WESCO International, Inc. DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Section
240.14a-12 |
WESCO INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11 (set
forth the amount on which the filing fee is calculated and state
how it was determined): |
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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2006 |
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Notice of Annual Meeting |
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and Proxy Statement |
WESCO International, Inc.
225 West Station Square Drive, Suite 700
Pittsburgh, PA 15219
WESCO INTERNATIONAL, INC.
225 West Station Square Drive, Suite 700
Pittsburgh, Pennsylvania 15219
NOTICE
FOR 2006 ANNUAL MEETING OF STOCKHOLDERS
to be held May 17, 2006
The Annual Meeting of the Stockholders of WESCO International,
Inc. will be held on Wednesday, May 17, 2006, at
2:00 p.m., E.D.T., at Renaissance Toronto Airport Hotel,
located at 801 Dixon Road, Toronto, Ontario, Canada M9W 1J5, to
consider and take action on the following:
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Election of a class of three Directors for a three-year term
expiring in 2009; |
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Ratify the appointment of PricewaterhouseCoopers LLP as our
independent registered public accounting firm for fiscal year
ending December 31, 2006; and |
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Transaction of any other business properly brought before the
meeting. |
The Board of Directors recommends a vote in favor of these
proposals. Stockholders of record at the close of business on
April 3, 2006 will be entitled to vote at the Annual
Meeting or any adjournments thereof. A list of stockholders
entitled to vote will be available at the Annual Meeting and
during ordinary business hours for ten days prior to the meeting
at our corporate offices, 225 West Station Square Drive,
Suite 700, Pittsburgh, Pennsylvania, 15219, for examination
by any holder of record for any legally valid purpose.
WESCO International, Inc. stockholders or their authorized
representatives by proxy may attend the meeting. If your shares
are held through an intermediary such as a broker or a bank, you
should present proof of your ownership at the meeting. Proof of
ownership could include a proxy from your bank or broker or a
copy of your account statement.
Most stockholders of record have a choice of voting over the
Internet, by telephone, or by returning the enclosed proxy card.
You should check your proxy card or information forwarded by
your bank, broker or other holder of record to see which options
are available to you.
In order to assure a quorum, it is important that stockholders
who do not expect to attend the meeting in person either fill
in, sign, date, and return the enclosed proxy in the
accompanying envelope or otherwise make arrangements to vote via
telephone or over the Internet.
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By order of the Board of Directors, |
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MARCY SMOREY-GIGER |
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Corporate Secretary |
WESCO INTERNATIONAL, INC.
225 West Station Square Drive, Suite 700
Pittsburgh, Pennsylvania 15219
PROXY STATEMENT
FOR 2006 ANNUAL MEETING OF STOCKHOLDERS
to be held May 17, 2006
PROXY SOLICITATION AND VOTING INFORMATION
The accompanying proxy is solicited by the Board of Directors
(the Board) of WESCO International, Inc. (the
Company) for use at the Annual Meeting of the
Stockholders (the Annual Meeting) to be held on
May 17, 2006, at Renaissance Toronto Airport Hotel, located
at 801 Dixon Road, Toronto, Ontario, Canada, at
2:00 p.m., E.D.T., and at any adjournment or postponement
thereof. The proxies will be voted if properly signed, received
by the Corporate Secretary of the Company prior to the close of
voting at the Annual Meeting, and not revoked. If no direction
is given in the proxy, it will be voted FOR the
proposals set forth in this Proxy Statement, including election
of the Directors nominated by the Board of Directors and
ratification of the independent registered public accounting
firm. The Company has not received timely notice of any
stockholder proposals for presentation at the Annual Meeting.
Alternatively, stockholders may be entitled to vote over the
Internet or by telephone. Individual stockholders should check
the enclosed proxy card or the information forwarded to them by
their bank, broker or other holder of record to see whether
these options are available to them. Action will be taken at the
Annual Meeting for the election of Directors, and any other
business that properly comes before the meeting, and the proxy
holders have the right to and will vote in accordance with their
judgment.
A stockholder who has returned a proxy via mail, telephone or
Internet may revoke it at any time before it is voted at the
Annual Meeting by delivering a revised proxy bearing a later
date, by voting by ballot at the Annual Meeting, or by
delivering a written notice withdrawing the proxy to the
Corporate Secretary of the Company at the address set forth
above.
This Proxy Statement, together with the accompanying proxy card,
is first being mailed to stockholders on or about April 17,
2006. The Companys 2005 Annual Report to Stockholders
accompanies this Proxy Statement. The cost of this solicitation
of proxies will be borne by the Company. In addition to
soliciting proxies by mail, telephone and the Internet, the
Board of Directors of the Company, without receiving additional
compensation for this service, may solicit in person.
Arrangements also will be made with brokerage firms and other
custodians, nominees, and fiduciaries to forward proxy
soliciting material to the beneficial owners of the Common
Stock, par value $.01 per share, of the Company
(Common Stock) held of record by such persons, and
the Company will reimburse such brokerage firms, custodians,
nominees, and fiduciaries for reasonable
out-of-pocket expenses
incurred by them in doing so. The cost of this proxy
solicitation will consist primarily of printing, legal fees, and
postage and handling.
Holders of Common Stock at the close of business on
April 3, 2006 (the Record Date) are entitled to
vote at the Annual Meeting or any adjournment or postponement
thereof. On that date 48,173,266 shares of Common Stock
were issued and outstanding.
The presence, in person or by proxy, of stockholders holding at
least a majority of the shares of Common Stock outstanding will
constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions and broker non-votes count as shares
present for purpose of determining a quorum. Holders of Common
Stock are entitled to cast one vote per share on each matter
presented for consideration and action at the Annual Meeting.
Proxies that are transmitted by nominee holders on behalf of
beneficial owners will count toward a quorum and will be voted
as instructed by the nominee holder. The election of Directors
will be determined by a plurality of the votes cast at such
election, and will require the affirmative vote of the holders
of a majority of the votes present at the meeting. The
ratification of our independent registered public accounting
firm will be determined by a majority of the votes present at
the meeting.
Only votes FOR or WITHHELD affect the
outcome of the election of Directors, and abstentions are not
counted for purposes of the election of Directors. With respect
to the ratification of our independent registered public
accounting firm, abstentions have the effect of a negative vote.
A broker non-vote occurs when a broker, bank or other nominee
holder does not vote on a particular item because the nominee
holder does not have discretionary authority to vote on that
item and has not received instructions from the beneficial owner
of the shares. Broker non-votes will not affect the outcome of
any of the matters scheduled to be voted upon at the Annual
Meeting, and they are not counted as shares voting with respect
to any matter on which the broker has not voted expressly.
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PROPOSALS REQUIRING YOUR VOTE
ITEM 1 BOARD OF DIRECTORS AND ELECTION OF
DIRECTORS
During 2005, the Board consisted of nine members, divided into
three classes. Effective January 1, 2006, the Board was
expanded to eleven members with Steven A. Raymund and Lynn M.
Utter being appointed as Class I Directors. The terms of
office of the three classes of Directors (Class I,
Class II and Class III) end in successive years. The
current term of the Class I Directors expires this year,
and their successors are to be elected at the Annual Meeting for
a three-year term expiring in 2009. The terms of the
Class II and Class III Directors do not expire until
2007 and 2008, respectively.
Effective May 17, 2006, Class I Directors, Michael J.
Cheshire and James A. Stern will retire from the Board and
accordingly will not stand for re-election. The Board has
nominated Steven A. Raymund, Lynn M. Utter and William J.
Vareschi for election as Class I Directors.
Mr. Vareschi was previously elected as a member of the
Board. A third party executive search firm identified multiple
Director candidates and following a comprehensive process,
Mr. Raymund and Ms. Utter were recommended for
appointment to the Board and were subsequently appointed to the
Board on December 8, 2005, effective January 1, 2006.
The accompanying proxy will be voted for the election of
Ms. Utter and Messrs. Raymund and Vareschi, unless
authority to vote for one or more of the nominees is withheld.
In the event that any of the nominees is unable or unwilling to
serve as a Director for any reason (which is not anticipated),
the proxy will be voted for the election of any substitute
nominee designated by the Board.
The Board unanimously recommends a vote FOR the
election of each of the Class I Director nominees.
