<PAGE>   1
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-K/A

                                 AMENDMENT NO. 1

[X]      Annual Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the Fiscal Year Ended December 27, 1997. 

                                       or

[ ]      Transition Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934, for the Transition Period From _______________ to
         _______________.

                         Commission file number 0-21677

                                 PROSOURCE, INC.
             (Exact name of registrant as specified in its charter)

             Delaware                                    65-0335019
_______________________________             ___________________________________
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                              1500 San Remo Avenue
                           Coral Gables, Florida 33146
                    ________________________________________
                    (Address of principal executive offices)

                                 (305) 740-1000
              ____________________________________________________
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None.

Securities registered pursuant to Section 12(g) of the Act: Class A Common
Stock, par value $0.01 per share.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

         Yes  /x/                    No  / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K.  / /

The aggregate market value of the voting stock held by non-affiliates of the
Registrant on February 20, 1998 was approximately $42,079,251. The market value
calculation was determined using the closing sale price of the Registrant's
Class A Common Stock on February 20, 1998, as reported on the Nasdaq National
Market.

At February 20, 1998, the registrant had outstanding 3,526,835 shares of Class A
Common Stock and 5,856,756 shares of Class B Common Stock.
<PAGE>   2
                       DOCUMENTS INCORPORATED BY REFERENCE


PART OF FORM 10-K    DOCUMENTS FROM WHICH PORTIONS ARE INCORPORATED BY REFERENCE

Part IV              Portions of the Registrant's Registration Statement on
                     Securities and Exchange Commission Form S-1 (registration
                     no. 333-11499) are incorporated by reference into Item 14.


                                        2
<PAGE>   3
                                   FORM 10-K/A

                                 AMENDMENT NO. 1

                                 PROSOURCE, INC.

                  The undersigned registrant hereby amends "Item 6. Selected
Consolidated Financial Data" and the following portions of "Item 8. Financial
Statements and Supplementary Data" in its Annual Report on Form 10-K for the
Fiscal Year ended December 27, 1997: the Consolidated Statements of Operations,
Consolidated Statements of Cash Flows and Notes (1)(j), (2), (3), (9)(b) and
(12) of the Notes to Consolidated Financial Statements. In furtherance thereof,
Item 6 and Item 8 of such Report are each hereby amended to read in their
respective entireties as follows:




                                        3
<PAGE>   4
                 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
             (in millions, except per share and certain other data)

<TABLE>
<CAPTION>
                                                                                        FISCAL YEARS ENDED
                                                           -------------------------------------------------------------------------
                                                            DECEMBER 27,   DECEMBER 28,   DECEMBER 30,   DECEMBER 31,   DECEMBER 25,
                                                               1997           1996           1995(a)        1994(b)        1993(c)  
                                                           -------------   ------------   ------------   ------------   ------------
                                                             (52 WEEKS)     (52 WEEKS)     (52 WEEKS)     (53 WEEKS)     (52 WEEKS)

<S>                                                        <C>         .  <C>         .  <C>         .  <C>         .  <C>         .
Statement of Operations Data:
   Net Sales ...........................................      $ 3,901.2      $ 4,125.0      $ 3,461.8      $ 1,598.1      $ 1,329.3
   Cost of sales .......................................        3,591.4        3,806.8        3,193.3        1,464.5        1,210.9
                                                              ---------      ---------      ---------      ---------      ---------
      Gross profit .....................................          309.8          318.2          268.5          133.6          118.4
   Operating expenses ..................................          302.1          301.3          255.2          131.0          114.2
   Loss on impairment of long-live assets ..............             --           15.7             --             --             --
   Restructuring and contract-termination charges ......             --           28.5            0.7             --             --
                                                              ---------      ---------      ---------      ---------      ---------
      Income (loss) from operations ....................            7.7          (27.3)          12.6            2.6            4.2
   Interest expense, net ...............................            9.2           13.1           13.3            6.6            5.5
                                                              ---------      ---------      ---------      ---------      ---------
      Loss before income taxes, extraordinary items     
        and cumulative effect of a change in           
        accounting principle ...........................           (1.5)         (40.4)          (0.7)          (4.0)          (1.3)
   Income tax benefit (provision) ......................            0.5           15.4           (0.1)           1.6            0.5
                                                              ---------      ---------      ---------      ---------      ---------
      Loss before extraordinary items and cumulative       
        effect of a change in accounting principle .....           (1.0)         (25.0)          (0.8)          (2.4)          (0.8)
   Extraordinary (loss) gain, net ......................           (6.3)           0.6           (0.8)            --             --
   Cumulative effect of a change in accounting
      principle, net ...................................           (6.4)            --             --             --             --
                                                              ---------      ---------      ---------      ---------      ---------
         Net loss ......................................      $   (13.7)     $   (24.4)     $    (1.6)     $    (2.4)     $    (0.8)
                                                              =========      =========      =========      =========      =========
Net loss per common share (basic and diluted):
   Loss before extraordinary items and cumulative effect
      of a change in accounting principle .............       $   (0.11)     $   (4.31)     $   (0.18)     $   (1.01)     $   (0.35)
   Extraordinary items, net ............................          (0.67)          0.11          (0.17)            --             --
   Cumulative effect of a change in accounting
      principle, net ...................................          (0.69)            --             --             --             --
                                                              ---------      ---------      ---------      ---------      ---------
         Net loss per common share .....................      $   (1.47)     $   (4.20)     $   (0.35)     $   (1.01)     $   (0.35)
                                                              =========      =========      =========      =========      =========
   Average outstanding shares used in calculation
      (in thousands) ...................................          9,334          5,796          4,441          2,353          2,348
                                                              =========      =========      =========      =========      =========
Balance Sheet Data (at end of period):
   Working capital .....................................      $   106.0      $    85.5      $   115.9      $    41.6      $    42.7
   Total assets ........................................          548.1          503.7          487.3          216.9          199.6
   Total debt ..........................................          174.2          112.6          162.7           65.1           68.5
   Stockholders' equity ................................           64.4           78.5           49.4           22.5           25.3
Other Data:
   Net asset turnover ..................................           16.4x          20.1x          18.3x          16.5x          13.6x
   Depreciation and amortization .......................      $    11.2      $    10.9      $    12.7      $     8.0      $     7.9
   Capital expenditures ................................      $    30.0      $    20.0      $     5.7      $     1.4      $     3.5
   Number of restaurants served (at end of period) .....         12,715         14,641         14,562          6,752          5,113

</TABLE>

(a) Includes the effects of the acquisition of substantially all of the assets
    and the assumption of certain liabilities of NAD on March 31, 1995.
(b) Includes the effects of the acquisition of certain assets and the assumption
    of certain liabilities of Malone Products, Inc. on October 31, 1994.
(c) Includes the effects of the acquisition of certain operating assets of
    McCabe's Quality Foods, California, Inc. on February 27, 1993 and the
    effects of the acquisition of certain assets and the assumption of certain
    liabilities of Valley Food Services, Inc. on March 27, 1993.
(d) The per share amounts prior to 1997 have been restated as required to comply
    with Statement of Financial Accounting Standards No. 128, "Earnings Per
    Share". For further discussion of this and the impact of Statement No. 128,
    see the notes to the consolidated financial statements.
(e) Certain amounts presented above for prior years have been reclassified to
    conform to the current year's presentation.



