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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