UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

o		Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

Commission file number 1-4720

WESCO FINANCIAL CORPORATION

(Exact name of Registrant as Specified in its Charter)

DELAWARE		95-2109453
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

301 East Colorado Boulevard, Suite 300, Pasadena, California		91101-1901
(Address of principal executives offices)		(Zip Code)

626/585-6700

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o		Accelerated Filer þ		Non-Accelerated Filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 7,119,807 as of August 6, 2010

 

 

		Page(s)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheet — June 30, 2010 and December 31, 2009			4
Condensed consolidated statement of income and retained earnings — three- and six-month periods ended June 30, 2010 and June 30, 2009			5
Condensed consolidated statement of cash flows — six-month periods ended June 30, 2010 and June 30, 2009			6
Notes to condensed consolidated financial statements			7-11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			12-20
Item 3. Quantitative and Qualitative Disclosures About Market Risk
EX-31.A
EX-31.B
EX-32.A
EX-32.B

     Reference is made to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, appearing on pages 35 — 37 of the Form 10-K Annual Report for the year ended December 31, 2009, filed by Wesco Financial Corporation (“Wesco”), for information on equity price risk, interest rate risk and foreign exchange risk at Wesco. There have been no material changes through June 30, 2010.

Item 4. Controls and Procedures.

     An evaluation was performed under the supervision and with the participation of the management of Wesco, including Charles T. Munger (Chief Executive Officer) and Jeffrey L. Jacobson (Chief Financial Officer), of the effectiveness of the design and operation of Wesco’s disclosure controls and procedures as of June 30, 2010. Based on that evaluation, Messrs. Munger and Jacobson concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported as specified in the rules and forms of the Securities and Exchange Commission, and are effective to ensure that information required to be disclosed by Wesco in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to Wesco’s management, including Mr. Munger and Mr. Jacobson, as appropriate to allow timely decisions regarding required disclosure. There have been no changes in Wesco’s internal control over financial reporting during the quarter ended June 30, 2010 that have materially affected or are reasonably likely to materially affect the internal control over financial reporting.

PART II. OTHER INFORMATION

Item 6. Exhibits

	31 (a) —		Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended (Chief Executive Officer)
	31 (b) —		Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended (Chief Financial Officer)
	32 (a) —		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
	32 (b) —		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)

WESCO FINANCIAL CORPORATION

(Dollar amounts in thousands)

(Unaudited)

		June 30,				Dec. 31,
		2010				2009
ASSETS
Cash and cash equivalents		$	383,553			$	273,671
Investments —
Securities with fixed maturities			230,091				229,872
Equity securities			1,936,171				2,065,627
Receivable from affiliates			197,453				173,476
Rental furniture			183,118				177,793
Goodwill of acquired businesses			277,478				277,590
Other assets			210,403				203,397
		$	3,418,267			$	3,401,426
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance losses and loss adjustment expenses —
Affiliated business		$	334,431			$	290,375
Unaffiliated business			50,245				53,091
Unearned insurance premiums —
Affiliated business			144,491				110,477
Unaffiliated business			9,477				11,516
Deferred furniture rental income and security deposits			9,112				11,846
Notes payable			36,100				28,200
Income taxes payable, principally deferred			251,384				290,667
Other liabilities			72,173				54,537
			907,413				850,709
Shareholders’ equity:
Capital stock and additional paid-in capital			33,324				33,324
Accumulated other comprehensive income			205,279				282,900
Retained earnings			2,272,251				2,234,493
Total shareholders’ equity			2,510,854				2,550,717
		$	3,418,267			$	3,401,426

See notes beginning on page 7.

WESCO FINANCIAL CORPORATION

(Dollar amounts in thousands except for amounts per share)

(Unaudited)

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Revenues:
Furniture rentals		$	80,048			$	81,365			$	151,913			$	164,064
Sales and service revenues			27,577				26,546				55,200				55,051
Insurance premiums earned —
Affiliated business			65,833				69,720				131,946				145,304
Unaffiliated business			3,886				7,582				9,627				11,295
Dividend and interest income			18,708				16,286				38,389				35,590
Realized investment losses			—				—				(259	)			—
Other			1,040				1,016				2,074				2,013
			197,092				202,515				388,890				413,317
Costs and expenses:
Cost of products and services sold			31,661				32,653				63,654				68,191
Insurance losses and loss adjustment expenses —
Affiliated business			42,803				54,953				94,373				100,940
Unaffiliated business			(6,793	)			1,644				(1,060	)			3,967
Insurance underwriting expenses —
Affiliated business			17,228				20,477				38,172				42,436
Unaffiliated business			2,263				3,212				3,936				4,472
Selling, general and administrative expenses			69,438				74,321				135,477				153,245
Interest expense			92				205				179				460
			156,692				187,465				334,731				373,711
Income before income taxes			40,400				15,050				54,159				39,606
Income taxes			9,130				2,120				10,562				6,717
Net income			31,270				12,930				43,597				32,889
Retained earnings — beginning of period			2,243,901				2,208,816				2,234,493				2,191,669
Cash dividends declared and paid			(2,920	)			(2,812	)			(5,839	)			(5,624	)
Retained earnings — end of period		$	2,272,251			$	2,218,934			$	2,272,251			$	2,218,934
Amounts per capital share based on 7,119,807 shares outstanding throughout each period:
Net income		$	4.39			$	1.82			$	6.12			$	4.62
Cash dividends		$	.410			$	.395			$	.820			$	.790

See notes beginning on page 7.