Class I Directors Present Term Expires in
2006
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Steven A. Raymund
Age: 50 Director since 2006
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Mr. Raymund has been Chief Executive Officer of Tech Data
Corporation since 1986, and in 1991 was appointed Chairman of
the Board of Directors. He serves as a member of the Board of
Directors and Chairman of the audit committee for Jabil Circuit,
Inc., and is on the executive committee of the Global Technology
Distribution Council (GTDC). He is a Director for the Alliance
for Excellent Education, a non-profit organization based in
Washington D.C., and also serves on Georgetown Universitys
Board of Visitors, an advisory body for the School of Foreign
Service. Mr. Raymund is a member of the Moffitt Cancer
Centers Board of Advisors. |
Lynn M. Utter
Age: 43 Director since 2006
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Ms. Utter joined Coors Brewing Company in 1997 and is
currently Chief Strategy Officer. She also serves on Boards of
Managers for Coors Container operation.
Ms. Utters previous experience includes six years
with Frito-Lay, where she held a variety of leadership positions
in sales, distribution and planning. She is Chairperson of The
University of Texas McComb School of Business
Administration Deans Advisory Council. |
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William J. Vareschi
Age: 63 Director since 2002
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Mr. Vareschi retired as Chief Executive Officer of Central
Parking Corporation in May 2003. Before joining Central Parking
Corp., his prior business career of more than 35 years of
service was spent with the General Electric Company. He held
numerous financial management positions within GE, including
Chief Financial Officer for GE Plastics Europe (in the
Netherlands), GE Lighting (Cleveland, Ohio), and GE Aircraft
Engines (Cincinnati, Ohio). Mr. Vareschi serves on the
Board of Directors for WMS Industries Inc. |
Class II Directors Present Term Expires in
2007
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Sandra Beach Lin
Age: 48 Director since 2002
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Ms. Beach Lin joined Avery Dennison Corporation in 2005 as
Group Vice President, Specialty Materials & Converting
Worldwide. She previously served as President, Alcoa Closure
Systems International, joining Alcoa in 2002 after 20 years
of business experience in the specialty chemicals, medical
products, and automotive components industries. She joined
Honeywell (then AlliedSignal) in 1994 and held various general
management positions, most recently serving as President of
Bendix Commercial Vehicle Systems. |
Robert J. Tarr, Jr
Age: 62 Director since 1998
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Mr. Tarr is a Professional Director and Private Investor.
He is also a special partner of Chartwell Investments, LLP, a
private equity firm. He was the Chairman, Chief Executive
Officer and President of HomeRuns.com, Inc. from February 2000
to September 2001. He was also President and Chief Executive
Officer/Chief Operating Officer of Harcourt General, Inc.
(formerly General Cinema Corporation) and The Neiman Marcus
Group, Inc. |
Kenneth L. Way
Age: 66 Director since 1998
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Mr. Way served as Chairman of Lear Corporation from 1988 to
2003, and was affiliated with Lear Corporation and its
predecessor companies for 36 years in engineering,
manufacturing and general management capacities. Mr. Way
retired from Lear on January 1, 2003. Mr. Way is also
a Director of Comerica, Inc., CMS Energy Corporation, Cooper
Standard Automotive, Inc., United Way and Karmanos Cancer
Institute, and is on the Board of Trustees for Henry Ford Health
System. |
Class III Directors Present Term Expires in
2008
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Roy W. Haley
Age: 59 Chairman of the Board
and Chief Executive
Officer Director since 1994
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Mr. Haley has been Chief Executive Officer of the Company
since February 1994, and Chairman of the Board since 1998. From
1988 to 1993, Mr. Haley was an executive at American
General Corporation, a diversified financial services company,
where he served as Chief Operating Officer, as President and as
a Director. Mr. Haley is also a Director of United
Stationers, Inc. and Cambrex Corporation, and is Chairman of the
Pittsburgh Branch of the Federal Reserve Bank of Cleveland. |
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George L. Miles, Jr
Age: 64 Director since 2000
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Mr. Miles has been President and Chief Executive Officer of
WQED Multimedia since September 1994. Mr. Miles is also a
Director of Equitable Resources, Inc., Chester, Inc.,
Harley-Davidson, Inc., and American International Group, Inc. |
James L. Singleton
Age: 50 Director since 1998
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Mr. Singleton is the former Co-Chairman of The Cypress
Group, L.L.C. and was a founding partner of that firm in April
1994. Prior to that time, he was a Managing Director in the
Merchant Banking Group at Lehman Brothers. Mr. Singleton is
also a Director of Danka Business Systems PLC and Williams
Scotsman International, Inc. |
ITEM 2 RATIFICATION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Board unanimously recommends a vote FOR
ratification of PricewaterhouseCoopers LLP as our independent
registered public accounting firm for 2006.
The Audit Committee of the Board has selected
PricewaterhouseCoopers LLP (PricewaterhouseCoopers)
as the Companys independent registered public accounting
firm for the fiscal year ending December 31, 2006. The
Company is submitting the selection of the independent
registered public accounting firm for stockholder ratification
at the Annual Meeting. Although ratification of this selection
is not legally required, the Board believes it is appropriate
for our stockholders to ratify such action. In the event that
the stockholders do not ratify the selection of
PricewaterhouseCoopers as the Companys independent
registered public accounting firm, the Audit Committee may
reconsider its selection.
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CORPORATE GOVERNANCE
The Board, management and employees are committed to employing
sound, ethical corporate governance and business practices. The
Company has updated its corporate governance practices in
accordance with the New York Stock Exchange (NYSE)
listed company standards. The Companys major corporate
governance documents can be accessed on the Companys
website at www.wesco.com/governance. The following is a
summary of our current corporate governance practices.
Director Independence
Pursuant to the requirements of the NYSE, the Board has adopted
Corporate Governance Guidelines that meet or exceed the
independence standards of the NYSE. Also, as part of the
Companys Corporate Governance Guidelines, the Board has
adopted categorical standards to assist it in evaluating the
independence of each of its directors. The categorical standards
are intended to assist the Board in determining whether or not
certain relationships between its directors and the Company or
its subsidiaries (either directly or indirectly as a partner,
shareholder, officer, director, trustee or employee of an
organization that has a relationship with the Company) are
material relationships for purposes of the NYSE
independence standards. The categorical standards establish
thresholds at which such relationships are deemed to be not
material. The Companys Governance Guidelines are available
on its website at www.wesco.com/governance. A copy may
also be obtained upon request to WESCO International, Inc.,
Suite 700,
225 West Station Square Drive, Pittsburgh,
Pennsylvania 15219, Attention: Director of Internal Audit. In
addition, the categorical standards adopted to evaluate the
independence of the Companys Directors are attached as
Appendix A to this Proxy Statement.
In December, at the time Mr. Raymund and Ms. Utter
were appointed, the independence of each director was reviewed,
applying the independence standards set forth in the
Companys Governance Policies. The review considered
relationships and transactions between each Director and his or
her immediate family and affiliates and its management and the
Companys independent registered public accounting firm.
Based on this review, the Board affirmatively determined that
the following Directors have no material relationships with the
Company and its subsidiaries and are independent as defined in
the Companys Governance Policies and the listing standards
of the NYSE: Ms. Beach Lin, Mr. Cheshire,
Mr. Miles, Mr. Raymund, Mr. Singleton,
Mr. Stern, Mr. Tarr, Ms. Utter, Mr. Vareschi
and Mr. Way. Mr. Haley is considered an inside
Director because of his employment as Chief Executive Officer of
the Company.
Corporate Governance Guidelines
The Company has adopted a set of Corporate Governance Guidelines
to assist members of the Board in fully understanding and
effectively implementing their responsibilities while assuring
the Companys on-going commitment to high standards of
corporate conduct and compliance. The Guidelines are reviewed
from time to time in response to changing regulatory
requirements and best practices and are revised accordingly. The
Guidelines address the following key topics:
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Director Qualifications; |
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Significant Changes in Job Responsibilities of Directors; |
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Elected Term; |
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Director Responsibilities; |
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Committees of the Board; |
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Meetings in Executive Session; |
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Director Access to Officers and Employees; |
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Director Compensation; |
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Succession Strategy; |
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Director Orientation and Continuing Education; |
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Evaluation of the Chief Executive Officer; and |
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Annual Performance Evaluation. |
The full text of the Corporate Governance Guidelines is
available on the Companys corporate governance website at
www.wesco.com./governance and is also available in print
for any requesting stockholder.
The Company has adopted a Code of Business Ethics and Conduct
(the Code) that applies to all of its employees. The
Code covers all areas of professional conduct, including
customer relations, conflicts of interest, insider trading, and
financial disclosure, as well as requiring strict adherence to
all laws and regulations applicable to our business. Employees
and Directors are required to sign, the Companys Code
annually. Employees are required to report any violations or
suspected violations of the Code to their supervisors or by
using the Companys ethics toll-free hotline. The full text
of the Code is available on the Companys corporate
governance website at www.wesco.com/governance and is
also available in print for any requesting stockholder.
