WESCO is a leading wholesaler and distributor of electrical and industrial products. We operate in large markets with a long history of consistent growth that exceeds the long-term growth rates for Gross Domestic Product. Even in periods of general economic weakness the aggregate market for electrical equipment and supplies has been resilient due to continued expansion in the use of automated processes, enhanced power systems, security devices, home and workplace lighting, and an ever-increasing array of electrical and electronic equipment. Although it has experienced occasional, temporary declines tied to general economic weakness, our industry continues to have long-term positive characteristics.

The current economic conditions are unusual. For the first time in more than two decades, industry sales of electrical equipment and supplies have had two consecutive years of declining volume. Weak industrial markets, a decline in industrial and facilities capital expenditures and a sharp drop in non-residential construction projects have adversely affected most of WESCO’s markets. Because the overall market demand for WESCO’s products and services had been depressed throughout 2002, our sales declined by 9%. In spite of this market weakness, we are confident that the long-term prospects for our industry are good and that recovery is inevitable. Accordingly, we have been emphasizing operational performance improvements that better position WESCO for successful and profitable operations today and for growth and improved performance when the economy rebounds.

Premier Customers
WESCO has developed an operations style and customer service standard that is often referred to as our “extra effort” approach. Whether customers are large or small, national in scope or highly localized, industrially or commercially oriented, WESCO provides service that is matched to their requirements. The value of WESCO’s service model is confirmed every year by our ability to add premier companies from a wide range of industries to our large and growing customer base. The large companies that select WESCO as their preferred supplier for national accounts, integrated supply or alliance programs typically have some sizeable facilities as well as a few smaller or remote operations. WESCO routinely demonstrates that we can provide exceptional local service while also meeting the sophisticated and highly diverse systems and reporting needs of corporate customers. We were again successful throughout 2002 in winning preferred supplier arrangements with large, well-known, multi-location customers. This sales success with premier organizations gives us confidence that we are gaining market share and laying the groundwork for future growth.

Productivity
The investments we’ve made in marketing and operations management during this unusually long economic downturn have positioned us for steady growth as the economy recovers. We’ve been able to protect our margins and reduce operating costs during this period of intense competition for new or retained business. Investments made in systems, processes and controls are producing outstanding information for use in product marketing, service level management, pricing, purchasing and strident control of operating costs. We have managed for profitability, generating positive cash flow and strengthening our balance sheet.

2002 Operating Results
Total sales revenue in 2002 was $3.33 billion, a 9.1% reduction from prior year levels. Operating income as a percent of sales declined to 2.3% from 2.6% in 2001. Net income increased 14.3% to $23.1 million, as a result of lower interest expense and a lower tax rate. Earnings per share were $0.49, compared to $0.43 in 2001.

Capital Structure
WESCO’s balance sheet and financial liquidity position were improved considerably during 2002. We strengthened working capital positions, and arranged a new, five-year, $290 million asset backed revolving credit facility in March. WESCO has no significant debt repayment obligations until 2007. As of year-end, ready funding availability under our revolving credit facility was $154 million. We made further improvements to our capital structure in early 2003 with the completion of a $51 million, 10-year term real estate financing.

Corporate Governance
In December, Ms. Sandra Beach Lin and Mr. William Vareschi were elected to the Board, bringing the total to ten. Ms. Beach Lin is president of Alcoa’s Closure Systems International Division and had previously served as an operating executive with Allied Signal, Smith & Nephew Perry, Crest Ultrasonics and American Cyanamid. Mr. Vareschi is the chief executive officer of Central Parking Corporation and a former long-term executive of General Electric. WESCO’s management team and its Board of Directors are fully committed to the highest standards of corporate governance, business conduct and financial reporting. During the year, management and the Board spent considerable time reviewing, validating and updating our governance procedures and compliance processes.

Outlook
WESCO’s management is determined to re-establish a pattern of sales and earnings growth. We have expanded our marketing activities at both local market and national levels, completed company-wide sales training, and added major new product lines and services. Since we do not anticipate significant near-term improvement in the general economic climate, we are maintaining a relentless focus on operational productivity. We fully intend to protect and improve on our low-cost position, and we are piloting productivity improvement concepts borrowed from leading industrial firms to drive savings in operations and working capital.

We thank our customers, employees, supplier partners and shareholders for their efforts and support during these challenging times.

Roy W. Haley
Chairman and Chief Executive Officer