9.1 million for the six months ended June 30, 2021 and 2020, respectively, for all defined contribution plans.
Deferred Compensation Plans
WESCO Distribution sponsors a non-qualified deferred compensation plan (the "WESCO Deferred Compensation Plan") that permits select employees to make pre-tax deferrals of salary and bonus. Employees have the option to transfer balances allocated to their accounts in the WESCO Deferred Compensation Plan into any of the available investment options. The WESCO Deferred Compensation Plan is an unfunded plan. As of June 30, 2021, the Company's obligation under the WESCO Deferred Compensation Plan was $19.3 million, which was included in other noncurrent liabilities in the Condensed Consolidated Balance Sheet. As of December 31, 2020, the Company's obligation under the WESCO Deferred Compensation Plan was $27.4 million, of which $10.1 million was included in other current liabilities and $17.3 million was in other noncurrent liabilities in the Condensed Consolidated Balance Sheet.
20

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

Anixter Inc. sponsored a non-qualified deferred compensation plan (the "Anixter Deferred Compensation Plan") that permitted select employees to make pre-tax deferrals of salary and bonus. Interest was accrued monthly on the deferred compensation balances based on the average ten-year Treasury note rate for the previous three months times a factor of 1.4, and the rate was further adjusted if certain financial goals were achieved. In the fourth quarter of 2020, the Company terminated the Anixter Deferred Compensation Plan. Accordingly, the deferred compensation liability of $45.1 million was classified in other current liabilities in the Condensed Consolidated Balance Sheet at December 31, 2020. In the second quarter of 2021, the Company settled the liability for the Anixter Deferred Compensation Plan by making lump sum payments of $42.8 million directly to participants.
The Company held assets in a Rabbi Trust arrangement to provide for the liability associated with the Anixter Deferred Compensation Plan. The assets were invested in marketable securities. As of December 31, 2020, the assets held in this arrangement were $39.6 million and were recorded in other current assets in the Condensed Consolidated Balance Sheets. In the second quarter of 2021, the Company liquidated this investment arrangement for approximately $39.7 million and used the proceeds to fund the settlement of the Anixter Deferred Compensation Plan described above.
Defined Benefit Plans
WESCO sponsors a contributory defined benefit plan (the "EECOL Plan") covering substantially all Canadian employees of EECOL Electric Corp. and a Supplemental Executive Retirement Plan for certain executives of EECOL Electric Corp. (the "EECOL SERP").
Anixter Inc. sponsors defined benefit pension plans in the U.S., which consist of the Anixter Inc. Pension Plan, the Executive Benefit Plan and the Supplemental Executive Retirement Plan (the "Anixter SERP") (together, the "Domestic Plans") and various defined benefit pension plans covering employees of foreign subsidiaries in Canada and Europe (together with the "EECOL Plan" and "EECOL SERP", the "Foreign Plans"). The Anixter Inc. Pension Plan was frozen to entrants first hired or rehired on or after July 1, 2015. The majority of the Anixter defined benefit pension plans are non-contributory, and with the exception of U.S. and Canada, cover substantially all full-time employees in their respective countries. Retirement benefits are provided based on compensation as defined in each of the pension plans.
In the fourth quarter of 2020, the Company terminated both the Anixter Inc. Executive Benefit Plan and the Anixter SERP. Accordingly, pension liabilities totaling $18.1 million associated with the Anixter Inc. Executive Benefit Plan and the Anixter SERP were classified as current in the Condensed Consolidated Balance Sheet at December 31, 2020. In the second quarter of 2021, the Company settled its liability for the Anixter Inc. Executive Benefit Plan by making lump sum payments of $10.4 million directly to participants. The Company expects to make lump sum payments directly to participants of the Anixter SERP during the second half of 2021.
The Domestic Plans are funded as required by the Employee Retirement Income Security Act of 1974 ("ERISA") and the Internal Revenue Service and the Foreign Plans are funded as required by applicable foreign laws. The EECOL SERP and the Anixter SERP are unfunded plans.
The Company made aggregate cash contributions to its Foreign Plans of $3.1 million and $0.8 million during the three months ended June 30, 2021 and 2020, respectively, and $5.7 million and $1.8 million during the six months ended June 30, 2021 and 2020, respectively.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

The following tables set forth the components of net periodic pension (benefit) cost for the Company's defined benefit plans:
Three Months Ended
(In thousands)June 30, 2021June 30, 2020June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Domestic Plans(1)
Foreign Plans(1)
Total
Service cost$763 $121 $3,316 $1,547 $4,079 $1,668 
Interest cost1,941 265 2,514 1,023 4,455 1,288 
Expected return on plan assets(4,327)(457)(4,365)(1,531)(8,692)(1,988)
Recognized actuarial gain(2)
— — 106 26 106 26 
Settlement(19)— — — (19)— 
Net periodic pension (benefit) cost$(1,642)$(71)$1,571 $1,065 $(71)$994 
Six Months Ended
(In thousands)June 30, 2021June 30, 2020June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Domestic Plans(1)
Foreign Plans(1)
Total
Service cost$1,527 $121 $6,540 $2,856 $8,067 $2,977 
Interest cost4,077 265 4,960 2,060 9,037 2,325 
Expected return on plan assets(8,827)(457)(8,620)(3,146)(17,447)(3,603)
Recognized actuarial gain(2)
— — 207 53 207 53 
Settlement(19)— — — (19)— 
Net periodic pension (benefit) cost$(3,242)$(71)$3,087 $1,823 $(155)$1,752 
(1)    The Company assumed the Domestic Plans and certain foreign plans, as described above, in connection with the acquisition of Anixter on June 22, 2020. The Company began recognizing the net periodic pension (benefit) cost associated with these plans as of the acquisition date.
(2)    For the three and six months ended June 30, 2021 and 2020, no amounts were reclassified from accumulated other comprehensive income into net income, respectively.
The service cost of $4.1 million and $1.7 million for the three months ended June 30, 2021 and 2020, respectively, and $8.1 million and $3.0 million for the six months ended June 30, 2021 and 2020, respectively, is reported as a component of selling, general and administrative expenses. The other components of net periodic pension (benefit) cost totaling net benefits of $4.2 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively, and net benefits of $8.2 million and $1.2 million for the six months ended June 30, 2021 and 2020, respectively, are presented as a component of other non-operating income ("other income, net").
Other Benefits
As permitted by the Merger Agreement, Anixter granted restricted stock units prior to June 22, 2020 in the ordinary course of business to its employees and directors. These awards, which did not accelerate solely as a result of the Merger, were converted into cash-only settled WESCO phantom stock units, which vest ratably over a 3-year period. As of June 30, 2021 and December 31, 2020, the estimated fair value of these awards was $18.2 million and $22.8 million, respectively. The Company recognized compensation expense associated with these awards of $0.6 million and $0.9 million for the three months ended June 30, 2021 and 2020, respectively, and $6.3 million and $0.9 million for the six months ended June 30, 2021 and 2020, respectively, which is reported as a component of selling, general and administrative expenses.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, accounts payable, bank overdrafts, outstanding indebtedness, foreign currency forward contracts, and benefit plan assets. Except for benefit plan assets, outstanding indebtedness and foreign currency forward contracts, the carrying value of the Company’s remaining financial instruments approximates fair value.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

