[WESCO International, Inc. LOGO]
FILED PURSUANT TO RULE 424(B)(5)
OF THE SECURITIES AND EXCHANGE COMMISSION
REGISTRATION NO. 333-119909
Prospectus Supplement to Prospectus dated December 6, 2004.
10,000,000 Shares
WESCO INTERNATIONAL, INC.
Common Stock
----------------------
WESCO International, Inc. is offering 4,000,000 of the shares to be sold in
the offering. The selling stockholders identified in this prospectus supplement
are offering an additional 6,000,000 shares. WESCO International will not
receive any of the proceeds from the sale of the shares being sold by the
selling stockholders.
The common stock is listed on the New York Stock Exchange under the symbol
"WCC". The last reported sale price of the common stock on December 16, 2004 was
$26.80 per share.
See "Risk Factors" beginning on page S-9 of this prospectus supplement and
page 3 of the accompanying prospectus to read about factors you should consider
before buying shares of the common stock.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
Per Share Total
--------- ------------
Initial price to public.................................. $26.25 $262,500,000
Underwriting discount.................................... $ 1.18 $ 11,800,000
Proceeds, before expenses, to WESCO International........ $25.07 $100,280,000
Proceeds, before expenses, to the selling stockholders... $25.07 $150,420,000
To the extent that the underwriters sell more than 10,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
1,371,914 shares from two institutional selling stockholders and then an
additional 128,086 shares from WESCO International, in each case at the initial
price to public less the underwriting discount.
---------------------
The underwriters expect to deliver the shares against payment in New York,
New York on December 22, 2004.
Joint Book-Running Lead Managers
GOLDMAN, SACHS & CO. LEHMAN BROTHERS
Joint Lead Managers
JPMORGAN UBS INVESTMENT BANK
Co-Managers
ROBERT W. BAIRD & CO. BEAR, STEARNS & CO. INC.
---------------------
Prospectus Supplement dated December 16, 2004.
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information about us and the offering. It
may not contain all the information you should consider before investing in our
common stock. You should carefully read this entire prospectus supplement, the
accompanying prospectus and the documents incorporated by reference into this
prospectus supplement and the accompanying prospectus, including the "Risk
Factors" sections of this prospectus supplement and the accompanying prospectus,
before making an investment decision. Unless the context otherwise requires,
references to "WESCO International", the "Company", "we", "our", "us" and
similar terms mean WESCO International, Inc. and its subsidiaries, including
WESCO Distribution, Inc., and predecessors. Unless otherwise specified, all
information in this prospectus supplement assumes no exercise of the
underwriters' option to purchase additional shares.
WESCO INTERNATIONAL, INC.
With sales of approximately $3.3 billion in 2003 and approximately $3.6
billion in the twelve months ended September 30, 2004, we are a leading North
American provider of electrical construction products and electrical and
industrial maintenance, repair and operating supplies, commonly referred to as
"MRO." We believe that we are the second largest distributor in the estimated
$83 billion U.S. electrical distribution industry, and the largest provider of
integrated supply services for MRO goods and services in the United States. Our
integrated supply solutions and outsourcing services are designed to fulfill a
customer's industrial MRO procurement needs through a highly automated,
proprietary electronic procurement and inventory replenishment system. We have
approximately 350 full service branches and five distribution centers located in
48 states, nine Canadian provinces, Puerto Rico, Mexico, Guam, the United
Kingdom, Nigeria and Singapore. We serve over 100,000 customers worldwide,
offering over 1,000,000 products from over 24,000 suppliers. Our diverse
customer base includes a wide variety of industrial companies; contractors for
industrial, commercial and residential projects; utility companies; and
commercial, institutional and governmental customers. Our top ten customers
accounted for approximately 11% of our sales in 2003. Our leading market
position, experienced workforce, extensive geographic reach, broad product and
service offerings and acquisition program have enabled us to grow our market
position.
INDUSTRY OVERVIEW
ELECTRICAL DISTRIBUTION. According to Electrical Wholesaling Magazine, the
U.S. electrical distribution industry had sales of $75 billion in 2003, with
sales forecasted to be approximately $83 billion in 2004 and $89 billion in
2005. Industry growth has averaged 5% per year from 1985 to 2003. This expansion
has been driven by general economic growth, increased use of electrical products
in businesses and industries, new products and technologies, and customers who
are seeking to more efficiently purchase a broad range of products and services
from a single point of contact, thereby eliminating the costs and expenses of
purchasing directly from manufacturers or multiple sources. The U.S. electrical
distribution industry is also highly fragmented. In 2003, the latest year for
which market share data is available, the four national distributors, including
WESCO, accounted for approximately 16% of estimated total industry sales.
INTEGRATED SUPPLY. The market for integrated supply services has grown
rapidly in recent years. Growth has been driven by the desire of large
industrial companies to reduce operating expenses by implementing comprehensive
third-party programs, which outsource cost-intensive procurement, stocking and
administrative functions associated with the purchase and consumption of MRO
supplies. For some of our customers, we believe these costs can account for over
50% of the total costs for MRO products and services. We believe that
significant opportunities exist for further expansion of integrated supply
services, as the total potential in the
S-1
U.S. for purchases of industrial MRO supplies and services is currently
estimated to be approximately $400 billion.
OUR STRATEGY
Our objective is to be the leading provider of electrical products and
other MRO supplies and services to companies in North America and selected
international markets. In achieving this leadership position, our goal will be
to grow earnings at a faster rate than sales by continuing to focus on margin
enhancement and continuous productivity improvement. Our growth strategy
leverages our existing strengths and focuses on developing new initiatives and
programs which position us to grow at a faster rate than the industry.
ENHANCE OUR LEADERSHIP POSITION IN ELECTRICAL DISTRIBUTION. We will
continue to leverage our extensive market presence and brand equity in the WESCO
name to further our leadership position in electrical distribution. We are the
second largest electrical distributor in the United States and, through our
value-added products and services, we believe we have become the industry leader
in serving several important and growing markets including:
- industrial customers with large, complex plant maintenance operations,
many of which require a national multi-site service solution for their
electrical product needs;
- large contractors for major industrial and commercial construction
projects;
- the electric utility industry; and
- manufacturers of factory-built homes, recreational vehicles and other
modular structures.
We are focusing our sales and marketing efforts in three primary areas:
- expanding our product and service offerings to existing customers in
industries we currently serve;
- targeting new clients in industries we currently serve; and
- targeting markets which provide significant growth opportunities, such as
multi-site retail construction, education and healthcare facilities,
OEM/direct material programs and regional and national contractors.
CONTINUE TO GROW OUR PREMIER POSITION IN NATIONAL ACCOUNTS. From 1994
through 2003, revenue from our national accounts program increased at a compound
annual growth rate of 10%. We will continue to invest in the expansion of this
program. Through our national accounts program, we coordinate electrical MRO
procurement and purchasing activities primarily for large industrial and
commercial companies across multiple locations. We have well-established
relationships with over 250 companies, providing us with a recurring base of
revenue through multi-year agreements with many of these companies. Our
objective is to continue to increase revenue from national accounts customers
by:
- offering existing national account customers new products and services
and serving additional customer locations;
- extending certain established national account relationships to include
our integrated supply services; and
- expanding our customer base by leveraging our existing industry expertise
in markets we currently serve, as well as entering into new markets.
S-2
FOCUS ON CONSTRUCTION NATIONAL ACCOUNTS. We intend to increase our
customer base, where we have targeted new construction accounts, with a focus on
large renovation and institutional projects. We seek to secure new major project
contracts through:
- active national marketing of our demonstrated project management
capabilities;
- further development of relationships with leading regional and national
contractors and engineering firms; and
- close coordination with multi-location contractor customers on their
major project requirements.
EXTEND OUR LEADERSHIP POSITION IN INTEGRATED SUPPLY SERVICES. We believe
that we are the largest provider of integrated supply services for MRO goods and
services in the United States. We provide a full complement of outsourcing
solutions, focusing on improving the supply chain management process for our
customers' indirect purchases. Our integrated supply programs replace the
traditional multi-vendor, resource-intensive procurement process with a single,
outsourced, fully automated process capable of managing all MRO and related
service requirements. Our solutions range from timely product delivery to
assuming full responsibility for the entire procurement function. Our customers
include some of the largest companies in the United States. We will continue to
expand our leadership position as the largest provider of integrated supply
services for MRO goods and services in the United States by, for instance,
leveraging established relationships with our large industrial customer base,
especially among existing national account customers who could benefit from our
integrated supply model. Based on our customers' continued reliance on
outsourcing, we believe that we are well positioned to capitalize on this trend.
GAIN SHARE IN FRAGMENTED LOCAL MARKETS. Significant opportunities exist to
gain market share in highly fragmented local markets. We intend to increase our
market share in key geographic markets through a combination of increased sales
and marketing efforts at existing branches, acquisitions that expand our product
and customer base and new branch openings. To promote this growth, we have a
compensation system for branch managers that encourages our branch managers to
increase sales and optimize business activities in their local markets,
including managing the sales force, configuring inventories, targeting potential
customers for marketing efforts and tailoring local service options.
EXPAND OUR LEAN INITIATIVE. LEAN is an organized series of continuous
improvement events focusing on simplification, elimination of waste and
achieving significant improvement throughout the business enterprise. Our LEAN
initiative was launched in the first half of 2003 and was implemented in
approximately 100 branches by the end of that year. Although LEAN is most often
associated with manufacturing operations, we are applying LEAN thinking to all
of our processes, activities and systems. Our focus is in eight key areas:
sales, margin, warehouse operations, purchasing, inventory, accounts receivable,
accounts payable and administrative processes. In 2004, our objective has been
to have most branches and headquarters operations exposed to some or all of the
LEAN activities and to continuously develop improvement processes for all
operations. We believe this initiative, in combination with other on going
programs, will contribute to an expansion of our operating margins of
approximately 1 1/2% to 2% over the next three years.
PURSUE STRATEGIC ACQUISITIONS. Since 1995, we have completed and
successfully integrated 25 acquisitions, which represented annual sales of
approximately $1.3 billion in 2003. We believe that the highly fragmented nature
of the electrical and industrial MRO distribution industry will continue to
provide us with acquisition opportunities. Our most recent acquisition was
completed in March 2001. We have not been as active in pursuing acquisition
candidates given the weak economy in recent years and the uncertainty of future
earnings streams of potential acquisition candidates; however, we expect our
acquisition activities to resume during the next year.
S-3
EXPAND PRODUCT AND SERVICE OFFERINGS. We are developing a new service
capability to assist customers in improving their internal productivity and
overall cost position. This service, which we call CR$, Cost Reduction Services,
is based on applying LEAN principles and practices in our customers' work
environment. To date, we have worked with manufacturers, assemblers and
contractors with large service operations to enhance supply chain operations and
logistics. Our work on productivity projects, in cooperation with our customers,
significantly increases the breadth of products that can be supplied and creates
fee-for-service opportunities in kitting, assembly and warehouse operations. We
continue to build on our demonstrated ability to introduce new products and
services to meet existing customer demands and capitalize on new market
opportunities. For example, we have the platform to sell integrated lighting
control and power distribution equipment in a single package for multi-site
specialty retailers, restaurant chains and department stores. These are strong
growth markets where our national accounts strategies and logistics
infrastructure provide significant benefits for our customers.
CAPITALIZE ON OUR INFORMATION SYSTEM CAPABILITIES. We intend to utilize
our sophisticated information technology capabilities to drive targeted direct
mail marketing campaigns, improve customer profitability and enhance our working
capital productivity. Our information system provides us with detailed,
actionable information across all facets of our broad network, allowing us to
quickly and effectively identify and act on profitability- and
efficiency-related initiatives.
EXPAND OUR INTERNATIONAL OPERATIONS. Our international sales, the majority
of which are in Canada, accounted for approximately 12% of total sales in the
nine months ended September 30, 2004. We believe that there is significant
additional demand for our products and services outside the United States and
Canada. Many of our multinational domestic customers are seeking distribution,
integrated supply and project management solutions globally. We follow our
established customers and pursue business that we believe utilizes and extends
our existing capabilities. We believe this strategy of working through
well-developed customer and supplier relationships significantly reduces risks
and provides the opportunity to establish profitable businesses. We currently
have five locations in Mexico. Additionally, our locations in Aberdeen, Scotland
and London, England support our sales efforts in Europe and the former Soviet
Union. We also have operations in Nigeria to serve West Africa and an office in
Singapore to support our operations in Asia.
OUR COMPETITIVE STRENGTHS
We believe the following strengths are central to the successful execution
of our strategy:
MARKET LEADERSHIP. Our ability to manage large construction projects and
complex multi-site plant maintenance programs and procurement projects that
require special sourcing, technical advice, logistical support and locally based
service has enabled us to establish leadership positions in our principal
markets. We have utilized these skills to generate significant revenues in
industries with intensive use of electrical and MRO products, including
electrical contracting, utilities, original equipment manufacturing, process
manufacturing and other commercial, institutional and governmental entities. We
also have extended our position within these industries to expand our customer
base.
VALUE-ADDED SERVICES. We are a leader in providing a wide range of
services and procurement solutions that draw on our product knowledge, supply
and logistics expertise and systems capabilities, enabling our customers to
reduce supply chain costs and improve efficiency. These programs include:
- National Accounts -- We coordinate product supply and materials
management activities for MRO supplies, project needs and direct material
for national and regional customers with multiple locations who seek
purchasing leverage through a single electrical products provider;
S-4
- Integrated Supply -- We design and implement programs that enable our
customers to significantly reduce the number of MRO suppliers they use
through services that include highly automated, proprietary electronic
procurement and inventory replenishment systems and on-site materials
management and logistics services; and
- Construction National Accounts -- We have a dedicated team of experienced
construction sales management personnel to service the needs of the
regional and national contractors. Top engineering and construction firms
which specialize in major projects such as airport expansions, power
plants and oil and gas facilities are also a focus group for our national
accounts program where we can continue to leverage our expertise.
BROAD PRODUCT OFFERING. We provide our customers with a broad product
selection consisting of over 1,000,000 electrical, industrial and data
communications products sourced from over 24,000 suppliers. Our broad product
offering enables us to meet virtually all of a customer's electrical product and
MRO requirements.
EXTENSIVE DISTRIBUTION NETWORK. Our distribution network consists of
approximately 350 branches and five distribution centers located in 48 states,
nine Canadian provinces, Mexico, the United Kingdom, Singapore, Puerto Rico,
Nigeria and Guam. This extensive network, which would be extremely difficult and
expensive to duplicate, allows us to:
- maintain local sourcing of customer service, technical support and sales
coverage;
- tailor branch products and services to local customer needs;
- offer multi-site distribution capabilities to large customers and
national accounts; and
- provide same-day deliveries.
LOW COST OPERATOR. Our competitive position has been enhanced by our low
cost position, which is based on:
- extensive use of automation and technology;
- centralization of functions such as purchasing, accounting and
information systems;
- strategically located distribution centers;
- purchasing economies of scale; and
- incentive programs that increase productivity and encourage
entrepreneurship.
As a result of these factors, we believe that we have one of the lowest
operating costs in our industry. Our selling, general and administrative
expenses as a percentage of revenues for the nine months ended September 30,
2004 decreased to 14.6%, which is significantly below our peer group average,
according to the National Association of Electrical Distributors. Our low cost
position enables us to generate a significant amount of net cash flow, as the
amount of capital investment required to maintain our business is relatively
low. Consequently, more of the cash we generate is available for debt reduction,
continued investment in the growth of our business and strategic acquisitions.