<PAGE>   5
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





                                 PROSOURCE, INC.

                   Index to Consolidated Financial Statements








Independent Auditors' Report.................................................. 6

Audited Consolidated Financial Statements:

         Consolidated Balance Sheets.......................................... 7

         Consolidated Statements of Operations................................ 8

         Consolidated Statements of Stockholders' Equity...................... 9

         Consolidated Statements of Cash Flows................................10

         Notes to Consolidated Financial Statements...........................11



                                        4
<PAGE>   6
                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
ProSource, Inc.:



We have audited the accompanying consolidated balance sheets of ProSource, Inc.
and subsidiaries as of December 27, 1997 and December 28, 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 27, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ProSource, Inc. and
subsidiaries as of December 27, 1997 and December 28, 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 27, 1997, in conformity with generally accepted accounting
principles.

As discussed in Note 13 to the consolidated financial statements, the Company
changed its method of capitalization of business process reengineering
activities in the fourth quarter of 1997.

KPMG PEAT MARWICK LLP

/s/ KPMG PEAT MARWICK LLP

Miami, Florida
February 20, 1998


                                        5
<PAGE>   7
                                 PROSOURCE, INC.
                           CONSOLIDATED BALANCE SHEETS
                     December 27, 1997 and December 28, 1996
                 (In thousands, except share and per-share data)

<TABLE>
<CAPTION>
                                    Assets                                     1997             1996
---------------------------------------------------------------------       ---------        ---------
<S>                                                                         <C>              <C>
Current assets:
    Cash and cash equivalents                                               $  12,501        $   2,763
    Accounts receivable, net of allowance for doubtful accounts of
       $4,085 and $2,334 respectively                                         222,247          219,340
    Inventories                                                               160,621          144,040
    Deferred income taxes, net                                                  7,190           10,914
    Prepaid expenses and other current assets                                   8,434            7,373
                                                                            ---------        ---------
                  Total current assets                                        410,993          384,430

Property and equipment, net                                                    59,961           49,637
Intangible assets, net                                                         39,883           41,436
Deferred income taxes, net                                                     28,802           16,100
Other assets                                                                    8,462           12,121
                                                                            ---------        ---------

                  Total assets                                              $ 548,101        $ 503,724
                                                                            =========        =========

                     Liabilities and Stockholders' Equity

Current liabilities:
    Accounts payable                                                        $ 277,953        $ 254,907
    Accrued liabilities                                                        27,012           42,475
    Current portion of long-term debt                                            --              1,500
                                                                            ---------        ---------
                  Total current liabilities                                   304,965          298,882

Long-term debt, less current portion                                          174,200          111,084
Other noncurrent liabilities                                                    4,521           15,243
                                                                            ---------        ---------

                  Total liabilities                                           483,686          425,209
                                                                            ---------        ---------

Commitments and contingencies

Stockholders' equity:
    Preferred stock, $.01 par value
        Authorized 10,000,000 shares: none issued                                  --               --
    Class A common stock, $.01 par value
       Authorized 50,000,000 shares; issued and outstanding 3,496,499
       shares and 3,400,000 shares, respectively                                   35               34
    Class B common stock, $.01 par value
       Authorized 10,000,000 shares; issued and outstanding 5,856,756
       shares and 5,963,856 shares, respectively                                   58               60
    Additional paid-in capital                                                104,934          105,256
    Accumulated deficit                                                       (40,580)         (26,901)
    Accumulated foreign-currency translation adjustments                          (32)              66
                                                                            ---------        ---------

                  Total stockholders' equity                                   64,415           78,515
                                                                            ---------        ---------

                  Total liabilities and stockholders' equity                $ 548,101        $ 503,724
                                                                            =========        =========
</TABLE>


See accompanying notes to consolidated financial statements.




                                        6
<PAGE>   8
                                 PROSOURCE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         Years ended December 27, 1997,
                     December 28, 1996 and December 30, 1995
                 (In thousands, except share and per-share data)

<TABLE>
<CAPTION>
                                                                         1997               1996               1995
                                                                     -----------        -----------        -----------

<S>                                                                  <C>                <C>                <C>
Net sales                                                            $ 3,901,165        $ 4,125,054        $ 3,461,837

Cost of sales                                                          3,591,368          3,806,811          3,193,270
                                                                     -----------        -----------        -----------

       Gross profit                                                      309,797            318,243            268,567

Operating expenses, including management fees to Onex of
    $0, $729 and $808, respectively                                      302,080            301,295            255,216

Loss on impairment of long-lived assets                                     --               15,733               --

Restructuring and contract-termination charges                              --               28,466                711
                                                                     -----------        -----------        -----------

       Income (loss) from operations                                       7,717            (27,251)            12,640

Interest expense, including interest to Onex of $0, $1,888
    and $1,738, respectively                                             (11,745)           (14,824)           (14,678)

Interest income                                                            2,552              1,694              1,339
                                                                     -----------        -----------        -----------

       Loss before income taxes, extraordinary items and
          cumulative effect of a change in accounting
             principle                                                    (1,476)           (40,381)              (699)

Income tax benefit (provision)                                               485             15,410                (85)
                                                                     -----------        -----------        -----------

       Loss before extraordinary items and cumulative
          effect of a change in accounting principle                        (991)           (24,971)              (784)

Extraordinary (loss) gain on early retirement of debt, net of
    income tax benefit (provision) of $4,073, $(397) and $502,
    respectively                                                          (6,262)               610               (772)

Cumulative effect of a change in accounting principle, net
    of income tax benefit of $3,293                                       (6,426)              --                 --
                                                                     -----------        -----------        -----------

       Net loss                                                      $   (13,679)       $   (24,361)       $    (1,556)
                                                                     ===========        ===========        ===========

Net loss per common share (basic and diluted):

Loss before extraordinary items and cumulative
    effect of a change in accounting principle                       $     (0.11)       $     (4.31)       $     (0.18)

Extraordinary items, net                                                   (0.67)              0.11              (0.17)

Cumulative effect of a change in accounting principle, net                 (0.69)              --                 --
                                                                     -----------        -----------        -----------

       Net loss per common share                                     $     (1.47)       $     (4.20)       $     (0.35)
                                                                     ===========        ===========        ===========

       Weighted average number of shares                               9,333,527          5,795,676          4,440,692
</TABLE>


          See accompanying notes to consolidated financial statements.




