EX-99.4 5 a15-14266_1ex99d4.htm EX-99.4

EXHIBIT 99.4

 

PCM, INC.

 

Unaudited Pro Forma Combined Financial Statements

 

The following unaudited pro forma combined financial statements have been derived from the historical consolidated financial statements of PCM, Inc. (“PCM”) and En Pointe Technologies Sales, Inc. (“En Pointe Inc.”) to give effect to PCM’s acquisition of certain assets of En Pointe. On April 1, 2015, PCM completed the acquisition of certain assets of En Pointe Inc., one of the nation’s largest independent IT solutions providers, headquartered in Southern California. PCM acquired the assets of En Pointe Inc.’s IT solutions provider business, excluding current tangible assets, such as accounts receivable and inventory. Under the terms of the agreement, PCM paid an initial purchase price of $15 million in cash. The assets were acquired by an indirect wholly-owned subsidiary of PCM, which subsidiary now operates as En Pointe Technologies Sales, LLC (“En Pointe”) under the En Pointe brand.

 

The unaudited pro forma combined statement of operations for the year ended December 31, 2014 gives effect to the acquisition as if it had occurred on January 1, 2014, the beginning of the earliest period presented. The unaudited pro forma combined statement of operations for the three months ended March 31, 2015 gives effect to the acquisition as if it had occurred on January 1, 2015. The unaudited pro forma combined balance sheet as of March 31, 2015 gives effect to the acquisition as if it had occurred on March 31, 2015. The unaudited pro forma combined financial information is presented for informational purposes only. The pro forma data is not necessarily indicative of what PCM’s financial position or results of operations actually would have been had PCM completed the acquisition as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company.

 

The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with the audited consolidated financial statements of PCM included in its Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 16, 2015, as amended on April 30, 2015, its Quarterly Reports on Form 10-Q for the quarter ended March 31, 2015 filed with the SEC on May 11, 2015 and its Current Reports on Form 8-K filed with the SEC from the end of our prior fiscal year through the date of this report.

 

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PCM, INC.

Unaudited Pro Forma Combined Balance Sheet

As of March 31, 2015

(Dollars in Thousands)

 

 

 

PCM

 

 

 

Pro Forma Combined

 

 

 

March 31,

 

Purchase

 

March 31,

 

 

 

2015

 

Adjustments(a)

 

2015

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,289

 

$

 

$

7,289

 

Accounts receivable, net of allowances

 

187,575

 

 

187,575

 

Inventories

 

42,939

 

4,544

(b)

47,483

 

Prepaid expenses and other current assets

 

10,047

 

920

(c)

10,967

 

Deferred income taxes

 

4,857

 

 

4,857

 

Current assets of discontinued operations

 

429

 

 

429

 

Total current assets

 

253,136

 

5,464

 

258,600

 

Property and equipment, net

 

86,137

 

439

(d)

86,576

 

Goodwill

 

25,510

 

40,474

(e)

65,984

 

Intangible assets, net

 

4,587

 

8,160

(f)

12,747

 

Other assets

 

6,295

 

115

(g)

6,410

 

Total assets

 

$

375,665

 

$

54,653

 

$

430,318

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

117,509

 

$

2,104

(h)

$

119,613

 

Accrued expenses and other current liabilities

 

24,716

 

13,378

(i)

38,094

 

Deferred revenue

 

3,891

 

191

(j)

4,082

 

Line of credit

 

49,240

 

17,295

(k)

66,535

 

Notes payable — current

 

4,091

 

 

4,091

 

Current liabilities of discontinued operations

 

486

 

 

486

 

Total current liabilities

 

199,933

 

32,969

 

232,902

 

Notes payable and other long-term liabilities

 

34,993

 

17

(l)

35,010

 

Earn-out liability

 

 

21,667

(m)

21,667

 

Deferred income taxes

 

12,167

 

 

12,167

 

Total liabilities

 

247,093

 

54,653

 

301,746

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

Common stock

 

16

 

 

16

 

Additional paid-in capital

 

121,270

 

 

121,270

 

Treasury stock, at cost

 

(18,192

)

 

(18,192

)

Accumulated other comprehensive income

 

117

 

 

117

 

Retained earnings

 

25,361

 

 

25,361

 

Total stockholders’ equity

 

128,572

 

 

128,572

 

Total liabilities and stockholders’ equity

 

$

375,665

 

$

54,653

 

$

430,318

 

 

The accompanying notes are an integral part of the unaudited pro forma combined financial statements. References in the table above are to the corresponding letter in Note 2: Pro Forma Adjustments.

