In this recent earnings call, John J. Engel, Chairman, President and CEO explains the companies top three priorities since the spread of COVID-19 and the actions it has taken to one, protect employees, two, super-serve customers and three, effectively manage business in response to this crisis. Engel further explains measures taken to cut costs effective May 1.
“I want to emphasize that WESCO provides mission-critical electrical, industrial, utility and communication solutions that enable our customers to efficiently, effectively and safely operate their businesses. In these challenging times, we remain laser-focused on super-serving our customers while ensuring the integrity of their supply chain. And number three, our third top priority, that is, effectively managing our business in response to this crisis. As we have done in prior economic downturns, we are aggressively managing our business and have taken a series of cost reduction and cash management actions as outlined on this page. Effective May 1, we are implementing temporary broad-based salary reductions through the end of the third quarter, beginning with a 25% reduction for the C-suite executives; a 25% reduction in the cash portion of the Board of Directors' compensation; and reductions of 12% to 20% across the rest of our businesses that are experiencing demand decline.”
David S. Schulz, Senior VP and CFO, outlines sales, and explains the impact COVID-19 has had on their business. He also explains the resiliency of their business model.
“This resilience is driven by three dynamics of the business model. First, the countercyclical cash flow that I discussed a moment ago; second, a cost structure that allows for quick adjustments in response to changing demand levels; and third, very low capital expenditures, given the nature of the business model. Over the past 10 years, WESCO and Anixter capital expenditures have averaged less than 0.5 point of sales. In the current environment, this resilience is enhanced by WESCO and Anixter being deemed essential businesses and the high degree of diversification by customer, supplier, end market and geography. Both WESCO and Anixter have proven abilities to deliver through the economic cycle as they both did from 2007 to 2011 when their net leverage was reduced to below two turns. Additionally, both companies have demonstrated the ability to use their cash flow to rapidly pay down debt following sizable acquisition. In the case of WESCO, we reduced leverage from 4.5 turns to 2.7 turns following the acquisition of EECOL in 2012. In Anixter's case, it reduced leverage from 4.1 turns to 2.8 turns in the two years following its acquisition of HD Power Solutions in 2015.”
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