                                        7
<PAGE>   9
                                 PROSOURCE, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                         Years ended December 27, 1997,
                     December 28, 1996 and December 30, 1995
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                             Accumulated
                                                                                                               foreign-
                                                                                   Additional                 currency
                                                                   Common Stock     paid-in     Accumulated   translation
                                                                Class A  Class B    capital        deficit    adjustments    Total
                                                                -------  -------    -------        -------    -----------    -----
<S>                                                             <C>      <C>      <C>           <C>          <C>           <C>
Balance, December 25, 1994                                        $--     $ 23    $  23,504       $   (984)       $--      $ 22,543

    Issuance of 2,858,500 Class B shares                           --       29       28,556             --         --        28,585
    Acquisition and retirement of 23,000 Class B shares            --       --         (222)            --         --          (222)
    Net loss                                                       --       --           --         (1,556)        --        (1,556)
    Foreign-currency translation adjustments                       --       --           --             --         71            71
                                                                  ---     ----    ---------       --------       ----      --------

Balance, December 30, 1995                                         --       52       51,838         (2,540)        71        49,421

    Issuance of 3,400,000 Class A shares, net                      34       --       43,193             --         --        43,227
    Amendment to 1995 Option Plan                                  --       --        1,224             --         --         1,224
    Issuance of 285,714 Class B shares to Onex                     --        3        3,997             --         --         4,000
    Conversion of subordinated notes payable to Onex
       into 459,242 Class B shares                                 --        5        4,594             --         --         4,599
    Issuance of 61,500 Class B shares                              --       --          615             --         --           615
    Acquisition and retirement of 20,000 Class B shares            --       --         (205)            --         --          (205)
    Net loss                                                       --       --           --        (24,361)        --       (24,361)
    Foreign-currency translation adjustments                       --       --           --             --         (5)           (5)
                                                                  ---     ----    ---------       --------       ----      --------

Balance, December 28, 1996                                         34       60      105,256        (26,901)        66        78,515

    Issuance of 33,799 Class A shares under the Employee
       Stock Purchase Plan                                         --       --          204             --         --           204
    Acquisition and retirement of 44,400 Class B shares            --       (1)        (554)            --         --          (555)
    Conversion of 62,700 Class B shares into 62,700 Class A
       shares                                                       1       (1)          --             --         --            --
    Compensation expense accrued under the 1997
       Directors Stock Option Plan                                 --       --           28             --         --            28
    Net loss                                                       --       --           --        (13,679)        --       (13,679)
    Foreign-currency translation adjustments                       --       --           --             --        (98)          (98)
                                                                  ---     ----    ---------       --------       ----      --------

Balance, December 27, 1997                                        $35     $ 58    $ 104,934       $(40,580)      $(32)     $ 64,415
                                                                  ===     ====    =========       ========       ====      ========
</TABLE>


See accompanying notes to consolidated financial statements.




                                        8
<PAGE>   10
                                 PROSOURCE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         Years ended December 27, 1997,
                     December 28, 1996 and December 30, 1995
                 (In thousands, except share and per-share data)

<TABLE>
<CAPTION>
                                                                                       1997             1996             1995
                                                                                    ---------        ---------        ---------
<S>                                                                                 <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                        $ (13,679)       $ (24,361)       $  (1,556)
    Adjustments to reconcile net loss to net cash (used in)
    provided by operating activities:
       Depreciation and amortization                                                   11,231           10,937           12,693
       Bad debt expense                                                                 2,275            1,682            1,845
       Loss (gain) on early retirement of debt                                         10,335           (1,007)           1,274
       Cumulative effect of a change in accounting principle                            9,719               --               --
       Deferred income tax benefit                                                     (8,978)         (14,085)          (1,749)
       Loss on impairment of long-lived assets                                             --           15,733               --
       Noncash contract-termination charges                                                --            5,224               --
       Gain on sales of property and equipment                                           (655)            (154)            (184)
       Changes in operating assets and liabilities, net of
       effects of companies acquired
              (Increase) decrease in accounts receivable                               (5,182)           9,067          (13,441)
              (Increase) decrease in inventories                                      (16,581)          (3,608)           7,706
              Increase in prepaid expenses and other assets                            (3,949)         (13,854)          (1,208)
              Increase in accounts payable                                             23,046           12,262           43,518
              (Decrease) increase in accrued and other noncurrent liabilities         (25,952)          23,450            1,099
                                                                                    ---------        ---------        ---------
                 NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                  (18,370)          21,286           49,997
                                                                                    ---------        ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                              (29,997)         (19,987)          (5,683)
    Proceeds from sales of property and equipment                                       1,786              154              362
    Payment for purchase of net assets acquired                                            --               --         (170,279)
                                                                                    ---------        ---------        ---------
                 NET CASH USED IN INVESTING ACTIVITIES                                (28,211)         (19,833)        (175,600)
                                                                                    ---------        ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Repayments of long-term debt to Onex                                                   --          (15,000)          (2,085)
    Repayments of long-term debt to others                                           (589,701)        (558,902)        (578,813)
    Borrowings on long-term debt from Onex                                                 --               --           18,750
    Borrowings on long-term debt from others                                          651,317          528,633          660,491
    Fees incurred in conjunction with long-term debt                                   (4,644)              --               --
    Proceeds from issuance of common stock to Onex                                         --            7,000           26,500
    Proceeds from issuance of common stock to others                                       --           37,464            2,085
    Payments to acquire and retire treasury stock                                        (555)            (205)            (222)
                                                                                    ---------        ---------        ---------
                 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                   56,417           (1,010)         126,706
                                                                                    ---------        ---------        ---------

Effect of exchange-rate changes on cash                                                   (98)              (5)              71
                                                                                    ---------        ---------        ---------
                 NET INCREASE IN CASH AND CASH EQUIVALENTS                              9,738              438            1,174
                                                                                    ---------        ---------        ---------

Cash and cash equivalents at beginning of year                                          2,763            2,325            1,151
                                                                                    ---------        ---------        ---------
Cash and cash equivalents at end of year                                            $  12,501        $   2,763        $   2,325
                                                                                    =========        =========        =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the year for:
       Interest to Onex                                                             $      --        $   2,927        $      41
                                                                                    =========        =========        =========

       Interest to others                                                           $  10,938        $  16,435        $  12,291
                                                                                    =========        =========        =========

       Income taxes, net of refunds                                                 $      --        $      --        $     993
                                                                                    =========        =========        =========
</TABLE>



SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

In October 1997, the Company issued 33,799 Class A common shares to employees
under the 1997 Employee Stock Purchase Plan at $6.035 per share in exchange for
accrued compensation totaling $204.