WESCO FINANCIAL CORPORATION

(Dollar amounts in thousands)

(Unaudited)

		Six Months Ended
		June 30,				June 30,
		2010				2009
Cash flows from operating activities, net		$	99,951			$	94,141
Cash flows from investing activities:
Maturities and redemptions of securities with fixed maturities			6,679				2,513
Proceeds from sales of equity securities			11,394				—
Purchases of securities with fixed maturities			(7,738	)			(4,238	)
Purchases of rental furniture			(43,078	)			(22,922	)
Sales of rental furniture			26,880				32,559
Change in condominium construction in process			16,706				(3,157	)
Other, net			(2,958	)			(2,638	)
Net cash flows from investing activities			7,885				2,117
Cash flows from financing activities:
Net increase (decrease) in notes payable, principally line of credit			7,900				(6,200	)
Payment of cash dividends			(5,839	)			(5,624	)
Net cash flows from financing activities			2,061				(11,824	)
Effect of foreign currency exchange rate changes			(15	)			121
Increase in cash and cash equivalents			109,882				84,555
Cash and cash equivalents — beginning of period			273,671				297,643
Cash and cash equivalents — end of period		$	383,553			$	382,198
Supplementary information:
Interest paid during period		$	122			$	520
Income taxes paid, net, during period			8,388				6,108

See notes beginning on page 7.

WESCO FINANCIAL CORPORATION

(Dollar amounts in thousands except for amounts per share)

(Unaudited)

Note 1. General

     The unaudited condensed consolidated financial statements of which these notes are an integral part include the accounts of Wesco Financial Corporation (“Wesco”) and its subsidiaries. In preparing these financial statements, management has evaluated events and transactions that have occurred subsequent to June 30, 2010. In management’s opinion, such statements reflect all adjustments (all of them of a normal recurring nature) necessary to a fair statement of interim results in accordance with accounting principles generally accepted in the United States of America.

     Reference is made to the notes to Wesco’s consolidated financial statements appearing on pages 46 through 58 of its 2009 Form 10-K Annual Report for other information deemed generally applicable to the condensed consolidated financial statements. In particular, Wesco’s significant accounting policies and practices are set forth in Note 1 on pages 46 through 51.

     Consolidated U.S. federal income tax return liabilities have been substantially settled with the Internal Revenue Service (the “IRS”) through 2001. The IRS has completed its examination of the consolidated U.S. federal income tax returns for the years 2002 through 2006. The returns for the years 2002 through 2006 are currently being reviewed in the IRS appeals process. The IRS has recently begun its examination of returns for the 2007 through 2009 tax years. Wesco’s management believes that the ultimate outcome of the Federal income tax examinations will not materially affect Wesco’s consolidated financial statements.

     Wesco’s management does not believe that any accounting pronouncements issued by the Financial Accounting Standards Board or other applicable authorities that are required to be adopted after June 30, 2010 are likely to have a material effect on reported shareholders’ equity.

Note 2. Investments

     Following is a summary of investments in securities with fixed maturities:

		June 30, 2010
		Amortized				Unrealized				Fair				Carrying
		Cost				Gains (Losses)				Value				Value
Mortgage-backed securities		$	16,426			$	1,989			$	18,415			$	18,415
Corporate bonds			200,000				3,400				203,400				200,000
Other			11,747				(71	)			11,676				11,676
		$	228,173			$	5,318			$	233,491			$	230,091

		December 31, 2009
		Amortized				Unrealized				Fair				Carrying
		Cost				Gains				Value				Value
Mortgage-backed securities		$	18,865			$	1,837			$	20,702			$	20,702
Corporate bonds			200,000				—				200,000				200,000
Other			8,265				905				9,170				9,170
		$	227,130			$	2,742			$	229,872			$	229,872

     Fair value of fixed maturity securities included gross unrealized losses of $91 at June 30, 2010 relating to one security in an unrealized loss position for less than twelve months. There were no fixed-maturity securities in an unrealized loss position at December 31, 2009.

     On December 17, 2009 Wesco acquired $200 million par amount of 5.0% senior notes due 2014 of Wm. Wrigley Jr. Company (“Wrigley”). Wesco has classified the Wrigley Notes as held-to-maturity, and accordingly, they are carried at cost.

