<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 11, 1998
Date of Report (Date of earliest event reported)
WESCO INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
<TABLE>
<CAPTION>
<S> <C>
333-43225 25-1723345
(Commission file number) (IRS Employer Identification No.)
COMMERCE COURT
FOUR STATION SQUARE, SUITE 700
PITTSBURGH, PENNSYLVANIA 15219 (412) 454-2254
(Address of principal executive offices) (Registrant's telephone number, including area code)
</TABLE>
N/A
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
<PAGE> 2
The following amends and restates, in its entirety, Item 7 of WESCO
International, Inc.'s (the "Company" or "WESCO") Form 8-K dated September 11,
1998 and filed on September 24, 1998 (the "Form 8-K") pursuant to which the
Company announced the acquisition of substantially all assets and assumption of
substantially all liabilities and obligations relating to the operations of
Bruckner Supply Company, Inc. ("Bruckner" or "Bruckner Acquisition").
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
Audited financial statements of Bruckner as of and for the year
ended December 31, 1997 and the independent auditors' report
thereon, are attached hereto as Exhibit 99.1.
Unaudited condensed interim financial statements of Bruckner as
of June 30, 1998 and for the six months ended June 30, 1998 and
1997, are attached hereto as Exhibit 99.2.
(b) Pro forma financial information
Pro forma consolidated financial information giving effect to the
Bruckner Acquisition and a leveraged recapitalization completed
in June 1998, which is more fully discussed in the Company's
Registration Statement on Form S-4 (File No. 333-43225), is
attached hereto as Exhibit 99.3.
(c) Exhibits
The exhibits listed below are filed herewith except as indicated.
2.01 Asset Purchase Agreement among Bruckner Supply Company, Inc.
and WESCO Distribution, Inc. dated September 11, 1998,
previously filed.
99.1 Audited financial statements of Bruckner as of and for the
year ended December 31, 1997, and the independent auditors'
report thereon, filed herewith.
99.2 Unaudited condensed interim financial statements of Bruckner
as of June 30, 1998 and for the six months ended June 30,
1998 and 1997, filed herewith.
99.3 Pro forma financial information filed herewith.
1
<PAGE> 3
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.
WESCO International, Inc.
(Registrant)
Date: November 13, 1998 By: /s/ Steven A. Burleson
------------------------------------
Steven A. Burleson
Vice President, Chief Financial
Officer and Treasurer
2
<PAGE> 4
EXHIBIT INDEX
2.01 Asset Purchase Agreement among Bruckner Supply Company, Inc. and WESCO
Distribution, Inc. dated September 11, 1998, previously filed. Omitted
schedules and exhibits will be provided supplementally to the Commission
upon request.
99.1 Audited financial statements of Bruckner as of and for the year ended
December 31, 1997, and the independent auditors' report thereon, filed
herewith.
99.2 Unaudited condensed interim financial statements for Bruckner as of June
30, 1998 and for the six months ended June 30, 1998 and 1997, filed
herewith.
99.3 Pro forma financial information filed herewith.
3
<PAGE> 1
Exhibit 99.1
BRUCKNER SUPPLY COMPANY, INC.
------------------
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
<PAGE> 2
BRUCKNER SUPPLY COMPANY, INC.
REPORT INDEX
FOR THE YEAR ENDED DECEMBER 31, 1997
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Balance Sheet 2
Statement of Income and Retained Earnings 3
Statement of Cash Flows 4
Notes to the Financial Statements 5
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
TO THE STOCKHOLDERS AND DIRECTORS OF
BRUCKNER SUPPLY COMPANY, INC.
We have audited the accompanying balance sheet of Bruckner Supply Company,
Inc. as of December 31, 1997, and the related statements of income and retained
earnings and cash flows for the year then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bruckner Supply Company,
Inc. at December 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
New York, New York /s/ ANCHIN, BLOCK & ANCHIN LLP
February 23, 1998 ------------------------------
1.
<PAGE> 4
BRUCKNER SUPPLY COMPANY, INC.