During 1997, the Company recognized $28 of compensation expense associated with
the 1997 Directors Stock Option Plan.

See accompanying notes to consolidated financial statements.




                                        9
<PAGE>   11
                                 PROSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      THE BUSINESS

                  ProSource, Inc. (the "Company") provides foodservice
                  distribution services to chain restaurants in North America
                  and provides purchasing and logistics services to the
                  foodservice market. The Company's 3,400 associates serve
                  approximately 12,700 restaurants, consisting primarily of
                  Burger King, Red Lobster, Long John Silver's, Olive Garden,
                  TGIFriday's, Chick-fil-A, Chili's, Sonic, TCBY and Wendy's
                  restaurant concepts, from 34 distribution centers and its
                  Corporate Support Center in Coral Gables, Florida.

                  The Company operates through ProSource Services Corporation
                  ("PSC"), a wholly owned subsidiary, and PSC's four main
                  wholly-owned operating subsidiaries, ProSource Distribution
                  Services Limited ("ProSource Canada"), BroMar Services, Inc.
                  ("BroMar"), ProSource Receivables Corporation ("PRC"), and PSD
                  Transportation Services, Inc. ("PSD"). PSC commenced
                  operations in July 1992. PRC and PSD commenced operations
                  during fiscal 1997. The consolidated financial statements
                  include the results of the operations of PSC, PRC and PSD from
                  their inception and the results of operations of ProSource
                  Canada and BroMar, which were formed or acquired by the
                  Company in connection with the acquisition of the National
                  Accounts Division ("NAD") of The Martin-Brower Company
                  ("Martin-Brower"), since the date of acquisition. The Company
                  is a subsidiary of Onex Corporation (collectively with its
                  affiliates, "Onex"), a company traded on the Toronto and
                  Montreal stock exchanges.

                  The Company operates on a 52- to 53-week accounting year,
                  ending on the last Saturday of each calendar year.

         (b)      PRINCIPLES OF CONSOLIDATION

                  The consolidated financial statements include the accounts of
                  the Company and its subsidiaries. Operations of the companies
                  and businesses acquired have been included in the accompanying
                  consolidated financial statements from their respective dates
                  of acquisition. All significant intercompany accounts and
                  transactions have been eliminated in consolidation.

         (c)      USE OF ESTIMATES

                  The preparation of financial statements in conformity with
                  generally accepted accounting principles requires management
                  to make estimates and assumptions that affect the reported
                  amounts of assets and liabilities and disclosure of contingent
                  assets and liabilities at the date of the financial statements
                  and the reported amounts of revenues and expenses during the
                  reporting period. Actual results could differ from those
                  estimates.


                                       10
<PAGE>   12
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (d)      CASH AND CASH EQUIVALENTS

                  Cash on hand and in banks and short-term securities with
                  maturities of three months or less when purchased are
                  considered cash and cash equivalents.

         (e)      INVENTORIES

                  Inventories, consisting primarily of food items, are stated at
                  the lower of cost or net realizable value. Cost is determined
                  using the weighted-average-cost method and the first-in,
                  first-out method. Cost of inventory using the
                  weighted-average-cost method represents 34%, 32% and 32% of
                  inventories in 1997, 1996, and 1995, respectively.

         (f)      PROPERTY AND EQUIPMENT

                  Property and equipment are stated at cost, less accumulated
                  depreciation and amortization. Depreciation is computed using
                  the straight-line method over the estimated useful lives of
                  the related assets. Amortization of leasehold improvements is
                  computed using the straight-line method over the shorter of
                  the lease term or estimated useful lives of the related
                  assets.

                  Costs of normal maintenance and repairs are charged to expense
                  when incurred. Replacements or betterments of properties are
                  capitalized. When assets are retired or otherwise disposed of,
                  their cost and the applicable accumulated depreciation and
                  amortization are removed from the accounts, and the resulting
                  gain or loss is reflected in the consolidated statements of
                  operations.

         (g)      INTANGIBLE ASSETS

                  Intangible assets are amortized using the straight-line method
                  over the following periods:

                           Goodwill                                    40 years
                           Noncompete agreements                        5 years
                           Customer lists                              12 years

                  Goodwill represents the excess of cost over fair value of net
                  assets acquired. The Company periodically evaluates the
                  recoverability of recorded costs for goodwill based upon
                  estimations of future undiscounted related operating income
                  from the acquired companies. Should the Company determine it
                  probable that future estimated undiscounted related operating
                  income from any of its acquired companies will be less than
                  the carrying amount of the associated goodwill, an impairment
                  of goodwill would be recognized, and goodwill would be reduced
                  to the amount estimated to be recoverable. The Company
                  believes that no material impairment existed at December 27,
                  1997 and December 28, 1996.



                                       11
<PAGE>   13
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (h)      DEFERRED DEBT-ISSUANCE COSTS

                  Included in other assets are deferred debt-issuance costs
                  which are amortized over the term of the related debt.

         (i)      SELF-INSURANCE

                  The Company self-insures up to certain retention limits under
                  its workers' compensation (except for a period during
                  1996-1997), auto liability and medical and dental insurance
                  programs. Costs in excess of retention limits are insured
                  under various contracts with insurance carriers. Estimated
                  costs for claims for which the Company is responsible are
                  determined based on historical claims experience, adjusted for
                  current trends. The liability related to workers' compensation
                  is discounted to net present value using a risk-free treasury
                  rate for maturities that match the expected settlement
                  periods. At December 27, 1997 and December 28, 1996, the
                  estimated accrued liabilities related to workers' compensation
                  were approximately $3.3 million and $4.4 million,
                  respectively, net of a discount of approximately $1.0 million
                  and $1.6 million, respectively.

         (j)      NET LOSS PER COMMON SHARE

                  In February 1997, Statement of Financial Accounting Standards
                  ("SFAS") No. 128, "Earnings per Share" was issued. SFAS No.
                  128 replaced the calculation of primary and fully diluted
                  earnings per share with basic and diluted earnings per share.
                  Unlike primary earnings per share, basic earnings per share
                  excludes any dilutive effects of options, warrants and
                  convertible securities. Diluted earnings per share is very
                  similar to the previously reported fully diluted earnings per
                  share. All earnings per share amounts for all periods have
                  been presented, and where appropriate, restated to conform
                  with the requirements of SFAS No. 128.