The Company also has adopted a Senior Financial Executive Code
of Business Ethics and Conduct (the Senior Financial
Executive Code), which applies to the Companys Chief
Executive Officer, Chief Financial Officer, principal accounting
officer and Controller and which is signed by such officers on
an annual basis. The full text of the Senior Financial Executive
Code is available on the Companys corporate governance
website at www.wesco.com/governance and is also available
in print for any requesting stockholder. The Company will
disclose future amendments to, or waivers from, the Senior
Financial Executive Code on its corporate governance website
within four business days of the amendment or waiver.
Stock Ownership Guidelines for all Directors and
Executives
In 2004, the Board adopted stock ownership guidelines for all
Directors and certain executive officers. According to the stock
ownership guidelines, Directors are expected to achieve within
three years of initial election to the Board, and to thereafter
maintain while serving as a Director, beneficial ownership of an
amount of Company equity equal in fair market value to at least
two-times their annual retainer. Also, in accordance with the
stock ownership guidelines, the Companys Chief Executive
Officer and each Vice President are expected to achieve within
three years of initial appointment to their respective
positions, and to thereafter maintain while serving as in such
positions, beneficial ownership of an amount of Company equity
equal in fair market value to at least four-times and two-times
their annual salary, respectively.
Executive Sessions; Presiding Director
The non-management members of the Board hold regularly scheduled
meetings in executive session. The Companys independent
Directors designated Mr. Singleton to preside over such
executive sessions through February 7, 2006. Effective
February 8, 2006, the Board appointed Mr. Way as
Presiding Director. The Presiding Director has broad authority
to call and conduct meetings of the independent Directors. He is
also responsible for planning and conducting the annual
evaluation of Board performance and effectiveness. During 2005,
the Board met in executive session to assess and evaluate its
activities, effectiveness, and performance. The non-management
independent Directors met in executive session at each Board
meeting held in person.
Annual Performance Evaluation
The Board and each of the Audit, Compensation, Executive and
Nominating and Governance Committees conducted an annual
self-evaluation during January and February 2006 as contemplated
by the Companys Corporate Governance Guidelines and the
charters of Board committees.
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Stockholder Communications with Directors
The Board has established a process to receive communications
from stockholders and other interested parties. Stockholders and
other interested parties may communicate with the Chairman of
the Audit Committee, Mr. Tarr, or the Presiding Director,
Mr. Way, and other non-management members of the Board by
confidential e-mail.
The applicable e-mail
addresses are accessible in the corporate governance section of
the Companys website at www.wesco.com/governance
under the caption Contact Our Board. The Director of
Internal Audit will review all such communications on a timely
basis and will forward all such communications, other than
solicitations, invitations or advertisements, to the appropriate
Board member on a monthly basis. All communications will be made
available to the Board on an immediate basis upon request by any
member of the Board. Stockholders who wish to communicate with
the Board in writing via regular mail should send such
correspondence to: WESCO International, Inc., Suite 700,
225 West Station Square Drive, Pittsburgh,
Pennsylvania 15219, Attention: Director of Internal Audit. Any
such hard-copy communications received will be reviewed by the
Director of Internal Audit and forwarded to the Board on the
same basis as electronic communications.
In addition, it is the Companys expectation that each
member of the Board attend the Annual Meeting of the
Companys stockholders, thereby providing additional
opportunities for stockholder access. All then-sitting members
of the Board were present at the Companys 2005 Annual
Meeting except for George L. Miles, Jr. and Robert J.
Tarr, Jr.
Nominating and Governance Committee
In addition to identifying and nominating candidates for
election or appointment to the Board, the Nominating and
Governance Committee is responsible for reviewing and making
recommendations to the Board with respect to the corporate
governance policies and practices of the Company. The Nominating
and Governance Committee operates under a separate charter,
which is available on the Companys corporate governance
website at www.wesco.com/governance and is also available
in print for any requesting stockholder.
During 2005, the Committee recommended and the Board approved
the following addition to the Companys Corporate
Governance Guidelines:
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Succession Strategy: The Chief Executive Officer shall
periodically discuss with the Board succession strategy planning
for certain senior officers of the Company assessing senior
managers and their potential to succeed the Chief Executive
Officer and other senior management positions. |
The Companys corporate governance practices have been
reviewed, documented, and made available for public access.
Recognizing the value of periodic reevaluations, as appropriate
or necessary, the Committee and the Board will conduct an
orderly assessment of a broad range of corporate governance
matters to determine whether any changes are warranted.
Director Nominating Procedures
The Nominating and Governance Committee will, from time to time,
seek to identify potential candidates for nomination as Director
and will consider potential candidates identified through
professional executive search arrangements, as well as referrals
or recommendations by members of the Board, by management of the
Company, or by stockholders of the Company. The Nominating and
Governance Committee has the sole authority to retain, approve
the fees and retention terms of and terminate any search firm to
be used to identify Director candidates. The Nominating and
Governance Committee has previously retained an executive search
firm to assist in identifying qualified Board member candidates.
In considering candidates submitted by stockholders of the
Company, the Nominating and Governance Committee will take into
consideration the needs of the Board along with candidates
qualifications. To have a
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candidate considered by the Committee, a stockholder must submit
the recommendation in writing and must include the following
information:
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The name and address of the proposed candidate; |
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The proposed candidates resume or a listing of his or her
qualifications to be a Director of the Company; |
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A description of what would make such person a good addition to
the Board; |
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A description of any relationship that could affect such
persons qualifying as an independent Director, including
identifying all other public company Board and committee
memberships; |
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A confirmation of such persons willingness to serve as a
Director if selected by the Nominating and Governance Committee; |
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Any information about the proposed candidate that, under the
federal proxy rules, would be required to be included in the
Companys Proxy Statement if such person were a
nominee; and |
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The name of the stockholder submitting the name of the proposed
candidate, together with information as to the number of shares
owned and the length of time of ownership. |
The stockholder recommendation and information described above
must be sent to: WESCO International, Inc., Suite 700,
225 West Station Square Drive, Pittsburgh, Pennsylvania
15219, Attention: Corporate Secretary and, in order to allow for
timely consideration, must be received not less than
120 days prior to the first anniversary of the date of the
Proxy Statement for the Companys most recent Annual
Meeting.
Once a person has been identified by the Nominating and
Governance Committee as a potential candidate, the Committee may
collect and review publicly available information to assess
whether the person should be considered further. Generally, if
the candidate expresses a willingness to be considered to serve
on the Board, the Nominating and Governance Committee will
conduct a thorough process of determining and assessing the
candidates qualifications and accomplishments. The
Nominating and Governance Committee follows the same evaluation
process with regard to candidates identified by the Committee
and any candidate who is recommended by our stockholders.
MEETINGS AND COMMITTEES OF THE BOARD
The Board has four standing committees: an Executive Committee,
a Nominating and Governance Committee, an Audit Committee, and a
Compensation Committee. The full Board held six meetings in
2005. Each Director attended 75% or more of the aggregate number
of meetings of the full Board held in 2005, with the exception
of Mr. Tarr who was unavailable to attend two meetings.
Each Director attended 75% or more of the meetings held by any
committee of the Board on which she or he served, with the
exception of Mr. Way who was unavailable to attend two
Nominating and Governance Committee meetings.
Executive Committee
The Executive Committee during 2005 consisted of
Messrs. Cheshire, Haley, Singleton and Stern, with
Mr. Singleton serving as Chairman. Effective
February 8, 2006, the Executive Committee consists of
Messrs. Cheshire, Haley, Raymund, Singleton, Stern and
Vareschi, with Mr. Singleton serving as Chairman. The
Committee may exercise all the powers and authority of the
Directors in the management of the business and affairs of the
Company and has been delegated authority to exercise the powers
of the Board during intervals between Board meetings. The
Executive Committee operates under a separate charter, which is
available on the Companys corporate governance website at
www.wesco.com/governance. The Executive Committee held
three meetings in 2005.
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Nominating and Governance Committee
The Nominating and Governance Committee of the Company is
composed of four Directors who are independent under
NYSE standards and the Companys categorical Board
independence standards, which are set forth in the
Companys Corporate Governance Guidelines. During 2005, the
Committee consisted of Ms. Beach Lin and
Messrs. Miles, Singleton and Way, with Mr. Miles
serving as Chairman. Effective February 8, 2006, the
Committee consists of Mses. Beach Lin and Utter and
Messrs. Miles and Tarr, with Mr. Miles serving as
Chairman. The Committee is responsible for identifying and
nominating candidates for election or appointment to the Board.