     Following is a summary of investments in equity securities:

		June 30, 2010								December 31, 2009
		Cost				Fair Value				Cost				Fair Value
The Procter & Gamble Company		$	372,480			$	374,275			$	372,480			$	378,331
The Coca-Cola Company			40,761				361,145				40,761				410,719
Wells Fargo & Company			382,779				323,666				382,779				341,240
Kraft Foods Incorporated			325,816				280,000				325,816				271,800
US Bancorp			266,940				223,500				266,940				225,100
Other			232,007				373,585				243,661				438,437
		$	1,620,783			$	1,936,171			$	1,632,437			$	2,065,627

     Fair values of equity securities included gross unrealized losses of $194,778 at June 30, 2010 and $157,205 at December 31, 2009. As of June 30, 2010, three marketable equity securities had been in an unrealized loss position for more than twelve months with unrealized losses of 14%, 16%, and 27% of their respective costs. In management’s judgment, the financial condition and near term prospects of these issuers are favorable and Wesco possesses the intent and ability to retain these investments for a period of time sufficient to allow for the prices to recover. Changing market conditions and other facts and circumstances may change the business prospects of these issuers as well as our ability and intent to hold these securities until their prices recover.

     Other equity securities includes an investment of $205,000, at cost, in shares of 10% cumulative perpetual preferred stock of The Goldman Sachs Group, Inc. (“GS”) and warrants to acquire up to approximately 1.78 million shares of GS common stock, at any time until they expire on October 1, 2013, at a price of $115 per share. GS has the right to call the preferred shares for redemption at any time at a premium of 10%.

     Wesco’s realized investment losses for 2010 were $259, before taxes. There were no realized investment losses in 2009 or realized investment gains the first six months of either 2009 or 2010.

Dollar amounts in thousands, except for amounts per share

Note 3. Comprehensive income

     The following table sets forth Wesco’s consolidated comprehensive income for the three- and six-month periods ended June 30, 2010 and 2009:

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Net income		$	31,270			$	12,930			$	43,597			$	32,889
Foreign currency translation adjustment, net of tax*			19				1,125				(567	)			951
Change in unrealized appreciation of investments, net of income tax effect of ($82,866), $111,604, ($41,572) and ($35,118)			(153,296	)			210,331				(77,054	)			(66,664	)
Comprehensive income (loss)		$	(122,007	)		$	224,386			$	(34,024	)		$	(32,824	)

Note 4. Fair value measurements

     Following is a summary of Wesco’s financial assets and liabilities measured and carried at fair value on a recurring basis by the type of inputs applicable to fair value measurement.

		Total Fair				Fair Value Measurements Using
		Value				(Level 1)				(Level 2)				(Level 3)
June 30, 2010
Investments in fixed-maturity securities		$	27,617			$	—			$	27,617			$	—
Investments in equity securities			1,936,171				1,648,253				—				287,918
December 31, 2009
Investments in fixed-maturity securities		$	29,872			$	—			$	29,872			$	—
Investments in equity securities			2,065,627				1,726,878				—				338,749

Dollar amounts in thousands, except for amounts per share

     Following is a summary of Wesco’s assets and liabilities measured at fair value, with the use of significant unobservable inputs (Level 3):

		Investments
		in Equity
		Securities
Balance as of December 31, 2009		$	338,749
Change in unrealized gains on level 3 investments, included in other comprehensive income			(50,831	)
Purchases			—
Balance as of June 30, 2010		$	287,918

		Investments
		in Equity
		Securities
Balance as of December 31, 2008		$	209,510
Change in unrealized gains on level 3 investments, included in other comprehensive income			86,777
Purchases			—
Balance as of June 30, 2009		$	296,287

Note 5. Goodwill

     The Company performed its annual impairment tests in the fourth quarter of 2009 and concluded that there was no impairment for any of its reporting units because the fair values exceeded the book carrying values. In connection with the preparation of its consolidated financial statements for the three- and six- month periods ended June 30, 2010, the Company reviewed the conclusions reached in connection with its impairment testing as of yearend 2009 and noted that no events had occurred, nor had circumstances changed significantly subsequent to yearend, that would more likely than not reduce the fair values of its reporting units below their carrying amounts.

     Certain of the Company’s reporting units have been negatively impacted by the recent economic recession from which their businesses have not yet fully recovered, but the extent of the impact over the long term cannot be reasonably predicted. There can be no assurance that the Company’s estimates and assumptions regarding future operating results made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. If the recession has an adverse impact on the long-term economic value of the reporting units, the Company may be required to record goodwill impairment losses in future periods. Currently, it is not possible to determine if any such future impairment losses would result or if such losses would be material.