         (k)      INCOME TAXES

                  The Company and its wholly-owned domestic subsidiaries file
                  consolidated federal and state tax returns in the United
                  States. Separate foreign tax returns are filed for the
                  Company's Canadian subsidiary. The Company follows the asset
                  and liability method of accounting for income taxes prescribed
                  by SFAS No. 109, "Accounting for Income Taxes". Under the
                  asset and liability method, deferred income taxes are
                  recognized for the tax consequences of "temporary differences"
                  by applying enacted statutory tax rates applicable to future
                  years to differences between the financial statement carrying
                  amounts and the tax basis of existing assets and liabilities.
                  The effect on deferred taxes of a change in tax rates is
                  recognized in income in the year that includes the enactment
                  date.



                                       12
<PAGE>   14
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (l)      TRANSLATION OF FOREIGN CURRENCY

                  The accounts of ProSource Canada are translated into U.S.
                  dollars in accordance with SFAS No. 52, "Foreign Currency
                  Translation". Consequently, all balance sheet accounts are
                  translated at the current exchange rate. Income and expense
                  accounts are translated at the average exchange rates in
                  effect during the year. Adjustments resulting from the
                  translation are included in accumulated foreign-currency
                  translation adjustments as a component of stockholders'
                  equity.

         (m)      IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

                  In June 1997, the Financial Accounting Standards Board (FASB)
                  issued Statement No. 130, "Reporting Comprehensive Income,"
                  which establishes standards for reporting and display of
                  comprehensive income and its components. In June 1997, the
                  FASB also issued Statement No. 131, "Disclosures about
                  Segments of an Enterprise and Related Information." This
                  statement establishes standards for reporting information
                  about a company's operating segments and related disclosures
                  about its products, services, geographic areas of operations
                  and major customers. Both statements will be adopted by the
                  Company in 1998. Management believes the adoption of these
                  statements will not materially impact the Company's results of
                  operations, cash flows or financial position.

         (n)      FAIR VALUE OF FINANCIAL INSTRUMENTS

                  The carrying amounts reported in the consolidated balance
                  sheets for cash and cash equivalents, accounts receivable,
                  accounts payable and accrued liabilities approximate fair
                  value because of their short-term maturities. The carrying
                  amounts reported for long-term debt approximate fair value
                  because they are variable-rate instruments that reprice
                  monthly.

         (o)      RECLASSIFICATIONS

                  Certain amounts previously presented in the financial
                  statements of prior years have been reclassified to conform to
                  the current year presentation.

(2)      BUSINESS COMBINATIONS

         On March 31, 1995, the Company completed the acquisition of
         substantially all of the assets and the assumption of certain
         liabilities of NAD from Martin-Brower. The total cost of the
         acquisition of $170 million was funded through a borrowing of $116
         million under the Company's previous revolving credit facility, a $9
         million note payable to Martin-Brower (net of a discount to reflect a
         constant interest rate), $18.5 million in notes payable to Onex, and
         the issuance of 2,650,000 shares of the Company's Class B common stock,
         valued at approximately $26.5 million. The acquisition has been
         accounted for under the purchase method of accounting. The accompanying
         consolidated financial statements include the assets acquired of
         approximately $232 million, consisting primarily of accounts receivable
         and inventories, and liabilities assumed of approximately $87 million,


                                       13
<PAGE>   15
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(2)      BUSINESS COMBINATIONS (CONTINUED)

         consisting primarily of trade accounts payable, based on their
         estimated fair values at the acquisition date. As a result of this
         transaction, the Company recorded goodwill of approximately $25
         million. In addition, the Company incurred an extraordinary charge
         relating to the write-off of approximately $0.8 million of unamortized
         deferred-debt issuance costs on debt repaid at the acquisition date.

         On March 30, 1996, the Company revised its estimates of certain costs
         related to the acquisition by $12 million. The effect of the revision
         increased acquisition-related liabilities by $12 million, deferred tax
         assets by approximately $4.4 million and goodwill by approximately $7.6
         million. During 1997, the Company reviewed the adequacy of its reserve
         associated with the NAD acquisition and concluded that the costs of
         integrating NAD would be higher than originally anticipated,
         principally due to employee related costs. As a result, in 1997 the
         Company increased the acquisition reserve by reclassifying $3.4 million
         from the restructuring reserve (see note 3). Management believes that
         the recorded acquisition reserve at December 27, 1997 is sufficient to
         cover all remaining costs associated with the integration of NAD.


(3)      RESTRUCTURING, TERMINATION CHARGES AND IMPAIRMENT OF LONG-LIVED ASSETS

         In conjunction with the NAD acquisition, the Company incurred
         restructuring costs of approximately $0.7 million in 1995 primarily
         relating to costs incurred to consolidate and integrate certain
         functions and operations. In 1996, as a result of a study to analyze,
         among other things, ways to integrate the NAD operations, improve
         customer service, reduce operating costs and increase existing
         warehouse capacity, the Company adopted a plan, which was approved by
         its Board of Directors, to consolidate and integrate its corporate and
         network operations, including the closing of 19 distribution facilities
         under lease agreements and 11 owned distribution facilities. As a
         result, in the first quarter of 1996, the Company accrued restructuring
         charges of $10.9 million, primarily related to the termination of the
         existing facility leases and employee related costs. The Company began
         the integration of some of these facilities, including communications
         to its employees and its customers in 1996. During 1997, the Company
         undertook a thorough evaluation of each specific facility's return on
         investment and alternative uses. As a result, the Company now intends
         to close 10 distribution facilities currently leased and 9 distribution
         facilities currently owned. The Company expects to complete the plan in
         stages through the year 2002. During 1997 and 1996, the Company paid in
         the aggregate $1.7 million and $2.8 million, respectively, in costs
         primarily related to facility leases and relocation costs. In addition,
         during 1997 the Company reclassified $3.4 million to acquisition
         related liabilities, which had no impact on 1997 operating results. As
         of December 27, 1997, the Company had approximately $3.0 million of
         accrued unpaid restructuring charges. Management believes that the
         remaining accrued restructuring charges, which consist primarily of
         costs associated with the termination of existing facility leases, are
         adequate to complete its plans.