It is also the responsibility of the Nominating and Governance
Committee to review and make recommendations to the Board with
respect to the corporate governance policies and practices of
the Company and to develop and recommend to the Board a set of
corporate governance principles applicable to the Company. The
Nominating and Governance Committee operates under a separate
charter, which is available on the Companys corporate
governance website at www.wesco.com/governance. The
principal activities of the Committee in 2005 involved the
identification and nomination of candidates for appointment as
Directors and the development of new or revised corporate
governance practices. The Nominating and Governance Committee
held three meetings in 2005.
Audit Committee
The Audit Committee during 2005 consisted of Ms. Beach Lin,
and Messrs. Tarr and Vareschi, with Mr. Tarr serving
as Chairman. Mr. Cheshire also served on the Committee
until September 7, 2005. Effective February 8, 2006,
the Committee consists of Ms. Beach Lin and
Messrs. Raymund, Tarr and Vareschi, with Mr. Tarr
serving as Chairman. All Committee members are independent
Directors in accordance with the independence standards of the
NYSE. The Board has determined that Mr. Tarr is an Audit
Committee Financial Expert, as defined under Item 401 of
SEC
Regulation S-K,
and that Mr. Tarr is independent according to the director
independence standards of the NYSE. The Audit Committee operates
under a written charter, which is available on the
Companys corporate governance website at
www.wesco.com/governance.
The Audit Committee is responsible for: (a) appointing the
independent registered public accounting firm to perform an
integrated audit of the Companys financial statements and
to perform services related to the audit; (b) reviewing the
scope and results of the audit with the independent registered
public accounting firm; (c) reviewing with management the
Companys year-end operating results; (d) considering
the adequacy of the internal accounting and control procedures
of the Company; (e) reviewing the Annual Report on
Form 10-K; and
(f) reviewing the non-audit services to be performed by the
independent registered public accounting firm, if any, and
considering the effect of such performance on the registered
public accounting firms independence. The Audit Committee
held six meetings in 2005 and has furnished the following report:
|
|
|
Report of the Audit Committee |
Management of the Company has the primary responsibility for the
financial statements and the reporting process including the
system of internal controls. The Audit Committee is responsible
for reviewing the Companys financial reporting process.
In this context, the Audit Committee has met and held
discussions with management and the independent registered
public accounting firm. Management represented to the Audit
Committee that the Companys financial statements were
prepared in accordance with generally accepted accounting
principles, and the Audit Committee reviewed and discussed the
Companys audited financial statements with management and
the independent registered public accounting firm. The Audit
Committee discussed with the independent registered public
accounting firm matters required to be discussed by Statement on
Auditing Standards No. 61 (Codification of Statements on
Auditing Standards AU § 380).
In addition, the Committee has discussed with its independent
registered public accounting firm, the independent registered
public accounting firms independence from the Company and
its management, including the matters in the written disclosures
pursuant to Rule 3600T of the Public Company Accounting
Oversight Board, which adopts on an interim basis Independence
Standards Board (ISB) standard No. 1.
10
The Committee discussed with the Companys internal
auditors and independent registered public accounting firm the
overall scope and plan for their respective audits. The
Committee meets with the internal auditors and independent
registered public accounting firm, with and without management
present, to discuss the results of their audits including, their
audit of the Companys internal controls, and the overall
quality of the Companys financial reporting.
In reliance on the reviews and discussions referred to above,
the Committee recommended to the Board (and the Board has
approved) that the audited financial statements be included in
the Annual Report on
Form 10-K for the
year ended December 31, 2005, for filing with the
Securities and Exchange Commission. The Committee and the Board
also appointed the selection of the Companys independent
registered public accounting firm, PricewaterhouseCoopers LLP,
for the year 2006.
Respectfully Submitted:
The Audit Committee
Robert J. Tarr, Jr., Chairman
Sandra Beach Lin
Steven A. Raymund
William J. Vareschi
|
|
|
Relationship with Independent Registered Public Accounting
Firm |
Aggregate fees for professional services rendered for the
Company by PricewaterhouseCoopers for the years ended
December 31, 2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Audit fees
|
|
$ |
1,645,000 |
|
|
$ |
1,407,000 |
|
Audit-related fees
|
|
|
33,000 |
|
|
|
32,000 |
|
Tax fees
|
|
|
461,000 |
|
|
|
522,000 |
|
All other fees
|
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,141,400 |
|
|
$ |
1,961,000 |
|
The audit fees for the years ended December 31, 2005 and
2004, respectively, were for professional services rendered for
the audits of the consolidated financial statements of the
Company, reviews of the Companys quarterly consolidated
financial statements and statutory audits. The fees for the year
ended December 31, 2005 and 2004 include fees related to
the Companys compliance with Section 404 of the
Sarbanes-Oxley Act.
The audit-related fees for the years ended December 31,
2005 and 2004, in each case, were for assurance and related
services related to employee benefit plan audits, accounting
consultations and attest services.
Tax fees for the years ended December 31, 2005 and 2004,
respectively, were for services related to tax planning and
compliance.
All other fees for the year ended December 31, 2005, were
for software licensing fees. During the years ended
December 31, 2005 and 2004, there were no services rendered
by PricewaterhouseCoopers, except as described above.
|
|
|
Audit Committee Pre-approval Policies and
Procedures |
The Companys Audit Committee has the sole authority to
pre-approve, and has policies and procedures that require the
pre-approval by the Audit Committee of all fees paid to, and all
services performed by, the Companys independent registered
public accounting firm. At the beginning of each year, the Audit
Committee approves the proposed services, including the nature,
type and scope of services contemplated and the related fees to
be rendered by the firm during the year. In addition, Audit
Committee pre-approval is also required for those engagements
that may arise during the course of the year that are outside
the scope of the
11
initial services and fees pre-approved by the Audit Committee.
During 2005 and 2004, all of the audit and non-audit services
provided by PricewaterhouseCoopers were pre-approved by the
Audit Committee.
|
|
|
Appointment of Independent Registered Public Accounting
Firm |
The Audit Committee has appointed PricewaterhouseCoopers as the
Companys independent registered public accounting firm to
audit the 2006 financial statements.
Compensation Committee
In 2005, the Compensation Committee consisted of
Messrs. Singleton, Stern, Tarr, and Way, all of whom are
independent Directors according to the recently revised
independence standards of the NYSE. Mr. Stern served as
Chairman of the Committee. Effective February 8, 2006, the
Committee consists of Ms. Utter and Messrs. Way,
Singleton and Stern, with Mr. Way serving as Chairman of
the Committee. All Committee members are independent Directors
in accordance with the independence standards of the NYSE. The
Compensation Committee is responsible for the review,
recommendation and approval of compensation arrangements for
Directors and executive officers, for the approval of such
arrangements for other senior level employees, and for the
administration of certain benefit and compensation plans and
arrangements of the Company. The Committee operates under a
separate charter setting forth its duties and responsibilities,
which is available on the Companys corporate governance
website at www.wesco.com/governance and is also available
in print for any requesting stockholder. The Compensation
Committee held three meetings in 2005.
|
|
|
Compensation of Directors |
Members of the Board who are also employees of the Company do
not receive cash compensation for their services as Directors.
Effective January 1, 2000, the Company established the
Deferred Compensation Plan for Non-Employee Directors under
which non-employee Directors can elect to defer 25% or more of
the annual Directors fee. Amounts deferred under this
arrangement are, on the deferral date, converted into stock
units (common stock equivalents), which will be credited via
book entry to an account in the Directors name. For
purposes of determining the number of stock units to be credited
to a Director for a particular year, the average of the high and
low trading prices of the Common Stock on the first trading day
in January of that year will be used. Distribution of deferred
stock units will be made in a lump sum or in installments, in
the form of shares of Common Stock, in accordance with the
distribution schedule selected by the Director at the time the
deferral election is made. All distributions will be made or
begin as soon as practical after January 1 of the year following
the Directors termination of Board service. In addition,
as of each July 1, beginning with July 1, 2002, each
non-employee Director who will be continuing as a Director after
that date receives a non-qualified stock option to
purchase 5,000 shares of Common Stock (or such other
amount as the Board may determine from time to time). The
exercise price of these options is equal to the fair market
value per share of Common Stock on the date of grant. A
non-employee Directors options vest on the third
anniversary of the date of grant. Effective July 1, 2005,
Directors will receive equity compensation in the form of Stock
Appreciation Rights (SARs).