Note 6. Environmental matters

     Wesco’s Precision Steel subsidiary and one of its subsidiaries are parties to an environmental matter in the state of Illinois, the ultimate outcome of which is not expected to be material.

Dollar amounts in thousands, except for amounts per share

Note 7. Business segment data

     Following is condensed consolidated financial information for Wesco, by business segment:

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Insurance segment:
Revenues		$	88,387			$	93,545			$	179,878			$	191,866
Net income			24,650				11,882				35,467				33,147
Goodwill of acquired businesses			26,991				26,991				26,991				26,991
Assets at end of period			2,801,800				2,413,965				2,801,800				2,413,965
Furniture rental segment:
Revenues		$	94,575			$	98,777			$	181,971			$	199,971
Net income			6,663				1,530				8,403				574
Goodwill of acquired businesses			250,487				251,026				250,487				251,026
Assets at end of period			514,378				533,630				514,378				533,630
Industrial segment:
Revenues		$	13,050			$	9,134			$	25,142			$	19,144
Net income (loss)			183				(285	)			237				(673	)
Assets at end of period			21,252				20,669				21,252				20,669
Realized investment loss:
Before taxes (included in revenues)		$	—			$	—			$	(259	)		$	—
After taxes (included in net income)			—				—				(168	)			—
Other items unrelated to business segments:
Revenues		$	1,080			$	1,059			$	2,158			$	2,336
Net loss			(226	)			(197	)			(342	)			(159	)
Assets at end of period			80,837				102,189				80,837				102,189
Consolidated totals:
Revenues		$	197,092			$	202,515			$	388,890			$	413,317
Net income			31,270				12,930				43,597				32,889
Goodwill of acquired businesses			277,478				278,017				277,478				278,017
Assets at end of period			3,418,267				3,070,453				3,418,267				3,070,453

Dollar amounts in thousands, except for amounts per share

WESCO FINANCIAL CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Reference is made to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing on pages 20 through 37 of the Form 10-K Annual Report filed by Wesco Financial Corporation (“Wesco”) for the year 2009 (“Wesco’s 2009 10-K”) for information deemed generally appropriate to an understanding of the accompanying condensed consolidated financial statements. The information set forth in the following paragraphs updates such discussion. Further, in reviewing the following paragraphs, attention is directed to the accompanying unaudited condensed consolidated financial statements.

OVERVIEW

Financial Condition

     Wesco’s consolidated balance sheet reflects significant liquidity and a strong capital base, with relatively little debt. A large amount of liquidity and capital is maintained in the insurance subsidiaries for strategic purposes and in support of reserves for unpaid losses.

Results of Operations

     Consolidated net income increased to $31.3 million for the second quarter of 2010 from $12.9 million for the second quarter of 2009 and to $43.6 million for the first six months of 2010 from $32.9 million for the first six months of 2009. The increases in consolidated earnings for the current periods reflect mainly a reduction in operating expenses of Wesco’s CORT furniture rental business as well as improved underwriting results of the insurance businesses. The operations of CORT and Precision Steel, although improved, continue to reflect the effects of weak economic conditions.

FINANCIAL CONDITION

     Wesco continues to have a strong consolidated balance sheet, with high liquidity and relatively little debt. Consolidated cash and cash equivalents, held principally by Wesco’s insurance businesses, amounted to $383.6 million at June 30, 2010, and $273.7 million at December 31, 2009.

     Wesco’s liability for unpaid losses and loss adjustment expenses at June 30, 2010 totaled $384.7 million, compared to $343.5 million at December 31, 2009. The increase related mainly to the retrocession agreement with Berkshire Hathaway’s National Indemnity Company (“NICO”) subsidiary, to assume 10% of NICO’s quota share reinsurance of Swiss Reinsurance Company and its major property-casualty affiliates (“Swiss Re”) described in Item 1, Business, appearing on page 11 of Wesco’s 2009 10-K.

     Wesco’s consolidated borrowings totaled $36.1 million at June 30, 2010, compared to $28.2 million at December 31, 2009. The borrowings relate principally to a revolving credit facility used in the furniture rental business. In addition to the notes payable and the liabilities for unpaid losses and loss adjustment expenses of Wesco’s insurance businesses, Wesco and its subsidiaries have operating lease and other contractual obligations which, at June 30, 2010, were essentially unchanged from the $125.8 million included in the table of off-balance sheet arrangements and contractual obligations appearing on page 29 of Wesco’s 2009 10-K.

     Wesco’s shareholders’ equity at June 30, 2010 was $2.51 billion ($352.66 per share), a decrease of $39.9 million from the $2.55 billion ($358.26 per share) reported at December 31, 2009. Wesco carries its available-for-sale investments at fair value on its consolidated balance sheet, with net unrealized appreciation or depreciation included as a component of shareholders’ equity, net of deferred taxes, without being reflected in

earnings. The decrease in shareholders’ equity for the six-month period reflected the net decrease in fair values of Wesco’s investments. Because unrealized appreciation or depreciation is recorded based upon market quotations and, in some cases, upon other inputs that are affected by economic and market conditions as of the balance sheet date, gains or losses ultimately realized upon sale of investments could differ substantially from unrealized appreciation or depreciation recorded on the balance sheet at any given time.