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT ASSETS:
Cash $ 175,760
Debt securities - Notes 1 and 2 8,428,780
Accounts receivable 22,044,715
Inventories - Note 1 2,195,277
Prepaid expenses and other current assets 126,624
------------
Total Current Assets $ 32,971,156
PROPERTY AND EQUIPMENT, NET-
NOTES 1 AND 3 357,705
DUE FROM AFFILIATES - NOTE 4 4,586
------------
TOTAL ASSETS $ 33,333,447
============
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 18,539,018
Bank Overdraft 3,536,448
Other current liabilities 618,476
------------
Total Current Liabilities $ 22,693,942
STOCKHOLDERS' EQUITY:
Common stock, no stated value:
Authorized - 200 shares
Issued and outstanding - 25 shares 7,500
Additional paid-in capital 2,022,843
Retained earnings 8,536,014
------------
10,566,357
Net unrealized holding gains on available-for-sale
securities - Notes 1 and 2 73,148
------------
Total Stockholders' Equity 10,639,505
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,333,447
============
</TABLE>
See the accompanying Notes to the Financial Statements.
2.
<PAGE> 5
BRUCKNER SUPPLY COMPANY, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
NET SALES - NOTE 7 $222,406,503
COST OF SALES 203,417,417
------------
GROSS PROFIT 18,989,086
% to Net Sales 8.5%
OPERATING EXPENSES 8,852,762
------------
OPERATING INCOME 10,136,324
INVESTMENT AND OTHER INCOME:
Investment income, net - Note 2 $647,067
Other income 170,863
--------
817,930
------------
INCOME BEFORE INCOME TAXES 10,954,254
PROVISION FOR INCOME TAXES - NOTE 1 215,000
------------
NET INCOME 10,739,254
RETAINED EARNINGS:
Balance, beginning of year 9,220,700
Distributions to stockholders (11,423,940)
------------
Balance, end of year $ 8,536,014
============
</TABLE>
See the accompanying Notes to the Financial Statements.
3.
<PAGE> 6
BRUCKNER SUPPLY COMPANY, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,739,254
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization $ 111,429
Amortization of bond interest 2,733
Net realized gain on sale of debt and marketable
equity securities (96,088)
Gain on sale of property and equipment (750)
Increase in:
Accounts receivable (10,718,009)
Inventories (1,540,402)
Prepaid expenses and other current assets (29,538)
Increase in:
Accounts payable and accrued expenses 7,009,628
------------
Total adjustments (5,260,997)
-----------
Net Cash Provided by Operating Activities 5,478,257
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (82,980)
Proceeds from sale of property and equipment 750
Purchases of debt and marketable equity securities (22,997,355)
Proceeds from sales and maturities of debt and marketable
equity securities 23,446,815
Decrease in due from affiliate 1,992,732
------------
Net cash Provided by Investing Activities 2,359,962
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholders (11,423,940)
Increase in bank overdraft 3,536,448
------------
Net Cash Used in Financing Activities (7,887,492)
-----------
NET DECREASE IN CASH (49,273)
CASH:
Beginning of year 225,033
-----------
End of year $ 175,760
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Income taxes - paid $ 165,780
- refunded 9,134
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES:
Net unrealized holding losses on available-for-sale
securities $ (41,824)
</TABLE>
See the accompanying Notes to the Financial Statements.
4.
<PAGE> 7
BRUCKNER SUPPLY COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business:
------------------------
Bruckner Supply Company, Inc. (the "Company") is an
integrated supply company whose customers are major corporations
located throughout the United States. The Company's revenues include
total amounts billed to customers for products sold and all other
aspects of handling customers' purchasing operations.
Revenue Recognition:
--------------------
The Company generally sells merchandise which is shipped
directly by its vendors to customers. Revenue is recognized upon
shipment.
Debt Securities:
----------------
Debt securities available for sale are measured at fair
value, with net unrealized gains and losses reported in equity. The
Company uses the specific identification method to determine the cost
of securities sold.
Use of Estimates:
-----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Inventories:
------------
Inventories, which consist of finished goods, are valued at
the lower of cost, first-in, first-out method, or market.
Property and Equipment:
-----------------------
Property and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed by
straight-line and accelerated methods over the estimated useful lives
of the assets.
Leasehold improvements are amortized by the straight-line
method over the estimated useful lives of the assets.
