XML 28 R14.htm IDEA: XBRL DOCUMENT
v3.22.0.1

ACQUISITIONS | 12 Months Ended
--- | ---
Dec. 31, 2021
Business Combinations [Abstract] |
ACQUISITIONS | Anixter International Inc. On June 22, 2020, Wesco completed its acquisition of Anixter International Inc. ("Anixter"), a Delaware corporation. Pursuant to the terms of the Agreement and Plan of Merger, dated January 10, 2020 (the “Merger Agreement”), by and among Anixter, Wesco and Warrior Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Wesco (“Merger Sub”), Merger Sub was merged with and into Anixter (the “Merger”), with Anixter surviving the Merger and continuing as a wholly owned subsidiary of Wesco. On June 23, 2020, Anixter merged with and into Anixter Inc., with Anixter Inc. surviving to become a wholly owned subsidiary of Wesco. The Company used the net proceeds from the issuance of senior unsecured notes, borrowings under its revolving credit and accounts receivable securitization facilities (as described further in Note 10, "Debt"), 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 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%. Anixter was 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 2019 annual sales of more than $8 billion. The Merger brought together two companies with highly compatible capabilities and characteristics. The combination of Wesco and Anixter created an enterprise with scale and has afforded the Company the opportunity to digitize its business and expand its services portfolio and supply chain offerings. The total 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 | 1,247,653 |
Total purchase consideration | $ | 4,698,336 |
Supplemental cash flow disclosure related to acquisitions: |
Cash paid for acquisition | $ | 3,811,038 |
Less: Cash acquired | (103,463) |
Cash paid for acquisition, net of cash acquired | $ | 3,707,575 |
The Merger was accounted for as a business combination with Wesco acquiring Anixter in accordance with ASC 805, Business Combinations. Under the acquisition method of accounting, the purchase consideration was 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 as Level 3 in the fair value hierarchy. Specifically, the fair values of the identified trademark and customer relationship intangible assets were estimated using the relief-from-royalty and multi-period excess earnings methods, respectively. Significant inputs used to value these identifiable intangible assets included projected revenues and expected operating margins, customer attrition rates, discount rates, royalty rates, and applicable income tax rates. The excess purchase consideration recorded as goodwill is not deductible for income tax purposes, and has been assigned to the Company's reportable segments based on their relative fair values, as disclosed in Note 5, "Goodwill and Intangible Assets". The resulting goodwill is primarily attributable to Anixter's workforce, significant cross-selling opportunities in additional geographies, enhanced scale, and other operational efficiencies. During the second quarter of 2021, the Company finalized its allocation of the purchase consideration to the respective fair values of assets acquired and liabilities assumed in the acquisition of Anixter. As the Company obtained additional information during the measurement period, it recorded adjustments to its preliminary estimates of fair value, which were as of June 30, 2020. As presented in the table below, the net impact of these measurement period adjustments was an increase to goodwill of $16.4 million. The following table sets forth the allocation of the purchase consideration to the respective fair value of assets acquired and liabilities assumed for the acquisition of Anixter:
| Preliminary Fair Value Estimates(1) |  | Measurement Period Adjustments |  | Final Purchase Price Allocation(1)
Assets | (In thousands)
Cash and cash equivalents | $ | 103,463 |  |  | $ | — |  |  | $ | 103,463 |
Trade accounts receivable | 1,309,894 |  |  | (8,928) |  |  | 1,300,966 |
Other receivables | 116,386 |  |  | — |  |  | 116,386 |
Inventories | 1,424,768 |  |  | (14,906) |  |  | 1,409,862 |
Prepaid expenses and other current assets | 53,462 |  |  | 14,202 |  |  | 67,664 |
Property, buildings and equipment | 215,513 |  |  | (3,792) |  |  | 211,721 |
Operating lease assets | 262,238 |  |  | 18,047 |  |  | 280,285 |
Intangible assets | 1,832,700 |  |  | 5,365 |  |  | 1,838,065 |
Goodwill | 1,367,981 |  |  | 16,356 |  |  | 1,384,337 |
Other assets | 114,258 |  |  | 25,589 |  |  | 139,847 |
Total assets | $ | 6,800,663 |  |  | $ | 51,933 |  |  | $ | 6,852,596 |
Liabilities |  |  |  |  |
Accounts payable | $ | 920,163 |  |  | $ | (1,239) |  |  | $ | 918,924 |
Accrued payroll and benefit costs | 69,480 |  |  | — |  |  | 69,480 |
Short-term debt and current portion of long-term debt | 13,225 |  |  | — |  |  | 13,225 |
Other current liabilities | 221,574 |  |  | 12,745 |  |  | 234,319 |
Long-term debt | 77,822 |  |  | (205) |  |  | 77,617 |
Operating lease liabilities | 200,286 |  |  | 17,017 |  |  | 217,303 |
Deferred income taxes | 392,165 |  |  | (15,111) |  |  | 377,054 |
Other noncurrent liabilities | 207,612 |  |  | 38,726 |  |  | 246,338 |
Total liabilities | $ | 2,102,327 |  |  | $ | 51,933 |  |  | $ | 2,154,260 |
Fair value of net assets acquired, including goodwill and intangible assets | $ | 4,698,336 |  |  | $ | — |  |  | $ | 4,698,336 |
(1) The preliminary fair value estimates are as of June 30, 2020. As disclosed above, the Company finalized its purchase price allocation during the measurement period. The following table sets forth the 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 |  | $ | 1,098,900 |  |  | 19
Trademarks |  | 735,000 |  |  | Indefinite
Non-compete agreements |  | 4,165 |  |  | 2
Total identifiable intangible assets |  | $ | 1,838,065 |  |  |
The results of operations of Anixter are included in the consolidated financial statements beginning on June 22, 2020, the acquisition date. For the years ended December 31, 2021 and 2020, the consolidated statements of income include $9.5 billion and $4.5 billion of net sales, respectively, and $580.6 million and $180.0 million of income from operations, respectively, for Anixter. For the years ended December 31, 2021 and 2020, the Company incurred costs related to the Merger of $158.5 million and $132.2 million, respectively, which primarily consist of advisory, legal, integration, separation and other costs. These costs are included in selling, general and administrative expenses for both periods. 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 14, "Employee Benefit Plans", as well as the respective income tax effects of such adjustments. For the year ended December 31, 2020, adjustments totaling $7.0 million increased the unaudited pro forma net income attributable to common stockholders, and adjustments totaling $201.3 million decreased the unaudited pro forma net income attributable to common stockholders for the year ended December 31, 2019. 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 periods, nor is it necessarily indicative of future results of operations of the combined company.
| Year Ended
(In thousands) | December 31, 2020 |  | December 31, 2019
Pro forma net sales | $ | 16,016,902 |  |  | $ | 17,204,472 |
Pro forma net income attributable to common stockholders | 119,839 |  |  | 285,100 |
Canadian Divestitures On August 6, 2020, the Company entered into a Consent Agreement with the Competition Bureau of Canada regarding the merger with Anixter. Under the Consent Agreement, the Company was required to divest certain legacy Wesco utility and data communications businesses in Canada, which had total net sales of approximately $110 million and $120 million for the years ended December 31, 2020 and 2019, respectively. In February 2021, the Company completed such divestitures for cash consideration totaling $56.0 million. The Company recognized a net gain from the sale of these businesses of $8.9 million, which is reported as a component of selling, general and administrative expenses for the year ended December 31, 2021. These dispositions fulfilled the Company’s divestiture commitments under the Consent Agreement and the net cash proceeds were used to repay debt.

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: | dtr-types: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