The assets of the Company's various defined benefit plans are primarily comprised of common/collective/pool funds (i.e., mutual funds). These funds are valued at the net asset value (NAV) of shares held in the underlying funds. Investments for which fair value is measured using the NAV per share practical expedient are not classified in the fair value hierarchy.
The Company uses a market approach to determine the fair value of its debt instruments, utilizing quoted prices in active markets, interest rates and other relevant information generated by market transactions involving similar instruments. Therefore, the inputs used to measure the fair value of the Company's debt instruments are classified as Level 2 within the fair value hierarchy.
The carrying value of WESCO's debt instruments with fixed interest rates was $3,230.4 million and $3,730.1 million as of June 30, 2021 and December 31, 2020, respectively. The estimated fair value of this debt was $3,520.2 million and $4,084.7 million as of June 30, 2021 and December 31, 2020, respectively. The reported carrying values of WESCO's other debt instruments, including those with variable interest rates, approximated their fair values as of June 30, 2021 and December 31, 2020.
The Company purchases foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated accounts on its earnings. The foreign currency forward contracts are not designated as hedges for accounting purposes. The Company's strategy is to negotiate terms for its derivatives and other financial instruments to be highly effective, such that the change in the value of the derivative offsets the impact of the underlying hedge. Its counterparties to foreign currency forward contracts have investment-grade credit ratings. The Company regularly monitors the creditworthiness of its counterparties to ensure no issues exist that could affect the value of its derivatives.
The Company does not hedge 100% of its foreign currency-denominated accounts. In addition, the results of hedging can vary significantly based on various factors, such as the timing of executing foreign currency forward contracts versus the movement of currencies as well as the fluctuations in the account balances throughout each reporting period. The fair value of foreign currency forward contracts is based on the difference between the contract rate and the current exchange rate. The fair value of foreign currency forward contracts is measured using observable market information. These inputs would be considered Level 2 in the fair value hierarchy. At June 30, 2021, foreign currency forward contracts were revalued at then-current foreign exchange rates with the changes in valuation reflected directly in other non-operating expenses ("other income, net") in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss) offsetting the transaction gain (loss) recorded on foreign currency-denominated accounts. At June 30, 2021 and December 31, 2020, the gross and net notional amounts of foreign currency forward contracts outstanding were approximately $215.2 million and $111.9 million, respectively. While all of the Company's foreign currency forward contracts are subject to master netting arrangements with its counterparties, assets and liabilities related to these contracts are presented on a gross basis within the Condensed Consolidated Balance Sheets. The gross fair value of assets and liabilities related to foreign currency forward contracts were immaterial.
11. COMMITMENTS AND CONTINGENCIES
From time to time, a number of lawsuits and claims have been or may be asserted against the Company relating to the conduct of its business, including litigation relating to commercial, product and employment matters. The outcome of any litigation cannot be predicted with certainty, and some lawsuits may be determined adversely to WESCO. However, management does not believe that the ultimate outcome of any such pending matters is likely to have a material adverse effect on WESCO's financial condition or liquidity, although the resolution in any fiscal period of one or more of these matters may have a material adverse effect on WESCO's results of operations for that period.
12. INCOME TAXES
The effective tax rate for the three and six months ended June 30, 2021 was 21.6% and 18.1%, respectively. The effective tax rate for the three and six months ended June 30, 2020 was 24.0% and 67.3%, respectively. WESCO’s effective tax rate typically differs from the federal statutory income tax rate due to the tax effect of intercompany financing, foreign tax rate differences, the U.S. taxes imposed on foreign income, nondeductible expenses and state income taxes. The effective tax rate for the three months ended June 30, 2021 is lower than the corresponding quarter of the prior year primarily due to a discrete income tax benefit of $3.4 million associated with the exercise and vesting of stock-based awards. For the six months ended June 30, 2021, the effective tax rate is lower than the corresponding year-to-date period of the preceding year primarily due to the discrete income tax benefits of $8.3 million resulting from a change in the valuation allowance recorded against foreign tax credit carryforwards, and $4.5 million associated with the exercise and vesting of stock-based awards. In addition, the effective tax rates for the prior year periods were higher due to costs incurred to complete the acquisition of Anixter. There have been no material adjustments to liabilities for uncertain tax positions since the last annual disclosure for the year ended December 31, 2020.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(unaudited)

13. BUSINESS SEGMENTS
The Company has operating segments that are organized around three strategic business units consisting of EES, CSS and UBS. These operating segments are equivalent to the Company's reportable segments. The Company's CODM evaluates the performance of its operating segments based primarily on net sales, income from operations, and total assets.
Corporate expenses are incurred to obtain and coordinate financing, tax, information technology, legal and other related services. The Company also has various corporate assets which are reported in corporate. Segment assets may not include jointly used assets, but segment results include depreciation expense or other allocations related to those assets. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis. Corporate expenses are shown in the tables below to reconcile the reportable segments to the consolidated financial statements.
The following tables set forth financial information by reportable segment for the periods presented:
(In thousands)Three Months Ended June 30, 2021
EESCSSUBSCorporateTotal
Net sales$1,923,011 $1,461,120 $1,211,659 $— $4,595,790 
Income from operations153,740 111,257 94,693 (140,818)218,872 
Three Months Ended June 30, 2020
(In thousands)EESCSSUBSCorporateTotal
Net sales$1,043,294 $341,470 $701,942 $— $2,086,706 
Income from operations45,809 27,922 51,774 (110,235)15,270 
(In thousands)Six Months Ended June 30, 2021
EESCSSUBSCorporateTotal
Net sales$3,643,824 $2,711,735 $2,281,708 $— $8,637,267 
Income from operations253,852 185,220 181,723 (268,672)352,123 
Six Months Ended June 30, 2020
(In thousands)EESCSSUBSCorporateTotal
Net sales$2,157,766 $565,185 $1,332,402 $— $4,055,353 
Income from operations89,135 37,868 93,559 (144,379)76,183 
There were no material changes to the amounts of total assets by reportable segment from those disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
14. SUBSEQUENT EVENTS
On July 2, 2021 (the “Redemption Date”), WESCO Distribution, Inc. redeemed the $350 million aggregate principal amount of its 2024 Notes at a redemption price equal to 101.344% of the principal amount plus accrued interest to, but not including, the Redemption Date. The redemption of the 2024 Notes was funded with borrowings under the Company's accounts receivable securitization and revolving credit facilities.
The redemption of the 2024 Notes will result in a loss on debt extinguishment totaling $6.9 million, which includes $4.7 million for the premium paid to redeem the 2024 Notes and $2.2 million for the write-off of unamortized debt issuance costs. The loss will be recorded as a component of interest expense, net in the Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2021.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the information in the unaudited condensed consolidated financial statements and notes thereto included herein 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 2020 Annual Report on Form 10-K. 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 WESCO International, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as well as WESCO International, Inc.’s other reports filed with the Securities and Exchange Commission (the "SEC").
Company Overview
WESCO International, Inc. ("WESCO International") and its subsidiaries (collectively, “WESCO” or the "Company"), headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and supply chain solutions.
On June 22, 2020, we completed our acquisition of Anixter International Inc. ("Anixter"), a Delaware corporation. Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020, by and among Anixter, WESCO and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of WESCO (“Merger Sub”), Merger Sub was merged with and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a wholly owned subsidiary of WESCO. On June 23, 2020, Anixter merged with and into Anixter Inc., with Anixter Inc. surviving to become a wholly owned subsidiary of WESCO.
We employ nearly 18,000 people, maintain relationships with approximately 30,000 suppliers, and serve more than 125,000 customers worldwide. With nearly 1,500,000 products, end-to-end supply chain services, and extensive digital capabilities, we provide innovative solutions to meet current customer needs across commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. Our innovative value-add 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 have approximately 800 branches, warehouses and sales offices with operations in more than 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.
During the second quarter of 2021, we established a new corporate brand strategy to adopt a single, master brand architecture. This initiative reflects our corporate integration strategy and simplifies engagement for our customers and suppliers. As a result, we will begin migrating certain legacy WESCO sub-brands to the master brand architecture over the course of the next year.
Prior to the completion of the Merger, we had four operating segments that had been aggregated as one reportable segment. Effective on the date of acquisition, we added Anixter as a separate reportable segment for the quarterly period ended June 30, 2020. At the beginning of the third quarter of 2020, we identified new operating segments organized around three strategic business units consisting of Electrical & Electronic Solutions ("EES"), Communications & Security Solutions ("CSS") and Utility and Broadband Solutions ("UBS"). The applicable comparative financial information reported in our previously issued interim financial statements for the three and six months ended June 30, 2020 has been recast in this Quarterly Report on Form 10-Q to conform to the basis of the new segments.
The following is a description of each of our reportable segments and their business activities.
Electrical & Electronic Solutions
The EES segment supplies a broad range of products and supply chain solutions primarily to the Construction, Industrial and Original Equipment Manufacturer ("OEM") markets. Product categories include a broad range of electrical equipment and supplies, wire and cable, lubricants, pipe, valves, fittings, fasteners, cutting tools, power transmission, and safety products. In addition, OEM customers require a reliable supply of assemblies and components to incorporate into their own products as well as value-add services such as supplier consolidation, design and technical support, just-in-time supply and electronic commerce, and supply chain management. EES includes the “Electrical and Electronic Solutions” business acquired from Anixter and the majority of WESCO's legacy industrial and construction businesses.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Communications & Security Solutions
The CSS segment supplies products and customized supply chain solutions to customers in a diverse range of industries including technology, finance, telecommunications service providers, transportation, education, government, healthcare and retail. CSS sells these products directly to end users or through various channels including data communications contractors, security, network, professional audio/visual and systems integrators. CSS has a broad product portfolio that includes copper and fiber optic cable and connectivity, access control, video surveillance, intrusion and fire/life safety, cabinets, power, cable management, wireless, professional audio/video, voice and networking switches and other ancillary products. CSS includes the “Network and Security Solutions” business acquired from Anixter and WESCO's legacy data communications and safety businesses.
Utility & Broadband Solutions
The UBS segment supplies electrical transmission and distribution products, power plant maintenance, repair and operations supplies and smart-grid products, and arranges materials management and procurement outsourcing for the power generation, power transmission and electricity distribution industries. The UBS segment combines the “Utility Power Solutions” business acquired from Anixter, and WESCO's legacy utility, broadband and integrated supply businesses.
Overall Financial Performance
Our financial results for the first six months of 2021 reflect the merger with Anixter, broad-based sales growth due to strong demand and improved economic conditions, the favorable impacts of margin improvement initiatives and lower operating expenses due to cost reduction actions and integration synergies, partially offset by higher salaries, variable compensation expense and benefit costs.
Net sales for the first six months of 2021 increased $4.6 billion, or 113.0%, over the corresponding year-to-date period. In addition to the impact from the Merger, the increase reflects improved economic conditions and strong demand. Cost of goods sold as a percentage of net sales and gross margin was 79.4% and 20.6%, respectively, for the first six months of 2021, compared to 81.0% and 19.0%, respectively, for the first six months of 2020. The increase in gross margin of 160 basis points reflects the favorable impact of margin improvement initiatives, partially offset by write-downs to the carrying value of certain personal protective equipment products during the first and second quarters of 2021, which had a negative impact of 20 basis points for the six months ended June 30, 2021.
Operating profit was $352.1 million for the first six months of 2021, compared to $76.2 million for the first six months of 2020. Operating profit as a percentage of net sales was 4.1% for the current six-month period, compared to 1.9% for the first six months of the prior year. Operating profit for the first six months of 2021 includes merger-related costs of $84.0 million and a net gain of $8.9 million resulting from the sale of WESCO's legacy utility and data communications businesses in Canada during the first quarter of 2021, which were divested in connection with the Merger. Additionally, we recognized $5.0 million of amortization expense for the six months ended June 30, 2021 resulting from changes in the estimated useful lives of certain legacy WESCO trademarks that are migrating to our master brand architecture, as described in Note 2, "Accounting Policies" of our Notes to the unaudited Condensed Consolidated Financial Statements. Adjusted for these items, operating profit was $432.3 million, or 5.0% of net sales. For the first six months of 2020, operating profit adjusted for merger-related costs of $78.0 million was $154.1 million, or 3.8% of net sales.
Earnings per diluted share for the first six months of 2021 was $2.89, based on 51.9 million diluted shares, compared to a loss per diluted share of $0.03 for the first six months of 2020, based on 42.3 million diluted shares. Adjusted for merger-related costs and interest, the net gain on the Canadian divestitures, accelerated trademark amortization expense, and the related income tax effects, earnings per diluted share for the first six months of 2021 and 2020 was $4.06 and $2.25, respectively, an increase of 80.4%.
Beginning in 2020, and continuing through the second quarter of 2021, the COVID-19 pandemic had a significant impact on our business, and there continues to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the economic conditions and possible resurgence of COVID, including new variants of the virus in various geographies, and the availability and effectiveness of treatments and vaccines. As the duration and severity of the COVID-19 pandemic remain uncertain and cannot be predicted, there is significant uncertainty as to the ultimate impact it will have on our business and our results of operations and financial condition. Events and factors relating to the COVID-19 pandemic include limitations on the ability of our suppliers to manufacture or procure the products we sell or to meet delivery requirements and commitments; disruptions to our global supply chains; limitations on the ability of our employees to perform their work due to travel or other restrictions; limitations on the ability of carriers to deliver our products to our customers; limitations on the ability of our customers to conduct their business and purchase our products and services, or pay us on a timely basis; and disruptions to our customers’ purchasing patterns. In response to the COVID-19 pandemic, we have taken actions focused on protecting the health and safety of our employees, which is our top priority.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