5.
<PAGE> 8
BRUCKNER SUPPLY COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED:)
Income Taxes:
-------------
The Company is taxed as an S corporation for Federal and New
York State tax purposes, whereby the company's income is reported by
the stockholders. Accordingly, no provision has been made for Federal
income taxes. The Company continues to be liable for certain states'
corporate taxes.
NOTE 2 - DEBT SECURITIES:
The following is a summary of investments at December 31, 1997:
<TABLE>
<CAPTION>
Gross Unrealized
Amortized ---------------- Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Available-For-Sale Debt Securities:
U.S. Government Bonds $8,355,632 $73,148 -- $8,428,780
</TABLE>
The following table summarizes the maturities of all debt securities
at fair value held at December 31, 1997:
<TABLE>
<CAPTION>
More Than More Than
Within 1 1 to 5 5 to 10
Year Years Years Total
---- ----- ----- -----
<S> <C> <C> <C> <C>
Available-For-Sale Securities: $2,656,195 $4,016,570 $1,756,015 $8,428,780
</TABLE>
Proceeds from sales and maturities of securities classified as
available-for-sale were $23,446,815. Gains of $133,493 and losses of
$37,405 were realized on these sales. The net unrealized holding gains
on available-for-sale securities decreased by $41,824 in 1997.
6.
<PAGE> 9
BRUCKNER SUPPLY COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2 - DEBT SECURITIES (CONTINUED):
<TABLE>
<CAPTION>
Investment income for 1997 is comprised of:
<S> <C>
Interest income $ 583,861
Net realized gains on sales of securities 96,088
----------
679,949
Less: Investment expenses 32,882
----------
$ 647,067
==========
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
Property and equipment consist of the following:
<S> <C>
Leasehold improvements $ 91,139
Machinery and equipment 476,238
Furniture and fixtures 244,586
Transportation and delivery equipment 233,799
----------
1,045,762
Less: Accumulated depreciation and
amortization 688,057
----------
$ 357,705
==========
</TABLE>
NOTE 4 - DUE FROM AFFILIATES:
The amounts due from affiliates are non-interest bearing and have no
specified repayment terms.
NOTE 5 - RETIREMENT PLAN:
The Company maintains a defined-contribution 401(k) savings plan
covering substantially all employees. Company contributions to the
plan are at the discretion of the Board of Directors. During 1997 no
company contribution was made to the plan.
7.
<PAGE> 10
BRUCKNER SUPPLY COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6 - COMMITMENTS AND CONTINGENCIES:
Leases:
-------
The Company leases office space from an affiliate under an
operating lease, which expires December 31, 2002, at an annual rent of
$150,000. The lease requires the Company to pay real estate taxes.
In February 1998, the Company entered into an operating lease for
additional office space, which expires February 6, 1999, at an annual
rent of $80,000.
The Company also leases certain computer equipment under an
operating lease, which expires August 31, 1999, at an annual rent of
$155,820.
Rent expense was $305,909 for 1997.
Future minimum rental commitments are as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
-------------------------
<S> <C>
1998 $ 379,153
1999 260,547
2000 150,000
2001 150,000
2002 150,000
----------
Total $1,089,700
==========
</TABLE>
Stockholders' Agreement:
-----------------------
Under the terms of a stockholders' agreement, upon their death,
Bruckner Supply Company, Inc. is required to purchase the shares owned
by its stockholders at a value determined annually by the stockholders,
and may be paid out over a period of ten years.
NOTE 7 - MAJOR CUSTOMER:
For the year ended December 31, 1997, one customer, through multiple
operating divisions located throughout the United States, accounted for
approximately 68% of net sales and approximately 37% of the December
31, 1997 accounts receivable balance.
NOTE 8 - SUBSEQUENT EVENT (unaudited):
On September 11, 1998, the Company sold to WESCO Distribution, Inc.,
substantially all of its assets and liabilities, other than cash, debt
securities, amounts due from affiliates, certain equipment and prepaid
expenses and bank overdraft.
8.
<PAGE> 1
EXHIBIT 99.2
BRUCKNER SUPPLY COMPANY, INC.