In addition to being a low cost operator in the industry, we realize
significant operating leverage in our business. As a result of our productivity
initiatives and operating leverage, we realized operating profit pull-through of
63% for the nine months ended September 30, 2004 compared to the same period in
2003. We define operating profit pull-through as incremental (measured against
the same period in the prior year) operating profit divided by incremental gross
profit and view this metric as a key measure of our operating efficiency.
S-5
THE OFFERING
Shares of common stock offered
by WESCO International........ 4,000,000 shares
Shares of common stock offered
by the selling stockholders... 6,000,000 shares
Shares of common stock
outstanding after this
offering...................... 46,114,320 shares(1)
Use of proceeds............... We estimate that our net proceeds from this
offering will be approximately $99.8 million,
after expenses. We intend to use our net
proceeds to repay a portion of our outstanding
9 1/8% senior subordinated notes due 2008
through redemption or repurchase. Pending use,
we intend to reduce our borrowings under our
revolving credit facility, if any, and accounts
receivable securitization program. We plan to
repay a portion of our senior subordinated
notes with funds borrowed under these
facilities.
We will not receive any proceeds from the sale
of common stock by the selling stockholders.
Risk Factors.................. See "Risk Factors" beginning on page S-9 of
this prospectus supplement and on page 3 of the
accompanying prospectus for a discussion of
factors you should consider before buying
shares of our common stock.
New York Stock Exchange
Symbol........................ WCC
(1) The number of shares of common stock to be outstanding after this
offering is based on the number of shares outstanding as of September
30, 2004. As of that date, we had 42,114,320 shares of common stock
outstanding, excluding:
- an aggregate of 4,067,953 shares of common stock held by us as
treasury shares;
- an aggregate of 6,643,670 shares of common stock reserved for issuance
upon exercise of outstanding options, at a weighted average exercise
price of $8.34 per share;
- an aggregate of 880,500 shares of common stock reserved for issuance
upon payment with respect to outstanding stock appreciation rights, at
a weighted average exercise price of $24.02 per share; and
- an aggregate of 5,967,419 shares of common stock available for future
issuance under our equity compensation plans.
S-6
SUMMARY CONSOLIDATED FINANCIAL DATA
The table below sets forth certain of our consolidated financial data as of
and for each of the periods indicated. The financial information for the years
ended December 31, 2001, 2002 and 2003, and as of December 31, 2001, 2002 and
2003, is derived from our audited consolidated financial statements, which
(other than the financial information as of December 31, 2001) are incorporated
by reference into this prospectus supplement and the accompanying prospectus.
The consolidated financial information as of and for the nine-month periods
ended September 30, 2004 and 2003 is derived from our unaudited consolidated
financial statements. In our opinion, such unaudited consolidated financial
statements include all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial data for such periods. The
results for the nine months ended September 30, 2004 are not necessarily
indicative of the results to be achieved for the year ending December 31, 2004
or for any other future period.
The data below should be read in conjunction with "Capitalization" on page
S-14 of this prospectus supplement and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements, including the notes thereto incorporated by reference in this
prospectus supplement and the accompanying prospectus.
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
2001 2002 2003 2003 2004
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
INCOME STATEMENT DATA:
Net sales....................... $ 3,658.0 $ 3,325.8 $ 3,286.8 $ 2,436.6 $ 2,753.3
Gross profit.................... 643.5 590.8 610.1 450.0 527.1
Selling, general and
administrative expenses....... 517.2 494.4 501.5 373.2 403.0
Depreciation and
amortization(1)............... 31.0 19.8 22.5 15.4 14.1
----------- ----------- ----------- ----------- -----------
Income from operations.......... 95.3 76.6 86.1 61.4 110.0
Interest expense, net........... 45.1 43.0 42.3 32.1 30.3
Loss on debt extinguishment(2).. -- 1.1 0.2 0.2 2.1
Other expenses.................. 16.9 6.6 4.5 3.4 4.4
----------- ----------- ----------- ----------- -----------
Income before income taxes...... 33.3 25.9 39.1 25.7 73.2
Provision for income taxes(3)... 13.1 2.8 9.1 5.1 25.4
----------- ----------- ----------- ----------- -----------
Net income...................... $ 20.2 $ 23.1 $ 30.0 $ 20.6 $ 47.8
=========== =========== =========== =========== ===========
Earnings per common share
Basic......................... $ 0.45 $ 0.51 $ 0.67 $ 0.46 $ 1.15
Diluted....................... $ 0.43 $ 0.49 $ 0.65 $ 0.44 $ 1.10
Weighted average common shares
outstanding
Basic......................... 44,862,087 45,033,964 44,631,459 45,117,257 41,534,864
Diluted....................... 46,901,673 46,820,093 46,349,082 46,657,523 43,602,818
OTHER FINANCIAL DATA:
Capital expenditures............ $ 13.8 $ 9.3 $ 8.4 $ 5.6 $ 6.9
Net cash provided (used) by
operating activities.......... 161.3 20.3 35.8 (1.5) 92.3
Net cash used by investing
activities.................... (69.2) (23.1) (9.2) (6.4) (38.0)
Net cash (used) provided by
financing activities.......... (38.0) (49.9) (22.3) 15.1 (62.7)
S-7
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
--------------------------------------- -------------------------
2001 2002 2003 2003 2004
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN MILLIONS)
BALANCE SHEET DATA:
Total assets.................... $ 1,170.8 $ 1,019.5 $ 1,161.2 $ 1,153.5 $ 1,233.4
Total long-term debt (including
current portion).............. 452.0 418.0 422.2 432.6 427.6
Long-term obligations(4)........ -- -- 53.0 15.0 2.0
Stockholders' equity............ 144.7 169.3 167.7 195.7 228.2
---------------
(1) Effective for 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible
Assets", as described in Note 4 to the consolidated financial statements
incorporated by reference in this prospectus supplement and accompanying
prospectus.
(2) Represents charges relating to the write-off of unamortized debt issuance
and other costs associated with the early extinguishment of debt.
(3) Benefits of $2.6 million and $5.3 million in 2003 and 2002, respectively,
from the resolution of prior year tax contingencies resulted in unusually
low provisions for income taxes for those years.
(4) Includes amounts due under earnout agreements for past acquisitions not
otherwise reflected in total long-term debt.
S-8
RISK FACTORS
An investment in our common stock involves risks. In deciding whether to
invest in our common stock, you should carefully consider the following risk
factors and the other information included or incorporated by reference in this
prospectus supplement and the accompanying prospectus. The risks described below
and in the accompanying prospectus are not the only ones we face. Additional
risks and uncertainties that we are unaware of, or that we currently deem
immaterial, also may become important factors that affect us. If any of these
risks occurs, our business and financial results could be materially adversely
affected. In that case, the trading price of our common stock could decline, and
you could lose all or part of your investment.
OUR SUBSTANTIAL AMOUNT OF DEBT REQUIRES SIGNIFICANT DEBT SERVICE OBLIGATIONS
THAT COULD ADVERSELY AFFECT OUR ABILITY TO FULFILL OUR OBLIGATIONS, LIMIT OUR
GROWTH AND IMPOSE RESTRICTIONS ON OUR BUSINESS.
We are significantly leveraged. As of September 30, 2004, we had $427.6
million of consolidated indebtedness, including $327.9 million in principal
amount of 9 1/8% senior subordinated notes due 2008, and stockholders' equity of
$228.2 million. We and our subsidiaries may incur additional indebtedness in the
future, subject to certain limitations contained in the instruments governing
our indebtedness. Accordingly, we will have significant debt service
obligations. These amounts exclude our accounts receivable securitization
program, through which we may sell up to $325.0 million of our accounts
receivable to a third party conduit and remove these receivables and the
associated debt from our consolidated balance sheet.
Our debt service obligations have important consequences, including but not
limited to the following:
- a substantial portion of cash flow from our operations will be dedicated
to the payment of principal and interest on our indebtedness, thereby
reducing the funds available for operations, future business
opportunities and acquisitions and other purposes and increasing our
vulnerability to adverse general economic and industry conditions;
- our ability to obtain additional financing in the future may be limited;
- as a result of our interest rate swap agreements, approximately $100.0
million of our fixed rate indebtedness has been effectively converted to
variable rates of interest, which will make us vulnerable to increases in
interest rates;
- we are substantially more leveraged than certain of our competitors,
which might place us at a competitive disadvantage; and
- we may be hindered in our ability to adjust rapidly to changing market
conditions.
Our ability to make scheduled payments of the principal of, or to pay
interest on, or to refinance our indebtedness and to make scheduled payments
under our operating leases or to fund planned capital expenditures or finance
acquisitions will depend on our future performance, which to a certain extent is
subject to economic, financial, competitive and other factors beyond our
control. There can be no assurance that our business will continue to generate
sufficient cash flow from operations in the future to service our debt, make
necessary capital expenditures or meet other cash needs. If unable to do so, we
may be required to refinance all or a portion of our existing debt, to sell
assets or to obtain additional financing.
A $190.0 million portion of the purchase commitments under our receivables
facility requires an annual renewal of its terms. That portion of the
arrangement expires on August 30, 2005. The remaining $135.0 million portion of
the purchase commitments under the facility has a three-year term expiring on
August 29, 2007. There can be no assurance that available funding or that any
sale of assets or additional financing would be possible in amounts and on terms
favorable to us.
S-9
Over the next three years from September 30, 2004, we are obligated to pay
approximately $55.4 million relating to earnout agreements associated with past
acquisitions, of which $50.0 million is represented by a note payable which is
included in our consolidated indebtedness as of September 30, 2004. Another
acquisition agreement also contains contingent consideration provisions of up to
$20.0 million.
RESTRICTIVE DEBT COVENANTS CONTAINED IN OUR REVOLVING CREDIT FACILITY AND THE
INDENTURE UNDER WHICH OUR SENIOR SUBORDINATED NOTES WERE ISSUED MAY LIMIT OUR
ABILITY TO TAKE CERTAIN ACTIONS.
The revolving credit facility and the indenture under which our senior
subordinated notes were issued contain financial and operating covenants that
limit the discretion of our management, under certain circumstances, with
respect to certain business matters including incurring additional indebtedness
and paying dividends. The revolving credit facility also requires us to meet
certain fixed charge tests depending on credit line availability. Our ability to
comply with these and other provisions of the revolving credit facility and the
indenture may be affected by changes in economic or business conditions or other
events beyond our control. A failure to comply with the obligations contained in
the revolving credit facility or the indenture could result in an event of
default under either the revolving credit facility or the indenture, which could
result in acceleration of the related debt and the acceleration of debt under
other instruments evidencing indebtedness that may contain cross-acceleration or
cross-default provisions. If the indebtedness under the revolving credit
facility were to be accelerated, there can be no assurance that our assets would
be sufficient to repay in full such indebtedness and our other indebtedness.
DOWNTURNS IN THE ELECTRICAL DISTRIBUTION INDUSTRY HAVE HAD IN THE PAST, AND MAY
IN THE FUTURE HAVE, AN ADVERSE EFFECT ON OUR SALES AND PROFITABILITY.
The electrical distribution industry is affected by changes in economic
conditions, including national, regional and local slowdowns in construction and
industrial activity, which are outside our control. Our operating results may
also be adversely affected by increases in interest rates that may lead to a
decline in economic activity, particularly in the construction market, while
simultaneously resulting in higher interest payments under the revolving credit
facility and interest rate swap agreements. In addition, during periods of
economic slowdown such as the one we recently experienced, our credit losses,
based on history, could increase. There can be no assurance that economic
slowdowns, adverse economic conditions or cyclical trends in certain customer
markets will not have a material adverse effect on our operating results and
financial condition.
AN INCREASE IN COMPETITION COULD DECREASE OUR SALES OR EARNINGS.
We operate in a highly competitive industry. We compete directly with
national, regional and local providers of electrical and other industrial MRO
supplies. Competition is primarily focused in the local service area and is
generally based on product line breadth, product availability, service
capabilities and price. Other sources of competition are buying groups formed by
smaller distributors to increase purchasing power and provide some cooperative
marketing capability. During 1999 and 2000, numerous special purpose
Internet-based procurement service companies, auction businesses and trade
exchanges were organized. Many of them targeted industrial MRO and contractor
customers of the type we serve. While the entrants did not have a noticeable
impact on our business, we expect that new competitors could develop over time
as Internet-based enterprises become more established and refine their service
capabilities.
Some of our existing competitors have, and new market entrants may have,
greater financial and marketing resources than we do. To the extent existing or
future competitors seek to gain or retain market share by reducing prices, we
may be required to lower our prices, thereby adversely affecting financial
results. Existing or future competitors also may seek to compete with
S-10
us for acquisitions, which could have the effect of increasing the price and
reducing the number of suitable acquisitions. In addition, it is possible that
competitive pressures resulting from the industry trend toward consolidation
could affect growth and profit margins.
LOSS OF KEY SUPPLIERS OR LACK OF PRODUCT AVAILABILITY COULD DECREASE OUR SALES
AND EARNINGS.
Most of our agreements with suppliers are terminable by either party on 60
days' notice or less. Our ten largest suppliers in 2003 accounted for
approximately 32% of our purchases for the period. Our largest supplier in 2003
was Eaton Corporation, through its Eaton Electrical division, accounting for
approximately 13% of our purchases. The loss of, or a substantial decrease in
the availability of, products from any of our key suppliers, or the loss of key
preferred supplier agreements, could have a material adverse effect on our
business. Supply interruptions also could arise from shortages of raw materials,
labor disputes or weather conditions affecting products or shipments,
transportation disruptions, or other reasons beyond our control. In addition,
certain of our products, such as wire and conduit, are commodity price based
products and may be subject to significant price fluctuations which are beyond
our control. An interruption of operations at any of our five distribution
centers could have a material adverse effect on the operations of branches
served by the affected distribution center. Furthermore, we cannot be certain
that particular products or product lines will be available to us, or available
in quantities sufficient to meet customer demand. Such limited product access
could put us at a competitive disadvantage.
A DISRUPTION OF OUR INFORMATION SYSTEMS COULD INCREASE EXPENSES, DECREASE OUR
SALES OR REDUCE EARNINGS.
A serious disruption of our information systems could have a material
adverse effect on our business and results of operations. Our computer systems
are an integral part of our business and growth strategies. We depend on our
information systems to process orders, manage inventory and accounts receivable
collections, purchase products, ship products to our customers on a timely
basis, maintain cost-effective operations and provide superior service to our
customers.
WE MAY BE SUBJECT TO REGULATORY SCRUTINY AND MAY SUSTAIN A LOSS OF PUBLIC
CONFIDENCE IF WE ARE UNABLE TO SATISFY REGULATORY REQUIREMENTS RELATING TO
INTERNAL CONTROLS OVER FINANCIAL REPORTING.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to perform an
evaluation of our internal controls over financial reporting and have our
auditor attest to such evaluation on an annual basis. Compliance with these
requirements has been expensive and time-consuming, and we expect that to
continue. Although no assurance can be given, we believe that we will be able to
meet the required deadlines. If we fail to timely complete this evaluation, or
if our auditors cannot timely attest to our evaluations, we may be subject to
regulatory scrutiny and a loss of public confidence in our internal controls.
OUR LARGEST STOCKHOLDER CAN EXERCISE INFLUENCE OVER OUR AFFAIRS.