During 2005, non-employee Directors received an annual retainer
of $50,000, payable in shares of common stock or a combination
of cash and shares of common stock (of which a maximum of 50%
may consist of cash) at each Directors direction. The
Chair of the Audit Committee receives an additional fee of
$10,000 payable annually. Board compensation levels have not
changed for fiscal 2006. In addition to the retainer,
non-employee directors are reimbursed for travel and other
reasonable
out-of-pocket expenses
related to attendance at Board and committee meetings.
12
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation information for the
Companys Chief Executive Officer and for the
Companys four other most highly compensated executive
officers for 2005 (the Named Executive Officers).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term | |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation | |
|
|
|
|
|
|
|
|
|
|
Securities | |
|
|
|
|
|
|
|
|
Annual Compensation | |
|
Underlying | |
|
All Other | |
|
|
|
|
Fiscal | |
|
| |
|
Equity Awards | |
|
Compensation ($) | |
|
Total | |
Name and Principal Position(s) |
|
Year | |
|
Salary ($) | |
|
Bonus ($)(1) | |
|
(#s)(2) | |
|
(3)(4)(5)(6)(7)(8) | |
|
Compensation | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Roy W. Haley
|
|
|
2005 |
|
|
|
700,000 |
|
|
|
1,600,000 |
|
|
|
200,000 |
|
|
|
136,632 |
|
|
|
2,436,632 |
|
|
Chairman and Chief |
|
|
2004 |
|
|
|
685,833 |
|
|
|
1,470,000 |
|
|
|
200,000 |
|
|
|
70,678 |
|
|
|
2,226,511 |
|
|
Executive Officer |
|
|
2003 |
|
|
|
615,000 |
|
|
|
300,000 |
|
|
|
300,000 |
|
|
|
35,072 |
|
|
|
950,072 |
|
John J. Engel
|
|
|
2005 |
|
|
|
450,000 |
|
|
|
530,000 |
|
|
|
75,000 |
|
|
|
102,778 |
|
|
|
1,082,778 |
|
|
Senior Vice President and |
|
|
2004 |
|
|
|
209,711 |
|
|
|
200,000 |
|
|
|
200,000 |
|
|
|
215,560 |
|
|
|
625,271 |
|
|
Chief Operating Officer |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen A. Van Oss
|
|
|
2005 |
|
|
|
408,333 |
|
|
|
430,000 |
|
|
|
75,000 |
|
|
|
65,156 |
|
|
|
903,489 |
|
|
Senior Vice President and |
|
|
2004 |
|
|
|
325,000 |
|
|
|
387,000 |
|
|
|
70,000 |
|
|
|
38,051 |
|
|
|
750,051 |
|
|
Chief Financial and |
|
|
2003 |
|
|
|
300,000 |
|
|
|
130,000 |
|
|
|
70,000 |
|
|
|
25,710 |
|
|
|
455,710 |
|
|
Administrative Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William M. Goodwin
|
|
|
2005 |
|
|
|
261,667 |
|
|
|
225,000 |
|
|
|
25,000 |
|
|
|
59,338 |
|
|
|
546,005 |
|
|
Vice President, Operations |
|
|
2004 |
|
|
|
242,000 |
|
|
|
280,500 |
|
|
|
30,000 |
|
|
|
38,308 |
|
|
|
560,808 |
|
|
|
|
|
2003 |
|
|
|
235,833 |
|
|
|
118,000 |
|
|
|
38,000 |
|
|
|
23,548 |
|
|
|
377,381 |
|
Donald H. Thimjon
|
|
|
2005 |
|
|
|
245,333 |
|
|
|
225,000 |
|
|
|
25,000 |
|
|
|
54,071 |
|
|
|
524,404 |
|
|
Vice President, Operations |
|
|
2004 |
|
|
|
242,000 |
|
|
|
280,500 |
|
|
|
35,000 |
|
|
|
35,852 |
|
|
|
558,352 |
|
|
|
|
|
2003 |
|
|
|
235,833 |
|
|
|
76,200 |
|
|
|
38,000 |
|
|
|
23,874 |
|
|
|
335,907 |
|
|
|
(1) |
Bonus amounts reflect compensation earned in the indicated
fiscal year, but approved and paid in the following year. Bonus
amounts reflect awards under documented performance objectives
and plans, and are inclusive of a special one-year Value
Acceleration Program payment approved by the Board for
performance substantially above established goals. |
|
(2) |
All equity awards granted to the Named Executive Officers in
2005, 2004 and 2003 were granted under the Companys 1999
Long-Term Incentive Plan (LTIP), as amended and
approved by the Board and stockholders. SARs granted in 2005
have an exercise price of $31.65 per share. SARs granted in
2004 have an exercise price of $24.02 per share.
Mr. Engel, after joining the Company in 2004 was granted
stock options at an exercise price of $16.82 per share. Stock
options granted in 2003 have an exercise price of $5.90 per
share. Awards granted under the LTIP are subject to certain time
and performance-based vesting requirements. |
|
(3) |
Includes contributions by the Company under the WESCO
Distribution, Inc. Retirement Savings Plan in the amounts of
(a) $2,583, $4,200, $2,800, $5,250, and $6,150 for
Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon,
respectively, in 2005 (b) $6,000, $3,938, $2,600, $4,925,
and $6,000 for Messrs. Haley, Engel, Van Oss, Goodwin, and
Thimjon, respectively, in 2004, (c) $6,000, $-0-, $2,400,
$4,500, and $6,000 for Messrs. Haley, Engel, Van Oss,
Goodwin, and Thimjon, respectively, in 2003. An award under the
Companys Retirement Savings Plan in the form of a
discretionary contribution was made to all employees in 2005 for
2004 performance, specifically, in the amounts of $10,000,
$5,729, $10,000, $14,000, and $14,000 for Messrs. Haley,
Engel, Van Oss, Goodwin and Thimjon, respectively. |
|
(4) |
Includes contributions by the Company under the WESCO
Distribution, Inc. Deferred Compensation Plan in the amounts of
(a) $62,517 $15,300, $21,060, $11,015, and $8,775 for
Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon,
respectively, in 2005 (b) $22,700, $-0-, $10,613, $5,779,
and $3,341 for Messrs. Haley, Engel, Van Oss, Goodwin, and
Thimjon, respectively, in 2004, (c) $14,750, $-0-, $10,500,
$5,036 and $2,666 for Messrs. Haley, Engel, Van Oss,
Goodwin, and Thimjon, respectively, in 2003. An |
13
|
|
|
award under the Companys Retirement Savings Plan in the
form of a discretionary contribution was made in 2005 to the
Deferred Compensation Plan in the amounts of $39,115, $-0-,
$12,646, $11,183, and $8,257 for Messrs. Haley, Engel, Van
Oss, Goodwin, and Thimjon, respectively. |
|
(5) |
Includes an annual automobile allowance paid by the Company in
the amount of $12,000 for each of Messrs. Haley, Van Oss,
Goodwin, and Thimjon in each of 2005, 2004, and 2003. Includes
automobile allowance in the amount of $12,000 in 2005 and $5,500
in 2004, the year Mr. Engel became employed with the
Company. |
|
(6) |
Includes the dollar value of insurance premiums paid by the
Company for each executive officers term life insurance in
the amounts of (a) $2,322, $540, $1,242, $3,713 and $3,366
for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon,
respectively, in 2005, (b) $2,419, $225, $1,294, $2,208,
and $3,152 for Messrs. Haley, Engel, Van Oss, Goodwin, and
Thimjon, respectively, in 2004, (c) $2,322, $-0-, $810,
$2,012, and $3,208 for Messrs. Haley, Engel, Van Oss,
Goodwin, and Thimjon, respectively, in 2003. |
|
(7) |
Includes non-cash awards in the amounts of (a) $8,095,
$-0-; $5,408, $2,177, and $1,523 for Messrs. Haley, Engel,
Van Oss, Goodwin, and Thimjon, respectively, in 2005,
(b) $7,809, $1,675, $5,094, $2,177 and $840 for
Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon,
respectively, in 2004. |
|
(8) |
Includes relocation allowance paid by the Company for
Mr. Engel in the amounts of $65,009 and $204,222 in 2005
and 2004 respectively. |
SARs Grants in Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total | |
|
|
|
|
|
Potential Realizable Value | |
|
|
Number of | |
|
SARs | |
|
|
|
|
|
at Assumed Rates of | |
|
|
Securities | |
|
Granted to | |
|
|
|
|
|
Stock Price Appreciation | |
|
|
Underlying | |
|
Employees | |
|
|
|
|
|
for SAR Term(1) | |
|
|
SARs | |
|
In Fiscal | |
|
Exercise | |
|
Expiration | |
|
| |
Name |
|
Granted | |
|
Year | |
|
Price ($/Sh) | |
|
Date | |
|
5% | |
|
10% | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Roy W. Haley
|
|
|
200,000 |
|
|
|
22.00 |
% |
|
|
31.65 |
|
|
|
7/1/2015 |
|
|
|
3,980,000 |
|
|
|
10,088,000 |
|
John J. Engel
|
|
|
75,000 |
|
|
|
8.25 |
% |
|
|
31.65 |
|
|
|
7/1/2015 |
|
|
|
1,492,500 |
|
|
|
3,783,000 |
|
Stephen A. Van Oss
|
|
|
75,000 |
|
|
|
8.25 |
% |
|
|
31.65 |
|
|
|
7/1/2015 |
|
|
|
1,492,500 |
|
|
|
3,783,000 |
|
William M. Goodwin
|
|
|
25,000 |
|
|
|
2.75 |
% |
|
|
31.65 |
|
|
|
7/1/2015 |
|
|
|
497,500 |
|
|
|
1,261,000 |
|
Donald H. Thimjon
|
|
|
25,000 |
|
|
|
2.75 |
% |
|
|
31.65 |
|
|
|
7/1/2015 |
|
|
|
497,500 |
|
|
|
1,261,000 |
|
Note: During 2003, the Company adopted the measurement
provisions of SFAS No. 123, Accounting for
Stock-Based Compensation and began expensing equity
awards. The Company recognized $8.6 million of compensation
expense related to all awards in the year ended
December 31, 2005.