Unaudited Condensed Balance Sheet
<TABLE>
<CAPTION>
JUNE 30
1998
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $539,327
Debt securities 753,554
Accounts receivable 33,441,794
Inventories 3,335,230
Prepaid expenses and other current assets 826,587
--------------
Total current assets 38,896,492
Property and equipment, net 358,994
Due from affiliates 4,911
--------------
Total assets $39,260,397
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $23,400,522
Bank overdraft 3,476,490
Other current liabilities 923,587
--------------
Total current liabilities 27,800,599
STOCKHOLDERS' EQUITY
Common stock 7,500
Additional paid-in capital 2,022,843
Retained earnings 9,417,697
Net unrealized holding gains on
available-for-sale securities 11,758
--------------
Total stockholders' equity 11,459,798
--------------
Total liabilities and stockholders' equity $39,260,397
==============
</TABLE>
See the accompanying Notes to Condensed Financial Statements.
1
<PAGE> 2
<TABLE>
<CAPTION>
BRUCKNER SUPPLY COMPANY, INC.
Unaudited Condensed Statement of Income
SIX MONTHS ENDED
JUNE 30
1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $132,014,762 $113,140,125
Cost of sales 118,414,945 104,822,756
-------------- -------------
Gross profit 13,599,817 8,317,369
Operating expenses 6,045,525 4,125,700
-------------- -------------
Operating income 7,554,292 4,191,669
Investment and other income
Investment income, net 214,000 390,000
Other income 18,456 10,101
-------------- -------------
232,456 400,101
Income before income taxes 7,786,748 4,591,770
Provision for income taxes 6,766 197
-------------- -------------
Net income $7,779,982 $4,591,573
============== =============
</TABLE>
See the accompanying Notes to Condensed Financial Statements.
2
<PAGE> 3
BRUCKNER SUPPLY COMPANY, INC.
Unaudited Condensed Statement of Cash Flow
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $7,779,982 $4,591,573
Adjustment to reconcile net income to cash from
operating activities
Depreciation and amortization 50,913 57,733
Net realized gain on sale of debt securities (81,665) (86,165)
Increase in:
Accounts receivable (11,397,079) (10,832,178)
Inventories (1,139,953) (760,604)
Prepaid and other current assets (699,963) 2,749
Increase in:
Accounts payable and accrued expenses 5,166,615 6,575,233
---------------------------
Net Cash Used in Operating Activities (321,150) (451,659)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (56,289) (82,980)
Purchases of debt securities (3,298,652) (11,427,935)
Proceeds from sales and maturities of debt securities 10,998,240 16,699,995
Increase in due from affiliate (325) -
---------------------------
Net Cash Provided By Financing Activities 7,642,974 5,189,080
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank overdrafts (59,958) 4,579,429
Distributions to stockholders (6,898,299) (9,430,000)
---------------------------
Net Cash Used in Financing Activities (6,958,257) (4,850,571)
---------------------------
Net increase (decrease) in cash 363,567 (113,150)
CASH:
Beginning of year 175,760 225,033
---------------------------
End of year $539,327 $111,883
===========================
</TABLE>
See the accompanying Notes to Condensed Financial Statements
3
<PAGE> 4
BRUCKNER SUPPLY COMPANY, INC.
Notes to the Condensed Financial Statements
Description of Business
Bruckner Supply Company, Inc. (the "Company") is an integrated supply company
whose customers are major corporations located throughout the United States. The
Company's revenues include total amounts billed to customers for products sold
and all other aspects of handling customers' purchasing operations.
Basis of Presentation
The unaudited condensed financial statements have been prepared in accordance
with generally accepted accounting principles. The notes included herein should
be read in conjunction with the audited financial statements of Bruckner
(included as Exhibit 99.1 to WESCO International, Inc.'s Current Report on Form
8-K/A dated September 11, 1998).
The unaudited condensed balance sheet as of June 30, 1998, and the unaudited
condensed statement of income and the unaudited condensed statement of cash
flows for the six months ended June 30, 1998 and 1997, in the opinion of
management, have been prepared on the same basis as the audited financial
statements and include all adjustments necessary for the fair presentation of
the results of the interim periods. All adjustments reflected in the condensed
financial statements are of a normal recurring nature. Results for the interim
periods presented are not necessarily indicative of the results to be expected
for the full year.
Subsequent Event
On September 11, 1998, the Company sold to WESCO Distribution, Inc.,
substantially all of its assets and liabilities, other than cash, debt
securities, amounts due from affiliates, certain equipment and prepaid expenses
and bank overdraft.
4
<PAGE> 1
EXHIBIT 99.3
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of WESCO
International, Inc. and subsidiaries (collectively, "WESCO") has been prepared
to give effect to (i) the acquisition of substantially all assets and assumption
of substantially all liabilities and obligations relating to the Bruckner Supply
Company, Inc. ("Bruckner"); and (ii) the recapitalization of WESCO completed in
June 1998 as discussed more fully below.
The Bruckner Acquisition was accounted for using the purchase method of
accounting pursuant to which the purchase price at closing was allocated to the
tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values. The purchase price allocations are preliminary. Final
allocations will be made based upon valuations and other studies that have not
been completed but are not expected to differ significantly from those presented
herein. See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
On June 5, 1998, (i) WESCO (x) repurchased and retired all of its common
stock held by the then existing non-management shareholders for $595.2 million
in the aggregate, (y) cashed-out all of the stock options held by non-management
optionholders for $57.5 million in the aggregate and (z) cashed-out a portion of
the stock options held by certain members of management for $0.9 million in the
aggregate (the aggregate funds necessary to effect such purchase of shares and
cash-out of options is herein referred to as the "Equity Consideration"); (ii)
WESCO sold shares of common stock to an investor group for $318.1 million in the
aggregate (the "Cash Equity Contribution"); (iii) the investor group purchased
shares of common stock from certain members of management for $1.9 million in
the aggregate; and (iv) management continued to retain the remainder of their
shares of common stock and stock options with an implied aggregate value of
approximately $97.7 million.
In addition to the proceeds of the Cash Equity Contribution, WESCO funded
the Equity Consideration, the repayment of approximately $379.1 million of then
outstanding indebtedness and the payment of transaction fees and expenses from:
(i) the initial borrowings of $170.0 million under a new credit agreement; (ii)
the proceeds of $250.0 million from a sale of accounts receivable pursuant to a
receivables facility; and (iii) the proceeds from the issuance of $300 million
of Senior Subordinated Notes and $87 million of Senior Discount Notes.
The foregoing transactions are collectively referred to herein as the
"Recapitalization." As a result of the Recapitalization, management owns
approximately 11.3% of the outstanding shares of common stock (which, together
with existing stock options and new stock options granted in connection with the
Recapitalization, represents over 30% of the common equity of WESCO on a fully
diluted basis). The Investor Group owns the remaining 88.7% of the outstanding
shares of Common Stock.
WESCO treated the Recapitalization as a recapitalization for financial
reporting purposes; accordingly, the historical basis of WESCO' assets and
liabilities were not affected by the transaction.
The pro forma adjustments presented are based upon available information
and include certain assumptions and adjustments that WESCO believes are
reasonable under the circumstances. These adjustments are directly attributable
to the transactions referenced above and are expected to have a continuing
impact on WESCO's business, results of operations and financial condition.
The historical condensed consolidated balance sheet of WESCO as of June 30,
1998 and the historical condensed consolidated statement of income of WESCO for
the six months ended June 30, 1998 were derived from the unaudited interim
condensed consolidated financial statements of WESCO included in its Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1998. The historical
condensed consolidated statement of income of WESCO for the year ended December
31, 1997 was derived from the audited consolidated financial statements of WESCO
included in its Registration Statement on Form S-4 filed with the
1
<PAGE> 2
Securities and Exchange Commission (File No. 333-43225) ("Registration
Statement"). The historical financial data of Bruckner for the year ended
December 31, 1997 was derived from its audited financial statements filed
herewith as Exhibit 99.1. The historical financial information of Bruckner as of
June 30, 1998 and the six months then ended was derived from unaudited interim
financial statements prepared by Bruckner's management and filed herewith as
Exhibit 99.2.
The unaudited pro forma condensed consolidated balance sheet of WESCO as of
June 30, 1998 gives effect to the Bruckner Acquisition as if it occurred on June
30, 1998. The unaudited pro forma condensed consolidated statement of income of
WESCO for the six month period ended June 30, 1998 and for the year ended
December 31, 1997 gives effect to the Recapitalization and the Bruckner
Acquisition as if they occurred on January 1, 1997.
The unaudited pro forma financial information and related notes are
provided for informational purposes only and do not necessarily reflect (i) the
results of operations or financial condition of WESCO that would have actually
resulted had the events referred to above or in the notes to the unaudited pro
forma financial information been consummated as of the dates indicated and are
not intended to project WESCO's financial condition or results of operations for
any future period; or (ii) with respect to the unaudited pro forma condensed
consolidated statement of income for the year ended December 31, 1997, (a) the
effect of certain non-recurring income statement charges resulting from the
Recapitalization, including non-capitalized transaction fees and expenses of
approximately $25.1 million, compensation charges of approximately $11.0 million
associated with one-time bonuses paid to certain members of management,
compensation charges of approximately $6.3 million associated with the cash
settlement relating to certain stock options, compensation charges of
approximately $4.1 million associated with the acceleration of vesting of one
recently hired executive's stock options issued at a discount, and a charge of
approximately $0.5 million related to the write-off of existing deferred
financing costs; and (b) losses totaling $2.6 million on the sale of trade
accounts receivable in connection with the Recapitalization. WESCO's historical
financial information as of and for the six months ended June 30, 1998 reflects
such amounts.
The unaudited pro forma financial information should be read in conjunction
with the sections of the Registration Statement entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"The Recapitalization", the audited consolidated financial statements and notes
thereto as of December 31, 1997 and 1996, and for each of the three years in the
period ended December 31, 1997 included in the Registration Statement, and with
WESCO's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1998.
2
<PAGE> 3
WESCO INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
WESCO Bruckner Pro WESCO
International, Bruckner Forma International,
Dollars in thousands Inc. Historical Historical (a) Adjustments Inc. Pro Forma
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $58,929 $539 $(539)(b)
(60,500)(c) $(1,571)
Debt securities 754 (754)(b)
Trade accounts receivable 179,200 33,442 212,642
Other accounts receivable 16,414 16,414
Inventories 335,271 3,335 267 (c) 338,873
Other current assets 44,114 827 44,941
-------------- ------------ -------------- --------------
Total current assets 633,928 38,897 (61,526) 611,299
Property, buildings and equipment, net 101,803 359 102,162
Goodwill, net of accumulated amortization 101,635 96,854 (c) 198,489
Other assets 19,020 5 (5)(b) 19,020
-------------- ------------ -------------- --------------
Total assets $856,386 $39,261 $35,323 $930,970
============== ============ ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $392,408 $26,877 $(3,476)(b) $415,809
Accrued payroll and benefit costs 13,810 13,810
Restructuring reserve 4,533 4,533
Other current liabilities 26,042 924 11,638 (d) 38,604
-------------- ------------ -------------- --------------
Total current liabilities 436,793 27,801 8,162 472,756
Long-term debt 526,962 38,621 (e) 565,583
Other noncurrent liabilities 7,466 7,466
Deferred income taxes 18,211 18,211
-------------- ------------ -------------- --------------
Total liabilities 989,432 27,801 46,783 1,064,016
Redeemable common stock 12,872 12,872
Stockholders' equity (145,918) 11,460 (11,460)(b) (145,918)
-------------- ------------ -------------- --------------
Total liabilities and stockholders' equity $856,386 $39,261 $35,323 $930,970
============== ============ ============== ==============
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet
3
<PAGE> 4
WESCO INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(a) Certain reclassifications have been made to the Bruckner historical
financial statements to conform to the presentation used by WESCO upon
completion of the acquisition.