Prior to this offering, The Cypress Group LLC ("Cypress") and its
affiliates hold approximately 46% of the issued and outstanding shares of our
common stock. Following this offering, Cypress and its affiliates will hold
approximately 31% of the issued and outstanding shares of our common stock
assuming no exercise of the underwriters' option to purchase additional shares
and approximately 28% if the underwriters exercise their option to purchase
additional shares in full. In addition, Cypress has the right to appoint two of
the nine members of our Board of Directors. Accordingly, Cypress and its
affiliates can exercise significant influence over our affairs, including the
election of our directors, appointment of our management and approval of actions
requiring the approval of our stockholders, including the adoption of
S-11
amendments to our certificate of incorporation and approval of mergers or sales
of substantially all of our assets.
THERE IS A RISK THAT THE MARKET VALUE OF OUR COMMON STOCK MAY DECLINE.
Stock markets have experienced significant price and trading volume
fluctuations, and the market prices of companies in our industry have been
volatile. It is impossible to predict whether the price of our common stock will
rise or fall. Trading prices of our common stock will be influenced by our
operating results and prospects and by economic, financial and other factors. In
addition, general market conditions, including the level of, and fluctuations
in, the trading prices of stocks generally, and sales of substantial amounts of
common stock by us or our largest stockholder in the market after any offering
of common stock offered by this prospectus supplement and the accompanying
prospectus, or the perception that such sales could occur, could affect the
price of our common stock and make it more difficult for us to raise funds
through future offerings of common stock.
S-12
USE OF PROCEEDS
We estimate that the net proceeds from our sale of 4,000,000 shares of
common stock in this offering will be approximately $99.8 million after
deducting underwriting discounts and commissions and the estimated expenses of
the offering. We will not receive any of the proceeds from the sale of shares of
our common stock by the selling stockholders.
We intend to use the net proceeds from our sale of these shares to repay a
portion of our outstanding 9 1/8% senior subordinated notes due 2008 through
redemption or repayment. We may apply the net proceeds in one or more
transactions from time to time at our discretion. Until we so use the net
proceeds, we intend to reduce our borrowings under our revolving credit
facility, if any, and accounts receivable securitization program. We plan to
repay a portion of our senior subordinated notes with funds borrowed under these
facilities.
PRICE RANGE OF OUR COMMON STOCK AND DIVIDEND POLICY
Our common stock is listed on the New York Stock Exchange. The following
table sets forth, for the periods indicated, the range of high and low sales
prices per share of our common stock as reported on the New York Stock Exchange
for the periods indicated.
HIGH LOW
------ ------
Year Ended December 31, 2002:
First Quarter............................................. $ 7.44 $ 4.05
Second Quarter............................................ 7.58 5.95
Third Quarter............................................. 7.25 3.99
Fourth Quarter............................................ 5.51 2.85
Year Ended December 31, 2003:
First Quarter............................................. $ 5.73 $ 3.32
Second Quarter............................................ 6.45 3.40
Third Quarter............................................. 7.30 4.96
Fourth Quarter............................................ 9.50 5.20
Year Ending December 31, 2004:
First Quarter............................................. $16.20 $ 8.87
Second Quarter............................................ 18.75 13.20
Third Quarter............................................. 25.75 16.00
Fourth Quarter (through December 16, 2004)................ 29.17 20.50
On December 16, 2004, the last sale price of our common stock as reported
on the New York Stock Exchange was $26.80 per share. On November 30, 2004, there
were 47 holders of record of our common stock.
We have not paid dividends on our common stock, and do not presently plan
to pay dividends in the foreseeable future. We currently expect that earnings
will be retained and reinvested to support either business growth or debt
reduction. In addition, our revolving credit facility and the indenture under
which our senior subordinated notes were issued restrict our ability to pay
dividends.
S-13
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
September 30, 2004:
- on an actual basis; and
- on an as adjusted basis to give effect to our issuance and sale of the
common stock in this offering and the application of the net proceeds
received by us from this offering as described under "Use of Proceeds".
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations", our consolidated
financial statements and related notes and the other financial information
incorporated by reference in this prospectus supplement and accompanying
prospectus.
AS OF
SEPTEMBER 30, 2004
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
Cash and cash equivalents................................... $ 19.2 $ 19.2
======= =======
Total debt (including current portion):
Mortgage financing facility............................... $ 49.7 $ 49.7
Revolving credit facility(1).............................. -- --
9 1/8% senior subordinated notes due 2008................. 327.9 234.3(2)
Other debt................................................ 50.0 50.0
------- -------
Total debt............................................. 427.6 334.0
Total stockholders' equity:
Preferred stock, $.01 par value; 20,000,000 shares
authorized; no shares issued or outstanding............ $ -- $ --
Common stock, $.01 par value; 210,000,000 shares
authorized; 42,114,320 shares issued and outstanding,
actual; and 46,114,320 shares issued and outstanding,
as adjusted............................................ 0.4 0.5
Class B nonvoting convertible common stock, $.01 par
value; 20,000,000 shares authorized; 4,339,431 shares
issued and no shares outstanding, actual and as
adjusted............................................... -- --
Additional capital........................................ 571.3 671.3
Retained earnings (deficit)............................... (288.9) (292.9)
Treasury stock, at cost; 8,407,384 shares, actual and as
adjusted............................................... (61.4) (61.4)
Accumulated other comprehensive income.................... 6.8 6.8
------- -------
Total stockholders' equity........................... 228.2 324.3
------- -------
Total capitalization.............................. $ 655.8 $ 658.3
======= =======
---------------
(1) As of November 30, 2004, we had borrowing availability of approximately $172
million under our revolving credit facility, after giving effect to
outstanding letters of credit.
(2) Reflects the net book value of the notes redeemed or repurchased of $93.6
million.
S-14
SELLING STOCKHOLDERS
The table below sets forth, as of September 30, 2004 and as adjusted for
the issuance and sale of 4,000,000 shares by WESCO International and the sale of
an aggregate of 6,000,000 shares of our common stock offered hereby by the
selling stockholders listed below, information concerning the beneficial
ownership of our common stock by the selling stockholders in this offering.
A person is deemed to have "beneficial ownership" of any shares of common
stock when a person or persons have the right to acquire them within 60 days
after the date of this prospectus supplement. For purposes of computing the
percentage of outstanding shares of common stock held by each selling
stockholder named below, any shares which a selling stockholder has the right to
acquire within 60 days after the date of this prospectus supplement is deemed to
be outstanding but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other selling stockholder.
BENEFICIAL OWNERSHIP NUMBER OF BENEFICIAL OWNERSHIP
BEFORE OFFERING SHARES OF AFTER OFFERING
------------------------ COMMON STOCK ------------------------
NUMBER OF PERCENT SOLD IN NUMBER OF PERCENT OF
SELLING STOCKHOLDER SHARES OF CLASS OFFERING SHARES CLASS
------------------- ---------- -------- ------------ ---------- ----------
Cypress Merchant Banking Partners
L.P.(1)......................... 18,580,966 44.1% 5,181,623(2) 13,399,343(2) 29.1%(2)
Cypress Offshore Partners
L.P.(1)......................... 962,370 2.3% 268,377(3) 693,993(3) 1.5%(3)
Roy W. Haley...................... 1,941,791(4) 4.5% 550,000 1,391,791(4) 3.0%
---------------
* Indicates ownership of less than 1.0% of the common stock.
(1) The Cypress Group LLC is the general partner of Cypress Associates L.P.,
which is the general partner of Cypress Merchant Banking Partners L.P. and
Cypress Offshore Partners L.P. Messrs. James L. Singleton and James A.
Stern, who are directors of WESCO International, are members of The Cypress
Group LLC and may be deemed to share beneficial ownership of the shares of
common stock shown as beneficially owned by such Cypress funds. Messrs.
Singleton and Stern disclaim beneficial ownership of such shares.
(2) Excludes 1,304,690 shares to be sold by Cypress Merchant Banking Partners
L.P. upon exercise in full of the underwriters' option to purchase
additional shares.
(3) Excludes 67,224 shares to be sold by Cypress Offshore Partners L.P. upon
exercise in full of the underwriters' option to purchase additional shares.
(4) Excludes 925,125 shares issuable upon the exercise of outstanding stock
options, which are not vested as of the date of this prospectus supplement,
held by Mr. Haley.
S-15
UNDERWRITING
WESCO International, the selling stockholders and the underwriters named
below have entered into an underwriting agreement with respect to the shares
being offered. Subject to certain conditions, each underwriter has severally
agreed to purchase the number of shares indicated in the following table.
Underwriters Number of Shares
------------ ----------------
Goldman, Sachs & Co. ....................................... 3,200,000
Lehman Brothers Inc. ....................................... 3,200,000
J.P. Morgan Securities Inc. ................................ 900,000
UBS Securities LLC.......................................... 900,000
Robert W. Baird & Co. Incorporated.......................... 900,000
Bear, Stearns & Co. Inc. ................................... 900,000
-----------
Total.................................................. 10,000,000
===========
The underwriters are committed to take and pay for all of the shares being
offered, if any are taken, other than the shares covered by the option described
below unless and until this option is exercised.
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
1,304,690 shares from Cypress Merchant Banking Partners L.P., an additional
67,224 shares from Cypress Offshore Partners L.P. and an additional 128,086
shares from WESCO International to cover such sales. If the option is exercised
in part, the underwriters have agreed to exercise the option to purchase shares
from Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P.
before exercising any part of the option to purchase additional shares from
WESCO International. They may exercise that option for 30 days. If any shares
are purchased pursuant to this option, the underwriters will severally purchase
shares in approximately the same proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the underwriters by WESCO International and the
selling stockholders. Such amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase up to an additional 128,086
shares from WESCO International, an additional 1,304,690 shares from Cypress
Merchant Banking Partners L.P. and an additional 67,224 shares from Cypress
Offshore Partners L.P.
Paid by WESCO International
No Exercise Full Exercise
----------- -------------
Per Share.............................................. $ 1.18 $ 1.18
Total.................................................. $4,720,000 $4,871,141
Paid by the Selling Stockholders
No Exercise Full Exercise
----------- -------------
Per Share.............................................. $ 1.18 $ 1.18
Total.................................................. $7,080,000 $8,698,859
Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus
supplement. Any shares sold by the underwriters to securities dealers may be
sold at a discount of up to $0.71 per share from the initial price to public.
Any such securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount of up to $0.10
per share from the initial price to
S-16
public. If all the shares are not sold at the initial price to public, the
underwriters may change the offering price and the other selling terms.
WESCO International and its executive officers and directors and the
selling stockholders have agreed with the underwriters not to dispose of or
hedge any of their common stock or securities convertible into or exchangeable
for shares of common stock during the period from the date of this prospectus
supplement continuing through the date 90 days after the date of this prospectus
supplement, except with the prior written consent of Goldman, Sachs & Co. and
Lehman Brothers Inc. This agreement does not apply to any existing employee
benefit plans.
The 90-day restricted period described in the preceding paragraph will be
extended if:
- during the last 17 days of the 90-day restricted period WESCO
International issues an earnings release or announces material news or a
material event; or
- prior to the expiration of the 90-day restricted period, WESCO
International announces that it will release earnings results during the
16-day period beginning on the last day of the 90-day period,
in which case the restrictions described in the preceding paragraph will
continue to apply until the expiration of the 18-day period beginning on the
issuance of the earnings release or the announcement of the material news or
material event.
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional shares in the offering. The underwriters may close
out any covered short position by either exercising their option to purchase
additional shares or purchasing shares in the open market. In determining the
source of shares to close out the covered short position, the underwriters will
consider, among other things, the price of shares available for purchase in the
open market as compared to the price at which they may purchase additional
shares pursuant to the option granted to them. "Naked" short sales are any sales
in excess of such option. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open market after
pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of various bids for or purchases of common
stock made by the underwriters in the open market prior to the completion of the
offering.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because Goldman, Sachs & Co. has repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of WESCO
International's common stock, and together with the imposition of the penalty
bid, may stabilize, maintain or otherwise affect the market price of the common
stock. As a result, the price of the common stock may be higher than the price
that otherwise might exist in the open market. If these activities are
commenced, they may be discontinued at any time. These transactions may be
effected on the New York Stock Exchange, in the over-the-counter market or
otherwise.
Each underwriter has represented, warranted and agreed that: (i) it has not
offered or sold and, prior to the expiry of a period of six months from the
closing of the offering, will not offer or sell any shares to persons in the
United Kingdom except to persons whose ordinary activities
S-17
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has only communicated or caused to be
communicated and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity (within the meaning of
section 21 of the Financial Services and Markets Act 2000 ("FSMA")) received by
it in connection with the issue or sale of any shares in circumstances in which
section 21(1) of the FSMA does not apply to WESCO International; and (iii) it
has complied and will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to the shares in, from or otherwise
involving the United Kingdom.
The shares may not be offered or sold, transferred or delivered, as part of
their initial distribution or at any time thereafter, directly or indirectly, to
any individual or legal entity in the Netherlands other than to individuals or
legal entities who or which trade or invest in securities in the conduct of
their profession or trade, which includes banks, securities intermediaries,
insurance companies, pension funds, other institutional investors and commercial
enterprises which, as an ancillary activity, regularly trade or invest in
securities.
The shares may not be offered or sold by means of any document other than
to persons whose ordinary business is to buy or sell shares or debentures,
whether as principal or agent, or in circumstances which do not constitute an
offer to the public within the meaning of the Companies Ordinance (Cap. 32) of
Hong Kong, and no advertisement, invitation or document relating to the shares
may be issued, whether in Hong Kong or elsewhere, which is directed at, or the
contents of which are likely to be accessed or read by, the public in Hong Kong
(except if permitted to do so under the securities laws of Hong Kong) other than
with respect to shares which are or are intended to be disposed of only to
persons outside Hong Kong or only to "professional investors" within the meaning
of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules
made thereunder.
This prospectus supplement and the accompanying prospectus have not been
registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, this prospectus and the accompanying prospectus and any other
document or material in connection with the offer or sale, or invitation or
subscription or purchase, of the shares may not be circulated or distributed,
nor may the shares be offered or sold, or be made the subject of an invitation
for subscription or purchase, whether directly or indirectly, to persons in
Singapore other than under circumstances in which such offer, sale or invitation
does not constitute an offer or sale, or invitation for subscription or
purchase, of the shares to the public in Singapore.
Each underwriter has acknowledged and agreed that the shares have not been
registered under the Securities and Exchange Law of Japan and are not being
offered or sold and may not be offered or sold, directly or indirectly, in Japan
or to or for the account of any resident of Japan, except (i) pursuant to an
exemption from the registration requirements of the Securities and Exchange Law
of Japan and (ii) in compliance with any other applicable requirements of
Japanese law.
WESCO International will pay all expenses incurred with respect to the
offering, other than underwriting discounts and commissions relating to the
registration and sale of the shares of common stock owned by the selling
stockholders, which will be borne by the selling stockholders. WESCO
International estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $500,000.
WESCO International and the selling stockholders have agreed to indemnify
the several underwriters against certain liabilities, including liabilities
under the Securities Act of 1933.
S-18
Certain of the underwriters and their respective affiliates have, from time
to time, performed, and may in the future perform, various financial advisory
and investment banking services for WESCO International, for which they received
or will receive customary fees and expenses.
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered hereby will be passed
upon for us by Kirkpatrick & Lockhart LLP, Pittsburgh, Pennsylvania and for the
underwriters by Sullivan & Cromwell LLP, New York, New York.