 

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PCM, INC.

Unaudited Pro Forma Combined Statement of Operations

For the Year Ended December 31, 2014

(In Thousands)

 

 

 

PCM

 

En Pointe

 

 

 

Pro Forma Combined

 

 

 

FYE
December 31,

 

FYE
September 30,

 

Pro Forma

 

FYE
December 31,

 

 

 

2014

 

2014

 

Adjustments

 

2014

 

Net sales

 

$

1,356,362

 

$

392,579

 

 

 

$

1,748,941

 

Cost of goods sold

 

1,164,295

 

333,911

 

 

 

1,498,206

 

Gross profit

 

192,067

 

58,668

 

 

 

250,735

 

Selling, general and administrative expenses

 

176,362

 

51,697

 

$

1,347

(n)

229,406

 

Operating profit

 

15,705

 

6,971

 

(1,347

)

21,329

 

Interest expense, net

 

3,180

 

577

 

329

(o)

4,086

 

Income from continuing operations before income taxes

 

12,525

 

6,394

 

(1,676

)

17,243

 

Income tax expense

 

5,490

 

393

 

1,675

(p)

7,558

 

Income from continuing operations

 

7,035

 

6,001

 

(3,351

)

9,685

 

Loss from discontinued operations, net of taxes

 

(1,570

)

 

 

(1,570

)

Net income

 

$

5,465

 

$

6,001

 

$

(3,351

)

$

8,115

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Earnings (Loss) Per Common Share

 

 

 

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.57

 

 

 

 

 

$

0.79

 

Loss from discontinued operations, net of taxes

 

(0.12

)

 

 

 

 

(0.13

)

Net income

 

$

0.45

 

 

 

 

 

$

0.66

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.55

 

 

 

 

 

$

0.75

 

Loss from discontinued operations, net of taxes

 

(0.13

)

 

 

 

 

(0.12

)

Net income

 

$

0.42

 

 

 

 

 

$

0.63

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

12,251

 

 

 

 

 

12,251

 

Diluted

 

12,881

 

 

 

 

 

12,881

 

 

The accompanying notes are an integral part of the unaudited pro forma combined financial statements. References in the table above are to the corresponding letter in Note 2: Pro Forma Adjustments.

 

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PCM, INC.

 

Unaudited Pro Forma Combined Statement of Operations

For the Three Months Ended March 31, 2015

(In Thousands)

 

 

 

PCM

 

En Pointe

 

 

 

Pro Forma Combined

 

 

 

Three Months
Ended
March 31,

 

Three Months
Ended
December 31,

 

Pro Forma

 

Three Months
Ended
March 31,

 

 

 

2015

 

2014

 

Adjustments

 

2015

 

Net sales

 

$

295,959

 

$

107,699

 

 

 

$

403,658

 

Cost of goods sold

 

256,854

 

92,389

 

 

 

349,243

 

Gross profit

 

39,105

 

15,310

 

 

 

54,415

 

Selling, general and administrative expenses

 

44,312

 

13,728

 

$

337

(n)

58,377

 

Operating profit (loss)

 

(5,207

)

1,582

 

(337

)

(3,962

)

Interest expense, net

 

771

 

113

 

82

(o)

966

 

Income (loss) from continuing operations before income taxes

 

(5,978

)

1,469

 

(419

)

(4,928

)

Income tax expense (benefit)

 

(2,454

)

363

 

68

(q)

(2,023

)

Income (loss) from continuing operations

 

(3,524

)

1,106

 

(487

)

(2,905

)

Loss from discontinued operations, net of taxes

 

(31

)

 

 

(31

)

Net income (loss)

 

$

(3,555

)

$

1,106

 

$

(487

)

$

(2,936

)

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss Per Common Share

 

 

 

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.29

)

 

 

 

 

$

(0.24

)

Loss from discontinued operations, net of taxes

 