(b) Reflects the cash paid at closing, the elimination of certain assets and
liabilities not acquired and the elimination of historical stockholders'
equity in connection with the Bruckner Acquisition as follows:
<TABLE>
<CAPTION>
<S> <C>
Assets and liabilities not acquired or assumed:
Cash $ 539
Securities available for sale 754
Amounts due from affiliates of Bruckner 5
Bank overdraft 3,476
Stockholders' equity 11,460
</TABLE>
(c) The Bruckner Acquisition is to be accounted for as a purchase business
combination. The purchase price at closing totaled approximately $99.1
million, consisting of $60.5 million in cash and $38.6 million of new
indebtedness. The new indebtedness consisted of $12.0 million borrowed
under WESCO's existing credit agreement and a noninterest-bearing
convertible note due March 31, 2000 and discounted to a value of $26.6
million for financial reporting purposes. The note is automatically
convertible into common stock of WESCO in the event of a public offering of
common stock of WESCO ("Public Offering") prior to March 31, 2000. For
purposes of this pro forma condensed consolidated financial information,
the purchase price allocation was as follows:
<TABLE>
<CAPTION>
<S> <C>
Consideration:
Cash $60,500
Increase in credit facility 12,000
Discounted seller note 26,621
Book value of assets acquired, net of liabilities assumed
and other obligations to seller (2,000)
-----------
Increase in basis 97,121
Allocation of increase in basis:
Increase in inventory value 267
Increase in goodwill and other intangible assets 96,854
-----------
$97,121
===========
</TABLE>
No assumptions were made regarding restructuring costs or recurring
benefits from synergies associated with the consummation of the
acquisition.
The asset purchase agreement provides for certain possible post-closing
purchase price adjustments based on Bruckner's net assets at closing of the
acquisition. WESCO has also agreed to pay additional contingent
consideration based on a multiple of increases in annual earnings before
interest, taxes, depreciation and amortization achieved by the Bruckner
division with respect to calendar year 1998 and future years through 2004,
up to a maximum additional contingent consideration of $130 million. Such
additional contingent consideration, if paid, is expected to be recorded as
an adjustment to the purchase price and increase goodwill and, accordingly,
would be amortized as a charge to earnings over the estimated remaining
life of the intangible asset. Bruckner may elect to receive up to 50% of
any additional contingent consideration in the form of common stock of
WESCO following a Public Offering. Some or all of the additional contingent
consideration is subject to earlier payment in the event of a "change of
control" of WESCO other than as a result of a Public Offering.
4
<PAGE> 5
(d) Reflects estimated additional other obligations due to seller based on
estimated post-closing adjustments.
(e) Reflects additional debt incurred in connection with the Bruckner
Acquisition consisting of (i) $12.0 million borrowed under WESCO's
existing credit agreement bearing interest at LIBOR (5.69% at June 30,
1998) plus 2.25%; and (ii) a noninterest-bearing convertible seller note
due March 31, 2000 with a face value of $30 million and discounted to a
value of $26.6 million for financial reporting purposes. For purposes of
this pro forma financial information, the discount of $3.4 million is
being accreted to interest expense on a straight-line basis (which
approximates the effective-interest method) over the term of the note.
5
<PAGE> 6
WESCO INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
WESCO Bruckner Pro WESCO
International, Bruckner Forma Recapitalization International,
In thousands Inc. Historical Historical(a) Adjustments Adjustments Inc. Pro Forma
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales, net $1,441,755 $132,015 $1,573,770
Cost of goods sold (exclusive of
depreciation and amortization) 1,181,769 118,415 1,300,184
-------------- ------------ ------------- --------------- -------------
Gross profit 259,986 13,600 273,586
Selling, general and administrative
expenses 205,107 5,991 $(170)(e) 210,928
Depreciation and amortization 6,328 55 $1,387 (b) 7,770
Recapitalization costs 51,800 51,800
-------------- ------------ ------------- --------------- -------------
Income (loss) from operations (3,249) 7,554 (1,387) 170 3,088
Interest expense, net 16,480 1,549 (c) 9,049 (f) 27,078
Other income (232) (232)
Other expenses, net 2,570 5,168 (g) 7,738
-------------- ------------ ------------- --------------- -------------
Income (loss) before income taxes (22,299) 7,786 (2,936) (14,046) (31,495)
Provision (benefit) for income taxes (12,693) 7 1,885 (d) (5,478)(d) (16,279)
-------------- ------------ ------------- --------------- -------------
Net income (loss) $(9,606) $7,779 $(4,821) $(8,568) $(15,216)
============== ============ ============= =============== =============
</TABLE>
See notes to unaudited pro forma condensed consolidated statement of income
6
<PAGE> 7
WESCO INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
WESCO Bruckner Pro WESCO
International, Bruckner Forma Recapitalization International,
In thousands Inc. Historical Historical(a) Adjustments Adjustments Inc. Pro Forma
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales, net $2,594,819 $222,406 $2,817,225
Cost of goods sold (exclusive of
depreciation and amortization) 2,130,900 203,417 2,334,317
-------------- ------------ ------------- -------------- ------------
Gross profit 463,919 18,989 482,908
Selling, general and administrative
expenses 372,532 8,742 $(400)(e) 380,874
Depreciation and amortization 11,331 111 $2,775 (b) 14,217
-------------- ------------ ------------- -------------- ------------
Income (loss) from operations 80,056 10,136 (2,775) 400 87,817
Interest expense, net 20,109 3,116 (c) 29,957 (f) 53,182
Other income (818) (818)
Other expenses, net 15,475 (g) 15,475
-------------- ------------ ------------- -------------- ------------
Income (loss) before income taxes 59,947 10,954 (5,891) (45,032) 19,978
Provision (benefit) for income taxes 23,710 215 1,760 (d) (17,562)(d) 8,123
-------------- ------------ ------------- -------------- ------------
Income (loss) from continuing
operations before non-recurring
charges directly attributable to
the Recapitalization $36,237 $10,739 $(7,651) $(27,469) $11,855
============== ============ ============= ============== ============
</TABLE>
See notes to unaudited pro forma condensed consolidated statement of income
7
<PAGE> 8
WESCO INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
(a) Certain reclassifications have been made to Bruckner's historical financial
statements to conform to the presentation used by WESCO upon completion of
the acquisition.
(b) Reflects amortization of goodwill and other intangible resulting from the
Bruckner Acquisition over an estimated period of 35 years.
(c) Reflects incremental interest expense on new obligations related to the
Bruckner Acquisition. The obligations consist of $12 million of new
borrowings and a noninterest-bearing convertible note due March 31, 2000
and discounted to a value of $26.6 million for financial reporting purposes
(face value $30.0 million). The assumed interest rate on the $12 million of
new borrowings under WESCO's existing credit agreement was 7.84%. For
purposes of this pro forma financial information, the original issue
discount is accreted on a straight-line basis (which approximates the
effective-interest method) over the period ending March 31, 2000. Assuming
a 0.125 percentage point change in interest rates, interest expense would
change by $8 thousand and $15 thousand for the six months ended June 30,
1998 and year ended December 31, 1997, respectively.
(d) Reflects the income tax effect of converting Bruckner from a Subchapter S
corporation to a C corporation and the income tax effects of the pro forma
adjustments at an assumed rate of 39%.
(e) Reflects the elimination of non-recurring advisory, management consulting
and monitoring fees paid to WESCO's investors prior to the Recapitalization
during the periods presented. Historical revenue and expenses would not
have been materially changed without these services.
(f) Reflects the incremental interest expense relating to the Recapitalization
assuming interest rates of 9.125% for the Senior Subordinated Notes, 8.05%
for the Tranche A Term Loan and 8.3% for the Tranche B Term Loan borrowings
under a new credit agreement, and amortization of original issue and
purchase discounts, as well as the incremental amortization expense
resulting from the capitalization of transaction fees and expenses of $10.5
million related to the Recapitalization. The amortization of debt issuance
costs were $677 thousand and $1.4 million for the six months ended June 30,
1998 and the year ended December 31, 1997, respectively. The Senior
Discount Notes were issued with an original issue discount of $36.5
million. The original issue discount is being accreted over the period
ending June 1, 2003. Beginning June 1, 2003, interest accrues at 11 1/8%.
Assuming a 0.125 percentage point change in interest rates, interest
expense would change by $106 thousand and $213 thousand for the six months
ended June 30, 1998 and year ended December 31, 1997, respectively.
(g) Reflects the costs related to the sale of certain accounts receivable in
connection with the Recapitalization at an assumed discount rate of 6.19%.
8