The products and services that we provide are integral to the daily operations of our customers and accordingly, we have taken actions to maintain the continuity of our operations in response to the pandemic. We have experienced, and may continue to experience, fluctuations in customer demand for certain of our products and services, including changes in project plans or timing due to circumstances affecting our customers, suppliers and other third parties. The full extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward remains highly uncertain and will depend on many factors outside of our control, including the duration and scope of the crisis, the emergence and effects of variants, the availability of effective treatments and vaccines, imposition of protective public safety measures, and the overall impact of the COVID-19 pandemic on the global economy and capital markets.
Cash Flow
We generated $102.8 million of operating cash flow for the first six months of 2021. Cash provided by operating activities included net income of $178.4 million and adjustments to net income totaling $101.8 million, which were primarily comprised of depreciation and amortization of $87.9 million, stock-based compensation expense of $13.2 million, amortization of debt discount and debt issuance costs of $9.2 million, a net gain of $8.9 million resulting from the divestiture of WESCO's legacy utility and data communications businesses in Canada, as described in Note 4, "Acquisitions and Disposals" of our Notes to the unaudited Condensed Consolidated Financial Statements, and deferred income taxes of $3.0 million. Operating cash flow also included changes in assets and liabilities of $177.5 million, which were primarily comprised of an increase in trade accounts receivable of $372.3 million resulting from higher sales in the latter part of the quarter and an increase in inventories of $268.3 million to support increased customer demand, partially offset by an increase in accounts payable of $474.9 million due to higher purchases of inventory.
Investing activities included $54.3 million of net proceeds from the Canadian divestitures and $20.2 million of capital expenditures.
Financing activities were primarily comprised of the redemption of our $500.0 million aggregate principal amount of 5.375% Senior Notes due 2021 (the "2021 Notes"), borrowings and repayments of $914.8 million and $869.8 million, respectively, related to our revolving credit facility (the "Revolving Credit Facility"), and borrowings and repayments of $643.0 million and $413.0 million, respectively, related to our accounts receivable securitization facility (the "Receivables Facility"). Financing activities for the first six months of 2021 also included $28.7 million of dividends paid to holders of our Series A Preferred Stock, net repayments related to our various international lines of credit of approximately $10.8 million, and $12.4 million of payments for taxes related to the exercise and vesting of stock-based awards.
Financing Availability
On June 1, 2021, we amended our Receivables Facility to increase its borrowing capacity from $1,200 million to $1,300 million, extend its maturity date from June 22, 2023 to June 21, 2024, decrease its LIBOR floor from 0.50% to 0.00% and decrease its interest rate spread from 1.20% to 1.15%. Borrowings under the amended accounts receivable securitization facility will be used to redeem our $350 million aggregate principal amount of 5.375% Senior Notes due 2024 (the "2024 Notes"), as described in Note 14, "Subsequent Events" of our Notes to the unaudited Condensed Consolidated Financial Statements.
As of June 30, 2021, we had $873.1 million in total available borrowing capacity under our Revolving Credit Facility, which was comprised of $581.7 million of availability under the U.S. sub-facility and $291.4 million of availability under the Canadian sub-facility. Available borrowing capacity under our Receivables Facility was $120.0 million. The Revolving Credit Facility and the Receivables Facility mature in June 2025 and June 2024, respectively.
Critical Accounting Policies and Estimates
We adopted Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, in the first quarter of 2021. The adoption of this ASU did not have a material impact on our consolidated financial statements and notes thereto.
During the second quarter of 2021, we made changes to the estimated useful lives of certain legacy WESCO trademarks that are migrating to our master brand architecture, as disclosed in Note 2, "Accounting Policies" of our Notes to the unaudited Condensed Consolidated Financial Statements.
See Note 2, "Accounting Policies" of our Notes to the unaudited Condensed Consolidated Financial Statements for more information regarding our significant accounting policies.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Results of Operations
Second Quarter of 2021 versus Second Quarter of 2020
The following table sets forth the percentage relationship to net sales of certain items in our Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the periods presented:
Three Months Ended
June 30, 2021June 30, 2020
Net sales100.0 %100.0 %
Cost of goods sold (excluding depreciation and amortization)79.0 81.1 
Selling, general and administrative expenses15.2 17.2 
Depreciation and amortization1.0 1.0 
Income from operations4.8 0.7 
Interest expense, net1.4 2.8 
Other income, net0.1 0.1 
Income (loss) before income taxes3.3 (2.2)
Provision for income taxes0.7 (0.5)
Net income (loss) attributable to WESCO International, Inc.2.6 (1.7)
Preferred stock dividends0.3 — 
Net income (loss) attributable to common stockholders2.3 %(1.7)%
Net Sales
The following table sets forth net sales by segment for the periods presented:
Three Months Ended
(In thousands)June 30, 2021June 30, 2020Growth
EES$1,923,011 $1,043,294 84.3 %
CSS1,461,120 341,470 327.9 %
UBS1,211,659 701,942 72.6 %
Total net sales$4,595,790 $2,086,706 120.2 %
Net sales were $4.6 billion for the second quarter of 2021, compared to $2.1 billion for the second quarter of 2020, an increase of 120.2%. The increase primarily reflects the merger with Anixter that was completed on June 22, 2020, along with growth across all segments, as described below.
EES reported net sales $1.9 billion for the second quarter of 2021, compared to $1.0 billion for the second quarter of 2020, an increase of 84.3%. In addition to the impact of the Merger, the increase reflects double-digit growth in our construction, original equipment manufacturer and industrial businesses due to continued strong demand and accelerating economic recovery in certain regions.
CSS reported net sales of $1.5 billion for the second quarter of 2021, compared to $341.5 million for the second quarter of 2020, an increase of 327.9%. In addition to the impact of the Merger, the increase reflects strong sales growth in both our security solutions and network infrastructure businesses driven by the rebound in the global economy, a rise in project activity, and new wins from our expanding business.
UBS reported net sales of $1.2 billion for the second quarter of 2021, compared to $701.9 million for the second quarter of 2020, an increase of 72.6%. Along with the impact of the Merger, the increase reflects broad-based growth in our utility business with strength in both the investor-owned utility and public power markets. UBS sales growth also reflects continued strong demand in our broadband business, as well as growth in our integrated supply business due to improving economic conditions.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Cost of Goods Sold
Cost of goods sold for the second quarter of 2021 was $3.6 billion compared to $1.7 billion for the second quarter of 2020, an increase of $1.9 billion, reflecting the merger with Anixter. Cost of goods sold as a percentage of net sales was 79.0% for the second quarter of 2021, compared to 81.1% for the second quarter of 2020. The decrease of 210 basis points primarily reflects the favorable impact of margin improvement initiatives, partially offset by a write-down of $8.0 million to the carrying value of certain personal protective equipment products that were considered to either be in excess of supply relative to demand or for which current net realizable value has declined below cost. This write-down of inventory impacted cost of goods sold as a percentage of net sales for the second quarter of 2021 by 20 basis points.
Selling, General and Administrative Expenses
SG&A expenses for the second quarter of 2021 totaled $699.6 million versus $359.8 million for the second quarter of 2020. As a percentage of net sales, SG&A expenses were 15.2% and 17.2%, respectively. The increase in SG&A expenses of $339.8 million, or 94.5%, primarily reflects the impact of the merger with Anixter. In addition, SG&A expenses in the current quarter reflect higher volume-related costs and SG&A payroll expenses, as described below. The realization of integration synergies and structural cost takeout actions favorably impacted SG&A expenses for the second quarter of 2021. SG&A expenses for the second quarter of 2021 include merger-related costs of $37.7 million. Adjusted for these costs, SG&A expenses were $661.9 million, or 14.4% of net sales, for the second quarter of 2021. SG&A expenses for the second quarter of 2020 include $73.3 million of merger-related costs. Adjusted for these costs, SG&A expenses were $286.4 million, or 13.7% of net sales, for the second quarter of 2020.
SG&A payroll expenses for the second quarter of 2021 of $458.4 million increased by $231.6 million compared to the same period in 2020 primarily due to the merger with Anixter. Excluding the impact of the Merger, SG&A payroll expenses were up $43.9 million in the current quarter due to higher variable compensation expense and benefit costs, as well as the impact of reinstating salaries and retirement savings plan employer matching contributions for legacy WESCO employees that had been suspended in the prior year in response to the COVID-19 pandemic.
Depreciation and Amortization
Depreciation and amortization increased $27.9 million to $46.7 million for the second quarter of 2021, compared to $18.8 million for the second quarter of 2020. The second quarter of 2021 includes $15.8 million attributable to the amortization of identifiable intangible assets acquired in the merger with Anixter, as well as $5.0 million resulting from changes in the estimated useful lives of certain legacy WESCO trademarks that are migrating to our master brand architecture, as described in Note 2, "Accounting Policies" of our Notes to the unaudited Condensed Consolidated Financial Statements. As of June 30, 2021, there is $42.8 million of estimated amortization expense remaining for trademarks migrating to our master brand architecture, of which approximately $15.4 million and $12.1 million are expected to be recognized in the third and fourth quarters of 2021, respectively.
Income from Operations
The following tables set forth income from operations by segment for the periods presented:
Three Months Ended June 30, 2021
(In thousands)EESCSSUBSCorporateTotal
Income from operations$153,740$111,257$94,693$(140,818)$218,872
Three Months Ended June 30, 2020
(In thousands)EESCSSUBSCorporateTotal
Income from operations$45,809$27,922$51,774$(110,235)$15,270
Operating profit was $218.9 million for the second quarter of 2021 compared to $15.3 million for the second quarter of 2020, an increase of $203.6 million. The increase primarily reflects the merger with Anixter. For the second quarter of 2021, operating profit also reflects the favorable impact of margin improvement initiatives, the realization of integration synergies and structural cost takeout actions. Operating profit for the second quarter of 2021 was negatively impacted by higher salaries, variable compensation expense and benefit costs compared to the prior year, including the impact of reinstating the salaries and certain benefits of legacy WESCO employees that had been suspended in the prior year in response to the COVID-19 pandemic.
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EES reported operating profit of $153.7 million for the second quarter of 2021, compared to $45.8 million for the second quarter of 2020, an increase of $107.9 million. The increase primarily reflects the factors impacting the overall business, as described above. Additionally, operating profit for the second quarter of 2021 was negatively impacted by the inventory write-down described above and accelerated amortization expense of $2.1 million associated with migrating to our master brand architecture.
CSS reported operating profit of $111.3 million for the second quarter of 2021, compared to $27.9 million for the second quarter of 2020, an increase of $83.4 million. The increase primarily reflects the factors impacting the overall business, as described above. Additionally, operating profit for the second quarter of 2021 was negatively impacted by $5.4 million from the inventory write-down described above, as well as accelerated amortization expense of $2.7 million associated with migrating to our master brand architecture.
UBS reported operating profit of $94.7 million for the second quarter of 2021, compared to $51.8 million for the second quarter of 2020, an increase of $42.9 million. The increase primarily reflects the factors impacting the overall business, as described above.
Interest Expense, net
Net interest expense totaled $67.6 million for the second quarter of 2021, compared to $61.3 million for the second quarter of 2020. The increase in interest expense was driven by financing activity related to the Anixter merger. Net interest expense for the second quarter of 2020 includes $44.7 million of merger-related financing and interest costs, of which $33.5 million was non-recurring.
Other Income, net
Other non-operating income ("other income, net") totaled $0.8 million for the second quarter of 2021, compared to $0.7 million for the second quarter of 2020.
Income Taxes
The provision for income taxes was an expense of $32.8 million for the second quarter of 2021, compared to a benefit of $10.9 million in last year's comparable period, and the effective tax rate was 21.6% and 24.0%, respectively. The lower effective tax rate in the current quarter as compared to the corresponding quarter of the prior year was primarily due to a discrete income tax benefit of $3.4 million associated with the exercise and vesting of stock-based awards. In addition, the effective tax rate for the corresponding quarter of the prior year was higher due to costs incurred to complete the merger with Anixter. Excluding the impact of the Merger, the effective tax rate for the prior quarter would have been approximately 22%.
Net Income (Loss) and Earnings (Loss) per Share
Net income for the second quarter of 2021 was $119.3 million, compared to a net loss of $34.5 million for the second quarter of 2020.
Net income attributable to noncontrolling interests was less than $0.1 million for the second quarter of 2021 and 2020.
Preferred stock dividends expense, which relates to the fixed-rate reset cumulative perpetual preferred stock, Series A, that was issued in connection with the Merger, was $14.4 million for the second quarter of 2021 compared to $1.3 million for the second quarter of 2020.
Net income and earnings per diluted share attributable to common stockholders were $104.8 million and $2.02 per diluted share, respectively, for the second quarter of 2021, compared with a net loss and loss per diluted share attributable to common stockholders of $35.8 million and $0.84 per diluted share, respectively, for the second quarter of 2020. Adjusted for merger-related costs, accelerated amortization expense associated with migrating to our master brand architecture, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders for the three months ended June 30, 2021 were $137.2 million and $2.64, respectively. Adjusted for merger-related costs and interest, the related income tax effects, and the weighted-average impact of 8.15 million shares of common stock issued as equity consideration to fund a portion of the merger with Anixter, net income and earnings per diluted share attributable to common stockholders were $55.9 million and $1.33, respectively, for the three months ended June 30, 2020.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