     As reported in Wesco’s 2009 10-K, the operations of Wesco’s subsidiaries have been impacted by weak economic conditions. Although the earnings of Wesco’s furniture rental and industrial segments have improved for the first half of 2010 over those of the corresponding year-ago period, Wesco’s subsidiaries will continue to focus on cost reduction actions, pending further economic recovery. Wesco has historically attempted to manage its financial condition so that it can weather cyclical economic conditions.

RESULTS OF OPERATIONS

     Wesco’s reportable business segments are organized in a manner that reflects how Wesco’s senior management views those business activities. Wesco’s management views insurance businesses as possessing two distinct operations — underwriting and investing — and believes that “underwriting gain or loss” is an important measure of their financial performance. Underwriting gain or loss represents the simple arithmetic difference between the following line items appearing on the consolidated statement of income: (1) insurance premiums earned, less (2) insurance losses and loss adjustment expenses, and insurance underwriting expenses. Management’s goal is to generate underwriting gains over the long term. Underwriting results are evaluated without allocation of investment income.

     The condensed consolidated income statement appearing on page 5 has been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Revenues, including realized net investment gains or losses, if any, are followed by costs and expenses, and a provision for income taxes, to arrive at net income. The following summary sets forth the after-tax contribution to GAAP net income of each business segment — insurance, furniture rental and industrial — as well as activities not considered related to such segments. Realized net investment gains or losses, if any, are excluded from segment activities, consistent with the way Wesco’s management views the business operations. (Amounts are in thousands.)

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Insurance segment:
Underwriting gain (loss)		$	9,242			$	(1,940	)		$	3,999			$	3,109
Investment income			15,408				13,822				31,468				30,038
Furniture rental segment			6,663				1,530				8,403				574
Industrial segment			183				(285	)			237				(673	)
Other			(226	)			(197	)			(342	)			(159	)
Realized investment losses			—				—				(168	)			—
Consolidated net income		$	31,270			$	12,930			$	43,597			$	32,889
Net income per capital share based on 7,119,807 shares outstanding throughout each period		$	4.39			$	1.82			$	6.12			$	4.62

Insurance Segment

     The insurance segment comprises Wesco-Financial Insurance Company (“Wes-FIC”) and The Kansas Bankers Surety Company (“KBS”). Their operations are conducted or supervised by wholly owned subsidiaries of Berkshire Hathaway Inc. (“Berkshire”), Wesco’s ultimate parent company. Following is a summary of the results of segment operations, which represents the combination of underwriting results with dividend and interest income. (Amounts are in thousands.)

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Insurance premiums written:
Reinsurance		$	69,237			$	67,212			$	167,987			$	192,162
Primary			2,147				2,250				5,031				5,062
Total		$	71,384			$	69,462			$	173,018			$	197,224
Insurance premiums earned:
Reinsurance		$	67,216			$	74,286			$	136,550			$	149,870
Primary			2,503				3,016				5,023				6,729
Total			69,719				77,302				141,573				156,599
Insurance losses, loss adjustment expenses and underwriting expenses			55,501				80,286				135,421				151,815
Underwriting gain (loss), before income taxes:
Reinsurance			12,867				( 192	)			4,221				7,446
Primary			1,351				(2,792	)			1,931				(2,662	)
Total			14,218				(2,984	)			6,152				4,784
Income taxes			4,976				(1,044	)			2,153				1,675
Underwriting gain (loss), after taxes		$	9,242			$	(1,940	)		$	3,999			$	3,109

     At June 30, 2010, in-force reinsurance business consisted principally of the participation in two distinctive arrangements with wholly owned subsidiaries of Berkshire. The first is a quota-share retrocession agreement with National Indemnity Company (“NICO”), which became effective at the beginning of 2008, for the assumption of a 10% share of NICO’s 20% quota share reinsurance of Swiss Re property casualty risks incepting over the five-year period ending December 31, 2012, on the same terms as NICO’s agreement with Swiss Re (the “Swiss Re contract”). The second is Wes-FIC’s participation, since 2001, in aviation-related risks (hull, liability and workers’ compensation) through aviation insurance pools, whose underwriting and claims are managed by United States Aviation Underwriters, Inc.