         The significant change brought about by the plan to integrate and
         consolidate the existing distribution network impaired the value of
         long-lived assets to be held and used until the plan is completed. As a
         result, in conjunction with the recording of the restructuring reserves
         in the first quarter of 1996, the Company recognized a loss on
         impairment in value of long-lived assets. The loss consisted of $7.3
         million of land and owned buildings, $4.3 million of furniture and
         equipment and leasehold


                                       14
<PAGE>   16
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(3)      RESTRUCTURING, TERMINATION CHARGES AND IMPAIRMENT OF LONG-LIVED ASSETS
         (CONTINUED)

         improvements management plans to hold and use through the completion of
         the plan, and $4.1 million of capitalized software costs which do not
         meet the long-term information technology strategy of the Company. The
         Company measured the amount of the loss by comparing fair value of the
         land and the owned buildings (determined by independent appraisals and
         updated with current comparisons to similar assets) to capitalized
         cost. The carrying value of furniture and equipment and capitalized
         software costs was written down to net realizable value since it is
         being replaced.

         The Company discontinued its distribution services to Arby's
         restaurants effective April 1, 1997. In connection therewith, as of
         December 28, 1996, the Company accrued approximately $10.6 million of
         costs associated with the termination of this agreement. During 1997,
         the Company paid and charged in the aggregate $9.1 million in costs
         primarily related to lease costs in connection with idle equipment and
         warehouse space and costs associated with rerouting the Company's
         transportation fleet required as a result of the loss of the Arby's
         business. In addition, the Company reclassified approximately $1.2
         million to the allowance for doubtful accounts receivable to reserve
         against outstanding Arby's accounts receivable. As of December 27,
         1997, the Company had approximately $0.3 million of accrued unpaid
         termination charges which management believes will be paid during 1998.

(4)      PROPERTY AND EQUIPMENT

         Property and equipment and related depreciable lives were as follows
         (in thousands):



<TABLE>
<CAPTION>
                                  December 27,  December 28,      Depreciable
                                      1997          1996             Lives
                                    -------       -------       ---------------

<S>                               <C>           <C>             <C>
Land                                $ 3,662       $ 3,636              --
Buildings and improvements           17,092        16,413       15 to 40 years
Warehouse and transportation
    equipment                        25,592        24,465       3 to 10 years
Computer software                     7,391         4,262       1 1/2 to 5 years
Leasehold improvements                8,966         4,384       3 to 13 years
Office equipment                      8,209         7,261       3 to 7 years
Projects in progress                 18,456        11,760              --
                                    -------       -------
                                     89,368        72,181
Less accumulated depreciation
    and amortization                 29,407        22,544
                                    -------       -------
Property and equipment, net         $59,961       $49,637
                                    =======       =======
</TABLE>

(5)      INTANGIBLE ASSETS

         Intangible assets consisted of the following (in thousands):


<TABLE>
<CAPTION>
                                                    December 27,      December 28,
                                                        1997               1996
                                                    -----------       -----------
<S>                                                 <C>               <C>
Goodwill                                               $41,298           $41,298
Identifiable intangibles                                 3,870             3,870
                                                       -------           -------
                                                        45,168            45,168
Less accumulated amortization                            5,285             3,732
                                                       -------           -------
Intangible assets, net                                 $39,883           $41,436
                                                       =======           =======
</TABLE>


                                       15
<PAGE>   17
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995


(6)      LONG-TERM DEBT

         Long-term debt consisted of the following loan agreements with banks
         (in thousands):


<TABLE>
<CAPTION>
                                                               December 27,    December 28,
                                                                   1997            1996
                                                               ------------    -----------

<S>                                                            <C>             <C>
$150 million accounts receivable securitization facility,
         due March 14, 2002                                      $125,000       $     --
$75 million revolving credit facility, due March 14, 2002          49,200             --
$210 million revolving credit facility, retired and repaid
         March 14, 1997                                                --         84,834
$15 million term-loan facility, retired and repaid
         March 14, 1997                                                --         12,750
$15 million term-loan facility, retired and repaid
         March 14, 1997                                                --         15,000
                                                                 --------       --------
         Total long-term debt                                     174,200        112,584
Less current portion                                                   --          1,500
                                                                 --------       --------
         Long-term debt, less current portion                    $174,200       $111,084
                                                                 ========       ========
</TABLE>

         (a)      EXISTING CREDIT FACILITIES

                  In March, 1997, the Company entered into two five-year loan
                  agreements aggregating $225 million (the "Existing Credit
                  Facilities") with a group of financial institutions to replace
                  its previous credit facility. In connection with this early
                  retirement of long-term debt, the Company recorded a pre-tax
                  extraordinary charge of $10.3 million ($6.3 million net of
                  taxes) in the first quarter of fiscal 1997. This charge
                  reflected the write-off of deferred financing costs of $6.3
                  million, prepayment penalties of $2.7 million and $1.3 million
                  in costs associated with the termination of interest-rate
                  protection agreements.

                  The Existing Credit Facilities bear interest based on either
                  the prime rate or LIBOR plus an additional spread based on
                  certain financial ratios and mature on March 14, 2002. The
                  effective rate at December 27, 1997 was 7.34%. The Company is
                  required to comply with various covenants in connection with
                  the Existing Credit Facilities and borrowings are subject to
                  calculations based on accounts receivable and inventory. The
                  revolving credit facility is secured by liens on substantially
                  all of the Company's assets and contains various restrictions
                  on, among other things, the Company's ability to pay dividends
                  and dispose of assets. Additionally, in the event of a change
                  in control, the outstanding principal amount of these
                  facilities shall become due and payable. PRC is the legal
                  borrower for the accounts


                                       16
<PAGE>   18
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(6)      LONG-TERM DEBT (CONTINUED)

                  receivable securitization facility. Pursuant to the terms of
                  the accounts receivable securitization facility PSC sells, on
                  an ongoing basis and without recourse, an undivided interest
                  in a designated pool of trade accounts receivable to PRC. In
                  order to maintain the designated balance in the pool of
                  accounts receivable sold, PSC is obligated to sell undivided
                  interests in new receivables as existing receivables are
                  collected. PSC has retained substantially the same credit risk
                  as if the receivables had not been sold. PSC, as agent for
                  PRC, retains collection and administrative responsibilities on
                  the receivables sold to PRC. The creditors for this facility
                  have security interests in PRC's assets (consisting primarily
                  of accounts receivable purchased from PSC) and are entitled to
                  be satisfied by such assets prior to equity holders. The
                  Company pays a quarterly variable commitment fee, as defined
                  in the agreements, based on the unused portion of the
                  facilities which fee averaged 0.33% of such unused portion
                  during 1997. At December 27, 1997, the Company had
                  approximately $35 million available under the Existing Credit
                  Facilities.