|
|
(1) |
Amounts represent hypothetical gains that could be achieved for
the respective SARs if exercised at the end of the SARs term.
These gains are based on assumed rates of stock price
appreciation of 5% and 10% compounded annually from the date the
respective SARs were granted to their expiration date. These
assumptions are not intended to forecast future appreciation of
our stock price. The potential realizable value computation does
not take into account federal or state income tax consequences
of SARs exercises or sales of appreciated stock. |
14
Aggregated Option/SARs Exercises in Last Fiscal Year and
Fiscal Year-End Option/SARs Values
The table below sets forth information for each Named Executive
Officer with regard to the aggregate (stock options and SARs)
held at December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
Value of Unexercised | |
|
|
|
|
|
|
Underlying Unexercised Option/ | |
|
In-the-Money Option/SARs | |
|
|
|
|
|
|
SARs Awards at FY-End | |
|
Awards at FY-End ($)(1) | |
|
|
|
|
|
|
| |
|
| |
|
|
Shares | |
|
|
|
|
|
|
|
|
Acquired | |
|
Value | |
|
(Exercisable Unexercisable) | |
|
(Exercisable Unexercisable) | |
|
|
on Exercise | |
|
Realized | |
|
| |
|
| |
Name |
|
(#) | |
|
(#) | |
|
(#) | |
|
(#) | |
|
($) | |
|
($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Roy W. Haley
|
|
|
N/A |
|
|
|
N/A |
|
|
|
808,542 |
|
|
|
958,458 |
|
|
|
29,942,502 |
|
|
|
25,899,658 |
|
John J. Engel
|
|
|
N/A |
|
|
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N/A |
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33,334 |
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241,666 |
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863,684 |
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5,149,316 |
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Stephen A. Van Oss
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25,000 |
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668,250 |
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130,963 |
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271,009 |
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4,217,782 |
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6,962,181 |
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William M. Goodwin
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10,525 |
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261,651 |
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84,283 |
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175,352 |
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2,634,489 |
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4,853,667 |
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Donald H. Thimjon
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54,808 |
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1,494,674 |
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11,667 |
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178,685 |
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218,290 |
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5,193,027 |
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(1) |
Based on the closing market price per share of $42.73 as
reported on the NYSE on December 31, 2005. |
During December 2003, in a privately negotiated transaction with
19 employees, including Messrs. Haley, Goodwin, and
Thimjon, the Company redeemed the net equity value of stock
options originally granted in 1994 and 1995, representing
approximately 2.9 million shares. The options held by the
employees had a weighted average price of $1.75. The options
were redeemed at a price of $8.63 per share, effective for
accounting purposes, as of December 31, 2003. The
transaction was settled, and the aggregate cash payment of
$20.1 million was made on January 6, 2004.
Employment Agreements
Employment Agreement with the Chief Executive Officer.
The Company is a party to an employment agreement with
Mr. Haley providing for a rolling employment term of three
years. Pursuant to this agreement, Mr. Haley is entitled to
an annual base salary of at least $500,000, the actual amount of
which may be adjusted by the Board from time to time, and an
annual incentive bonus equal to a percentage of his annual base
salary ranging from 0% to 200%. The actual amount of
Mr. Haleys annual incentive bonus will be determined
based upon the Companys financial performance as compared
to the annual performance objectives established for the
relevant fiscal year. If Mr. Haleys employment is
terminated by the Company without cause, by
Mr. Haley for good reason or as a result of
Mr. Haleys death or disability, Mr. Haley is
entitled to continued payments of his average annual base salary
and his average annual incentive bonus, reduced by any
disability payments for the three-year period, or in the case of
a termination due to Mr. Haleys death or disability,
the two-year period, following such termination, and continued
welfare benefit coverage for the two-year period following such
termination. In addition, in the event of any such qualifying
termination, all outstanding options held by Mr. Haley will
become fully vested.
The agreement further provides that, in the event of the
termination of Mr. Haleys employment by the Company
without cause or by Mr. Haley for good
reason, in either such case, within the two-year period
following a change in control of the Company, in
addition to the termination benefits described above,
Mr. Haley is entitled to receive continued welfare benefit
coverage and payments in lieu of additional contributions to the
Companys Retirement Savings Plan and Deferred Compensation
Plan for the three-year period following such change in
control. The Company has agreed to provide Mr. Haley
with an excise tax gross up with respect to any excise taxes
Mr. Haley may be obligated to pay pursuant to
Section 4999 of the United States Internal Revenue Code of
1986 on any excess parachute payments. In addition, following a
change in control, Mr. Haley is entitled to a
minimum annual bonus equal to 50% of his base salary, and the
definition of good reason is modified to include
certain additional events. The agreement also contains customary
covenants regarding nondisclosure of confidential information
and non-competition and non-solicitation restrictions.
Employment Agreement with the Chief Operating Officer.
The Company is a party to an employment agreement with
Mr. Engel providing for an employment term of two years,
subject to automatic renewals for
15
an additional year as of each annual anniversary of the
agreement. The agreement provides that Mr. Engel is
entitled to an annual base salary of at least $450,000, subject
to adjustment by the Board, and incentive compensation under the
Companys incentive compensation and other bonus plans for
senior executives in amounts ranging from 0% to 100% his annual
base salary, based upon the Companys achievement of
earnings, sales growth and return on investment or other
performance criteria established by the Compensation Committee.
If Mr. Engels employment is terminated by reason of
his death, the Company will pay the amount of his accrued but
unpaid base salary through his date of death, any accrued but
unpaid incentive compensation, any other reimbursable amounts
and any payments required to be made under the Companys
employee benefit plans or programs. If Mr. Engels
employment is terminated by reason of disability, he will
continue to receive his base salary and all welfare benefits
through the date of disability, offset by the amount of any
disability income payments provided under the Companys
disability insurance. If Mr. Engels employment is
terminated by the Company without cause or by him
for good reason, he is entitled to his accrued but
unpaid base salary through the date of termination, a cash
amount equal to his pro rata incentive compensation for the
fiscal year in which the termination occurs, monthly cash
payments equal to 1.5 times his monthly base salary as of the
date of termination for the greater of (i) the remainder of
the employment agreements term, or (ii) eighteen
months following the date of termination, and continued welfare
benefit coverage for the two years. In such event, all stock
options, except those that will remain unvested due to specified
operational or financial performance criteria not being
satisfactorily achieved, will become fully vested, and the
Company will pay the full cost of his COBRA continuation
coverage. If Mr. Engels employment is so terminated
within one year following a change in control of the
Company, the cash amount equal to 1.5 times his monthly
base salary will be paid in monthly installments for
24 months. The Company has agreed to provide Mr. Engel
with a partial excise tax gross up with respect to any excise
taxes Mr. Engel may be obligated to pay. The agreement also
contains customary covenants regarding nondisclosure of
confidential information and non-competition and
non-solicitation restrictions. Additionally, under the terms of
the agreement, the Company paid approximately $204,222 and
$65,009 in relocation expenses on behalf of Mr. Engel in
2004 and 2005, respectively.
Employment Agreement with the Chief Financial Officer.
