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F I S C A LAnnual ReportY E A R2 0 1 7
WHO WE AREWesco Aircraft is one of the world’s leading distributors and providers of comprehensive supplychain management services to the global aerospace industry. The company’s services range fromtraditional distribution to the management of supplier relationships, quality assurance, kitting, justin-time delivery, chemical management services, third-party logistics or fourth-party logistics andpoint-of-use inventory management.BROAD PRODUCT OFFERING AND SERVICE CAPABILITIESWesco Aircraft’s full-service approach aligns to the evolving needs of our customers. We offer a comprehensiverange of cost-saving innovations by combining our vast breadth of products with our value-add supply chainservices, allowing our customers to focus on their core competencies.HardwareChemicalsElectronic ComponentsBearingsMachined Partsand ToolingQuality AssuranceKittingJust-in-Time (JIT)ManagementChemical ManagementServices (CMS)3PL/4PL ServicesVALUE PROPOSITIONOur value proposition is robust. For customers, we can reduce overhead, improve working capital and aggregatedemand to buy better than they can individually. For suppliers, the value we bring includes improved utilization,demand forecasts to improve their production system and access to a significantly larger number of customers.Customer BenefitsLower SG&AReduced working capitalLower excess andobsolescence expenseImproved productivityCustomersSuppliersSupplier BenefitsReduced finished goodsinventoryPrice disciplineImproved working capitaland cash flowSupply base consolidationAccess to more than 7,000customersSubstantial improvement inpart qualityLower administrative andselling costsBetter on-time deliveryImproved on-timeperformanceFewer stock shortagesLower average lead-timeImproved machineutilization
Dear Shareholders,I don’t think anyone would disagreethat fiscal 2017 was a challengingyear for Wesco. When I was askedto step into this role last May, ourbusiness was not performing toexpectations. Wesco had become tooinwardly focused, making short-termdecisions that hurt our relationshipswith customers and our financialperformance. As one shareholder observed, our goals werein the wrong order; we had placed financial results ahead ofsupporting the customer – and achieved neither in the process.To right the ship, we quickly engaged in activities that wouldhelp us better understand our execution issues and formulatea plan to address them. We renewed our “customer-first” cultureto ensure that Wesco would return to the world-class service forwhich we were known. We also invested in inventory and peopleto improve service levels.I personally met with our top customers and suppliers,rebuilding partnerships and restoring relationships, as wellas our employees to encourage engagement, alignment andaccountability. We also reorganized to speed decision-makingand bring us closer to the customer.We then developed a long-term improvement plan withinitiatives to drive better performance. Our plan is groundedin four principal focus areas: profitable growth and improvedmargins; procurement and inventory management; customerservice and on-time delivery; and greater efficiency andreduced costs.In the first area, our initiatives led to a significant increase in adhoc bookings in the second half of fiscal 2017 compared to thefirst half of the year. The same customers I met with earlier in theyear are telling me now that it’s nice to see Wesco back – andgiving us more business as a result.In addition, our focus on winning new business, streamliningimplementations and improving service has helped us mitigatevolume declines in existing agreements and deliver betterperformance in long-term contracts.At the same time, we’re actively managing inventory,aggregating demand, accelerating remaining long-termpurchase agreements and instilling greater discipline in ourbuying processes to lower cost and improve margins. Weinvested in inventory during the year to capitalize on pricebreaks, while providing more parts where they are needed, andto support new business.In customer service and on-time delivery, we implemented newoperational processes and metrics in our largest warehouse, whilereducing overtime and total labor cost per transaction. As a result,we have seen on-time delivery rates return to levels customerspreviously enjoyed with Wesco. These new processes are beingrolled out now to all major warehouse sites, and because of theirsuccess, we are expanding their scope to include procurementand sales operations.Through the execution of these initiatives, we believe we havestabilized our business from an operational perspective. Weare seeing positive trends emerge and a recovery in keyleading indicators.More importantly, we’re changing the way we think about thebusiness, where our people, culture, customers and suppliersrank just as high as achieving financial performance. I’m a firmbeliever that a fully engaged workforce will deliver superiorcustomer service, which will lead to better financial performance.It all starts with a Vision of generating value for our people,customers, suppliers and shareholders and delivering the bestcustomer experience in everything we do, every day we cometo work.We advance this Vision through Values that define who we are asan organization – Values that include people, teamwork, ethics,engagement, accountability, open communications, customerfocus, quality, safety, a bias for action and achieving results.Our long-term Goals are to work as a highly engaged team; toadvance a culture based on our Values; to be the customer’sfirst choice and the supplier’s preferred partner; to lead withinnovation and execution; and to deliver profitable growth that’sabove the market.We’ve rebuilt Wesco’s foundation on people and customers; wenow need to turn our attention to driving greater efficiency andreducing our cost structure. I’m