EXPERTS
The consolidated financial statements of WESCO International, Inc.
incorporated in this prospectus supplement by reference to the Annual Report on
Form 10-K for the year ended December 31, 2003 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent registered
public accounting firm, given on the authority of such firm as experts in
auditing and accounting.
S-19
PROSPECTUS
WESCO INTERNATIONAL, INC.
$200,000,000
Debt Securities
Common Stock
Preferred Stock
Warrants
Depositary Shares
WESCO INTERNATIONAL, INC.
7,371,914 Shares of Common Stock
WESCO DISTRIBUTION, INC.
Guarantees of Debt Securities of WESCO International, Inc.
---------------------
WESCO International, Inc. from time to time may offer to sell, in one or
more series, debt securities, common stock, preferred stock, warrants or
depositary shares or any combination of these securities. WESCO International's
debt securities may be guaranteed by WESCO Distribution, Inc., a wholly owned
subsidiary of WESCO International. The total amount of securities offered by
WESCO International, under this prospectus will have an initial aggregate
offering price of up to $200,000,000, or the equivalent amount in other
currencies, currency units or composite currencies, although WESCO International
may increase this amount in the future.
The selling stockholders identified on page 23 may sell from time to time
up to 7,371,914 shares of common stock of WESCO International, Inc. owned by
them.
The common stock of WESCO International is listed on the New York Stock
Exchange and trades under the ticker symbol "WCC."
This prospectus describes some of the general terms that may apply to these
securities and the general manner in which they may be offered. The specific
terms of any securities to be offered, and the specific manner in which they may
be offered, will be described in one or more supplements to this prospectus.
This prospectus may not be used to sell securities unless it is accompanied by a
prospectus supplement that describes those securities.
We urge you to carefully read "Risk Factors" beginning on page 3 and other
information included or incorporated by reference in this prospectus and any
prospectus supplement for a discussion of factors you should carefully consider
before deciding to invest in any securities offered by this prospectus.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
The date of this prospectus is December 6, 2004.
TABLE OF CONTENTS
SUMMARY..................................................... 1
RISK FACTORS................................................ 3
FORWARD-LOOKING STATEMENTS.................................. 6
RATIOS OF EARNINGS TO FIXED CHARGES......................... 7
USE OF PROCEEDS............................................. 7
DESCRIPTION OF DEBT SECURITIES.............................. 8
DESCRIPTION OF CAPITAL SECURITIES........................... 18
DESCRIPTION OF WARRANTS..................................... 21
DESCRIPTION OF DEPOSITARY SHARES............................ 22
SELLING STOCKHOLDERS........................................ 25
PLAN OF DISTRIBUTION........................................ 25
LEGAL MATTERS............................................... 27
EXPERTS..................................................... 27
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
We have filed a registration statement on Form S-3 (together with all
amendments, exhibits, schedules and supplements thereto, the "registration
statement") under the Securities Act of 1933, as amended (the "Securities Act").
This prospectus, which forms part of that registration statement, does not
contain all of the information set forth in that registration statement.
Statements contained in this prospectus as to the contents of any contract,
agreement or other document are not necessarily complete. For a more complete
understanding and description of each contract, agreement or other document
filed as an exhibit to the registration statement, we urge you to read the
documents contained in those exhibits.
WESCO International files reports, proxy statements and other information
with the SEC. These reports, proxy statements and other information that WESCO
International files with the SEC can be read and copied at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 to obtain further information on the operation of the
Public Reference Room. The SEC maintains an Internet site that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the SEC, including us. The SEC's Internet address is
http://www.sec.gov. In addition, WESCO International's common stock, $.01 par
value ("Common Stock"), is listed on the New York Stock Exchange under the
ticker symbol "WCC," and its reports and other information can be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005. Our Internet
address is http://www.wesco.com. The information on our Internet site is not a
part of this prospectus.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file
with it. This means that we can disclose important information to you by
referring you to other documents. Any information we incorporate in this manner
is considered part of this prospectus except to the extent updated and
superseded by information contained in this prospectus. Some information that we
file with the SEC after the date of this prospectus and until we sell all of the
securities
covered by this prospectus will automatically update and supersede the
information contained in this prospectus.
We incorporate by reference the following documents that WESCO
International has filed with the SEC and any filings that we will make with the
SEC in the future under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") until we sell all of the
securities covered by this prospectus, including between the date of this
prospectus and the date on which the registration statement of which this
prospectus is a part is declared effective by the SEC, except as noted below:
OUR SEC FILINGS (FILE NO. 001-14989) PERIOD FOR OR DATE OF FILING
------------------------------------ ----------------------------
Annual Report on Form 10-K............... Year Ended December 31, 2003
Quarterly Reports on Form 10-Q........... Quarters Ended March 31, June 30 and
September 30, 2004
Current Reports on Form 8-K.............. July 15 and October 21, 2004
Form 8-A................................. May 4, 1999
Pursuant to General Instruction B of Form 8-K, any information submitted
under Item 2.02, Results of Operations and Financial Condition, or Item 7.01,
Regulation FD Disclosure, of Form 8-K is not deemed to be "filed" for the
purpose of Section 18 of the Exchange Act, and we are not subject to the
liabilities of Section 18 with respect to information submitted under Item 2.02
or Item 7.01 of Form 8-K. We are not incorporating by reference any information
submitted under Item 2.02 or Item 7.01 of Form 8-K into any filing under the
Securities Act or the Exchange Act or into this prospectus.
Statements contained in this prospectus as to the contents of any contract
or other document referred to in this prospectus do not purport to be complete,
and, where reference is made to the particular provisions of that contract or
other document, those references are qualified in all respects by reference to
all of the provisions contained in that contract or other document. Any
statement contained in a document incorporated by reference, or deemed to be
incorporated by reference, into this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated by reference in this prospectus modifies or supersedes that
statement. Any such statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
We will provide without charge, upon written or oral request, a copy of any
or all of the documents that are incorporated by reference into this prospectus
and a copy of any or all other contracts or documents which are referred to in
this prospectus. Requests should be directed to: WESCO International, Inc.,
Attention: Corporate Secretary, 225 West Station Square Drive, Suite 700,
Pittsburgh, Pennsylvania 15219, telephone number: (412) 454-2200. You also may
review a copy of the registration statement and its exhibits at the SEC's Public
Reference Room in Washington, D.C., as well as through the SEC's Internet site.
ii
SUMMARY
This summary is a brief discussion of material information contained in, or
incorporated by reference into, this prospectus as further described above under
"Where You Can Find More Information." This summary does not contain all of the
information that you should consider before investing in any securities being
offered by this prospectus. We urge you to carefully read this entire
prospectus, the documents incorporated by reference into this prospectus and the
prospectus supplement relating to the securities that you propose to buy,
especially any description of investment risks that we may include in the
prospectus supplement. Unless the context otherwise requires, references to
"WESCO International", the "Company", "we", "our" and "us" and similar terms
mean WESCO International, Inc. and its subsidiaries (including WESCO
Distribution, Inc.) and predecessors. References to "WESCO Distribution" mean
WESCO Distribution, Inc., excluding its subsidiaries, unless the context
otherwise requires.
WESCO INTERNATIONAL, INC.
With sales of approximately $3.3 billion in 2003, we are a leading North
American provider of electrical construction products and electrical and
industrial maintenance, repair and operating supplies, commonly referred to as
"MRO." We are the second largest distributor in the estimated $74 billion U.S.
electrical distribution industry, and the largest provider of integrated supply
services. Our integrated supply solutions and outsourcing services are designed
to fulfill a customer's industrial MRO procurement needs through a highly
automated, proprietary electronic procurement and inventory replenishment
system. This system allows our customers to consolidate suppliers and reduce
their procurement and operating costs. We have approximately 350 branches and
five distribution centers located in 48 states, nine Canadian provinces, Puerto
Rico, Mexico, Guam, the United Kingdom, Nigeria and Singapore. We serve over
100,000 customers worldwide, offering over 1,000,000 products from over 24,000
suppliers. Our diverse customer base includes a wide variety of industrial
companies; contractors for industrial, commercial and residential projects;
utility companies; and commercial, institutional and governmental customers. Our
leading market positions, experienced workforce, extensive geographic reach,
broad product and service offerings and acquisition program have enabled us to
compete effectively against the companies in our industry.
We are a Delaware corporation with our principal executive offices located
at 225 West Station Square Drive, Suite 700, Pittsburgh, Pennsylvania 15219,
telephone number (412) 454-2200. Our Internet website is www.wesco.com.
Information contained on our website is not part of, and should not be construed
as being incorporated by reference into, this prospectus.
WESCO DISTRIBUTION, INC.
WESCO Distribution is a wholly owned operating subsidiary of WESCO
International and, together with its subsidiaries, conducts primarily all of
WESCO International's consolidated operations.
WESCO Distribution is a Delaware corporation with its principal executive
offices located at 225 West Station Square Drive, Suite 700, Pittsburgh,
Pennsylvania 15219, telephone number (412) 454-2200. Additional information
about WESCO Distribution and its operations can be found at www.wescodist.com.
Information contained on that website is not part of, and should not be
construed as being incorporated by reference into, this prospectus.
1
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
offer from time to time up to an aggregate of $200,000,000 of any of the
securities described in this prospectus. In addition, under this shelf process,
one or more of the selling stockholders named in this prospectus may sell up to
an aggregate of 7,371,914 shares of our common stock in one or more offerings
from time to time. This prospectus provides you with a general description of
the securities that we or any such selling stockholders may offer. Each time we
or any such selling stockholders offer securities under this prospectus, we will
provide you with a prospectus supplement that will describe the specific
amounts, prices and terms of the securities being offered. The prospectus
supplement may also add, update or change information contained in this
prospectus.
We may use this prospectus to offer any of the following of our securities
from time to time:
- debt securities, either directly or represented by depositary shares,
which may be senior or subordinated and which may be guaranteed by WESCO
Distribution;
- common stock, par value $.01 per share;
- preferred stock, par value $.01 per share, either directly or represented
by depositary shares;
- warrants for the purchase of our common stock, preferred stock or debt
securities.
When we use the term "securities" in this prospectus, we mean any of the
securities that we or the selling stockholders named in this prospectus may
offer under this prospectus, unless we say otherwise. This prospectus describes
the general terms that may apply to the securities. The specific terms of any
particular securities that we or the selling stockholders may offer will be
described in a separate supplement to this prospectus. You also should read the
documents we have referred to you in "Where You Can Find More Information" for
additional information about our company, including our financial statements.
2
RISK FACTORS
Investing in our securities involves risks. In addition to the other
information contained in or incorporated by reference into this prospectus, you
should carefully consider the following risk factors and the information under
"Forward-Looking Statements," which appear elsewhere in this prospectus,
together with any added, updated or changed information included in any
prospectus supplement and in our reports filed with the SEC that are
incorporated by reference into this prospectus, before deciding whether to
invest in our securities.
OUR SUBSTANTIAL AMOUNT OF DEBT REQUIRES SIGNIFICANT DEBT SERVICE OBLIGATIONS
THAT COULD ADVERSELY AFFECT OUR ABILITY TO FULFILL OUR OBLIGATIONS AND COULD
LIMIT OUR GROWTH AND IMPOSE RESTRICTIONS ON OUR BUSINESS.
We are and will continue to be for the foreseeable future significantly
leveraged. As of September 30, 2004, we had $427.6 million of consolidated
indebtedness and stockholders' equity of $228.2 million. We and our subsidiaries
may incur additional indebtedness in the future, subject to certain limitations
contained in the instruments governing our indebtedness. Accordingly, we will
have significant debt service obligations. These amounts exclude our accounts
receivable securitization program, through which we sell accounts receivable to
a third-party conduit and remove these receivables from our consolidated balance
sheet.
Our debt service obligations have important consequences, including but not
limited to the following:
- a substantial portion of cash flow from our operations will be dedicated
to the payment of principal and interest on our indebtedness, thereby
reducing the funds available for operations, future business
opportunities and acquisitions and other purposes and increasing our
vulnerability to adverse general economic and industry conditions;
- our ability to obtain additional financing in the future may be limited;
- as a result of our interest rate swap agreements, approximately $100.0
million of our fixed rate indebtedness has been effectively converted to
variable rates of interest, which will make us vulnerable to increases in
interest rates;
- we are substantially more leveraged than certain of our competitors,
which might place us at a competitive disadvantage; and
- we may be hindered in our ability to adjust rapidly to changing market
conditions.
Our ability to make scheduled payments of the principal of, or to pay
interest on, or to refinance our indebtedness and to make scheduled payments
under our operating leases or to fund planned capital expenditures or finance
acquisitions will depend on our future performance, which to a certain extent is
subject to economic, financial, competitive and other factors beyond our
control. There can be no assurance that our business will continue to generate
sufficient cash flow from operations in the future to service our debt, make
necessary capital expenditures or meet other cash needs. If unable to do so, we
may be required to refinance all or a portion of our existing debt, to sell
assets or to obtain additional financing.
A $190.0 million portion of the purchase commitments under our Receivables
Facility requires an annual renewal of its terms. That portion of the
arrangement expires on August 30, 2005. The remaining $135.0 million portion of
the purchase commitments under the facility has a three-year term expiring on
August 29, 2007. There can be no assurance that available funding or that any
sale of assets or additional financing would be possible in amounts on terms
favorable to us.
Over the next three years, we are obligated to pay approximately $53.0
million relating to earnout agreements associated with past acquisitions, of
which $50.0 million is represented by a
3
note payable which is included in our consolidated indebtedness as of September
30, 2004. A certain other acquisition agreement also contains contingent
consideration provisions of up to $20.0 million.
RESTRICTIVE DEBT COVENANTS CONTAINED IN OUR REVOLVING CREDIT FACILITY AND THE
INDENTURE UNDER WHICH OUR SENIOR SUBORDINATED NOTES WERE ISSUED MAY LIMIT OUR
ABILITY TO TAKE CERTAIN ACTIONS.
The revolving credit facility and the indenture under which our senior
subordinated notes were issued contain financial and operating covenants that
limit the discretion of our management with respect to certain business matters
including incurring additional indebtedness and paying dividends. The revolving
credit facility also requires us to meet certain fixed charge tests depending on
credit line availability. Our ability to comply with these and other provisions
of the revolving credit facility and the indenture may be affected by changes in
economic or business conditions or other events beyond our control. A failure to
comply with the obligations contained in the revolving credit facility or the
indenture could result in an event of default under either the revolving credit
facility or the indenture which could result in acceleration of the related debt
and the acceleration of debt under other instruments evidencing indebtedness
that may contain cross-acceleration or cross-default provisions. If the
indebtedness under the revolving credit facility were to be accelerated, there
can be no assurance that our assets would be sufficient to repay in full such
indebtedness and our other indebtedness.
DOWNTURNS IN THE ELECTRICAL DISTRIBUTION INDUSTRY HAVE HAD IN THE PAST, AND MAY
IN THE FUTURE HAVE, AN ADVERSE EFFECT ON OUR SALES AND PROFITABILITY.
The electrical distribution industry is affected by changes in economic
conditions, including national, regional and local slowdowns in construction and
industrial activity, which are outside our control. Our operating results may
also be adversely affected by increases in interest rates that may lead to a
decline in economic activity, particularly in the construction market, while
simultaneously resulting in higher interest payments under the revolving credit
facility. In addition, during periods of economic slowdown, such as the one we
recently experienced, our credit losses, based on history, could increase. There
can be no assurance that economic slowdowns, adverse economic conditions or
cyclical trends in certain customer markets will not have a material adverse
effect on our operating results and financial condition.