The Company is party to an employment agreement with
Mr. Van Oss providing for an employment term of two years,
subject to automatic renewals for an additional year as of each
annual anniversary of the agreement. The agreement provides that
Mr. Van Oss is entitled to an annual base salary of at
least $450,000, subject to adjustment by the Board, and
incentive compensation under the Companys incentive
compensation and other bonus plans for senior executives in
amounts ranging from 0% to 100% his annual base salary, based
upon the Companys achievement of earnings, sales growth
and return on investment or other performance criteria
established by the Compensation Committee.
If Mr. Van Oss employment is terminated by reason of
his death, the Company will pay the amount of his accrued but
unpaid base salary through his date of death, any accrued but
unpaid incentive compensation, any other reimbursable amounts
and any payments required to be made under the Companys
employee benefit plans or programs. If Mr. Van Oss
employment is terminated by reason of disability, he will
continue to receive his base salary and all welfare benefits
through the date of disability, offset by the amount of any
disability income payments provided under the Companys
disability insurance. If Mr. Van Oss employment is
terminated by the Company without cause or by him
for good reason, he is entitled to his accrued but
unpaid base salary through the date of termination, a cash
amount equal to his pro rata incentive compensation for the
fiscal year in which the termination occurs, monthly cash
payments equal to 1.5 times his monthly base salary as of the
date of termination for the greater of (i) the remainder of
the employment agreements term, or (ii) eighteen
months following the date of termination, and continued welfare
benefit coverage for the two years. In such event, all stock
options, except those that will remain unvested due to specified
operational or financial performance criteria not being
satisfactorily achieved, will become fully vested, and the
Company will pay the full cost of his COBRA continuation
coverage. If Mr. Van Oss employment is so terminated
within one year following a change in control of the
Company, the cash amount equal to 1.5 times his monthly base
salary will be paid in monthly installments for 24 months.
The
16
Company has agreed to provide Mr. Van Oss with a partial
excise tax gross up with respect to any excise taxes
Mr. Van Oss may be obligated to pay. The agreement also
contains customary covenants regarding nondisclosure of
confidential information and non-competition and
non-solicitation restrictions.
Report of Compensation Committee on Executive
Compensation
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Responsibilities and Goals |
The Compensation Committee, composed of independent,
non-employee Directors, has the responsibility of administering
executive compensation and benefit programs, policies and
practices. The Committee engages the assistance of outside
consultants and uses third-party surveys in its consideration of
compensation levels and incentive plan designs. On an annual
basis, the Committee reviews and approves the compensation and
benefit programs for the executive officers, including the
Chairman and Chief Executive Officer.
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Executive Officer Compensation |
The objective of the Companys compensation program for
executive officers, including Mr. Haley, is to attract,
motivate, and reward the high caliber of executive performance
required to be successful in the competitive distribution
industry, and to enhance positive business results and growth in
stockholder value.
The Companys compensation program for executive officers
consists of a base salary, annual incentive bonuses and
long-term incentives. Executives have significant amounts of
compensation at risk, based on performance. Executives also
maintain a significant equity stake in the Company, aligning the
interests of management with those of the Companys
stockholders. As of December 31, 2005, each of the Named
Executive Officers owned Company stock valued at more than three
times their annual base salary.
The Companys Executive Compensation Programs can be
described as follows:
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Base salaries for the Companys executives are targeted at
or near the median of similarly sized industrial distribution
companies and other large distributors or wholesalers. Salaries
for each executive are reviewed annually, taking into account
factors such as overall company performance in relation to
competition and industry circumstances, changes in duties and
responsibilities, strategic and operational accomplishments, and
individual performance. From time to time (and not necessarily
on an annual basis), the Committee adjusts base salaries for
executive officers (including Mr. Haley) based on
performance, and if appropriate to reflect competitive pay
practices of peer companies. |
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Annual incentives are awarded for achievement of strategic and
operational objectives, improvement in operating results, and
performance in relation to financial goals of the Company, which
are established at the beginning of the year. Cash bonus
incentive awards granted for 2005 performance reflect
significant financial and operational achievements, which
exceeded targeted performance levels. |
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Long-term incentives generally are granted in the form of equity
awards such as stock options or SARs. The Committee believes
that equity awards are an effective long-term link between
executive performance and stockholder value. The Committee
authorized a SARs grant in July 2005, and each of the Named
Executive Officers received an equity award as shown in the
table reflecting SARs Grants in the Last Fiscal Year. |
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Chief Executive Officer Compensation |
In determining the compensation level for Mr. Haley, the
Companys Chief Executive Officer, the Committee reviewed
his performance against previously established 2005 objectives,
the Companys record performance in most performance
categories, and the significant gain in share price benefiting
all stockholders. The Committee assessed Mr. Haleys
individual performance and leadership, as reflected in the
Companys financial and operating performance, new business
development initiatives, successful completion of two
acquisitions, the effectiveness of the Companys continuous
improvement programs, cash flow generation and progress made in
capital structure improvements, refinancing transactions,
working capital performance, and overall liquidity.
Mr. Haleys base salary was established as $700,000
effective March 1, 2004, and was
17
increased to $750,000 effective January 1, 2006.
Mr. Haleys cash bonus for 2005 performance was
$1,600,000. He was also granted SARs for 200,000 shares of
the Companys Common Stock during 2005. This information is
also shown in the Summary Compensation Table and the SARs Grants
Table in this Proxy Statement.
The Committees goal is to maintain compensation and
benefit programs that are competitive within the distribution
industry and clearly linked to stockholder value. The Committee
believes that the 2005 compensation levels as disclosed in this
Proxy Statement are reasonable and appropriate.
The Committee intends to ensure that compensation paid to its
executive officers is within the limits of, or exempt from, the
deductibility limits of 162(m) of the Internal Revenue Code and
expects that all compensation will be deductible. However, it
reserves the right to pay compensation that is not deductible if
it determines that to be in the best interests of the Company
and its stockholders.
Respectfully Submitted:
Compensation Committee
Kenneth Way, Chairman
James L. Singleton
James A. Stern
Lynn M. Utter
Compensation Committee Interlocks
None of the Companys executive officers serve as an
executive officer of, or as a member of the compensation
committee of any public company entity that has an executive
officer, Director or other designee serving as a member of our
Board.
18
COMPARATIVE STOCK PERFORMANCE
The following performance graph compares the total stockholder
return of an investment in the Companys Common Stock to
that of a peer group of other industrial and construction
products distributors and the Russell 2000 index of small cap
stocks for the period commencing December 31, 2000 and
ending on December 31, 2005. The graph assumes that the
value of the investment in the Companys Common Stock was
$100 on December 31, 2000. The historical information set
forth below is not necessarily indicative of future performance.
The Company does not make or endorse any predictions as to
future stock performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG WESCO INTERNATIONAL, INC., THE RUSSELL 2000 INDEX
AND A PEER GROUP
19
The following table reflects the companies that are included in
the Peer Group Indexes for the years presented. Companies in
italics were, at varying points, removed from the Peer Group
Index as such companies ceased to be publicly-traded companies.
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2001 |
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2002/2003/2004/2005 |
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Airgas, Inc.
Applied Industrial Technologies
Barnes Group, Inc.
Building Materials Holding Corp.
Fastenal Company
Grainger (W.W.), Inc.
Hughes Supply, Inc.
Industrial Distribution Group, Inc.
Kaman Corp.
KEVCO, Inc.
Lawson Products, Inc.
Maxco, Inc.
MSC Industrial Direct Co., Inc.
NCH Company
Noland Company
Pameco Corp.
Park-Ohio Holdings Corp.
Premier Farnell PLC
SCP Pool Corp.
Strategic Distribution, Inc.
Watsco, Inc. |
|
Airgas, Inc.
Applied Industrial Technologies
Barnes Group, Inc.
Building Materials Holding Corp.
Fastenal Company
Grainger (W.W.), Inc.
Hughes Supply, Inc.
Industrial Distribution Group, Inc.
Kaman Corp.
Lawson Products, Inc.
Maxco, Inc.
MSC Industrial Direct Co., Inc.
Noland Company
Park-Ohio Holdings Corp.
Premier Farnell PLC
SCP Pool Corp.
Strategic Distribution, Inc. |
20
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the
Companys Common Stock as of April 3, 2006, by each
person or group known by the Company to beneficially own more
than five percent of the outstanding Common Stock, each
Director, each of the Named Executive Officers, and all
Directors and executive officers as a group. Unless otherwise
indicated, the holders of all shares shown in the table have
sole voting and investment power with respect to such shares. In
determining the number and percentage of shares beneficially
owned by each person, shares that may be acquired by such person
pursuant to options or convertible stock exercisable or
convertible within 60 days of April 3, 2006 are deemed
outstanding for purposes of determining the total number of
outstanding shares for such person and are not deemed
outstanding for such purpose for all other stockholders.