not satisfied with our progressin these areas.To accelerate the process and deliver more tangible financialimprovement, we initiated a comprehensive business review.Although work has just begun, we expect the review to furtherclarify our potential to improve the business and result in evenbetter service for our customers, a lower cost structure andgreater shareholder value.While I acknowledge the lack of progress made in our shareprice, our focus is on improving the long-term fundamentalsof our business. I also know that we’ve talked about turningaround the business for years and patience might be wearingthin. While we still have a lot more work to do, I’m encouragedby our operational progress.We’re seeing improvements in certain metrics for the first timein several quarters, and this builds confidence in our future. Weexpect this trend to continue in fiscal 2018 as we work acrossmultiple fronts to achieve better financial performance.I’d like to thank our dedicated employees, strong and diversecustomers, valuable supplier partners and shareholders. I believewe have a great future ahead of us and a value proposition thatis unmatched in the industry. Through a relentless focus ongenerating value in everything we do, I’m confident we willsucceed in the years ahead.Sincerely,Todd RenehanChief Executive OfficerNovember 28, 2017
FINANCIAL SUMMARYFINANCIAL HIGHLIGHTSFiscal Years Ended September 30,( in thousands, except per share data)Net sales201720162015 1,429,429 1,477,366 92(237,346)91,378(154,744)(2.40)0.93(1.60)(Loss) income from operationsInterest expense, netNet (loss) incomeDiluted net (loss) income per shareCash and cash equivalents 61,625 77,061 82,866Accounts receivable256,301249,195253,348Net 020,973Accounts payable184,273181,700149,615Long-term debt and capital lease obligations (1) (2)790,851835,989954,730Total stockholders’ equity649,731882,915817,573Total assetsNotes:(1)Total long-term debt and capital lease obligations excludes current portion.(2)Total long-term debt was reduced by deferred debt issuance costs of 11.7 million and 7.6 million as of September 30, 2017 and 2016, respectively,as required by ASU 2015-03 which we adopted on October 1, 2016. Total long-term debt was not retroactively recast to include deferred debt issuancecosts as of September 30, 2015.GLOBAL PRESENCEExpanding to support customers worldwide58 Locations 17 Countries 2,900 Employees 565,000 SKUsEUROPEEMEA / APACAMERICASSales/AdministrationValencia, CAOrlando, FLMelville, NYWest Chester, PAAustin, TXSanta Fe, ArgentinaSaltillo, MexicoNORTHCentral StockingAMERICAForward StockingLocationsLocationsDecatur, ALValencia, CAFoley, ALRancho Cordova,Savannah, GACATempe, AZAustin, TXFort Worth, TXMcDonough, GAAuburn, WAMiami, FLLachine, QCWichita, KSAmesbury, MA SOUTH Queretaro, MXBerkeley, MO AMERICAGreenville, NCMississauga, ONMechanicsburg, PAAustin, TXNorthlake, TXChihuahua, MXSales/AdministrationHuddersfield, UKMIDDLECleckheaton,EAST UKBremen, GermanyYokneam Elite,IsraelAFRICAMarcon, ItalyShanghai, ChinaSingaporeCentral StockingLocationsASIAHuddersfield,UKCrawley, UKGlasgow, UKLinlithgow, UKHamburg, GermanyShannon, IrelandMielec, PolandForward StockingLocationsAberdeen, UKCheltenham, UKHuddersfield, UKToulouse, FranceAkko, IsraelRome, ItalyMelbourne,AustraliaChengdu, ChinaPudong, ChinaShanghai, ChinaAUSTRALIABangalore, IndiaPune, IndiaBaguio City,PhilippinesSingaporeIstanbul, Turkey
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended September 30, 2017or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period fromtoCommission File No. 001-35253WESCO AIRCRAFT HOLDINGS, INC.(Exact Name of Registrant as Specified in Its Charter)Delaware20-5441563(State of Incorporation)(I.R.S. Employer Identification Number)24911 Avenue StanfordValencia, California 91355(Address of Principal Executive Offices and Zip Code)(661) 775-7200(Registrant’s Telephone Number, Including Area Code)Securities Registered pursuant to Section 12(b) of the Act:Title of Each ClassCommon Stock, par value 0.001 per shareName of Each Exchange on Which RegisteredNew York Stock ExchangeSecurities Registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or shorter period that the registrant wasrequired to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or anemerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’in Rule 12b-2 of the Exchange Act.Large accelerated filerNon-accelerated filer (Do not check if a smaller reporting company)Accelerated filerSmaller reporting companyEmerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No As of March 31, 2017, the aggregate market value of the voting and non-voting common equity held by non-affiliates based on the closing price as of thatday was approximately 768,292,000.The number of shares of common stock (par value 0.001 per share) of the registrant outstanding as of November 21, 2017, was 99,433,767.Documents Incorporated by ReferencePart III of this Annual Report on Form 10-K incorporates by reference certain information from the registrants’ definitive proxy statement for the 2018annual meeting of stockholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than120 days after the registrant’s fiscal year end of September 30, 2017. With the exception of the sections of the definitive proxy statement specificallyincorporated herein by reference, the definitive proxy statement is not deemed to be filed as part of this Annual Report on Form 10-K.
TABLE OF CONTENTSPagePart IBusiness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Properties . . .
Just-in-Time (JIT) Management. November 28, 2017 Dear Shareholders, I don t think anyone would disagree that fiscal 2017 was a challenging year for Wesco. When I was asked to step into this role last May, our business was not performing to expectations. Wesco had become too inwardly focused, making short-term decisions that hurt our relationships with customers and our financial performance .