The following tables reconcile income from operations, net interest expense, provision for income taxes and earnings per diluted share to adjusted income from operations, adjusted net interest expense, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:

Three Months Ended
Adjusted Income from Operations:June 30, 2021June 30, 2020
(In thousands)
Income from operations$218,872 $15,270 
Merger-related costs37,720 73,345 
Accelerated trademark amortization5,049 — 
Adjusted income from operations$261,641 $88,615 
Three Months Ended
Adjusted Interest Expense, Net:June 30, 2021June 30, 2020
(In thousands)
Interest expense, net$67,590 $61,270 
Merger-related interest expense(1)
— (44,738)
Adjusted interest expense, net$67,590 $16,532 
(1)    The adjustment for the three months ended June 30, 2020 represents financing and interest costs associated with the debt financing used to fund a portion of the merger with Anixter, of which $33.5 million was non-recurring.
Three Months Ended
Adjusted Provision for Income Taxes:June 30, 2021June 30, 2020
(In thousands)
Provision for income taxes$32,800 $(10,854)
Income tax effect of adjustments to income from operations and net interest(1)
10,381 26,363 
Adjusted provision for income taxes$43,181 $15,509 
(1)    The adjustments to income from operations and net interest have been tax effected at rates of 24.3% and 22.3% for the three months ended June 30, 2021 and 2020, respectively.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Three Months Ended
Adjusted Earnings per Diluted Share:June 30, 2021June 30, 2020
(In thousands, except per share data)
Adjusted income from operations$261,641 $88,615 
Adjusted interest expense, net67,590 16,532 
Other income, net(802)(687)
Adjusted income before income taxes194,853 72,770 
Adjusted provision for income taxes43,181 15,509 
Adjusted net income151,672 57,261 
Net income attributable to noncontrolling interests89 47 
Adjusted net income attributable to WESCO International, Inc.151,583 57,214 
Preferred stock dividends14,352 1,276 
Adjusted net income attributable to common stockholders$137,231 $55,938 
Diluted shares51,994 42,775 
Adjusted diluted shares(1)
51,994 41,969 
Adjusted earnings per diluted share(2)
$2.64 $1.33 
(1)    Adjusted diluted shares for the three months ended June 30, 2020 exclude the weighted-average impact of 8.15 million shares of common stock issued as equity consideration to fund a portion of the merger with Anixter.
(2)    Adjusted earnings per diluted share for the three months ended June 30, 2020, as previously reported in our Quarterly Report on Form 10-Q for the period ended June 30, 2020, excluded preferred stock dividends of $1.3 million. Adjusted earnings per diluted share excluding the preferred stock dividends was $1.36 for the three months ended June 30, 2020.
Note: For the three months ended June 30, 2021, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related costs, accelerated amortization expense associated with migrating to our master brand architecture, and the related income tax effects. For the three months ended June 30, 2020, income from operations, net interest expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related costs and interest, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin %
The following tables reconcile net income attributable to common stockholders to EBITDA, adjusted EBITDA and adjusted EBITDA margin % by segment, which are non-GAAP financial measures, for the periods presented:
Three Months Ended June 30, 2021
(In thousands)EESCSSUBSCorporateTotal
Net income attributable to common stockholders$153,976$111,046$94,688$(254,867)$104,843
Net (loss) income attributable to noncontrolling interests(76)165 89
Preferred stock dividends14,352 14,352
Provision for income taxes32,800 32,800
Interest expense, net67,590 67,590
Depreciation and amortization12,78119,2415,4669,216 46,704
EBITDA$166,681$130,287$100,154$(130,744)$266,378
Other income, net(160)2115(858)(802)
Stock-based compensation expense(1)
1,4346415433,331 5,949
Merger-related costs37,720 37,720
Adjusted EBITDA$167,955$131,139$100,702$(90,551)$309,245
Adjusted EBITDA margin %8.7%9.0%8.3%6.7%
(1) Stock-based compensation expense in the calculation of adjusted EBITDA for the three months ended June 30, 2021 excludes $1.3 million as such amount is included in merger-related costs.
Three Months Ended June 30, 2020
(In thousands)EESCSSUBSCorporateTotal
Net income (loss) attributable to common stockholders$45,915$27,764$51,774$(161,235)$(35,782)
Net (loss) income attributable to noncontrolling interests(162)— — 209 47
Preferred stock dividends— — — 1,276 1,276
Provision for income taxes— — — (10,854)(10,854)
Interest expense, net— — — 61,270 61,270
Depreciation and amortization7,3514,0164,0823,306 18,755
EBITDA$53,104$31,780$55,856$(106,028)$34,712
Other income, net56158(901)(687)
Stock-based compensation expense1,1182633063,214 4,901
Merger-related costs— — — 73,345 73,345
Adjusted EBITDA$54,278$32,201$56,162$(30,370)$112,271
Adjusted EBITDA margin %5.2 %9.4 %8.0 %5.4 %
Note: EBITDA, Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of our performance and ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and other non-operating expenses (income), non-cash stock-based compensation and merger-related costs. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.
Adjusted EBITDA for EES was $168.0 million for the second quarter of 2021, or 8.7% of net sales, compared to $54.3 million for the second quarter of 2020, or 5.2% of net sales.
Adjusted EBITDA for CSS was $131.1 million for the second quarter of 2021, or 9.0% of net sales, compared to $32.2 million for the second quarter of 2020, or 9.4% of net sales.
Adjusted EBITDA for UBS was $100.7 million for the second quarter of 2021, or 8.3% of net sales, compared to $56.2 million for the second quarter of 2020, or 8.0% of net sales.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020
The following table sets forth the percentage relationship to net sales of certain items in our Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the periods presented:
Six Months Ended
June 30, 2021June 30, 2020
Net sales100.0 %100.0 %
Cost of goods sold (excluding depreciation and amortization)79.4 81.0 
Selling, general and administrative expenses15.5 16.3 
Depreciation and amortization1.0 0.8 
Income from operations4.1 1.9 
Interest expense, net1.6 1.9 
Other income, net— — 
Income (loss) before income taxes2.5 — 
Provision for income taxes0.4 — 
Net income (loss) attributable to WESCO International, Inc.2.1 — 
Preferred stock dividends0.4 — 
Net income (loss) attributable to common stockholders1.7 %— %
Net Sales
The following table sets forth net sales by segment for the periods presented:
Six Months Ended
(In thousands)June 30, 2021June 30, 2020Growth
EES$3,643,824 $2,157,766 68.9 %
CSS2,711,735 565,185 379.8 %
UBS2,281,708 1,332,402 71.2 %
Total net sales$8,637,267 $4,055,353 113.0 %
Net sales were $8.6 billion for the first six months of 2021, compared to $4.1 billion for the first six months of 2020, an increase of 113.0%. The increase primarily reflects the merger with Anixter, along with growth across all segments, as described below.
EES reported net sales $3.6 billion for the first six months of 2021, compared to $2.2 billion for the first six months of 2020, an increase of 68.9%. In addition to the impact of the Merger, the increase reflects growth in our construction and original equipment manufacturer businesses due to continued strong demand and improving economic conditions.
CSS reported net sales of $2.7 billion for the first six months of 2021, compared to $565.2 million for the first six months of 2020, an increase of 379.8%. The increase reflects the impact from the Merger and broad-based growth in our security solutions and network infrastructure businesses.
UBS reported net sales of $2.3 billion for the first six months of 2021, compared to $1.3 billion for the first six months of 2020, an increase of 71.2%. Along with the impact of the Merger, the increase reflects broad-based growth in our utility business, continued strong demand in our broadband business, and growth from integrated supply programs.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Cost of Goods Sold
Cost of goods sold for the first six months of 2021 was $6.9 billion compared to $3.3 billion for the first six months of 2020, an increase of $3.6 billion, reflecting the merger with Anixter. Cost of goods sold as a percentage of net sales was 79.4% for the first six months of 2021, compared to 81.0% for the first six months of 2020. The decrease of 160 basis points primarily reflects the favorable impact of margin improvement initiatives, partially offset by a write-down of $16.9 million to the carrying value of certain personal protective equipment products that were considered to either be in excess of supply relative to demand or for which current net realizable value has declined below cost. This write-down of inventory impacted cost of goods sold as a percentage of net sales for the first six months of 2021 by 20 basis points.
Selling, General and Administrative Expenses
