XML 27 R10.htm IDEA: XBRL DOCUMENT
v3.20.2

ACQUISITIONS | 6 Months Ended
--- | ---
Jun. 30, 2020
Business Combinations [Abstract] |
Business Combination Disclosure | 4. ACQUISITIONS Anixter International Inc. As described in Note 1, on June 22, 2020, WESCO completed its previously announced merger with Anixter. The Company used the net proceeds from the issuance of senior unsecured notes, borrowings under a new asset-based revolving credit facility and an amended account receivable securitization facility (as described further in Note 8), as well as cash on hand, to finance the acquisition of Anixter and related transaction costs. At the effective time of the Merger, each outstanding share of common stock of Anixter (subject to limited exceptions) was converted into the right to receive (i) $72.82 in cash, (ii) 0.2397 shares of common stock of WESCO, par value $0.01 per share (the “WESCO Common Stock”) and (iii) 0.6356 depositary shares, each representing a 1/1,000th interest in a share of newly issued fixed-rate reset cumulative perpetual preferred stock of WESCO, Series A, with a $25,000 stated amount per whole preferred share and an initial dividend rate equal to 10.625%. Headquartered near Chicago, Illinois, Anixter is a leading distributor of network and security solutions, electrical and electronic solutions, and utility power solutions with locations in over 300 cities across approximately 50 countries, and annual sales of more than $8 billion. The Merger brings together two companies with highly compatible capabilities and characteristics. The combination of WESCO and Anixter will create an enterprise with scale and should afford the Company the opportunity to digitize its business, and expand its services portfolio and supply chain offerings. The total preliminary estimated fair value of consideration transferred for the Merger consisted of the following:
| (In thousands)
Cash portion attributable to common stock outstanding | $ | 2,476,010 |
Cash portion attributable to options and restricted stock units outstanding | 87,375 |
Fair value of cash consideration | 2,563,385 |
Common stock consideration | 313,512 |
Series A preferred stock consideration | 573,786 |
Fair value of equity consideration | 887,298 |
Extinguishment of Anixter obligations, including accrued and unpaid interest | 1,248,403 |
Total purchase consideration | $ | 4,699,086 |
Supplemental cash flow disclosure related to acquisitions: |
Cash paid for acquisition | $ | 3,811,788 |
Less: Cash acquired | (103,463) |
Cash paid for acquisition, net of cash acquired | $ | 3,708,325 |
The Merger has been accounted for as a business combination with WESCO acquiring Anixter in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Under the acquisition method of accounting, the preliminary purchase consideration has been allocated to the identified assets acquired and liabilities assumed based on their respective acquisition date fair value, with any excess allocated to goodwill. The fair value estimates were based on income, market and cost valuation methods using primarily unobservable inputs developed by management, which are categorized within Level 3 of the fair value hierarchy. Significant inputs used to value the identifiable intangible assets included projected revenues, estimated future cash flows, discount rates, royalty rates, and applicable income tax rates. The excess purchase consideration recorded to goodwill is not deductible for income tax purposes, and has been assigned to the Anixter reportable segment, as disclosed in Note 5. The resulting goodwill is primarily attributable to Anixter's workforce, significant cross-selling opportunities in additional geographies, enhanced scale, and other operational efficiencies. The estimated fair values of assets acquired and liabilities assumed are based on preliminary calculations and valuations using estimates and assumptions at the time of acquisition. The determination of the fair values of assets acquired and liabilities assumed, especially those related to identifiable intangible assets, is preliminary due to the timing of the completion of the Merger and the complexity of combining a multibillion dollar business. Accordingly, as the Company obtains additional information during the measurement period (not to exceed one year from the acquisition date), WESCO's estimates and assumptions for its preliminary purchase consideration allocations may change materially. The following table sets forth the preliminary allocation of the purchase consideration to the respective fair value of assets acquired and liabilities assumed for the acquisition of Anixter:
| (In thousands)
Assets |
Cash and cash equivalents | $ | 103,463 |
Trade accounts receivable | 1,309,894 |
Other accounts receivable | 116,386 |
Inventories | 1,424,768 |
Prepaid expenses and other current assets | 53,462 |
Property, buildings and equipment | 215,513 |