AN INCREASE IN COMPETITION COULD DECREASE SALES OR EARNINGS.
We operate in a highly competitive industry. We compete directly with
national, regional and local providers of electrical and other industrial MRO
supplies. Competition is primarily focused in the local service area and is
generally based on product line breadth, product availability, service
capabilities and price. Other sources of competition are buying groups formed by
smaller distributors to increase purchasing power and provide some cooperative
marketing capability. During 1999 and 2000, numerous special purpose
Internet-based procurement service companies, auction businesses and trade
exchanges were organized. Many of them targeted industrial MRO and contractor
customers of the type served by us. While the entrants did not have a noticeable
impact on our business, we expect that new competitors could develop over time
as Internet-based enterprises become more established and refine their service
capabilities.
Some of our existing competitors have, and new market entrants may have,
greater financial and marketing resources than we do. To the extent existing or
future competitors seek to gain or retain market share by reducing prices, we
may be required to lower our prices, thereby adversely affecting financial
results. Existing or future competitors also may seek to compete with us for
acquisitions, which could have the effect of increasing the price and reducing
the number of suitable acquisitions. In addition, it is possible that
competitive pressures resulting from the industry trend toward consolidation
could affect growth and profit margins.
4
LOSS OF KEY SUPPLIERS OR LACK OF PRODUCT AVAILABILITY COULD DECREASE SALES AND
EARNINGS.
Most of our agreements with suppliers are terminable by either party on 60
days' notice or less. Our ten largest suppliers in 2003 accounted for
approximately 32% of our purchases for the period. Our largest supplier was
Eaton Corporation, through its Eaton Electrical division, accounting for
approximately 13% of our purchases. The loss of, or a substantial decrease in
the availability of, products from any of our key suppliers, or the loss of key
preferred supplier agreements, could have a material adverse effect on our
business. Supply interruptions also could arise from shortages of raw materials,
labor disputes or weather conditions affecting products or shipments,
transportation disruptions, or other reasons beyond our control. In addition,
certain of our products, such as wire and conduit, are commodity price based
products and may be subject to significant price fluctuations which are beyond
our control. An interruption of operations at any of our five distribution
centers could have a material adverse effect on the operations of branches
served by the affected distribution center. Furthermore, we cannot be certain
that particular products or product lines will be available to us, or available
in quantities sufficient to meet customer demand. Such limited product access
could put us at a competitive disadvantage.
A DISRUPTION OF OUR INFORMATION SYSTEMS COULD INCREASE EXPENSES, DECREASE SALES
OR REDUCE EARNINGS.
A serious disruption of our information systems could have a material
adverse effect on our business and results of operations. Our computer systems
are an integral part of our business and growth strategies. We depend on our
information systems to process orders, manage inventory and accounts receivable
collections, purchase products, ship products to our customers on a timely
basis, maintain cost-effective operations and provide superior service to our
customers.
WE MAY BE SUBJECT TO REGULATORY SCRUTINY AND MAY SUSTAIN A LOSS OF PUBLIC
CONFIDENCE IF WE ARE UNABLE TO SATISFY REGULATORY REQUIREMENTS RELATING TO
INTERNAL CONTROLS OVER FINANCIAL REPORTING.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to perform an
evaluation of our internal controls over financial reporting and have our
auditor attest to such evaluation on an annual basis. Compliance with these
requirements is expected to be expensive and time-consuming. Although no
assurance can be given, we believe that we will be able to meet the required
deadlines. If we fail to timely complete this evaluation, or if our auditors
cannot timely attest to our evaluations, we may be subject to regulatory
scrutiny and a loss of public confidence in our internal controls.
WESCO INTERNATIONAL'S CONTROLLING STOCKHOLDERS OWN APPROXIMATELY 46% OF ITS
COMMON STOCK AND CAN EXERCISE SIGNIFICANT INFLUENCE OVER OUR AFFAIRS.
Approximately 46% of the issued and outstanding shares of common stock of
WESCO International is held by The Cypress Group LLC and its affiliates.
Accordingly, Cypress and its affiliates can exercise significant influence over
our affairs, including the election of our directors, appointment of our
management and approval of actions requiring the approval of our stockholders,
including the adoption of amendments to our certificate of incorporation and
approval of mergers or sales of substantially all of our assets.
5
FORWARD-LOOKING STATEMENTS
You should carefully review the information contained in or incorporated by
reference into this prospectus. In this prospectus, statements that are not
reported financial results or other historical information are "forward-looking
statements." Forward-looking statements give current expectations or forecasts
of future events and are not guarantees of future performance. They are based on
our management's expectations that involve a number of business risks and
uncertainties, any of which could cause actual results to differ materially from
those expressed in or implied by the forward-looking statements.
You can identify these forward-looking statements by the fact that they do
not relate strictly to historic or current facts. They use words such as
"anticipates," "believes," "estimates," "expects," "would," "should," "will,"
"will likely result," "forecast," "outlook," "projects," and similar expressions
in connection with any discussion of future operating or financial performance.
We cannot guarantee that any forward-looking statements will be realized,
although we believe that we have been prudent in our plans and assumptions.
Achievement of future results is subject to risks, uncertainties and assumptions
that may prove to be inaccurate. Among others, the factors discussed in "Risk
Factors" could cause actual results to differ from those in forward-looking
statements included in or incorporated by reference into this prospectus or that
we otherwise make. Should known or unknown risks or uncertainties materialize,
or should underlying assumptions prove to be inaccurate, actual results could
vary materially from those anticipated, estimated or projected. You should bear
this in mind as you consider any forward-looking statements.
We undertake no obligation to publicly update forward-looking statements,
whether as a result of new information, future events or otherwise, except as
may be required by law. You are advised, however, to consider any additional
disclosures that we may make on related subjects in future filings with the SEC.
You should understand that it is not possible to predict or identify all factors
that could cause our actual results to differ. Consequently, you should not
consider any list of factors to be a complete set of all potential risks or
uncertainties.
6
RATIOS OF EARNINGS TO FIXED CHARGES
Our consolidated ratios of earnings to fixed charges for the six months
ended September 30, 2004 and the years ended December 31, 2003, 2002, 2001, 2000
and 1999 are as follows:
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------
2004 2003 2002 2001 2000 1999
------------- ---- ---- ---- ---- ----
Ratios of earnings to fixed charges... 2.9x 1.7x 1.5x 1.6x 2.1x 2.0x
USE OF PROCEEDS
We intend to use the net proceeds that we receive from the sale of the
securities offered by this prospectus for general corporate purposes unless
otherwise indicated in the applicable prospectus supplement relating to a
specific issuance of securities. These general corporate purposes include, but
are not limited to, repayment, redemption or refinancing of debt, capital
expenditures, investments in or loans to subsidiaries and joint ventures,
funding of possible acquisitions, working capital, satisfaction of other
obligations and repurchase of outstanding securities. Pending any such use, the
net proceeds from the sale of the Securities may be invested in short-term,
investment grade, interest-bearing instruments. We will not receive any of the
proceeds from the sale of Common Stock by any selling stockholder. We will
include a more detailed description of the use of net proceeds of any specific
offering in the applicable prospectus supplement relating to the offering.
7
DESCRIPTION OF DEBT SECURITIES
The following is a general description of the debt securities (the "Debt
Securities") that we may offer from time to time. The particular terms of the
Debt Securities offered by any prospectus supplement and the extent, if any, to
which the general provisions described below may apply will be described in the
applicable prospectus supplement. We may choose to issue debt securities
denominated in U.S. dollars or in any other currency, including the euro.
The Debt Securities will be either senior Debt Securities or subordinated
Debt Securities. We will issue any senior Debt Securities under a senior
indenture between us and a trustee. We will issue any subordinated Debt
Securities under a subordinated indenture between us and the same or another
trustee. The senior indentures and the subordinated indentures are collectively
referred to in this prospectus as the indentures, and the trustee or trustees
under the senior indenture and the trustee or trustees under the subordinated
indenture are collectively referred to in this prospectus as trustees. Any Debt
Securities issued by us may be guaranteed by WESCO Distribution.
The following description is only a summary of the material provisions of
the indentures. We urge you to read the appropriate indenture because it, and
not this description, defines your rights as holders of the Debt Securities. See
the information under the heading "Where You Can Find More Information" for
information on how to contact us for a copy of the appropriate indenture.
GENERAL
The senior Debt Securities are unsubordinated obligations, will rank on par
with all other debt obligations of ours, and, unless otherwise indicated in the
related prospectus supplement, will be unsecured. The subordinated Debt
Securities will be subordinate, in right of payment to senior Debt Securities. A
description of the subordinated Debt Securities is provided below under
"-- Subordinated Debt Securities". The specific terms of any subordinated Debt
Securities will be provided in the related prospectus supplement. For a complete
understanding of the provisions pertaining to the subordinated Debt Securities,
you should refer to the subordinated indenture attached as an exhibit to the
Registration Statement of which this prospectus is a part.
TERMS
The indentures do not limit the principal amount of debt we may issue.
We may issue notes or bonds in traditional paper form or in the form of a
global security. The Debt Securities of any series may be issued in definitive
form or, if provided in the related prospectus supplement, may be represented in
whole or in part by a global security or securities, registered in the name of a
depositary designated by us. Each Debt Security represented by a global security
is referred to as a "Book-Entry Security."
Debt Securities may be issued from time to time pursuant to this prospectus
and will be offered on terms determined by market conditions at the time of
sale. Debt Securities may be issued in one or more series with the same or
various maturities and may be sold at par, a premium or an original issue
discount. Debt Securities sold at an original issue discount may bear no
interest or interest at a rate that is below market rates. Unless otherwise
provided in the prospectus supplement, Debt Securities denominated in U.S.
dollars will be issued in denominations of $1,000 and integral multiples
thereof.
Please refer to the prospectus supplement for the specific terms of the
Debt Securities offered, including the following:
- designation of an aggregate principal amount, purchase price and
denomination;
- date of maturity;
8
- if other than U.S. currency, the currency for which the Debt Securities
may be purchased;
- the interest rate or rates and the method of calculating interest;
- the times at which any premium and interest will be payable;
- the place or places where principal, any premium and interest will be
payable;
- any redemption or sinking fund provisions or other repayment obligations;
- any index used to determine the amount of payment of principal of and any
premium and interest on the Debt Securities;
- the application, if any, of the defeasance provisions to the Debt
Securities;
- if other than the entire principal amount, the portion of the Debt
Securities that would be payable upon acceleration of the maturity
thereof;
- whether the Debt Securities will be issued in whole or in part in the
form of one or more global securities, and in such case, the depositary
for the global securities;
- whether the Debt Securities will be guaranteed by WESCO Distribution;
- any additional covenants applicable to the Debt Securities being offered;
- any additional events of default applicable to the Debt Securities being
offered;
- any cross default provisions, if applicable;
- the terms of subordination, if applicable;
- the terms of conversion, if applicable; and
- any other specific terms, including any terms that may be required by or
advisable under applicable law.
Except with respect to Book-Entry Securities, Debt Securities may be
presented for exchange or registration of transfer, in the manner, at the places
and subject to the restrictions set forth in the Debt Securities and the
prospectus supplement. Such services will be provided without charge, other than
any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the indentures.
DEBT GUARANTEES
Debt Securities issued by us may be fully and unconditionally guaranteed by
WESCO Distribution, but will not otherwise be guaranteed by any other
subsidiary. Any guarantee of Debt Securities will be set forth in the applicable
indenture or a supplemental indenture and described in the applicable prospectus
supplement relating to an issuance of guaranteed Debt Securities.
Payments with respect to guarantees of Debt Securities will be subordinated
in right of payment to the prior payment in full of all senior indebtedness of
WESCO Distribution to the same extent and manner that payments with respect to
the Debt Securities are subordinated in right of payment to the prior payment in
full of all of the issuer of the Debt Securities.
CERTAIN COVENANTS IN THE INDENTURES
PAYMENT
We will pay principal of and premium, if any, and interest on the Debt
Securities at the place and time described in the Debt Securities. Unless
otherwise provided in the prospectus supplement, we will pay interest on any
Debt Security to the Person in whose name that security is registered at the
close of business on the regular record date for that interest payment.
9
Any money deposited with the trustee or any paying agent for the payment of
principal of or any premium or interest on any Debt Security that remains
unclaimed for two years after that amount has become due and payable will be
paid to us at our request. After this occurs, the holder of that security must
look only to us for payment of that amount and not to the trustee or paying
agent.
LIENS
The Company will not, nor will it permit any Domestic Subsidiary to,
directly or indirectly, issue, assume or Guarantee any Debt if such Debt or
Guarantee is subordinate to the Notes and is secured by any Lien, without in any
such case effectively securing, concurrently with the issuance, assumption or
Guaranty of any such Debt, any series of Notes (together with, if the Company
shall so determine, any other indebtedness of or Guaranteed by the Company or
such Domestic Subsidiary ranking equally with such series of Notes and then
existing or thereafter created) equally and ratably with such Debt, so long as
such Debt is so secured; provided, however, that the foregoing restriction shall
not apply to Permitted Liens. "Permitted Liens" means:
- Liens on any property acquired, constructed or improved by the Company or
any Domestic Subsidiary after the date hereof, which are created or
assumed contemporaneously with or within three years after its
acquisition, or completion of construction or improvement (or within six
months thereafter pursuant to a firm commitment for financing
arrangements entered into within that three-year period) to secure or
provide for the payment of the purchase price or cost thereof, or Liens
existing on any property at the time of its acquisition;
- Liens existing on any property, shares of stock or indebtedness acquired
from a Person merged with or into the Company or a Domestic Subsidiary
after the date hereof;
- with respect to any corporation that becomes a Domestic Subsidiary after
the date hereof, Liens on property of, or shares of stock or indebtedness
issued by, any such corporation existing at the time it becomes a
Domestic Subsidiary and not incurred in connection with or in
anticipation of such corporation becoming a Domestic Subsidiary;
- Liens to secure Debt of a Domestic Subsidiary owed to the Company or Debt
of a Domestic Subsidiaries owed to another Domestic Subsidiary;
- Liens in favor of governmental bodies to secure partial, progress,
advance or other payments pursuant to any contract or statute;
- any Lien existing on the date of the indenture; or
- Liens for the sole purpose of extending, renewing or replacing Debt, in
whole or in part, including any increase in the amount of such Debt not
prohibited under this Indenture.
In the event that the Company shall hereafter secure any series of
securities equally and ratably with any other obligation or indebtedness
pursuant to the provisions of this Section, the Trustee is hereby authorized,
but not required, to enter into an indenture or agreement supplemental hereto
and to take such action, if any, as it may deem advisable to enable it to
enforce effectively the rights of the Holders of the Notes so secured, equally
and ratably with such other obligation or indebtedness.
LIMITATIONS ON CERTAIN SALE AND LEASEBACKS
The Company and its Subsidiaries may incur Attributable Debt in respect of
a Sale and Leaseback Transaction after the date of this Indenture; provided,
however, that the aggregate amount of any such Attributable Debt incurred after
the date of this Indenture pursuant this Section 1011 shall not exceed $75.0
million at any one time.
10
MERGER AND CONSOLIDATION
We will not merge or consolidate with any other entity or sell or convey
all or substantially all of our or its assets, as the case may be, to any
Person, firm, corporation or other entity, except that we may merge or
consolidate with, or sell or convey all or substantially all of our or its
assets, as the case may be, to any other entity if:
- we are the continuing entity, or the successor entity (if other than us)
is organized and existing under the laws of the United States of America
or a State thereof and such entity expressly assumes payment of the
principal and interest on all the Debt Securities, and the performance
and observance of all of the covenants and conditions of the applicable
indenture to be performed by us; and
- there is no default under the applicable indenture.
Upon such a succession, we will be relieved from any further obligations
under the applicable indenture. For purposes of this paragraph, "substantially
all of our or its assets" means, at any date, a portion of the non-current
assets reflected in our consolidated balance sheet as of the end of the most
recent quarterly period that represents at least 66 2/3% of the total reported
value of such assets.
WAIVER OF CERTAIN COVENANTS
Unless otherwise provided in the prospectus supplement, we may, with
respect to the Debt Securities of any series, omit to comply with any provision
of the covenants described under "Liens" and "Limitations on Certain Sale and
Leasebacks" above or in any covenant provided in the terms of those Debt
Securities if, before the time for such compliance, holders of at least a
majority in principal amount of the outstanding Debt Securities of that series
waive such compliance in that instance or generally.
EVENTS OF DEFAULT
An Event of Default occurs with respect to any series of Debt Securities
when:
- We default in paying principal of or premium, if any, on any of the Debt
Securities of such series when due;
- We default in paying interest on the Debt Securities of such series when
due, continuing for 30 days;
- We default in making deposits into any sinking fund payment with respect
to any Debt Security of such series when due;
- WESCO Distribution, as a guarantor, if applicable, fails to perform any
other covenant or warranty in the Debt Securities of such series or in
the applicable indenture continues for a period of 90 days after notice
of such failure as provided in that indenture;
- A guarantee is held in any judicial proceeding to be unenforceable or
invalid;
- Certain events of bankruptcy, insolvency, or reorganization occur; or
- Any other Event of Default occurs with respect to Debt Securities of that
series.
We will be required annually to deliver to the trustee officers'
certificates stating whether or not the signers have any knowledge of any
default in the performance by us of certain covenants.
If an Event of Default shall occur and be continuing with respect to any
series, the trustee or the holders of not less than 25% in principal amount of
the Debt Securities of such series then outstanding may declare the Debt
Securities of such series to be due and payable. If an Event of
11
Default described in clause (vi) of the first paragraph under "Events of
Default" occurs with respect to any series of Debt Securities, the principal
amount of all Debt Securities of that series (or, if any securities of that
series are original issue discount securities, the portion of the principal
amount of such securities as may be specified by the terms thereof) will
automatically become due and payable without any declaration by the trustee or
the holders. The trustee is required to give holders of the Debt Securities of
any series written notice of a default with respect to such series as and to the
extent provided by the Trust Indenture Act, except that the trustee may not give
such notice of a default described in clause (v) of the first paragraph under
"Events of Default" until at least 60 days after the default. As used in this
paragraph, a "default" means an event described in the first paragraph under
"Events of Default" without including any applicable grace period.
If at any time after the Debt Securities of such series have been declared
due and payable, and before any judgment or decree for the moneys due has been
obtained or entered, we will pay or deposit with the trustee amounts sufficient
to pay all matured installments of interest upon the Debt Securities of such
series and the principal of all Debt Securities of such series which shall have
become due, otherwise than by acceleration, together with interest on such
principal and, to the extent legally enforceable, on such overdue installments
of interest and all other amounts due under the applicable indenture shall have
been paid, and any and all defaults with respect to such series under that
indenture shall have been remedied, then the holders of a majority in aggregate
principal amount of the Debt Securities of such series then outstanding, by
written notice to us and the trustee, may rescind and annul the declaration that
the Debt Securities of such series are due and payable. In addition, the holders
of a majority in aggregate principal amount of the Debt Securities of such
series may waive any past default and its consequences with respect to such
series, except a default in the payment of the principal of or any premium or
interest on any Debt Securities of such series or a default in the performance
of a covenant that cannot be modified under the indentures without the consent
of the holder of each affected Debt Security.
The trustee is under no obligation to exercise any of the rights or powers
under the indentures at the request, order or direction of any of the holders of
Debt Securities, unless such holders shall have offered to the trustee
reasonable security or indemnity. Subject to such provisions for the
indemnification of the trustee and certain limitations contained in the
indentures, the holders of a majority in aggregate principal amount of the Debt
Securities of each series at the time outstanding shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the trustee, or exercising any trust or power conferred on the trustee, with
respect to the Debt Securities of such series.
No holder of Debt Securities will have any right to institute any
proceeding, judicial or otherwise, with respect to the indentures, for the
appointment of a receiver or trustee or for any other remedy under the
indentures unless:
- The holder has previously given written notice to the trustee of a
continuing Event of Default with respect to the Debt Securities of that
series; and
- The holders of at least 25% in principal amount of the outstanding Debt
Securities of that series have made a written request to the trustee, and
offered reasonable indemnity, to the trustee to institute proceedings as
trustee, the trustee has failed to institute the proceedings within 60
days, and the trustee has not received from the holders of a majority in
principal amount of the Debt Securities of that series a direction
inconsistent with that request.
Notwithstanding the foregoing, the holder of any Debt Security will have an
absolute and unconditional right to receive payment of the principal of and any
premium and, subject to the provisions of the applicable indenture regarding the
payment of default interest, interest on that
12
Debt Security on the due dates expressed in that security and to institute suit
for the enforcement of payment.
MODIFICATION OF THE INDENTURES
Each indenture contains provisions permitting us and the trustee to modify
that indenture or enter into or modify any supplemental indenture without the
consent of the holders of the Debt Securities in regard to matters as shall not
adversely affect the interests of the holders of the Debt Securities, including,
without limitation, the following:
- to evidence the succession of another corporation to us;
- to add to the covenants of ours further covenants for the benefit or
protection of the holders of any or all series of Debt Securities or to
surrender any right or power conferred upon us by that indenture;
- to add any additional Events of Default with respect to all or any series
of Debt Securities;
- to add to or change any of the provisions of that indenture to facilitate
the issuance of Debt Securities in bearer form with or without coupons,
or to permit or facilitate the issuance of Debt Securities in
uncertificated form;
- to add to, change or eliminate any of the provisions of that indenture in
respect of one or more series of Debt Securities thereunder, under
certain conditions designed to protect the rights of any existing holder
of those Debt Securities;
- to secure all or any series of Debt Securities;
- to establish the forms or terms of the Debt Securities of any series;
- to evidence the appointment of a successor trustee and to add to or
change provisions of that indenture necessary to provide for or
facilitate the administration of the trusts under that indenture by more
than one trustee;
- to cure any ambiguity, to correct or supplement any provision of that
indenture which may be defective or inconsistent with another provision
of that indenture;
- to make other amendments that do not adversely affect the interests of
the holders of any series of Debt Securities in any material respect;
- to release WESCO Distribution, if applicable, from its obligations under
its guarantee (other than in accordance with the terms thereof) without
the consent of the holder of each Debt Security so affected; and
- to add or change or eliminate any provision of that indenture as shall be
necessary or desirable in accordance with any amendments to the Trust
Indenture Act.
We and the trustee may otherwise modify each indenture or any supplemental
indenture with the consent of the holders of not less than a majority in
aggregate principal amount of each series of Debt Securities affected thereby at
the time outstanding, except that no such modifications shall:
- extend the fixed maturity of any Debt Securities or any installment of
interest or premium on any Debt Securities, or reduce the principal
amount thereof or reduce the rate of interest or premium payable upon
redemption, or reduce the amount of principal of an original issue
discount Debt Security or any other Debt Security that would be due and
payable upon a declaration of acceleration of the maturity thereof, or
change the currency in which the Debt Securities are payable or impair
the right to institute suit for the enforcement of any payment after the
stated maturity thereof or the redemption date, if applicable, or
adversely affect any right of the holder of any Debt Security to require
us to
13
repurchase that security, without the consent of the holder of each Debt
Security so affected;
- reduce the percentage of Debt Securities of any series, the consent of
the holders of which is required for any waiver or supplemental
indenture, without the consent of the holders of all Debt Securities
affected thereby then outstanding; or
- modify the provisions of that indenture relating to the waiver of past
defaults or the waiver or certain covenants or the provisions described
under "Modification of the indentures," except to increase any percentage
set forth in those provisions or to provide that other provisions of that
indenture may not be modified without the consent of the holder of each
Debt Security affected thereby, without the consent of the holder of each
Debt Security affected thereby.
SATISFACTION AND DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Each indenture shall be satisfied and discharged if (i) we shall deliver to
the trustee all Debt Securities then outstanding for cancellation or (ii) all
Debt Securities not delivered to the trustee for cancellation shall have become
due and payable, are to become due and payable within one year or are to be
called for redemption within one year, and we shall deposit an amount sufficient
to pay the principal, premium, if any, and interest to the date of maturity,
redemption or deposit (in the case of Debt Securities that have become due and
payable), provided that in either case we shall have paid all other sums payable
under that indenture.
Each indenture provides, if such provision is made applicable to the Debt
Securities of a series,
- that we may elect either (A) to defease and be discharged from any and
all obligations with respect to any Debt Security of such series (except
for the obligations to register the transfer or exchange of such Debt
Security, to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B)
to be released from our obligations with respect to such Debt Security
under Sections 801, 803, 1005, 1006, 1007 and 1009 of that indenture
(being the restrictions described above under "Certain Covenants of ours
in the indentures") together with additional covenants that may be
included for a particular series; and
- that Sections 501(4), 501(5) (as to Sections 801, 803, 1005, 1006, 1007
and 1009) and 501(8), as described in clauses (iv), (v) and (vii) under
"Events of Default," shall not be Events of Default under that indenture
with respect to such series ("covenant defeasance"), upon the deposit
with the trustee (or other qualifying trustee), in trust for such
purpose, of money certain U.S. government obligations and/or, in the case
of Debt Securities denominated in U.S. dollars, certain state and local
government obligations which through the payment of principal and
interest in accordance with their terms will provide money, in an amount
sufficient to pay the principal of (and premium, if any) and interest on
such Debt Security, on the scheduled due dates.
In the case of defeasance, the holders of such Debt Securities are entitled
to receive payments in respect of such Debt Securities solely from such trust.
Such a trust may only be established if, among other things, we have delivered
to the trustee an Opinion of Counsel (as specified in the indentures) to the
effect that the holders of the Debt Securities affected thereby will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance or covenant defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred. Such
Opinion of Counsel, in the case of defeasance under clause (A) above, must refer
to and be based upon a ruling of the Internal
14
Revenue Service or a change in applicable Federal income tax law occurring after
the date of the indentures.
RECORD DATES
The indentures provide that in certain circumstances we may establish a
record date for determining the holders of outstanding Debt Securities of a
series entitled to join in the giving of notice or the taking of other action
under the applicable indenture by the holders of the Debt Securities of such
series.
SUBORDINATED DEBT SECURITIES
Although the senior indenture and the subordinated indenture are generally
similar and many of the provisions discussed above pertain to both senior and
subordinated Debt Securities, there are many substantive differences between the
two. This section discusses some of those differences.
SUBORDINATION
Subordinated Debt Securities will be subordinate, in right of payment, to
all Senior Debt. "Senior Debt" is defined to mean, with respect to us, the
principal, premium, if any, and interest on the following:
- all indebtedness of ours, whether outstanding on the date of issuance or
thereafter created, incurred or assumed, which is for money borrowed, or
evidenced by a note or similar instrument given in connection with the
acquisition of any business, properties or assets, including securities;
- any indebtedness of others of the kinds described in the preceding clause
for the payment of which we are responsible or liable (directly or
indirectly, contingently or otherwise) as guarantor or otherwise; and
- amendments, renewals, extensions and refundings of any indebtedness
described in the preceding clauses (1) or (2), unless in any instrument
or instruments evidencing or securing such indebtedness or pursuant to
which the same is outstanding, or in any such amendment, renewal,
extension or refunding.
DIFFERENCE BETWEEN SUBORDINATED DEBT SECURITY COVENANTS AND SENIOR DEBT
SECURITY COVENANTS AND EVENTS OF DEFAULT
Subordinated Debt Securities may not have the advantage of all of the
covenants and Events of Default provided in the senior indenture. For example,
covenants relating to Liens or Sale and Leaseback Transactions as discussed
above are not applicable to securities issued pursuant to the subordinated
indenture.
TERMS OF SUBORDINATED DEBT SECURITIES MAY CONTAIN CONVERSION OR EXCHANGE
PROVISIONS
The prospectus supplement for a particular series of subordinated Debt
Securities will describe the specific terms discussed above that apply to the
subordinated Debt Securities being offered thereby as well as any applicable
conversion or exchange provisions.
MODIFICATION OF THE INDENTURE RELATING TO SUBORDINATED DEBT SECURITIES
The subordinated indenture may be modified by us and the trustee without
the consent of the Holders of the subordinated Debt Securities for one or more
of the purposes discussed above under "-- Modification of the Indentures." We
and the trustee may also modify the
15
subordinated indenture to make provision with respect to any conversion or
exchange rights for a given issue of subordinated Debt Securities.
GOVERNING LAW
The laws of the State of New York govern each indenture and will govern the
Debt Securities.
BOOK-ENTRY SECURITIES
The following description of book-entry securities will apply to any series
of Debt Securities issued in whole or in part in the form of one or more global
securities except as otherwise described in the prospectus supplement.
Book-entry securities of like tenor and having the same date will be
represented by one or more global securities deposited with and registered in
the name of a depositary that is a clearing agent registered under the Exchange
Act. Beneficial interests in book-entry securities will be limited to
institutions that have accounts with the depositary ("participants") or Persons
that may hold interests through participants.
Ownership of beneficial interests by participants will only be evidenced
by, and the transfer of that ownership interest will only be effected through,
records maintained by the depositary. Ownership of beneficial interests by
Persons that hold through participants will only be evidenced by, and the
transfer of that ownership interest within such participant will only be
effected through, records maintained by the participants. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the ability
to transfer beneficial interests in a global security.
Payment of principal of and any premium and interest on book-entry
securities represented by a global security registered in the name of or held by
a depositary will be made to the depositary, as the registered owner of the
global security. Neither we, the trustee nor any agent of ours or the trustee
will have any responsibility or liability for any aspect of the depositary's
records or any participant's records relating to or payments made on account of
beneficial ownership interests in a global security or for maintaining,
supervising or reviewing any of the depositary's records or any participant's
records relating to the beneficial ownership interests. Payments by participants
to owners of beneficial interests in a global security held through such
participants will be governed by the depositary's procedures, as is now the case
with securities held for the accounts of customers registered in "street name,"
and will be the sole responsibility of such participants.
A global security representing a book-entry security is exchangeable for
definitive Debt Securities in registered form, of like tenor and of an equal
aggregate principal amount registered in the name of, or is transferable in
whole or in part to, a Person other than the depositary for that global
security, only if (a) the depositary notifies us that it is unwilling or unable
to continue as depositary for that global security or the depositary ceases to
be a clearing agency registered under the Exchange Act, (b) there shall have
occurred and be continuing an Event of Default with respect to the Debt
Securities of that series or (c) other circumstances exist that have been
specified in the terms of the Debt Securities of that series. Any global
security that is exchangeable pursuant to the preceding sentence shall be
registered in the name or names of such Person or Persons as the depositary
shall instruct the trustee. It is expected that such instructions may be based
upon directions received by the depositary from its participants with respect to
ownership of beneficial interests in such global security.
Except as provided above, owners of beneficial interests in a global
security will not be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the holders thereof for any purpose
under the indentures, and no global security shall
16
be exchangeable, except for a security registered in the name of the depositary.
This means each Person owning a beneficial interest in such global security must
rely on the procedures of the depositary and, if such Person is not a
participant, on the procedures of the participant through which such Person owns
its interest, to exercise any rights of a holder under the indentures. We
understand that under existing industry practices, if we request any action of
holders or an owner of a beneficial interest in such global security desires to
give or take any action that a holder is entitled to give or take under the
indentures, the depositary would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participant to give or take such
action or would otherwise act upon the instructions of beneficial owners owning
through them.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in this "Description of Debt
Securities." Reference is made to the indentures for complete definitions of
these terms, as well as any other capitalized terms used in this description for
which no definition is provided. Unless otherwise provided in the applicable
prospectus supplement, the following terms will mean as follows for purposes of
covenants that may be applicable to any particular series of senior debt
securities.
The term "Attributable Debt," in respect of a Sale and Leaseback
Transaction, means, as of any particular time, the present value (discounted at
the rate of interest implicit in the lease involved in such Sale and Leaseback
Transaction, as determined by us in good faith) of the obligation of the lessee
thereunder for rental payments (excluding, however, any amounts required to be
paid by the lessee, whether or not designated as rent or additional rent, on
account of maintenance and repairs, insurance, taxes, assessments, water rates
or similar charges or any amounts required to be paid by the lessee thereunder
contingent upon the monetary inflation or the amount of sales, maintenance and
repairs, insurance, taxes, assessments, water rates or similar charges) during
the remaining term of the lease (including any period for which the lease has
been extended or may, at the option of the lessor, be extended).
The term "Consolidated Net Tangible Assets" means the total of all the
assets appearing on the consolidated balance sheet of us and our Subsidiaries
less the following: (A) current liabilities; (B) intangible assets such as
goodwill, trademarks, trade names, patents and unamortized debt discount and
expense; and (C) appropriate adjustments on account of minority interests of
other Persons holding stock in any Subsidiary of ours.
The term "Debt" means indebtedness for money borrowed.
The term "Domestic Subsidiary" means a Subsidiary formed under the laws of,
or conducting its principal operations within, the United States or any State or
territory thereof.
The term "Lien" means any mortgage, pledge, lien, encumbrance, charge or
security interest of any kind, excluding certain liens relating to taxes,
easements and similar liens arising in the ordinary course of business.
The term "Person" means an individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
The term "Principal Property" means any branch, distribution center or
other operating facility owned by us or any Domestic Subsidiary, the book value
of the real property, plant and equipment of which (as shown, without deduction
of any depreciation reserves, on the books of the owner or owners) is not less
than two percent of Consolidated Net Tangible Assets except (A) any such
facility which our Board of Directors determines is not of material importance
to the total business conducted, or assets owned, by us and our Domestic
Subsidiaries as an
17
entirety, or (B) any portion of any such facility which our Board of Directors
determines not to be of material importance to the use or operation thereof.
The term "Sale and Leaseback Transaction" means any arrangement with any
Person providing for the leasing to us or any Domestic Subsidiary of ours any
Principal Property or portion thereof (except for temporary leases for a term,
including any renewal thereof, of not more than 36 months and except for leases
between us and a Subsidiary or between Subsidiaries), which Principal Property
(or portion thereof) has been or is to be sold or transferred by us or such
Domestic Subsidiary to such Person.
The term "Subsidiary" means with respect to any Person, any corporation,
association or other business entity of which more than 50% of the outstanding
voting stock is owned, directly or indirectly, by such Person and one or more
Subsidiaries of such Person (or combination thereof). Unless otherwise
specified, "Subsidiary" means a Subsidiary of ours.
DESCRIPTION OF CAPITAL SECURITIES
COMMON STOCK
We may issue, either separately or together with other securities, shares
of our Common Stock. Under our Restated Certificate of Incorporation, we are
authorized to issue up to 210,000,000 shares of our Common Stock. As of
September 30, 2004, we had 42,114,320 shares of Common Stock issued and
outstanding. Under our Restated Certificate of Incorporation, we also are
authorized to issue up to 20,000,000 shares of Class B nonvoting convertible
common stock, $.01 par value ("Class B Common Stock"). As of September 30, 2004,
we had 4,339,431 shares of Class B Common Stock issued and held in our treasury.
We will not offer any shares of Class B Common Stock under this prospectus.
A prospectus supplement relating to an offering of Common Stock or other
securities convertible or exchangeable for, or exercisable into, Common Stock,
or the settlement of which may result in the issuance of Common Stock, will
describe the relevant terms, including the number of shares offered, any initial
offering price and market price and dividend information, as well as, if
applicable, information on other related securities.
Voting Rights. Each holder of shares of Common Stock is entitled to one
vote per share on all matters to be voted on by stockholders. Holders of Common
Stock are not entitled to cumulative votes in the election of directors.
Dividend Rights. The holders of Common Stock are entitled to dividends and
other distributions if, as and when declared by our Board of Directors out of
assets legally available therefore, subject to the rights of any holder of
preferred stock, restrictions set forth in our credit facilities and
restrictions, if any, imposed by other indebtedness outstanding from time to
time. The holders of Common Stock and Class B Common Stock are entitled to
equivalent per share dividends and distributions.
Other Rights. Upon our liquidation, dissolution or winding up, the holders
of shares of Common Stock would be entitled to share pro rata (on an equal basis
with the holders of the Class B Common Stock) in the distribution of all of our
assets remaining available for distribution after satisfaction of all its
liabilities and the payment of the liquidation preference of any outstanding
preferred stock. The holders of Common Stock have no preemptive or other
subscription rights to purchase shares of our Common Stock, nor are they
entitled to the benefits of any sinking fund provisions.
18
CLASS B COMMON STOCK
Our Class B Common Stock is identical to our Common Stock in all respects
except that the holders of Class B Common Stock will have no right to vote,
except as required by law. Shares of Class B Common Stock automatically convert
into the same number of shares of Common Stock upon the sale or transfer by the
holder thereof to a non-affiliate of ours. To the extent permitted by law, each
holder of Class B Common Stock is entitled to convert any or all shares of Class
B Common Stock held into the same number of shares of Common Stock at any time.
PREFERRED STOCK
We may elect to issue shares of our preferred stock, $.01 par value
("Preferred Stock"), from time to time in one or more series, as described in
the applicable prospectus supplement. Shares of our Preferred Stock may have
dividend, redemption, voting and liquidation rights taking priority over our
Common Stock and Class B Common Stock, and shares of Preferred Stock may be
convertible into our Common Stock. The issuance of shares of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
holders of shares of Common Stock and Class B Common Stock and could adversely
affect the rights and powers, including voting rights, of holders of shares of
Common Stock and Class B Common Stock. The existence of authorized and
undesignated shares of Preferred Stock may also have an adverse effect on the
market price of our Common Stock. In addition, the issuance of any shares of
Preferred Stock could have the effect of delaying, deferring or preventing a
change of control.
Our Board of Directors is authorized, subject to any limitations prescribed
by law, to provide for the issuance of shares of Preferred Stock in one or more
series without any approval of our stockholders. Our Board of Directors
determines the rights, qualifications, restrictions and limitations relating to
each series of our Preferred Stock at the time of issuance, and such rights,
qualifications, restrictions and limitations may differ with respect to those of
shares of Preferred Stock of a different series. Our Restated Certificate of
Incorporation authorizes our Board of Directors, without further stockholder
action, to provide for the issuance of up to 20,000,000 shares of Preferred
Stock, in one or more series. As of September 30, 2004, no shares of Preferred
Stock have been designated or are issued and outstanding. We may amend from time
to time our Restated Certificate of Incorporation to increase the number of
authorized shares of Preferred Stock.
The particular terms of any series of Preferred Stock being offered by us
under this prospectus will be described in the applicable prospectus supplement
relating to that series of Preferred Stock. Those terms may include:
- the title and liquidation preference per share of the Preferred Stock
offered and the number of shares offered;
- the purchase price of the Preferred Stock offered;
- the dividend rate (or method of calculation), the dates on which
dividends will be paid and the date from which dividends will begin to
accumulate;
- any redemption or sinking fund provisions of the Preferred Stock offered;
- any conversion provisions of the Preferred Stock offered;
- the voting rights, if any, of the Preferred Stock offered; and
- any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions of the
Preferred Stock offered.
If the terms of any series of Preferred Stock being offered differ from the
terms set forth in this prospectus, the definitive terms will be disclosed in
the applicable prospectus supplement. The summary in this prospectus is not
complete. You should refer to the applicable Certificate of
19
Amendment to our Restated Certificate of Incorporation or the applicable
certificate of designations, as the case may be, establishing a particular
series of Preferred Stock, in either case which will be filed with the Secretary
of State of the State of Delaware and the SEC in connection with an offering of
Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Dividend Rights. The Preferred Stock will be preferred over our Common
Stock and Class B Common Stock as to payment of dividends. Before any dividends
or distributions (other than dividends or distributions payable in Common Stock)
on our Common Stock will be declared and set apart for payment or paid, the
holders of shares of each series of Preferred Stock will be entitled to receive
dividends when, as and if declared by our Board of Directors. We will pay those
dividends either in cash, shares of Common Stock or Preferred Stock or
otherwise, at the rate and on the date or dates set forth in the applicable
prospectus supplement. With respect to each series of Preferred Stock, the
dividends on each share of the series will be cumulative from the date of issue
of the share unless another date is set forth in the applicable prospectus
supplement relating to the series. Accruals of dividends will not bear interest.
Rights Upon Liquidation. The Preferred Stock will be preferred over our
Common Stock and Class B Common Stock as to assets so that the holders of each
series of Preferred Stock will be entitled to be paid, upon our voluntary or
involuntary liquidation, dissolution or winding up and before any distribution
is made to the holders of Common Stock, the amount set forth in the applicable
prospectus supplement. However, in this case the holders of Preferred Stock will
not be entitled to any other or further payment. If upon any liquidation,
dissolution or winding up our net assets are insufficient to permit the payment
in full of the respective amounts to which the holders of all outstanding
Preferred Stock are entitled, our entire remaining net assets will be
distributed among the holders of each series of Preferred Stock in amounts
proportional to the full amounts to which the holders of each series are
entitled.
Redemption. All shares of any series of Preferred Stock will be redeemable
to the extent set forth in the prospectus supplement relating to the series. All
shares of any series of Preferred Stock will be convertible into shares of our
Common Stock or into shares of any other series of Preferred Stock to the extent
set forth in the applicable prospectus supplement.
Voting Rights. Except as indicated in the applicable prospectus
supplement, the holders of Preferred Stock will be entitled to one vote for each
share of Preferred Stock held by them on all matters properly presented to
stockholders. The holders of Common Stock, Class B Common Stock and the holders
of all series of Preferred Stock will vote together as one class.
CERTAIN PROVISIONS OF OUR RESTATED CERTIFICATE OF INCORPORATION
Our Restated Certificate of Incorporation provides for a classified Board
of Directors in which directors are divided into three classes, each class being
elected for a term of three years expiring at successive yearly intervals. In
addition, our Restated Certificate of Incorporation requires a vote of a
majority of the remaining Board of Directors to fill a vacancy on our Board of
Directors and does not permit vacancies to be filled by a vote of our
stockholders. Our Restated Certificate of Incorporation provides that vacancies
filled by our Board of Directors will be filled for the remainder of the term of
the class in which the vacancy occurs. Our Restated Certificate of Incorporation
further states that a decrease in the number of directors will not shorten the
term of any incumbent.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are a Delaware corporation subject to Section 203 of the DGCL. Section
203 provides in general that an interested stockholder acquiring more than 15%
of the outstanding voting stock of a corporation subject to Section 203 but less
than 85% of such stock may not engage in
20
certain business combinations (as defined in Section 203) with the corporation
for a period of three years subsequent to the date on which the stockholder
became an interested stockholder unless:
- prior to such date the corporation's board of directors approve either
the business combination or the transaction in which the stockholder
became an interested stockholder; or
- the business combination is approved by the corporation's board of
directors and authorized by a vote of at least 66 2/3% of the outstanding
voting stock of the corporation not owned by the interested stockholder.
A "business combination" includes mergers, asset sales and other
transactions resulting in financial benefit to a stockholder. Section 203 could
prohibit or delay mergers or other takeover or change of control attempts with
respect to us and, accordingly, may discourage attempts that might result in a
premium over the market price for the shares held by stockholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our Common Stock is Mellon Investor
Services LLC.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of our Common Stock, Preferred Stock
or Debt Securities. Each series of warrants will be issued under a separate
warrant agreement to be entered into between us and a bank or trust company, as
warrant agent. The warrant agent will act solely as our agent in connection with
the warrants and will not assume any obligation or relationship of agency or
trust for or with any registered holders of warrants or beneficial owners of
warrants. This summary of some provisions of the warrants is not complete. You
should refer to the applicable warrant agreement, including the applicable form
of warrant certificate, relating to the specific warrants being offered for the
complete terms of the warrant agreement and the warrants, as well as the
identity of the applicable warrant agent. That warrant agreement, together with
the applicable form of warrant certificate, will be filed with the SEC in
connection with the offering of the specific warrants and will be available by
the means described under "Where You Can Find More Information."
The particular terms of any issue of warrants will be described in the
applicable prospectus supplement relating to the issue. Those terms may include:
- the securities for which you may exercise the warrants;
- the designation, aggregate principal amount, currencies, denominations
and terms of the series of Debt Securities purchasable upon exercise of
warrants to purchase Debt Securities and the price at which the Debt
Securities may be purchased upon exercise, if applicable;
- the designation, number of shares, stated value and terms (including,
without limitation, liquidation, dividend, conversion and voting rights)
of the series of Preferred Stock purchasable upon exercise of warrants to
purchase shares of Preferred Stock and the price at which that number of
shares of Preferred Stock of such series may be purchased upon exercise,
if applicable;
- the number of shares of Common Stock purchasable upon the exercise of
warrants to purchase shares of Common Stock and the price at which that
number of shares of Common Stock may be purchased upon exercise, if
applicable;
- the date on which the right to exercise the warrants will commence and
the date on which the right will expire;
21
- the material U.S. federal income tax consequences applicable to the
warrants; and
- any other terms of the warrants.
The exercise price and the expiration date for warrants, as well as the
kind, frequency and timing of any notice to be given, will be subject to
adjustment as described in the applicable prospectus supplement. Holders of
warrants may exchange warrant certificates for new warrant certificates of
different denominations and may exercise warrants at the corporate trust office
of the warrant agent or any other office that we indicate in the applicable
prospectus supplement. Prior to the exercise of warrants, holders of warrants
will not have any of the rights of holders of the Common Stock, Preferred Stock
or Debt Securities purchasable upon that exercise, as the case may be, and will
not be entitled to payments of principal, premium or interest, as applicable, on
any debt securities purchasable upon the exercise or dividend payments, if any,
or voting rights of any Preferred Stock or Common Stock purchasable upon the
exercise.
Each warrant will entitle its holder to purchase the principal amount of
Debt Securities or the number of shares of Preferred Stock or Common Stock, as
the case may be, at the exercise price set forth in, or calculable as set forth
in, the applicable prospectus supplement. After the close of business on the
expiration date, unexercised warrants will become void. We will specify the
place or places where, and the manner in which, warrants may be exercised in the
applicable prospectus supplement.
We will forward the securities purchasable upon the exercise of warrants as
soon as practicable after receipt of payment and the properly completed and
executed warrant certificate at the corporate trust office of the warrant agent
or other office stated in the applicable prospectus supplement. If a holder of
warrants exercises less than all of the warrants represented by the warrant
certificate, we will issue a new warrant certificate for the remaining warrants.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
At our option, we may elect to offer fractional interests in our Debt
Securities or fractional shares of our Preferred Stock, rather than full
interests in our Debt Securities or full shares of our Preferred Stock, as the
case may be. If we exercise this option, we will issue to the public receipts
for depositary shares, and each of these depositary shares will represent a
fraction of a Debt Security of ours or of a share of a particular series of our
Preferred Stock, as the case may be, and that fraction or the formula by which
that fraction may be determined will be set forth in the applicable prospectus
supplement.
The Debt Securities or shares of any series of Preferred Stock underlying
the depositary shares, as the case may be, will be deposited under a deposit
agreement between us and a bank or trust company, as depositary. The depositary
will have its principal office in the United States, unless specified otherwise
in the applicable prospectus supplement. Subject to the terms of the applicable
deposit agreement, each owner of a depositary share will be entitled, in
proportion to the applicable fraction of the Debt Security or share of Preferred
Stock, as the case may be, underlying that depositary share, to all the rights
and preferences of the Debt Security or Preferred Stock, as the case may be,
underlying that depositary share. Those rights include any applicable dividend,
voting, redemption and liquidation rights.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the depositary shares in accordance with the terms of
the offering. This summary of some provisions of the depositary receipts is not
complete. You should refer to the applicable deposit agreement, including the
applicable form of depositary receipts, relating to the specific depositary
receipts
22
being offered for the complete terms of the deposit agreement and the depositary
receipts and the identity of the depositary. That deposit agreement, together
with the applicable form of depositary receipt, will be filed with the SEC in
connection with the offering of the depositary receipts and will be available by
the means described under "Where You Can Find More Information."
Pending the preparation of definitive engraved depositary receipts and upon
our written order, the depositary may issue temporary depositary receipts
substantially identical to the definitive depositary receipts but not in
definitive form. These temporary depositary receipts will entitle their holders
to all the rights of definitive depositary receipts which are to be prepared
without unreasonable delay. Temporary depositary receipts then will be
exchangeable for definitive depositary receipts at our expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute any payments of interest, cash dividends or
other cash distributions received with respect to the Debt Securities or
Preferred Stock, as the case may be, to the record holders of depositary shares
in proportion to the number of depositary shares owned by those holders.
If there is a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
that are entitled to receive the distribution, unless the depositary determines
that it is not feasible to make the distribution. If this occurs, with our
approval, the depositary may sell the property and distribute the net proceeds
from the sale to the applicable holders in proportion to the number of
depositary shares owned by those holders.
REDEMPTION OF DEPOSITARY SHARES
If the Debt Security or series of Preferred Stock, as the case may be,
represented by depositary shares is subject to redemption, the depositary shares
will be redeemed with the proceeds received by the depositary from the
redemption, in whole or in part, of that Debt Security or series of Preferred
Stock held by the depositary. The redemption price per depositary share will be
equal to the applicable fraction of the redemption price payable with respect to
that Debt Security or series of the Preferred Stock, as the case may be.
Whenever we redeem Debt Securities or shares of Preferred Stock that are held by
the depositary, the depositary will redeem, as of the same redemption date, the
number of depositary shares representing the Debt Securities or shares of
Preferred Stock, as the case may be, so redeemed. If fewer than all of the
depositary shares are to be redeemed, the depositary shares to be redeemed will
be selected by lot or pro rata, as may be determined by the depositary.
EXERCISE OF RIGHTS OR VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of Preferred
Stock underlying depositary shares are entitled to vote, or of any request for
instructions or directions from holders of Debt Securities underlying depositary
shares, the depositary will mail the information contained in the notice to the
record holders of the applicable depositary shares. Each record holder of the
applicable depositary shares on the record date will be entitled to instruct the
depositary on how to give instructions or directions with respect to the Debt
Securities represented by that holder's depositary shares or how to vote the
amount of the Preferred Stock represented by that holder's depositary shares, as
the case may be. The record date for the depositary shares will be the same date
as the record date for the underlying Debt Securities or Preferred Stock, as the
case may be. The depositary then will attempt, to the extent practicable, to
give instructions or directions with respect to the Debt Securities or to vote
the number of shares of Preferred Stock underlying those depositary shares, as
the case may be, in accordance with such instructions, and we will agree to take
all actions which may be deemed necessary by the depositary to enable the
depositary to do so. The depositary will not give
23
instructions or directions with respect to Debt Securities or vote shares of
Preferred Stock, as the case may be, if it does not receive specific
instructions from the holders of the depositary shares representing interests in
those securities.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT
The form of depositary receipt evidencing depositary shares and any
provision of a deposit agreement may at any time be amended by agreement between
us and the depositary. However, any amendment which materially and adversely
alters the rights of the holders of depositary shares will not be effective
unless the amendment has been approved by the holders of at least a majority of
the depositary shares then outstanding. A deposit agreement may be terminated by
us or by the depositary only if:
- all outstanding depositary shares issued under that deposit agreement
have been redeemed; or
- with respect to all depositary shares issued under that deposit
agreement, there has been a complete repayment or redemption of the
underlying Debt Securities or a final distribution of the underlying
Preferred Stock, as the case may be, including in connection with our
liquidation, dissolution or winding up, and the repayment, redemption or
distribution proceeds, as the case may be, have been distributed to you.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We also will pay
charges of the depositary in connection with the initial deposit and any
redemption of the underlying Debt Securities or Preferred Stock. Holders of
depositary receipts will pay the transfer and other taxes and governmental and
other charges, including a fee for the withdrawal of Debt Securities or shares
of Preferred Stock, as the case may be, upon surrender of depositary receipts,
as are expressly provided in the relevant deposit agreement.
MISCELLANEOUS
The depositary will forward to holders of depositary receipts all reports
and communications from us that we deliver to the depositary and that we are
required to furnish to the holders of the underlying Debt Securities or
Preferred Stock, as the case may be.
Neither we nor the depositary will be liable if either of us is prevented
or delayed by law or any circumstance beyond our control in performing our
respective obligations under the deposit agreement. Our obligations and those of
the depositary will be limited to performance in good faith of our respective
duties under the deposit agreement. Neither we nor the depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or underlying Debt Securities or Preferred Stock unless
satisfactory indemnity is furnished. We and the depositary may rely upon written
advice of counsel or accountants, or upon information provided by persons
presenting Debt Securities or Preferred Stock, as the case may be, for deposit,
holders of depositary receipts or other persons believed to be competent and on
documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering notice to us of its
election to resign. We may remove the depositary at any time. Any resignation or
removal will take effect upon the appointment of a successor depositary and its
acceptance of the appointment.
24
SELLING STOCKHOLDERS
The table below presents certain information regarding the beneficial
ownership of the Common Stock of WESCO International outstanding as of September
30, 2004 by two partnerships affiliated with The Cypress Group LLC ("Cypress"),
Roy W. Haley, our Chairman and Chief Executive Officer, William M. Goodwin, our
Vice President, Operations, and Jaimini Mehta, our Vice President, Business
Development.
The selling stockholders may sell up to an aggregate of 7,371,914 shares of
Common Stock under this prospectus. Cypress may sell up to the maximum number of
shares of Common Stock set forth opposite its name in the table below, provided
that the other named selling stockholders do not sell the maximum number of
shares of Common Stock that may be sold by them under this prospectus. The other
named selling stockholders may not sell more than the number of shares of Common
Stock set forth opposite their names in the table below. Within these
limitations, the number of shares to be sold by each selling stockholder will be
set forth in the applicable prospectus supplement. In no event will the maximum
number of shares of Common Stock sold by all selling stockholders under this
prospectus exceed 7,371,914 shares in the aggregate.
NUMBER OF SHARES OF
COMMON STOCK BENEFICIALLY
OWNED AFTER THE CALL OF
SHARES OF COMMON STOCK MAXIMUM NUMBER OF MAXIMUM NUMBER OF SHARES
BENEFICIALLY OWNED SHARES OF COMMON OF COMMON STOCK
----------------------- STOCK TO BE SOLD -------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE HEREUNDER NUMBER PERCENTAGE
------------------------ ---------- ---------- ----------------- ----------- -----------
Cypress Merchant Banking
Partners L.P.(1)...... 18,580,966 44.1% 7,010,690 11,570,276 25.1%
Cypress Offshore
Partners L.P.(1)...... 962,370 2.3% 361,224 601,146 1.3%
Roy W. Haley............ 1,941,791 4.6% 730,000 1,211,791 2.6%
Jaimini Mehta........... 903,479 2.1% 400,000 503,479 1.1%
William M. Goodwin...... 187,394 * 70,000 117,394 *
---------------
* Indicates ownership of less than 1.0% of the Common Stock
(1) Cypress is the general partner of Cypress Associates L.P. Cypress Associates
L.P. is the general partner of Cypress Merchant Banking Partners L.P. and
Cypress Offshore Partners L.P. Messrs. Singleton and Stern, who are
directors of WESCO International, are members of Cypress and may be deemed
to share beneficial ownership of the shares of Common Stock shown as
beneficially owned by such Cypress funds. Messrs. Singleton and Stern
disclaim beneficial ownership of such shares.
PLAN OF DISTRIBUTION
We and any selling stockholders may offer the offered securities in one or
more of the following ways, or any other way set forth in an applicable
prospectus supplement from time to time:
- to or through underwriting syndicates represented by managing
underwriters;
- through one or more underwriters without a syndicate for them to offer
and sell to the public;
- through dealers or agents;
- to investors directly in negotiated sales or in competitively bid
transactions; or
- to holders of other securities in exchanges in connection with
acquisitions.
25
The prospectus supplement for each series of securities we or any selling
stockholders sell will describe the offering, including:
- the name or names of any underwriters;
- the purchase price and the proceeds to us from that sale;
- any underwriting discounts and other items constituting underwriters'
compensation, which in the aggregate will not exceed eight percent of the
gross proceeds of the offering;
- any commissions paid to agents;
- the initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers; and
- any securities exchanges on which the securities may be listed.
UNDERWRITERS
If underwriters are used in a sale, we or the selling stockholders, as the
case may be, will execute an underwriting agreement with them regarding those
securities. Unless otherwise described in the applicable prospectus supplement,
the obligations of the underwriters to purchase these securities will be subject
to conditions, and the underwriters must purchase all of these securities if any
are purchased.
The securities subject to the underwriting agreement may be acquired by the
underwriters for their own account and may be resold by them from time to time
in one or more transactions, including negotiated transactions, at a fixed
offering price or at varying prices determined at the time of sale. Underwriters
may be deemed to have received compensation from us in the form of underwriting
discounts or commissions and may also receive commissions from the purchasers of
these securities for whom they may act as agent. Underwriters may sell these
securities to or through dealers. These dealers may receive compensation in the
form of discounts, concessions or commissions from the underwriters and
commissions from the purchasers for whom they may act as agent. Any initial
offering price and any discounts or concessions allowed or re-allowed or paid to
dealers may be changed from time to time.
We may authorize underwriters to solicit offers by institutions to purchase
the securities subject to the underwriting agreement from us, at the public
offering price stated in the applicable prospectus supplement under delayed
delivery contracts providing for payment and delivery on a specified date in the
future. If we sell securities under these delayed delivery contracts, the
applicable prospectus supplement will state that this is the case and will
describe the conditions to which these delayed delivery contracts will be
subject and the commissions payable for that solicitation.
In connection with underwritten offerings of the securities, the
underwriters may engage in over-allotment, stabilizing transactions, covering
transactions and penalty bids in accordance with Regulation M under the Exchange
Act, as follows:
- Over-allotment transactions involve sales in excess of the offering size,
which create a short position for the underwriters.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Covering transactions involve purchases of the securities in the open
market after the distribution has been completed in order to cover short
positions.
- Penalty bids permit the underwriters to reclaim a selling concession from
a broker-dealer when the securities originally sold by that broker-dealer
are repurchased in a covering transaction to cover short positions.
These stabilizing transactions, covering transactions and penalty bids may
cause the price of the securities to be higher than it otherwise would be in the
absence of these transactions. If these transactions occur, they may be
discontinued at any time.
26
AGENTS
We also may sell any of the securities through agents designated by us from
time to time. We will name any agent involved in the offer or sale of these
securities and will list commissions payable by us to these agents in the
applicable prospectus supplement. These agents will be acting on a best efforts
basis to solicit purchases for the period of its appointment, unless stated
otherwise in the applicable prospectus supplement.
DIRECT SALES
We or any selling stockholders may sell any of the securities directly to
purchasers. In this case, we or any selling stockholders will not engage
underwriters or agents in the offer and sale of these securities.
In addition, Debt Securities, shares of Common Stock or Preferred Stock or
other of our securities described in this prospectus may be issued upon the
exercise of warrants.
INDEMNIFICATION
We or any selling stockholders may indemnify underwriters, dealers or
agents who participate in the distribution of securities against certain
liabilities, including liabilities under the Securities Act, and may agree to
contribute to payments that these underwriters, dealers or agents may be
required to make.
NO ASSURANCE OF LIQUIDITY
The securities we or any selling stockholders offer may be a new issue of
securities with no established trading market. Any underwriters that purchase
securities from us or any selling stockholders may make a market in these
securities. The underwriters will not be obligated, however, to make a market
and may discontinue market-making at any time without notice to holders of the
securities. We cannot assure you that there will be liquidity in the trading
market for any securities of any series offered under this prospectus.
LEGAL MATTERS
The validity of the issuance of the offered securities will be passed upon
for us by Kirkpatrick & Lockhart LLP, Pittsburgh, Pennsylvania.
EXPERTS
The consolidated financial statements of WESCO International, Inc.
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
for the year ended December 31, 2003 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent registered public
accounting firm, given on the authority of such firm as experts in auditing and
accounting.
27
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus supplement
or the accompanying prospectus. You must not rely on any unauthorized
information or representations. This prospectus supplement is an offer to sell
only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus supplement and the accompanying prospectus is current only as of its
date.
---------------------
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Prospectus Supplement Summary........ S-1
Risk Factors......................... S-9
Use of Proceeds...................... S-13
Price Range of Our Common Stock and
Dividend Policy.................... S-13
Capitalization....................... S-14
Selling Stockholders................. S-15
Underwriting......................... S-16
Validity of Common Stock............. S-19
Experts.............................. S-19
Prospectus
Summary.............................. 1
Risk Factors......................... 3
Forward-Looking Statements........... 6
Ratios of Earnings to Fixed
Charges............................ 7
Use of Proceeds...................... 7
Description of Debt Securities....... 8
Description of Capital Securities.... 18
Description of Warrants.............. 21
Description of Depositary Shares..... 22
Selling Stockholders................. 25
Plan of Distribution................. 25
Legal Matters........................ 27
Experts.............................. 27
10,000,000 Shares
WESCO INTERNATIONAL, INC.
Common Stock
---------------------
PROSPECTUS SUPPLEMENT
---------------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
JPMORGAN
UBS INVESTMENT BANK
ROBERT W. BAIRD & CO.
BEAR, STEARNS & CO. INC.