SG&A expenses for the first six months of 2021 totaled $1.3 billion versus $659.1 million for the first six months of 2020. As a percentage of net sales, SG&A expenses were 15.5% and 16.3%, respectively. The increase in SG&A expenses of $677.0 million, or 102.7%, primarily reflects the impact of the merger with Anixter. In addition, SG&A expenses in the current year reflect higher volume-related costs and SG&A payroll expenses, as described below. SG&A expenses for the first six months of 2021 were favorably impacted by the realization of integration synergies and structural cost takeout actions, as well as lower travel, entertainment and similar expenses due to restrictions imposed on non-essential business travel in response to the COVID-19 pandemic. SG&A expenses for the first six months of 2021 include merger-related costs of $84.0 million, as well as a net gain of $8.9 million resulting from the sale of WESCO's legacy utility and data communications businesses in Canada, which were divested during the first quarter of 2021 in connection with the Merger. Adjusted for these amounts, SG&A expenses were 14.6% of net sales for the first six months of 2021. SG&A expenses for the first six months of 2020 include $78.0 million of merger-related costs. Adjusted for these costs, SG&A expenses were $581.2 million, or 14.3% of net sales, for the first six months of 2020.
SG&A payroll expenses for the first six months of 2021 of $882.1 million increased by $451.7 million compared to the same period in 2020 primarily due to the merger with Anixter. Excluding the impact of the Merger, SG&A payroll expenses were up $48.8 million in the current year due to higher variable compensation expense and benefit costs, as well as the impact of reinstating salaries and retirement savings plan employer matching contributions for legacy WESCO employees that had been suspended in the prior year in response to the COVID-19 pandemic.
Depreciation and Amortization
Depreciation and amortization increased $53.1 million to $87.9 million for the first six months of 2021, compared to $34.8 million for the first six months of 2020. The six months ended June 30, 2021 includes $31.4 million attributable to the amortization of identifiable intangible assets acquired in the merger with Anixter, as well as $5.0 million resulting from changes in the estimated useful lives of certain legacy WESCO trademarks that are migrating to our master brand architecture, as described in Note 2, "Accounting Policies" of our Notes to the unaudited Condensed Consolidated Financial Statements. As of June 30, 2021, there is $42.8 million of estimated amortization expense remaining for trademarks migrating to our master brand architecture, of which approximately $27.5 million is expected to be recognized over the remainder of 2021, $10.0 million in 2022 and $5.3 million thereafter.
Income from Operations
The following tables set forth income from operations by segment for the periods presented:
Six Months Ended June 30, 2021
(In thousands)EESCSSUBSCorporateTotal
Income from operations$253,852$185,220$181,723$(268,672)$352,123
Six Months Ended June 30, 2020
(In thousands)EESCSSUBSCorporateTotal
Income from operations$89,135$37,868$93,559$(144,379)$76,183
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Operating profit was $352.1 million for the first six months of 2021 compared to $76.2 million for the first six months of 2020, an increase of 362.2%. The increase primarily reflects the merger with Anixter. For the first six months of 2021, operating profit also reflects the favorable impact of margin improvement initiatives, the realization of integration synergies and structural cost takeout actions. Additionally, income from operations reflects the benefit of lower travel, entertainment and similar expenses due to restrictions imposed on non-essential business travel in response to the COVID-19 pandemic. Operating profit for the first six months of 2021 was negatively impacted by higher salaries, variable compensation expense and benefit costs, as well as the impact of reinstating salaries and certain benefits of legacy WESCO employees that had been suspended in the prior year in response to the COVID-19 pandemic.
EES reported operating profit of $253.9 million for the first six months of 2021, compared to $89.1 million for the first six months of 2020, an increase of $164.7 million. The increase primarily reflects the factors impacting the overall business, as described above. Additionally, operating profit for the first six months of 2021 was negatively impacted by the inventory write-down described above and accelerated amortization expense of $2.1 million associated with migrating to our master brand architecture.
CSS reported operating profit of $185.2 million for the first six months of 2021, compared to $37.9 million for the first six months of 2020, an increase of $147.4 million. The increase primarily reflects the factors impacting the overall business, as described above. Additionally, operating profit for the first six months of 2021 was negatively impacted by $12.9 million from the inventory write-down described above, as well as accelerated amortization expense of $2.7 million associated with migrating to our master brand architecture.
UBS reported operating profit of $181.7 million for the first six months of 2021, compared to $93.6 million for the first six months of 2020, an increase of $88.2 million. The increase primarily reflects the factors impacting the overall business, as described above, combined with the benefit from the gain on the Canadian divestitures.
Interest Expense, net
Net interest expense totaled $138.0 million for the first six months of 2021, compared to $77.9 million for the first six months of 2020. The increase in interest expense was driven by financing activity related to the Anixter merger. Net interest expense for the first six months of 2020 includes $45.3 million of merger-related financing and interest costs, of which $33.5 million was non-recurring.
Other Income, net
Other non-operating income ("other income, net") totaled $3.6 million for the first six months of 2021, compared to $0.8 million for the first six months of 2020.
Income Taxes
The provision for income taxes was an expense of $39.3 million for the first six months of 2021, compared to a benefit of $0.6 million in last year's comparable period, and the effective tax rate was 18.1% and 67.3%, respectively. The lower effective tax rate in the current period was primarily due to the discrete income tax benefits of $8.3 million and $4.5 million associated with a change in the valuation allowance recorded against foreign tax credit carryforwards and the exercise and vesting of stock-based awards, respectively, which together reduced the effective tax rate by approximately 5.9 percentage points. In addition, the effective tax rate in the corresponding preceding year-to-date period was higher due to costs incurred to complete the merger with Anixter. Excluding the impact of the Merger, the effective tax rate for the first six months of 2020 would have been approximately 22%.
Net Income (Loss) and Earnings (Loss) per Share
Net income for the first six months of 2021 was $178.4 million, compared to a net loss of $0.3 million for the first six months of 2020.
Net income attributable to noncontrolling interests was less than $0.1 million for the first six months of 2021, compared to a net loss of $0.2 million for the first six months of 2020.
Preferred stock dividends expense, which relates to the fixed-rate reset cumulative perpetual preferred stock, Series A, that was issued in connection with the Merger, was $28.7 million for the first six months of 2021 compared to $1.3 million for the first six months of 2020.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Net income and earnings per diluted share attributable to common stockholders were $149.7 million and $2.89 per diluted share, respectively, for the first six months of 2021, compared with a net loss and loss per diluted share attributable to common stockholders of $1.4 million and $0.03 per diluted share, respectively, for the first six months of 2020. Adjusted for merger-related costs, the net gain on the sale of WESCO's legacy utility and data communications businesses in Canada, accelerated amortization expense associated with migrating to our master brand architecture, and the related income tax effects, net income and earnings per diluted share attributable to common stockholders for the six months ended June 30, 2021 were $210.5 million and $4.06, respectively. Adjusted for merger-related costs and interest, the related income tax effects, and the weighted-average impact of 8.15 million shares of common stock issued as equity consideration to fund a portion of the merger with Anixter, net income and earnings per diluted share attributable to common stockholders were $94.3 million and $2.25, respectively, for the six months ended June 30, 2020.
The following tables reconcile income from operations, net interest expense, provision for income taxes and earnings per diluted share to adjusted income from operations, adjusted net interest expense, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:

Six Months Ended
Adjusted Income from Operations:June 30, 2021June 30, 2020
(In thousands)
Income from operations$352,123 $76,183 
Merger-related costs84,042 77,953 
Accelerated trademark amortization5,049 — 
Net gain on Canadian divestitures(8,927)— 
Adjusted income from operations$432,287 $154,136 
Six Months Ended
Adjusted Interest Expense, Net:June 30, 2021June 30, 2020
(In thousands)
Interest expense, net$137,963 $77,862 
Merger-related interest expense(1)
— (45,253)
Adjusted interest expense, net$137,963 $32,609 
(1)    The adjustment for the six months ended June 30, 2020 represents financing and interest costs associated with the debt financing used to fund a portion of the merger with Anixter, of which $33.5 million was non-recurring.
Six Months Ended
Adjusted Provision for Income Taxes:June 30, 2021June 30, 2020
(In thousands)
Provision for income taxes$39,331 $(587)
Income tax effect of adjustments to income from operations and net interest(1)
19,348 27,492 
Adjusted provision for income taxes$58,679 $26,905 
(1)    The adjustments to income from operations and net interest have been tax effected at rates of 24.1% and 22.3% for the six months ended June 30, 2021 and 2020, respectively.

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Six Months Ended
Adjusted Earnings per Diluted Share:June 30, 2021June 30, 2020
(In thousands, except per share data)
Adjusted income from operations$432,287 $154,136 
Adjusted interest expense, net137,963 32,609 
Other income, net(3,609)(807)
Adjusted income before income taxes297,933 122,334 
Adjusted provision for income taxes58,679 26,905 
Adjusted net income239,254 95,429 
Net income (loss) attributable to noncontrolling interests65 (185)
Adjusted net income attributable to WESCO International, Inc.239,189 95,614 
Preferred stock dividends28,704 1,276 
Adjusted net income attributable to common stockholders$210,485 $94,338 
Diluted shares51,875 42,412 
Adjusted diluted shares(1)
51,875 42,009 
Adjusted earnings per diluted share(2)
$4.06 $2.25 
(1)    Adjusted diluted shares for the six months ended June 30, 2020 exclude the weighted-average impact of 8.15 million shares of common stock issued as equity consideration to fund a portion of the merger with Anixter.
(2)    Adjusted earnings per diluted share for the six months ended June 30, 2020, as previously reported in our Quarterly Report on Form 10-Q for the period ended June 30, 2020, excluded preferred stock dividends of $1.3 million. Adjusted earnings per diluted share excluding the preferred stock dividends was $2.28 for the six months ended June 30, 2020.
Note: For the six months ended June 30, 2021, income from operations, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related costs, a net gain on the sale of WESCO's legacy utility and data communications businesses in Canada, accelerated amortization expense associated with migrating to our master brand architecture, and the related income tax effects. For the six months ended June 30, 2020, income from operations, net interest expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude merger-related costs and interest, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin %
The following tables reconcile net income attributable to common stockholders to EBITDA, adjusted EBITDA and adjusted EBITDA margin % by segment, which are non-GAAP financial measures, for the periods presented:
Six Months Ended June 30, 2021
(In thousands)EESCSSUBSCorporateTotal
Net income attributable to common stockholders$254,606$184,639$181,701$(471,277)$149,669
Net (loss) income attributable to noncontrolling interests(151)216 65
Preferred stock dividends28,704 28,704
Provision for income taxes39,331 39,331
Interest expense, net137,963 137,963
Depreciation and amortization23,34435,53410,67618,359 87,913
EBITDA$277,799$220,173$192,377$(246,704)$443,645
Other income, net(603)58122(3,609)(3,609)
Stock-based compensation expense(1)
2,7851,0668835,908 10,642
Merger-related costs84,042 84,042
Net gain on Canadian divestitures(8,927)— (8,927)
Adjusted EBITDA$279,981$221,820$184,355$(160,363)$525,793
Adjusted EBITDA margin %7.7 %8.2 %8.1 %6.1 %
(1) Stock-based compensation expense in the calculation of adjusted EBITDA for the six months ended June 30, 2021 excludes $2.5 million as such amount is included in merger-related costs.
Six Months Ended June 30, 2020
(In thousands)EESCSSUBSCorporateTotal
Net income (loss) attributable to common stockholders$89,593$37,710$93,559$(222,238)$(1,376)
Net loss attributable to noncontrolling interests(394)— — 209 (185)
Preferred stock dividends— — — 1,276 1,276
Provision for income taxes— — — (587)(587)
Interest expense, net— — — 77,862 77,862
Depreciation and amortization14,2275,8577,6037,161 34,848
EBITDA$103,426$43,567$101,162$(136,317)$111,838
Other income, net(64)158(901)(807)
Stock-based compensation expense2,1974195996,312 9,527
Merger-related costs— — — 77,953 77,953
Adjusted EBITDA$105,559$44,144$101,761$(52,953)$198,511
Adjusted EBITDA margin %4.9 %7.8 %7.6 %4.9 %
Note: EBITDA, Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of our performance and ability to meet debt service requirements. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and other non-operating expenses (income), non-cash stock-based compensation, merger-related costs and net gain on the sale of WESCO's legacy utility and data communications businesses in Canada. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.
Adjusted EBITDA for EES was $280.0 million for the first six months of 2021, or 7.7% of net sales, compared to $105.6 million for the first six months of 2020, or 4.9% of net sales.
Adjusted EBITDA for CSS was $221.8 million for the first six months of 2021, or 8.2% of net sales, compared to $44.1 million for the first six months of 2020, or 7.8% of net sales.
Adjusted EBITDA for UBS was $184.4 million for the first six months of 2021, or 8.1% of net sales, compared to $101.8 million for the first six months of 2020, or 7.6% of net sales.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Liquidity and Capital Resources
Our liquidity needs generally arise from fluctuations in our working capital requirements, capital expenditures, acquisitions and debt service obligations. As of June 30, 2021, we had $873.1 million in available borrowing capacity under our Revolving Credit Facility and $120.0 million in available borrowing capacity under our Receivables Facility, which combined with available cash of $118.1 million, provided liquidity of $1.1 billion. Cash included in our determination of liquidity represents cash in certain deposit and interest bearing investment accounts. 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. In addition, 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. At June 30, 2021, approximately 68% of our debt portfolio was comprised of fixed rate debt.
As described in Note 8, "Debt" of our Notes to the unaudited Condensed Consolidated Financial Statements, on January 14, 2021, we redeemed the $500 million aggregate principal amount of our 2021 Notes at a redemption price equal to 100% of the principal amount plus accrued interest to, but not including, January 14, 2021. The redemption of the 2021 Notes was funded with available cash, as well as borrowings under our accounts receivable securitization and revolving credit facilities.
As also described in Note 8, "Debt" of our Notes to the unaudited Condensed Consolidated Financial Statements, on June 2, 2021, we exercised our right to redeem the $350 million aggregate principal amount of our 2024 Notes at a redemption price equal to 101.344% of the principal amount plus accrued interest to, but not including, July 2, 2021, the date fixed for the redemption. See Note 14, "Subsequent Events" of our Notes to the unaudited Condensed Consolidated Financial Statements for more information.
As a result of the redemption of the 2024 Notes and amendment to the Receivables Facility, as described above, total interest expense is expected to be reduced by approximately $2 million in 2021 and $18 million per year thereafter based on current interest rates.
Since the merger with Anixter, we have used cash and the net proceeds from the divestiture of WESCO's legacy utility and data communications businesses in Canada to reduce our debt, net of cash, by approximately $464 million. Over the next several quarters, it is expected that excess liquidity will be directed primarily at debt reduction and merger-related integration activities, and we expect to maintain sufficient liquidity through our credit facilities and cash balances. We expect to spend between $100 million to $120 million in 2021 on capital expenditures and cloud-based initiatives, much of which will be invested to align the systems of our legacy businesses and enhance our digital tools.
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. We also communicate on a regular basis with our lenders regarding our financial and working capital performance, liquidity position and financial leverage. Our financial leverage ratio, on a pro forma basis, was 4.5 as of June 30, 2021 and 5.3 as of December 31, 2020. In addition, we are in compliance with all covenants and restrictions contained in our debt agreements as of June 30, 2021.