Operating lease assets | 262,238 |
Intangible assets | 1,832,700 |
Goodwill | 1,367,981 |
Other assets | 114,258 |
Total assets | $ | 6,800,663 |
Liabilities |
Accounts payable | $ | 920,163 |
Accrued payroll and benefit costs | 69,480 |
Short-term debt and current portion of long-term debt | 13,225 |
Other current liabilities | 221,574 |
Long-term debt | 77,822 |
Operating lease liabilities | 200,286 |
Deferred income taxes | 392,165 |
Other noncurrent liabilities | 206,862 |
Total liabilities | $ | 2,101,577 |
Fair value of net assets acquired, including goodwill and intangible assets | $ | 4,699,086 |
The following table sets forth the preliminary identifiable intangible assets and their estimated weighted-average useful lives:
Identifiable Intangible Assets | Estimated Fair Value |  | Weighted-Average Estimated Useful Life in Years
| (In thousands) |  |
Customer relationships | $ | 1,093,700 |  |  | 15
Trademarks | 735,000 |  |  | Indefinite
Non-compete agreements | 4,000 |  |  | 1
Total identifiable intangible assets | $ | 1,832,700 |  |  |
The results of operations of Anixter are included in the unaudited condensed consolidated financial statements beginning on June 22, 2020, the acquisition date. For the three and six months ended June 30, 2020, the condensed consolidated statements of (loss) income include $221.9 million of net sales and $18.4 million of income from operations for Anixter. Transaction costs related to the merger were comprised of legal, advisory and other costs of $73.3 million and $78.0 million, which are included in selling, general and administrative expenses for the three and six months ended June 30, 2020, respectively. Pro Forma Financial Information The following unaudited pro forma financial information presents combined results of operations for the periods presented, as if the Company had completed the Merger on January 1, 2019. The unaudited pro forma financial information includes adjustments to amortization and depreciation for intangible assets and property, buildings and equipment, adjustments to interest expense for the additional indebtedness incurred to complete the acquisition (including the amortization of debt discount and issuance costs), transaction costs, change in control and severance costs, dividends accrued on the Series A preferred stock, compensation expense associated with the WESCO phantom stock unit awards described in Note 10, as well as the respective income tax effects of such adjustments. The unaudited pro forma net income attributable to common stockholders presented below includes adjustments totaling $58.4 million and $55.8 million for the three months ended June 30, 2020 and 2019, respectively, and $6.3 million and $110.5 million for the six months ended June 30, 2020 and 2019, respectively. The unaudited pro forma financial information does not reflect any cost savings, operating synergies or revenue enhancements that WESCO may achieve as a result of its acquisition of Anixter, the costs to integrate the operations of WESCO and Anixter or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements. The unaudited pro forma financial information presented below is not necessarily indicative of consolidated results of operations of the combined business had the acquisition occurred at the beginning of the respective fiscal years, nor is it necessarily indicative of future results of operations of the combined company.
| Three Months Ended |  |  |  | Six Months Ended |  |
(In thousands) | June 30, 2020 |  | June 30, 2019 |  | June 30, 2020 |  | June 30, 2019
Pro forma net sales | $ | 3,678,504 |  |  | $ | 4,384,752 |  |  | $ | 7,691,263 |  |  | $ | 8,425,934 |
Pro forma net income attributable to common stockholders | 29,421 |  |  | 71,180 |  |  | 47,410 |  |  | 97,898 |
Sylvania Lighting Services Corp. On March 5, 2019, WESCO Distribution, Inc. ("WESCO Distribution"), through its WESCO Services, LLC subsidiary, acquired certain assets and assumed certain liabilities of Sylvania Lighting Services Corp. ("SLS"). Headquartered in Wilmington, Massachusetts, SLS offers a full spectrum of energy-efficient lighting upgrade, retrofit, and renovation solutions with annual sales of approximately $100 million and approximately 220 employees across the U.S. and Canada. WESCO Distribution funded the purchase price paid at closing with borrowings under its then outstanding accounts receivable securitization facility. The purchase price was allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date, resulting in goodwill of $11.6 million, which is deductible for tax purposes. The following table sets forth the consideration paid for the acquisition of SLS:
| Six Months Ended
| June 30
| 2019
| (In thousands)
Fair value of assets acquired | $ | 34,812 |
Fair value of liabilities assumed | 7,070 |
Cash paid for acquisition | $ | 27,742 |

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration