Table of Contents
9,075,536 Shares
WESCO International, Inc.
Common Stock
This is a public offering of common stock of WESCO International, Inc. All of the 9,075,536 shares are being offered by the selling stockholders named in this prospectus supplement.
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 July 28, 2005 was $35.02 per share.
Investing in our common stock involves risks. See “Risk Factors” beginning on page 2 of the prospectus accompanying this prospectus supplement.
Per Share | Total | |||||||
Public offering price | $ | 34.05 | $ | 309,022,001 | ||||
Underwriting discounts and commissions | $ | 0.10 | $ | 907,554 | ||||
Proceeds to selling stockholders (before expenses) | $ | 33.95 | $ | 308,114,447 |
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.
Lehman Brothers expects to deliver the shares on or about August 3, 2005.
LEHMAN BROTHERS
July 29, 2005.
TABLE OF CONTENTS
Prospectus Supplement
Page | ||||
S-1 | ||||
S-1 | ||||
S-1 | ||||
S-2 | ||||
S-2 | ||||
S-3 | ||||
S-4 | ||||
S-7 | ||||
S-7 | ||||
Prospectus | ||||
Summary | 1 | |||
Risk Factors | 2 | |||
Forward-Looking Statements | 4 | |||
Use of Proceeds | 5 | |||
Selling Stockholders | 5 | |||
Plan of Distribution | 6 | |||
Legal Matters | 8 | |||
Experts | 8 |
i
Table of Contents
ABOUT THIS PROSPECTUS SUPPLEMENT
You should rely only on the information contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus. We have not, and the underwriter has not, authorized anyone to provide you with information that is different. This prospectus supplement is not an offer to sell or solicitation of an offer to buy these shares of common stock in any circumstances under which the offer or solicitation is unlawful. You should not assume that the information we have included in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date of this prospectus supplement or the accompanying prospectus or that any information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference regardless of the time of delivery of this prospectus supplement or of any such shares of our common stock.
This document is in two parts. The first part is this prospectus supplement, which adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference into the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information, some of which may not apply to this offering of common stock. This prospectus supplement adds, updates and changes information contained in the accompanying prospectus and the information incorporated by reference. To the extent the information contained in this prospectus supplement differs or varies from the information contained in the accompanying prospectus or any document incorporated by reference, the information in this prospectus supplement shall control.
No dealer, sales person 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 and the accompanying prospectus are an offer to sell only the securities specifically offered by it, but only under circumstances and in jurisdictions where it is lawful to do so.
RISK FACTORS
Investing in our common stock involves risks. To better understand the risks involved in an investment in our common stock, before deciding whether to purchase any of our common stock, please carefully read the risks set forth under the caption “Risk Factors” in the accompanying prospectus and the risks described in the other documents incorporated by reference into this prospectus supplement and the accompanying prospectus.
WESCO INTERNATIONAL, INC.
With sales of approximately $3.7 billion in 2004 and approximately $4.0 billion in the twelve months ended June 30, 2005, 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, United Arab Emirates 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 2004. Our leading market positions, experienced workforce, extensive geographic reach, broad product and service offerings and acquisition program have enabled us to grow our market positions.
S-1
Table of Contents
RECENT DEVELOPMENTS
On July 21, 2005, we announced our financial results for the six months ended June 30, 2005. We reported that:
• | net sales for the six months ended June 30, 2005 were $2.1 billion versus $1.8 billion in the comparable period in 2004; | |
• | gross margin for the six months ended June 30, 2005 was 18.5% versus 19.4% in the comparable period in 2004; | |
• | operating income totaled $87.5 million for the six months ended June 30, 2005 versus $69.1 million in the comparable period in 2004; | |
• | net income for the six months ended June 30, 2005, including a $6.5 million charge in the first quarter for redeeming a portion of our senior subordinated notes, was $38.7 million versus $28.8 million in the comparable period in 2004; and | |
• | diluted earnings per share were $0.79 per share for the six months ended June 30, 2005 versus $0.67 per share in the comparable period in 2004. |
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, 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 Ended December 31, 2004: | |||||||||
First Quarter | $ | 16.20 | $ | 8.87 | |||||
Second Quarter | 18.75 | 13.20 | |||||||
Third Quarter | 25.75 | 16.00 | |||||||
Fourth Quarter | 30.14 | 20.50 | |||||||
Year Ending December 31, 2005: | |||||||||
First Quarter | $ | 37.37 | $ | 27.12 | |||||
Second Quarter | 31.93 | 23.14 | |||||||
Third Quarter (through July 28, 2005) | 35.35 | 31.26 |
On July 28, 2005, the last sale price of our common stock as reported on the New York Stock Exchange was $35.02 per share.
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-2
Table of Contents
SELLING STOCKHOLDERS
The table below sets forth, as of the date of this prospectus supplement and as adjusted for the sale of an aggregate of 9,075,536 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 | Beneficial Ownership | |||||||||||||||||||
Before Offering | Number of | After Offering | ||||||||||||||||||
Shares of | ||||||||||||||||||||
Number of | Percent of | Common Stock | Number of | Percent of | ||||||||||||||||
Selling Stockholder | Shares | Class | Sold in Offering | Shares | Class | |||||||||||||||
Cypress Merchant Banking Partners L.P.(1) | 8,628,637 | 18.4 | % | 8,628,637 | — | — | ||||||||||||||
Cypress Offshore Partners L.P.(1) | 446,899 | * | 446,899 | — | — |
* | Indicates ownership of less than 1.0% of our common stock. |
(1) | The Cypress Group LLC 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. James L. Singleton and James A. 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. |
S-3
Table of Contents
UNDERWRITING
Under the terms of an underwriting agreement, which will be filed as an exhibit to a current report on Form 8-K and incorporated into the registration statement, of which this prospectus supplement and the accompanying prospectus constitute a part, Lehman Brothers Inc. has agreed to purchase from the selling stockholders named in this prospectus supplement, and the selling stockholders named in this prospectus supplement have agreed to sell to the underwriter, 9,075,536 shares of our common stock.
The underwriting agreement provides that the underwriter’s obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement, including:
• | the obligation to purchase all of the shares of common stock offered hereby, if any of the shares are purchased; | |
• | the representations and warranties made by us and the selling stockholders to the underwriter are true and correct; | |
• | there is no material change in the financial markets; and | |
• | we deliver customary closing documents to the underwriter. |
Commissions and Expenses
The underwriter has advised us that the underwriter proposes to offer the shares of common stock directly to the public at the public offering price set forth on the cover page of this prospectus supplement, and to selected dealers, at such public offering price less a selling concession not in excess of $0.05 per share. After the offering, the underwriter may change the offering price and other selling terms.
The following table summarizes the underwriting discounts and commissions that the selling stockholders named in this prospectus supplement will pay to the underwriter. The underwriting fee is the difference between the initial price to the public and the amount the underwriter pays to the selling stockholders named in this prospectus supplement for the shares.
Per Share | Total | |||||||
Paid by the selling stockholders | $ | 0.10 | $ | 907,554 |
The expenses of the offering that are payable by us are estimated to be $100,000 (exclusive of underwriting discounts and commissions). We have agreed to pay expenses incurred by the selling stockholders named in this prospectus supplement in connection with the offering, other than the underwriting discounts and commissions.
Indemnification
We and the selling stockholders named in this prospectus supplement have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as amended, and to contribute to payments that the underwriter may be required to make for these liabilities.
S-4
Table of Contents
Stabilization and Short Positions
In connection with this offering, the underwriter may engage in stabilizing transactions, covering transactions or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Securities Exchange Act of 1934, as amended:
• | 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 common stock in the open market after the distribution has been completed in order to cover short positions. |
These stabilizing transactions and covering transactions may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions, if commenced, may be discontinued at any time.
Neither we nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor the underwriter make any representation that the underwriter will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
European Union Prospectus Directive
The underwriter has represented that (i) 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 (the “FSMA”)) received by it in connection with the issue or sale of any shares of common stock in circumstances in which Section 21(1) of the FSMA does not apply to us and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the offered shares of common stock in, from or otherwise involving the United Kingdom.