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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

The following table sets forth our financial leverage ratio, which is a non-GAAP financial measure, for the periods presented:
Pro Forma(1)
Twelve Months Ended
(In millions of dollars, except ratio)June 30,
2021
December 31,
2020
Net income attributable to common stockholders$221.5 $115.6 
Net loss attributable to noncontrolling interests(0.3)(0.5)
Preferred stock dividends57.6 30.1 
Provision for income taxes62.7 55.7 
Interest expense, net286.8 255.8 
Depreciation and amortization174.7 153.5 
EBITDA803.0 610.2 
Other, net(5.3)4.6 
Stock-based compensation19.4 34.7 
Merger-related costs and fair value adjustments181.0 206.7 
Out-of-period adjustment18.9 18.9 
Net gain on sale of asset and Canadian divestitures(27.7)(19.8)
Adjusted EBITDA$989.3 $855.3 
As of
June 30,
2021
December 31,
2020
Short-term debt and current portion of long-term debt, net$367.0 $528.8 
Long-term debt, net4,303.1 4,370.0 
Debt discount and debt issuance costs(2)
80.5 88.2 
Fair value adjustments to Anixter Senior Notes due 2023 and 2025(2)
(1.3)(1.7)
Total debt4,749.3 4,985.3 
Less: Cash and cash equivalents287.9 449.1 
Total debt, net of cash$4,461.4 $4,536.2 
Financial leverage ratio4.5 5.3
(1)Pro forma adjusted EBITDA includes the financial results of WESCO's legacy utility and data communications businesses in Canada, which were divested in the first quarter of 2021 under a Consent Agreement with the Competition Bureau of Canada.
(2)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 measures 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 foreign exchange and other non-operating expenses (income), non-cash stock-based compensation, costs and fair value adjustments associated with the merger with Anixter, an out-of-period adjustment related to inventory absorption accounting, and net gain on the sale of a U.S. operating branch and WESCO's legacy utility and data communications businesses in Canada. Pro forma financial leverage ratio is calculated by dividing total debt, excluding debt discount and debt issuance costs, net of cash, by pro forma adjusted EBITDA. Pro forma EBITDA and pro forma adjusted EBITDA gives effect to the combination of WESCO and Anixter as if it had occurred at the beginning of the respective trailing twelve month period.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Most of the undistributed earnings of our foreign subsidiaries have been taxed in the U.S. under either the one-time transition tax or the global intangible low-taxed income ("GILTI") tax regime imposed by the Tax Cuts and Jobs Act of 2017 ("TCJA"). Except for a portion of foreign earnings previously taxed in the U.S. that can effectively be distributed without further material U.S. or foreign taxation, we continue to assert that the undistributed earnings of our foreign subsidiaries are indefinitely reinvested. To the extent the earnings of our foreign subsidiaries are distributed in the form of dividends, such earnings may be subject to additional taxes. We believe that we are able to maintain a sufficient level of liquidity for our domestic operations and commitments without incurring any material tax cost to repatriate cash held by our foreign subsidiaries.
Cash Flow
Operating Activities. Net cash generated from operations for the first six months of 2021 totaled $102.8 million, compared to $132.7 million for the first six months of 2020. Operating activities included net income of $178.4 million and adjustments to net income totaling $101.7 million, which were primarily comprised of depreciation and amortization of $87.9 million, stock-based compensation expense of $13.2 million, amortization of debt discount and debt issuance costs of $9.2 million, a net gain of $8.9 million resulting from the Canadian divestitures, and deferred income taxes of $3.0 million. Other sources of cash in the first six months of 2021 included an increase in accounts payable of $474.9 million due to higher purchases of inventory, an increase in other current and noncurrent liabilities of $26.0 million, and an increase in accrued payroll and benefit costs of $1.9 million. Primary uses of cash in the first six months of 2021 included an increase in trade accounts receivable of $372.3 million resulting from higher sales in the latter part of the quarter, an increase in inventories of $268.3 million to support increased customer demand, an increase in other accounts receivable of $25.4 million due to higher supplier volume rebate accruals, and an increase in other current and noncurrent assets of $14.3 million.
Net cash provided by operating activities for the first six months of 2020 totaled $132.7 million, which included a net loss of $0.3 million and adjustments to net loss totaling $43.4 million, which were primarily comprised of depreciation and amortization of $34.8 million and stock-based compensation expense of $9.5 million. Other sources of cash in the first six months of 2020 included an increase in other current and noncurrent liabilities of $93.8 million, a decrease in inventories of $55.4 million, a decrease in trade accounts receivable of $29.3 million, a decrease in other accounts receivable of $20.5 million, and an increase in accrued payroll and benefit costs of $1.7 million. Primary uses of cash in the first six months of 2020 included a decrease in accounts payable of $83.1 million, and an increase in other current and noncurrent assets of $28.1 million.
Investing Activities. Net cash provided by investing activities for the first six months of 2021 was $32.4 million, compared to $3.7 billion of net cash used during the first six months of 2020. Included in the first six months of 2021 was $54.3 million of net proceeds from the divestiture of WESCO's legacy utility and data communications businesses in Canada, as described in Note 4, "Acquisitions and Disposals" of our Notes to the unaudited Condensed Consolidated Financial Statements. Included in the first six months of 2020 was $3.7 billion to fund a portion of the merger with Anixter, as described in Note 4, "Acquisitions and Disposals" of our Notes to the unaudited Condensed Consolidated Financial Statements. Capital expenditures were $20.2 million for the six month period ended June 30, 2021, compared to $27.2 million for the six month period ended June 30, 2020.
Financing Activities. Net cash used in financing activities for the first six months of 2021 was $289.7 million, compared to $3.7 billion of net cash provided by financing activities for the first six months of 2020. During the first six months of 2021, financing activities primarily consisted of the redemption of our $500.0 million aggregate principal amount of 2021 Notes, borrowings and repayments of $914.8 million and $869.8 million, respectively, related to our Revolving Credit Facility, and borrowings and repayments of $643.0 million and $413.0 million, respectively, related to our Receivables Facility. Financing activities for the first six months of 2021 also included $28.7 million of dividends paid to holders of our Series A Preferred Stock, net repayments related to our various international lines of credit of approximately $10.8 million, and $12.4 million of payments for taxes related to the exercise and vesting of stock-based awards.
During the first six months of 2020, financing activities consisted of $2,815.0 million of net proceeds from the issuance of senior unsecured notes to finance a portion of the merger with Anixter, borrowings and repayments of $875.3 million and $425.6 million, respectively, related to our prior revolving credit facility, as well as borrowings and repayments of $700.0 million and $155.0 million, respectively, related to our prior accounts receivable securitization facility. Financing activities for the first six months of 2020 also included net repayments related to our various international lines of credit of approximately $10.5 million. Additionally, we paid $79.5 million of debt issuance costs associated with financing the merger with Anixter.
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 2020 Annual Report on Form 10-K.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