         (b)      PREVIOUS CREDIT FACILITY

                  On March 31, 1995, in conjunction with the acquisition of NAD,
                  the Company entered into a $240 million Loan and Security
                  Agreement (the "Previous Credit Facility") with a group of
                  banks that was retired and repaid before its maturity on March
                  14, 1997. The Previous Credit Facility provided for a
                  revolving-credit facility of up to $210 million and term loans
                  aggregating $30 million. The interest rate on the Previous
                  Credit Facility was reset every month to reflect current
                  market rates. The effective rate during fiscal 1996 and 1995
                  was 8.7 percent. This rate reflected the effect of
                  interest-rate protection agreements, which were terminated on
                  March 14, 1997 in connection with the retirement of this
                  facility.

(7)      LEASES

         The Company leases certain of its facilities, vehicles and other
         equipment under long-term operating leases. Certain transportation
         equipment leases call for contingent rental payments based upon total
         miles. Future minimum lease payments under non-cancelable operating
         leases as of December 27, 1997, by fiscal year are as follows (in
         thousands):


<TABLE>
<S>                                                 <C>
         1998                                       $   28,600
         1999                                           25,183
         2000                                           22,222
         2001                                           18,342
         2002                                           13,581
         Thereafter                                     36,315
                                                       -------
         Total                                       $ 144,243
                                                       =======
</TABLE>

         Rent expense, including contingent rental expense, was approximately
         $36.8 million, $39.3 million and $30.6 million during fiscal years
         1997, 1996 and 1995, respectively.


                                       17
<PAGE>   19
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(8)      INCOME TAXES

         The income tax benefit (provision) before extraordinary items and
         cumulative effect of a change in accounting principle for fiscal years
         1997, 1996 and 1995, respectively, consisted of the following (in
         thousands):


<TABLE>
<CAPTION>
                                                          1997            1996           1995
                                                        -------        --------        -------
<S>                                                     <C>            <C>             <C>
Current taxes:
     Federal                                            $  (582)       $    937        $(1,236)
     State                                                 (545)             (9)          (408)
                                                        -------        --------        -------
         Total current taxes                             (1,127)            928         (1,644)
                                                        -------        --------        -------

Deferred taxes, excluding other components:
      Federal                                             1,170          11,449          1,126
      State                                                 404           3,217            264
                                                        -------        --------        -------
         Total deferred taxes, excluding
           other components                               1,574          14,666          1,390
                                                        -------        --------        -------

Other:
      Alternative minimum tax-credit
          (utilization) carryforwards                        38            (184)           666
      Utilization of operating-loss carryforwards            --              --           (497)
                                                        -------        --------        -------
         Total other                                         38            (184)           169
                                                        -------        --------        -------

Income tax benefit (provision)                          $   485        $ 15,410        $   (85)
                                                        =======        ========        =======
</TABLE>

         The following table summarizes the differences between the Company's
         effective income tax rate and the statutory Federal income tax rate for
         fiscal years 1997, 1996 and 1995:


<TABLE>
<CAPTION>
                                                       1997           1996           1995
                                                      ------         ------         ------
<S>                                                   <C>            <C>            <C>
Statutory federal income tax rate                       34.0%          34.0%          34.0%
Increase (decrease) resulting from:
      State income taxes (net of federal taxes)          5.0            5.2          (16.9)
      Goodwill amortization                             (0.7)          (0.3)         (10.9)
      Other                                             (5.4)          (0.7)         (18.4)
                                                      ------         ------         ------
                                                        32.9%          38.2%         (12.2)%
                                                      ======         ======         ======
</TABLE>



                                       18
<PAGE>   20
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(8)      INCOME TAXES (CONTINUED)


         The tax effects of each type of temporary difference that gave rise to
         the Company's deferred tax assets and deferred tax liabilities at
         December 27, 1997 and December 28, 1996 are as follows (in thousands):


<TABLE>
<CAPTION>
                                                                    1997            1996
                                                                 --------        --------
Deferred tax assets:
<S>                                                              <C>             <C>
     Acquisition-related expenses                                $  1,262        $  3,567
     Accounts receivable, principally due to allowance for
         doubtful accounts                                          2,011           1,222
     Property, plant and equipment, principally due to
         differences in depreciation                                1,063           1,935
     Self-insurance reserves                                        3,355           3,493
     Impairment of long-lived assets                                3,231           4,036
     Restructuring and contract-termination charges                 3,224           8,121
     Benefit of federal and state net operating-loss
         carryforwards                                             23,933           5,797
     Other                                                          2,682           2,025
                                                                 --------        --------
         Total deferred tax assets                                 40,761          30,196
     Less valuation allowance                                          --              --
                                                                 --------        --------
         Total deferred tax assets, net                          $ 40,761        $ 30,196
                                                                 ========        ========

Deferred tax liabilities:
     Computer software                                           $ (3,225)       $ (1,811)
     Acquisition-related liabilities                               (1,138)           (803)
     Other                                                           (406)           (568)
                                                                 --------        --------

         Total deferred tax liabilities                            (4,769)         (3,182)
                                                                 --------        --------

         Net deferred tax assets                                 $ 35,992        $ 27,014
                                                                 ========        ========
</TABLE>

         In order to fully realize the net deferred tax assets at December 27,
         1997, the Company will need to generate future taxable income of
         approximately $90 million. Management believes that it is more likely
         than not that the Company's deferred tax asset will be realized as a
         result of future taxable income, expected to be generated based on the
         Company's reasonable projections of future earnings. The Company
         anticipates that increases in taxable income will result primarily from
         (i) future projected revenue and gross margin growth through the
         addition of new restaurant chains and the expansion of services
         provided to new and existing restaurant chains, (ii) a reduction in
         interest expense due to a reduction in its indebtedness, (iii) cost
         savings through its corporate and network consolidation plan and (iv)
         other cost-reduction initiatives. In addition, management believes
         reasonable tax planning strategies and other potential transactions
         will be available that could be used to realize the deferred tax asset
         before the expiry of any material net operating losses, which will not
         begin to occur until after 2010.

         At December 27, 1997 and December 28, 1996, other current assets
         included income taxes receivable of approximately $0.4 million and $1.5
         million, respectively, which consisted primarily of overpayments of tax
         liabilities and pending carryback refund claims. United States federal
         income tax returns for fiscal years 1992 and 1993 are currently under
         examination by the Internal Revenue Service. A preliminary assessment
         is pending which is not material to the consolidated financial position
         or results of operations as of December 27, 1997.

                                       19
<PAGE>   21

(9)      EMPLOYEE BENEFIT PLANS

         (a)      DEFINED-CONTRIBUTION PLANS

                  On January 1, 1997, the Company's defined contribution plan,
                  which covers substantially all employees, was renamed the
                  ProSource Retirement Advantage Plan. Eligible employees can
                  contribute up to 15% of base compensation, with the following
                  benefits: (i) Company contributions of 2 percent, (ii)
                  additional Company matching of 50 percent of the first 6
                  percent contributed by the employee, and (iii) vesting of
                  Company contributions ratably over four years of service.