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), the underwriter has represented and agreed that with effect from and including the date on which the European Union Prospectus Directive (the “EU Prospectus Directive”) is implemented in that Relevant Member State (the “Relevant Implementation Date”), it has not made and will not make an offer of shares of common stock to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:
(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than€43,000,000 and (3) an annual net turnover of more than€50,000,000, as shown in its last annual or consolidated accounts; or | |
(c) in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3 of the EU Prospectus Directive. |
For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares of common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares, as the same may be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State and the expression EU
S-5
Table of Contents
Electronic Distribution
This prospectus supplement and the accompanying prospectus in electronic format may be made available on the Internet sites or through other online services maintained by the underwriter or by its affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriter may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriter on the same basis as other allocations.
Other than this prospectus supplement and the accompanying prospectus in electronic format, the information on the underwriter’s web site and any information contained in any other web site maintained by the underwriter is not part of this prospectus supplement and the accompanying prospectus or the registration statement of which this prospectus supplement and the accompanying prospectus form a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter and should not be relied upon by investors.
Stamp Taxes
If you purchase shares of common stock offered in this prospectus supplement and the accompanying prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus supplement.
Relationship
The underwriter and its related entities have engaged and may in the future engage in commercial and investment banking transactions with us and the selling stockholders in the ordinary course of their business. They have received customary compensation and expenses for these commercial and investment banking transactions.
S-6
Table of Contents
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered hereby is being passed upon for us by Kirkpatrick & Lockhart Nicholson Graham LLP, Pittsburgh, Pennsylvania. The selling stockholders are being represented by Simpson Thacher & Bartlett LLP, New York, New York, and the underwriter is being represented by Sullivan & Cromwell LLP, New York, New York.
EXPERTS
The consolidated financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Report on Internal Control over Financial Reporting) incorporated in this prospectus supplement by reference to the Annual Report on Form 10-K for the year ended December 31, 2004 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
S-7
Table of Contents
1 | ||||
2 | ||||
4 | ||||
5 | ||||
5 | ||||
6 | ||||
8 | ||||
8 |
Our SEC Filings (File No. 001-14989) | Period for or Date of Filing | |
Annual Report on Form 10-K | Year Ended December 31, 2004 | |
Current Reports on Form 8-K | January 13 and February 4, 2005 | |
Form 8-A | May 4, 1999 |
Table of Contents
ii
Table of Contents
1
Table of Contents
• | 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 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. |
2
Table of Contents
3
Table of Contents
4
Table of Contents
Number of Shares of | ||||||||||||||||||||
Common Stock | ||||||||||||||||||||
Beneficially Owned | ||||||||||||||||||||
After the Sale of | ||||||||||||||||||||
Maximum Number of | ||||||||||||||||||||
Shares of Common Stock | Maximum Number of | Shares of Common | ||||||||||||||||||
Beneficially Owned | Shares of Common | Stock | ||||||||||||||||||
Stock to be Sold | ||||||||||||||||||||
Name of Beneficial Owner | Number | Percentage | Hereunder | Number | Percentage | |||||||||||||||
Cypress Merchant Banking Partners L.P.(1) | 12,431,663 | 26.8 | % | 12,431,663 | — | * | ||||||||||||||
Cypress Offshore Partners L.P.(1) | 643,873 | 1.4 | % | 643,873 | — | * |
* | 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 |
5
Table of Contents
owned by such Cypress funds. Messrs. Singleton and Stern disclaim beneficial ownership of such shares. |
• | 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. |
• | the name or names of any underwriters, dealers or agents; | |
• | the purchase price and the proceeds to the selling stockholders 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. |
6
Table of Contents
• | 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. |
7
Table of Contents
8
Table of Contents
9,075,536 Shares
WESCO International, Inc.
Common Stock
PROSPECTUS SUPPLEMENT
LEHMAN BROTHERS