 

 

 

 

 

 

Net loss

 

$

(0.29

)

 

 

 

 

$

(0.24

)

 

 

 

 

 

 

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.29

)

 

 

 

 

$

(0.24

)

Loss from discontinued operations, net of taxes

 

 

 

 

 

 

 

Net loss

 

$

(0.29

)

 

 

 

 

$

(0.24

)

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

12,230

 

 

 

 

 

12,230

 

Diluted

 

12,230

 

 

 

 

 

12,230

 

 

The accompanying notes are an integral part of the unaudited pro forma combined financial statements. References in the table above are to the corresponding letter in Note 2: Pro Forma Adjustments.

 

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PCM, Inc.

 

Notes to Unaudited Pro Forma Combined Financial Statements

 

1. Basis of Presentation and Acquisition of Certain Assets of En Pointe

 

On April 1, 2015, PCM completed the acquisition of certain assets of En Pointe Inc.’s IT solutions provider business, excluding current tangible assets, such as accounts receivable and inventory. Under the terms of the agreement, PCM paid an initial purchase price of $15 million in cash, which we financed through borrowings under our existing credit facility.

 

The unaudited pro forma combined statement of operations for the year ended December 31, 2014 gives effect to the acquisition as if it had occurred on January 1, 2014, the beginning of the earliest period presented. The unaudited pro forma combined balance sheet as of March 31, 2015 gives effect to the acquisition as if it had occurred on March 31, 2015. The unaudited pro forma combined balance reflects the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based upon their respective estimated fair values, which are subject to change, and have been made based on management’s best estimate as of the date of this Form 8-K/A. The preliminary purchase price allocation included herein is dependent upon valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive allocation. The final purchase price allocation will be determined within a year of the closing of the acquisition. The actual amounts recorded as of the completion of the allocation of the purchase price, including its effect on our results of operations, may differ materially from the information presented in these unaudited pro forma combined financial statements. The unaudited pro forma combined financial information is presented for informational purposes only. The pro forma data is not necessarily indicative of what PCM’s financial position or results of operations actually would have been had PCM completed the acquisition as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company.

 

2. Pro Forma Adjustments

 

The following adjustments give pro forma effect to the En Pointe transaction described above:

 

a.              The purchase adjustments column reflects the fair value of the limited assets purchased plus the purchase price allocation attributable to goodwill and intangible assets.

b.              Represents specific inventory acquired as part of the transaction, including approximately $2.1 million under a vendor financing arrangement. See note (h) below.

c.               Primarily represents prepayments to vendors for unfulfilled purchase orders as of the acquisition date.

d.              Represents the approximate fair market value of fixed assets purchased, including equipment, software and furniture & fixtures.

e.               Goodwill reflects the excess of the purchase price over the identified tangible and intangible assets.

f.                Reflects estimated identified intangibles assets in the amount of $4.3 million for customer relationships, $2.0 million for trademarks/tradenames, and approximately $1.9 million for non-compete agreements.

g.              Represents real estate deposits on several leased facilities.

h.              Represents vendor financing supporting a purchase order to be delivered over time.

i.                 Represents various accrued liabilities, including $10.8 million for estimated earnout payments to be made over the next 12 months plus various transaction related expenses such as legal, accounting and banking fees.

j.                 Represents certain deferred revenues as of the acquisition date.

k.              Represents the initial purchase price of $15 million plus the immediate purchase of approximately $2.3 million of inventory at the time of closing.

l.                 Represents the long term portion of an assumed capital lease obligation.

m.          Represents the estimated earnout payments to be made between after twelve months.

n.              Reflects the estimated annual amortization expense associated with trademarks/tradenames, customer relationships and non-complete agreements of sellers using estimated useful lives for each asset of 3 years, 20 years and 4 years, respectively.

o.              Reflects the increased annual interest expense from the aggregate borrowings of $17.295 million using an average rate of 1.905%, which represents the average LIBOR rate applicable to our credit facility.

p.              Reflects the tax effect on the consolidated pro forma combined taxable income at PCM’s 2014 tax rate of 43.83%.

q.              Reflects the tax effect on the consolidated pro forma combined taxable income at PCM’s Q1 2015 tax rate of 41.05%.

 

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