Inflation
The rate of inflation, as measured by changes in the producer price index, affects different commodities, the cost of products purchased and ultimately the pricing of our different products and product classes to our customers. For the six months ended June 30, 2021, pricing related to inflation did not have a material impact on our operating profit.
Seasonality
Our operating results are not significantly affected by seasonal factors. Sales during the first and fourth quarters are usually 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.
Guarantor Financial Statements
WESCO Distribution (the “Issuer”) has outstanding $350 million in aggregate principal amount of 5.375% Senior Notes due 2024 (the “2024 Notes”).
The 2024 Notes are unsecured senior obligations of WESCO Distribution and are fully and unconditionally guaranteed on a senior unsecured basis by WESCO International and Anixter Inc. (the “Guarantors”), ranking pari passu in right of payment with all other existing and future senior obligations of the Issuer, including obligations under other unsubordinated indebtedness. The 2024 Notes are effectively subordinated to all existing and future obligations of the Issuer that are secured by liens on any property or assets of the Issuer, including the Issuer’s Revolving Credit Facility and the then outstanding term loan facility (the “Senior Secured Credit Facilities”), to the extent of the value of the collateral securing such obligations, and are structurally subordinated to all liabilities (including trade payables) of any of the Guarantors’s or the Issuer’s subsidiaries (the “non-Guarantor Subsidiaries”) and senior in right of payment to all existing and future obligations of the Issuer that are, by their terms, subordinated in right of payment to the 2024 Notes.
The 2024 Notes are guaranteed by the Guarantors and not by the non-Guarantor Subsidiaries. In the event of a bankruptcy, liquidation or reorganization of any of the non-Guarantor Subsidiaries, such non-Guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute or contribute, as the case may be, any of their assets to the Issuer or the Guarantors. Therefore, the 2024 Notes and the guarantee of the Guarantors (the “Guarantee”) are effectively subordinated to the liabilities of the non-Guarantor Subsidiaries.
The Guarantee constitutes a senior obligation of the Guarantors, ranking pari passu in right of payment with all other senior obligations of the Guarantors, including obligations under other unsubordinated indebtedness. The Guarantee is effectively subordinated to all existing and future obligations incurred by the Guarantors that are secured by liens on any property or assets of the Guarantors, including the Senior Secured Credit Facilities, to the extent of the value of the collateral securing such obligations, structurally subordinated to all liabilities (including trade payables) of the non-Guarantor Subsidiaries and senior in right of payment to all existing and future obligations of the Guarantors that are, by their terms, subordinated in right of payment to the Guarantee.
The Guarantors guarantee to each holder of the 2024 Notes and to the respective trustees (i) the due and punctual payment of the principal of, premium, if any, and interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of and interest on the 2024 Notes, to the extent lawful, and the due and punctual payment of all other obligations and due and punctual performance of all obligations of the Issuer to the holders or the respective trustee all in accordance with the terms of the 2024 Notes and the indentures governing the 2024 Notes and (ii) in the case of any extension of time of payment or renewal of any 2024 Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at stated maturity, by acceleration or otherwise.
If the Issuer becomes a debtor in a case under the U.S. Bankruptcy Code or encounters other financial difficulty, under federal or state fraudulent transfer law, a court may void, subordinate or otherwise decline to enforce the 2024 Notes. A court might do so if it is found that when the Issuer issued the 2024 Notes, or in some states when payments became due under the 2024 Notes, the Issuer received less than reasonably equivalent value or fair consideration and either: (i) were insolvent or rendered insolvent by reason of such incurrence; (ii) were left with inadequate capital to conduct its business; or (iii) believed or reasonably should have believed that the Issuer would incur debts beyond its ability to pay.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

A court might also void an issuance of the 2024 Notes without regard to the above factors, if the court found that the Issuer issued the 2024 Notes with actual intent to hinder, delay or defraud its creditors. A court would likely find that the Issuer did not receive reasonably equivalent value or fair consideration for the 2024 Notes, if the Issuer did not substantially benefit directly or indirectly from the issuance of the 2024 Notes. If a court were to void the issuance of the 2024 Notes, holders would no longer have any claim against the Issuer. Sufficient funds to repay the 2024 Notes may not be available from other sources. In addition, the court might direct holders to repay any amounts that they already received from the Issuer.
The following tables present summarized financial information for WESCO International, WESCO Distribution and Anixter Inc. on a combined basis after elimination of (i) intercompany transactions and balances among such entities and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor. The summarized financial information has been prepared in accordance with Rule 13-01 of Regulation S-X.
Summarized Balance Sheets
(In thousands)
(unaudited)
As of
June 30, 2021December 31, 2020
Assets
Current assets$2,508,796 $2,259,748 
Due from non-guarantor subsidiaries 337,478 277,957 
Total current assets2,846,274 2,537,705 
Noncurrent assets3,334,235 3,368,247 
Total assets$6,180,509 $5,905,952 
Liabilities
Current liabilities$1,906,543 $1,821,835 
Due to non-guarantor subsidiaries 2,529,212 2,046,613 
Total current liabilities 4,435,755 3,868,448 
Noncurrent liabilities3,859,587 4,169,639 
Total liabilities$8,295,342 $8,038,087 
Summarized Statement of Income (Loss)
(In thousands)
(unaudited)
Six Months Ended
June 30, 2021
Net sales(1)
$3,475,869 
Gross profit(1)
697,156 
Net loss$(39,568)
(1) Includes $43.0 million of net sales and cost of goods sold to non-guarantor subsidiaries.
Impact of Recently Issued Accounting Standards
See Note 2, "Accounting Policies" of our Notes to the unaudited Condensed Consolidated Financial Statements for information regarding the effect of new accounting pronouncements.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

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 the expected benefits and costs of the transaction between WESCO and Anixter International Inc., including anticipated future financial and operating results, synergies, accretion and growth rates, and the combined company's plans, objectives, expectations and intentions, statements that address the combined company's expected future business and financial performance, and other statements identified by words such as "anticipate," "plan," "believe," "estimate," "intend," "expect," "project," "will" and similar words, phrases or expressions. 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.
Those risks, uncertainties and assumptions include the risk of any unexpected costs or expenses resulting from the transaction, the risk of any litigation or post-closing regulatory action relating to the transaction, the risk that the transaction could have an adverse effect on the ability of the combined company to retain customers and retain and hire key personnel and maintain relationships with its suppliers, customers and other business relationships and on its operating results and business generally, or the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the proposed transaction or it may take longer than expected to achieve those synergies or benefits, the risk that the leverage of the company may be higher than anticipated, the impact of natural disasters, health epidemics and other outbreaks, especially the outbreak of COVID-19 since December 2019, which may have a material adverse effect on the combined company's business, results of operations and financial conditions, and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond each company's control. Additional factors that could cause results to differ materially from those described above can be found in WESCO's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and WESCO's other reports filed with the SEC.
Item 3.    Quantitative and Qualitative Disclosures about Market Risks.
For a discussion of changes to the market risks that were previously disclosed in our 2020 Annual Report on Form 10-K, 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”.
Item 4.    Controls and Procedures.
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 June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, a number of lawsuits and claims have been or may be asserted against us relating to the conduct of our business, including litigation relating to commercial, product and employment matters. The outcome of any litigation cannot be predicted with certainty, and some lawsuits may be determined adversely to us. However, management does not believe that the ultimate outcome of any such pending matters is likely to have a material adverse effect on our financial condition or liquidity, although the resolution in any fiscal period of one or more of these matters may have a material adverse effect on our results of operations for that period.
Item 1A. Risk Factors.
There have been no material changes to the risk factors previously disclosed in Item 1A. to Part 1 of WESCO’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES


Item 6.    Exhibits.
(a)Exhibits
(10)Material Contracts
(1) Third Amendment to the Fifth Amended and Restated Receivables Purchase Agreement (filed herewith)
(2) WESCO International, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 12, 2021)
(31)    Rule 13a-14(a)/15d-14(a) Certifications
(1) Certification of Chief Executive Officer pursuant to Rules 13a-14(a) promulgated under the Exchange Act.
(2) Certification of Chief Financial Officer pursuant to Rules 13a-14(a) promulgated under the Exchange Act.
(32)    Section 1350 Certifications
(1) Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(2) Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document.
101.SCH    XBRL Taxonomy Extension Schema Document.
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB    XBRL Taxonomy Extension Label Linkbase Document.
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)
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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WESCO International, Inc.
(Registrant)
August 6, 2021By:/s/ David S. Schulz
(Date)David S. Schulz
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

August 6, 2021By:/s/ Matthew S. Kulasa
(Date)Matthew S. Kulasa
Senior Vice President, Corporate Controller and Chief Accounting Officer
(Principal Accounting Officer)

48