     Contractual delays in reporting, and limitations in details reported, by the ceding companies necessitate that estimates be made of reinsurance premiums written and earned, as well as reinsurance losses and expenses. Under the Swiss Re contract, estimates of premiums, claims and expenses are generally reported to NICO and Wes-FIC 45 days after the end of each quarterly period. The relative importance of the Swiss Re contract to Wesco’s results of operations causes those results to be particularly sensitive to this estimation process. However, increases or decreases in premiums earned as a result of the estimation process related to the reporting lag are typically substantially offset by related increases or decreases in claim and expense estimates. Periodic underwriting results can also be affected significantly by changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior periods.

     Written reinsurance premiums included $60.6 million relating to the Swiss Re contract for the second

quarter and $152.9 million for the first six months of 2010, up 6.9% from the $56.7 million written for the second quarter, but down 11.9% from the $173.6 million written for the first six months of 2009. Earned premiums under the contract were $59.2 million for the second quarter and $119.0 million for the first six months of 2010, down 9.2% for the quarter and 9.6% for the first six months from the $65.2 million and $131.7 million earned under the contract for the corresponding 2009 periods. Written aviation-related reinsurance premiums were $8.6 million for the second quarter and $15.1 million for the first six months of 2010, down 17.9% and 18.9% from the respective 2009 figures. Earned aviation-related premiums declined by 17.0% for the second quarter and 25.4% for the first six months of 2010 from the corresponding 2009 figures. Both Swiss Re and the aviation pool manager have reported that they will not underwrite business when they deem pricing to be inadequate with respect to risks assumed.

     Written primary insurance premiums were relatively unchanged for the second quarter and first six months of 2010 from those of the corresponding 2009 periods. Earned primary premiums declined by 17.0% for the second quarter and 25.4% for the six-month period of 2010, reflecting principally the rapid winding down of KBS’s deposit guarantee bond line of insurance, announced late in 2008 and discussed at length in Wesco’s 2009 10-K. The aggregate face amount of outstanding deposit guarantee bonds has been reduced, from $9.7 billion at September 30, 2008, when deposits in 1,671 separate institutions were insured, to $4.0 million, insuring deposits in two institutions, currently. KBS anticipates that outstanding deposit guarantee bonds will decline to $2.9 million of deposits in one institution by September 30, 2010, and to zero in July 2011. KBS management believes that neither of the institutions for which deposit guarantee bonds are currently outstanding is facing a significant risk of failure. Neither of these institutions’ deposit guarantee bonds exposes KBS to an after-tax loss in excess of $1.9 million.

     Management believes that “underwriting gain or loss” is an important measure of the financial performance of an insurance company. Underwriting results of Wesco’s insurance segment fluctuate from period to period, but historically have been generally favorable. Pre-tax underwriting gain (loss) under the Swiss Re contract amounted to $9.4 million for the second quarter and $3.1 million for the first six months of 2010, versus ($1.5 million) and $4.4 million for the corresponding periods of 2009. The underwriting results under the contract for the first six months of 2010 included (i) estimated losses in the aggregate amount of $23.3 million, before taxes, from the Chilean earthquake and European Windstorm Xynthia, which occurred in the first quarter, and the destruction in the second quarter of the Deepwater Horizon oil rig in the Gulf of Mexico, significantly offset by (ii) $20.5 million, before taxes, of favorable reserve development, of which $17.3 million related to calendar year 2009 and $3.2 million to calendar year 2008. Underwriting results under the contract for the 2009 periods reflected favorable 2008 reserve development of $6.0 million, before taxes, recorded in the first quarter, and the detrimental effect on loss and loss expense reserves previously established, of the declining value of the U.S. Dollar relative to other currencies in which Swiss Re conducts its business. Wesco does not view currency fluctuations as material to its arrangement under the contract and does not hedge against such fluctuations. Underwriting results from the aviation pools reflect pre-tax underwriting gains of $3.5 million for the second quarter and $1.1 million for the first six months of 2010, and $1.4 million and $3.1 million for the corresponding periods of 2009. The frequency and severity of aviation-related losses tend to be volatile.

     Pre-tax underwriting results from primary insurance improved by $4.1 million for the second quarter and $4.6 million for the first six months of 2010, from those of the corresponding 2009 periods. The frequency and severity of primary insurance losses tend to be volatile. Loss experience was more favorable in the more recent periods than in the 2009 periods, when underwriting results for the first six months reflected losses of $4.2 million from two bank failures, including $3.2 million, less $0.5 million received from the FDIC, in the second quarter, the latter figure relating to a bank failure that occurred in the third quarter of 2008. There were no

losses from bank failures during the first half of 2010.

     The profitability of any reinsurance or insurance arrangement is best assessed after all losses and expenses have been realized, perhaps many years after the coverage period, rather than for any given reporting period.

     Following is a summary of investment income produced by Wesco’s insurance segment. (Amounts are in thousands.)