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Shares | |
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Percent | |
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Beneficially | |
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Owned | |
Name |
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Owned(1) | |
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Beneficially | |
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FMR Corporation
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7,106,159 |
(2) |
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14.8 |
% |
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82 Devonshire Street |
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Boston, Massachusetts 02109 |
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Putnam, LLC d/b/a Putnam Investments
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2,631,966 |
(3) |
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5.5 |
% |
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One Post Office Square |
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Boston, Massachusetts 02109 |
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Roy W. Haley
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1,569,387 |
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3.2 |
% |
Stephen A. Van Oss
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246,928 |
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* |
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William M. Goodwin
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84,252 |
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* |
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John J. Engel
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83,334 |
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* |
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Donald H. Thimjon
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69,359 |
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* |
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James L. Stern
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25,000 |
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* |
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Robert J. Tarr, Jr.
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15,000 |
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* |
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James L. Singleton
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10,000 |
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* |
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Kenneth L. Way
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5,453 |
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* |
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George L. Miles, Jr.
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5,000 |
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* |
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Sandra Beach Lin
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350 |
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* |
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All 19 executive officers and Directors as a group
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2,180,661 |
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4.4 |
% |
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* |
Indicates ownership of less than 1% of the Common Stock. |
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(1) |
The beneficial ownership of Directors set forth in the following
table does not reflect shares of common stock payable to any
such Director following the Directors termination of Board
service with respect to portions of annual fees deferred under
the Companys Deferred Compensation Plan for Non-Employee
Directors or in settlement of any options or SARs granted to any
such Director under that plan to the extent that those options
or SARs may not be exercised or settled within 60 days of
April 3, 2006. |
|
(2) |
Based on a Schedule 13G/A filed under the Securities Exchange
Act of 1934 by FMR Corporation and its affiliates on
February 14, 2006. |
|
(3) |
Based on a schedule 13G/A filed under the Securities Exchange
Act of 1934 by Putnam, LLC d/b/a Putnam Investments and its
affiliates on February 10, 2006. |
Section 16(a) Beneficial Ownership Reporting
Compliance
Under the federal securities laws of the United States, the
Companys Directors, its executive officers, and any
persons beneficially holding more than ten percent of the
Companys Common Stock are required to report their
ownership of the Companys Common Stock and any changes in
that ownership to the SEC and the NYSE. Specific due dates for
these reports have been established. The Company is required to
report in this Proxy Statement any failure to file by these
dates. For the fiscal year ended December 31, 2005, there
was one late filing each for J. Stanley Baumgartner, Jr.
(Form 4) and William M. Goodwin (Form 5).
21
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers has served as the Companys
independent registered public accounting firm since 1994.
Representatives of PricewaterhouseCoopers will be present at the
Annual Meeting, and will have an opportunity to make a statement
if they desire to do so, and will be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
No stockholder proposals were submitted for consideration by the
Board for the 2006 Annual Meeting.
Rule 14a-8 of the
Exchange Act contains the procedures for including certain
stockholder proposals in the Companys Proxy Statement and
related materials. The deadline for submitting a stockholder
proposal pursuant to
Rule 14a-8 for the
2007 Annual Meeting of the Company is the date, which is
120 days prior to the first anniversary date of the mailing
of this Proxy Statement, or December 18, 2006. With respect
to any stockholder proposal outside the procedures provided in
Rule 14a-8 and
received by the Company no later than 45 days prior to the
first anniversary date of the mailing of this Proxy Statement,
or March 3, 2007, the Company may be required to include
certain limited information concerning such proposal in the
Companys Proxy Statement so that proxies solicited for the
2007 Annual Meeting may confer discretionary authority to vote
on any such matter. Any stockholder proposals should be
addressed to the Corporate Secretary of the Company,
225 West Station Square Drive, Suite 700, Pittsburgh,
Pennsylvania 15219.
22
APPENDIX A
WESCO INTERNATIONAL, INC.
INDEPENDENCE POLICY
The Board of Directors of WESCO International, Inc. has adopted
the following standards for determining the independent status
of each its Directors for purposes of serving on the Board and
its Committees and complying with the listing standards of the
New York Stock Exchange and Securities and Exchange Commission
rules on corporate governance. The Board of Directors will, on
an annual basis, affirmatively determine the independent status
of each of its Directors relative to the standards that have
been adopted. Such standards and determinations will be
disclosed in the Companys proxy materials and Annual
Report on
Form 10-K, as
required.
Independence Standards
A member of the Companys Board is considered to be
independent of management of the Company, unless:
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Such Director is also a member of management of the Company, |
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Such Director (or an immediate family member of such Director)
received more than $100,000 in direct compensation in any one
year within the past three years for services, other than
Director and committee fees and pension or other forms of
deferred compensation for prior service (provided such
compensation is not contingent in any way on continued service), |
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Such Director (or an immediate family member of such Director)
was affiliated with or employed, in a professional capacity, by
a present or former internal or external auditor of the Company
within the past three years, |
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Such Director (or an immediate family member of such Director)
was employed, as an executive officer, by another company where
any of the Companys present executive officers served on
such companys compensation committee within the past three
years, |
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Such Director (or an immediate family member of such Director)
was an employee of a company that made payments to, or received
payments from, the Company for property or services in an amount
which, in any single fiscal year, exceeded $1 million or 2%
of such other companys consolidated gross revenues,
whichever was greater, during the past three years, |
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Such Director (or an immediate family member of such Director)
was an employee of a company that was indebted to the Company in
an amount that exceeds 5% of such companys total assets or
5% of the Companys total assets at the end of each
respective fiscal year within the past three years, or |
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Such Director (or immediate family member of such Director) was
affiliated, either as an employee, officer or director, with a
foundation, university or other non-profit organization that
received a donation from the Company in excess of $100,000 or
from an executive officer of the Company in excess of $10,000 in
any one year during the past three years. |
For purposes of participating on the Audit Committee of the
Board, such Director (in addition to the above) will also meet
the independence requirements set forth in
Rule 10A-3 of the
Securities Exchange Act of 1934, as amended.
A-1
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This Proxy is solicited on behalf of the Board of Directors. The Board of Directors recommends a vote FOR the foregoing proposals.
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Please
Mark Here
for Address
Change or
Comments
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SEE REVERSE SIDE |
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1 |
ELECTION OF DIRECTORS: |
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The election of three directors, |
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01 Steven A. Raymund 02
Lynn M. Utter Jr. 03 William J Vareschi for a three-year term to expire in 2009 |
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In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
This proxy, when properly executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is made the proxy will be voted FOR the foregoing proposals. |
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FOR
all nominees listed above (except as marked to the contrary)
o
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WITHHOLD AUTHORITY to vote for all nominees listed above
o |
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Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership please sign in partnership name by authorized person.
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(Instruction: To
withhold authority to vote for any nominee write that nominees name on the line below)
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FOR
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2 |
Ratification of the Independent
Registered Public Accounting firm
for 2006: PricewaterhouseCoopers LLP |
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Choose MLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to
Investor Service Direct® at www.melloninvestor.com/isd where step-by-step
instructions will prompt you through enrollment. |
Please disregard if you have previously provided your consent decision
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Signature
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Signature
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Date |
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, 2006 |
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Vote
by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your
Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
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Internet
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Telephone
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Mail |
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http://www.proxyvoting.com/wcc
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1-866-540-5760
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Use the internet to vote your proxy.
Have your proxy card in hand when
you access the web site.
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OR
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Use any touch-tone telephone to
vote your proxy. Have your proxy
card in hand when you call.
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OR
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Mark, sign and date your proxy card
and return it in the enclosed postage-paid envelope.
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If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the Internet at www.wesco.com/annualreport
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WESCO International, Inc. 225 West Station Square Drive, Suite 700
Pittsburgh, Pennsylvania 15219 |
This Proxy is solicited on behalf of the Board of Directors. The Board of Directors recommends a vote FOR the foregoing proposals. |
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PROXY |
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The undersigned hereby appoints Stephen A. Van Oss and Marcy Smorey-Giger as Proxies, and each of them with full power of substitution, to represent the undersigned and to vote
all shares of common stock of WESCO International, Inc., which the undersigned would be entitled to vote if personally present and voting at the Annual Meeting of
Stockholders to be held May 17, 2006 or any adjournment thereof, upon
all matters coming before the meeting. |
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Address
Change/Comments (Mark the corresponding box on the
reverse side) |
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