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Investment income, before taxes		$	18,668			$	16,243			$	38,305			$	35,267
Income taxes			3,260				2,421				6,837				5,229
Investment income, after taxes		$	15,408			$	13,822			$	31,468			$	30,038

     Investment income of the insurance segment comprises dividends and interest earned principally from the investment of shareholder capital (including reinvested earnings) as well as float (principally premiums received before payment of related claims and expenses). Pre-tax dividend income was relatively unchanged for the second quarter, but decreased by $2.7 million for the first six months of 2010, from the corresponding 2009 figures. Pre-tax interest income increased by $2.4 million for the second quarter, and by $5.7 million for the first six months of 2010, from the corresponding 2009 figures, due principally to an investment of $200 million in 5% notes in the fourth quarter of 2009.

     The income tax provisions, expressed as percentages of pre-tax investment income, shown in the foregoing table, amounted to 17.5% and 14.9% for the quarters, and 17.8% and 16.1% for the six-month periods ended June 30, 2010 and 2009, reflecting the relation of dividend income, which is substantially exempt from income taxes, to interest income, which is fully taxable.

     Management continues to seek to invest in the purchase of businesses and in long-term equity holdings.

Furniture Rental Segment

     The furniture rental segment consists of CORT Business Services Corporation (“CORT”). Following is a summary of segment operating results. (Amounts are in thousands.)

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Revenues:
Furniture rentals		$	80,048			$	81,365			$	151,913			$	164,064
Furniture sales			12,676				15,364				26,880				32,510
Service fees			1,851				2,048				3,178				3,397
Total revenues			94,575				98,777				181,971				199,971
Cost of rentals, sales and fees			21,168				24,872				43,006				51,631
Selling, general and administrative expenses			65,614				71,268				128,348				147,149
Interest expense			92				205				179				460
			86,874				96,345				171,533				199,240
Income before income taxes			7,701				2,432				10,438				731
Income taxes			1,038				902				2,035				157
Segment net income		$	6,663			$	1,530			$	8,403			$	574

     Furniture rental revenues for the second quarter of 2010 decreased $1.3 million (1.6%) from those of the second quarter of 2009, and for the first six months of 2010, by $12.2 million (7.4%) from those of the first six months of 2009. Management believes that “core rental revenues,” a measurement that excludes revenues from trade shows and locations not in operation throughout each period, is an important statistic in analyzing comparable revenue levels from different periods. Core rental revenues increased $5.4 million (9.4%) in the second quarter of 2010 from those of the first quarter of 2010, following an increase of $1.7 million (3.1%) in the first quarter of 2010 from those of the fourth quarter 2009. The number of furniture leases outstanding at the end of the second quarter of 2010 increased 13.8% from the number outstanding at the end of the first quarter of 2010 after an increase of 5.4% from those outstanding as of yearend 2009. Customer demand for rental furniture decreased significantly during the recent economic recession; however, the improvements in core rental revenues and furniture leases outstanding indicate that customer demand has increased from the depressed levels reached late in 2009, and management is hopeful that the recent recovery will be sustained.

     Furniture sales revenues decreased 17.5% and 17.3% for the second quarter and first six months of 2010 from those reported for the respective year-ago periods; however furniture sales margins increased to 36.0% and 35.5% for the second quarter and first six months of 2010, from 34.4% and 34.0% for the second quarter and first six months of 2009. Management controls rental furniture inventory levels by adjusting selling prices. In light of the recent improvement in furniture rental customer demand, management has become more comfortable with the inventory level than previously.

     Service fees revenues for the second quarter and first six months of 2010 were relatively unchanged from those of the similar periods of 2009.

     Cost of rentals, sales and fees amounted to 22.4% and 23.6% of revenues for the second quarter and first six

months of 2010 compared with 25.2% and 25.8% for the second quarter and first six months of 2009. The decreases in the cost percentages for the 2010 periods were due principally to a relative decrease in depreciation expense attributable mainly to lower average furniture inventory levels and an increase in profit margin on furniture sold.

     Selling, general, administrative and interest expenses (“operating expenses”) for the segment were $65.7 million for the second quarter of 2010, down $5.8 million (8.1%) from $71.5 million incurred in the second quarter of 2009, and $128.5 million for the first six months of 2010, down $19.1 million (12.9%) from the $147.6 million reported for the first six months of 2009. The decrease in operating expenses principally reflects lower occupancy- and employee-related expenses as a result of management’s cost-cutting initiatives. Management intends to continue its focus on containing operating expenses.

     Income before income taxes of the furniture rental segment amounted to $7.7 million and $10.4 million in the second quarter and first six months of 2010 versus $2.4 million and $0.7 million in the second quarter and first six months of 2009. The improvement in profitability is due principally to the significant reduction in fixed operating expenses, as explained above.

Industrial Segment

     Following is a summary of the results of operations of the industrial segment, which consists of the businesses of Precision Steel Warehouse, Inc. and its subsidiaries. (Amounts are in thousands.)

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2010				2009				2010				2009
Revenues		$	13,050			$	9,134			$	25,142			$	19,144
Cost of sales and services		$	10,494			$	7,780			$	20,648			$	16,559
Selling, general and administrative expenses			2,099				1,827				3,950				3,700
Income (loss) before income taxes		$	457			$	(473	)		$	544			$	(1,115	)
Income taxes			274				(188	)			307				(442	)
Segment net income (loss)		$	183			$	(285	)		$	237			$	(673	)

     Reference is made to pages 27 and 28 of Wesco’s 2009 10-K for information about Wesco’s industrial segment, including the challenges affecting the domestic steel service industry for a number of years, which were exacerbated by recessionary conditions which began in the latter half of 2008.

     Industrial segment revenues increased by $3.9 million (42.9%) for the second quarter and $6.0 million (31.3%) for the first six months of 2010 from those of the corresponding 2009 periods. Sales, in terms of pounds sold, increased by 39.9% for the second quarter and 39.3% for the first six months, to 8.3 million pounds for the current quarter and 16.4 million pounds for the first six months of 2010, from 5.9 million pounds sold during the second quarter and 11.8 million pounds sold during the first six months of 2009. We do not know to what degree the recent improvement in sales volume might be an indication of sustainable growth in domestic industrial activity, or to what degree it might indicate that customers of the industrial segment may be restocking their inventories. In any event, the volume of pounds sold for the first six months of 2010 compares unfavorably with the 21.4 million pounds sold by the industrial segment as recently as in the first six months of 2008.

     The industrial segment operates on a low gross profit margin (revenues, less cost of products and services).

The segment’s business activities also require a base of operations supported by significant fixed operating costs. The increases in pre-tax and net income of the industrial segment for the second quarter and first six months of 2010 were attributable principally to the increase in sales and service revenues. Segment operating results for the first six months of 2010 include litigation-related expenses of $0.2 million incurred in the second quarter in connection with the environmental matter discussed in Note 6 to the accompanying condensed consolidated financial statements.

*       *       *       *       *

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

     Reference is made to page 29, in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Wesco’s 2009 10-K, for a table summarizing the contractual obligations associated with ongoing business activities of Wesco and its subsidiaries, some of which are off-balance sheet, and involve cash payments in periods after yearend 2009. At June 30, 2010, there have been no material changes in contractual obligations, including off-balance sheet arrangements, of Wesco or its subsidiaries from those reported as of December 31, 2009.

*       *       *       *       *

     Consolidated revenues, expenses and net income reported for any period are not necessarily indicative of future revenues, expenses and net income in that they are subject to significant variations in amount and timing of investment gains and losses, large individual or catastrophe losses incurred under property and casualty insurance and reinsurance contracts, and changes in the general U.S. economy.

CRITICAL ACCOUNTING POLICIES AND PRACTICES

     Reference is made to pages 30 to 35, in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Wesco’s 2009 10-K for the accounting policies and practices considered by Wesco’s management to be critical to its determination of consolidated financial position and results of operations, as well as to Note 1 to Wesco’s consolidated financial statements appearing on pages 46 through 51 thereof for a description of the significant policies and practices followed by Wesco (including those deemed critical) in preparing its consolidated financial statements. There have been no changes in significant policies and practices through June 30, 2010.

     In applying certain accounting policies, Wesco’s management is required to make estimates and judgments regarding transactions that have occurred and ultimately will be settled several years in the future. Amounts recognized in the consolidated financial statements from such estimates are necessarily based on assumptions about numerous factors involving varying, and possibly significant, degrees of judgment and uncertainty. Accordingly, the amounts currently recorded in the financial statements may prove, with the benefit of hindsight, to be inaccurate.

FORWARD-LOOKING STATEMENTS

     Certain written or oral representations of management stated in this annual report or elsewhere constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as contrasted with statements of historical fact. Forward-looking statements include statements which are predictive in nature, or which depend upon or refer to future events or conditions, or which include words such

as expects, anticipates, intends, plans, believes, estimates, may, or could, or which involve hypothetical events. Forward-looking statements are based on information currently available and are subject to various risks and uncertainties that could cause actual events or results to differ materially from those characterized as being likely or possible to occur. Such statements should be considered judgments only, not guarantees, and Wesco’s management assumes no duty, nor has it any specific intention, to update them.

     Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause Wesco’s actual performance and future events and actions to differ materially from those expressed in or implied by such forward-looking statements include, but are not limited to those risks reported in Item 1A, Risk Factors, in Wesco’s 2009 10-K, but also to the occurrence of one or more catastrophic events such as acts of terrorism, hurricanes, earthquakes, or other events that cause losses insured by Wesco’s insurance subsidiaries, changes in insurance laws or regulations, changes in income tax laws or regulations, and changes in general economic and market factors that affect the prices of investment securities or the industries in which Wesco and its affiliates do business.

SIGNATURES

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