                  The Company also had a Money Purchase Plan which covered those
                  former NAD salaried employees not covered by a defined-benefit
                  plan. Under this plan, the Company contributed 10 percent of
                  eligible salary. The Money Purchase Plan was terminated
                  effective December 1996.

                  The amount of contribution expense incurred by the Company for
                  these plans was approximately $1.5 million, $2.7 million and
                  $2.2 million for fiscal years 1997, 1996 and 1995,
                  respectively.

         (b)      DEFINED-BENEFIT PENSION PLANS

                  In conjunction with the changes to the ProSource Retirement
                  Advantage Plan in 1997, the Company terminated all three
                  noncontributory defined-benefit pension plans covering
                  substantially all employees except those covered by
                  multiemployer pension plans under collective-bargaining
                  agreements. The Company settled all pension obligations
                  related to these terminated plans in 1997 through (i) the
                  purchase of annuities, (ii) lump-sum payments, or (iii) the
                  transfer of plan benefits into the ProSource Retirement
                  Advantage Plan, at the participant's discretion. In 1997, the
                  Company recognized no gain or loss associated with the
                  termination of these defined-benefit pension plans. At
                  December 27, 1997, the Company's remaining accrual of $9,000
                  combined with excess plan assets of approximately $46,000 are
                  expected to cover any remaining costs relating to the
                  termination of these plans.

                  Pension costs of approximately $1.1 million and $0.9 million
                  reflected in the consolidated statements of operations for
                  fiscal years 1996 and 1995, respectively, were determined
                  based on actuarial studies. The Company's pension expense for
                  contributions to the various multiemployer pension plans under
                  collective-bargaining agreements was approximately $1.1
                  million, $1.2 million, and $0.9 million for fiscal years 1997,
                  1996 and 1995, respectively.

(10)     STOCKHOLDERS' EQUITY

         Under the ProSource, Inc. Employee Stock Purchase Plan (the "Stock
         Plan"), officers and key employees of the Company ("Management
         Employees") purchased a total of 408,100 shares of Class B common stock
         at $10.00 per share in 1992, 132,500 shares of Class B common stock at
         $11.00 per share in 1993 and 1994, and 270,000 shares of Class B common
         stock at $10.00 per share in 1995 and 1996. In connection with the
         purchases of Class B common stock, each Management Employee entered
         into a Management Shareholders Agreement with the Company and Onex.

         The ProSource, Inc. Amended Management Option Plan (1995) (the "1995
         Option Plan") provides certain Management Employees with options to
         purchase one-half the number of shares of Class B common stock
         purchased under the Stock Plan at the same price per share paid by such
         stockholder (either $10.00 or $11.00). Subject to the 1995 Option Plan,
         options granted under the 1995 Option Plan are exercisable until
         December 31, 2000. No additional options will be granted under the 1995
         Option Plan. The 1995 Option Plan was amended in November 1996 to
         provide that all unvested options vest at a rate of 10% per year
         through December 31, 1999, when all remaining options vest. As a
         result, the Company recorded a pretax charge in 1996 of $1.2 million
         reflecting the difference 

                                       20
<PAGE>   22
                                PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995


(10)     STOCKHOLDERS' EQUITY (continued)

         between the market price of the Company's Class A common stock on the
         date of amendment and the exercise price of such options.

         Under the 1996 Stock Option Plan (the "1996 Option Plan"), the Company
         may grant options to its employees for up to 550,000 shares of Class B
         common stock. In 1997 and 1996, the Company granted options to purchase
         16,000 and 358,000 shares, respectively, of Class B common stock at
         $14.00 per share. Options under the 1996 Option Plan vest ratably over
         four years from the date of grant. These options cannot be exercised,
         however, until the earlier of (i) the date on which the market value of
         the Company's common stock is 25% greater than the exercise price and
         (ii) the eighth anniversary of the date of grant. Subject to the
         provisions of the 1996 Option Plan, vested options may be exercised for
         a period of up to 10 years from the date of grant.

         Under the ProSource, Inc. 1997 Directors Stock Option Plan (the "1997
         Directors Plan"), which was approved by the shareholders in April 1997,
         the Company may grant options to its directors, who so elect to receive
         such options in lieu of fees, to purchase shares of Class A common
         stock at $4.00 per share below the stated fair market value on the date
         of grant. Options to purchase up to 100,000 shares of Class A common
         stock may be granted under this plan. In April 1997, the Company
         granted options to purchase 10,500 shares of Class A common stock at
         $5.25 per share. Options under the 1997 Directors Plan vest and become
         exercisable one year from the date of grant, provided that the holder
         thereof is still a director of the Company at such time. Subject to the
         provisions of the 1997 Directors Plan, options may be exercised for a
         period of up to 10 years after the vesting date. During the year ended
         December 27, 1997, the Company recognized $28,000 of compensation
         expense associated with this plan.



                                       21
<PAGE>   23
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(10)     STOCKHOLDERS' EQUITY (CONTINUED)

         A summary of the status of the Company's three option plans for the
         years ended December 27, 1997, December 28, 1996, and December 30, 1995
         is as follows:


<TABLE>
<CAPTION>
                                             Weighted                    Weighted                     Weighted
                                             Average                     Average                       Average
                              1997           Exercise       1996         Exercise        1995         Exercise
                             Shares           Price        Shares         Price         Shares          Price
                             ------           -----        ------         -----         ------          -----
<S>                          <C>            <C>           <C>           <C>            <C>           <C>
Options outstanding -
   beginning                 706,450        $  12.10      327,700        $  10.16      237,450        $  10.22
Options granted               26,500           10.53      388,750           13.69      101,750           10.00
Options exercised                 --              --         (125)          10.00           --              --
Options canceled             (93,300)          11.91       (9,875)          10.00      (11,500)          10.00
                            --------        --------     --------        --------     --------        --------
Options outstanding -
   ending                    639,650        $  12.06      706,450        $  12.10      327,700        $  10.16
                            ========        ========     ========        ========     ========        ========
Options exercisable -
   year-end                  176,449        $  11.86       78,401        $  10.13       41,500        $  10.12
                            ========        ========     ========        ========     ========        ========
</TABLE>

         The following table summarizes information about stock options
         outstanding at December 27, 1997:


<TABLE>
<CAPTION>
                          Options Outstanding                           Options Exercisable
--------------------------------------------------------------    ----------------------------


                 Number         Weighted Avg.                       Number
    Exercise   Outstanding        Remaining      Weighted Avg.    Exercisable    Weighted Avg.
     Prices    at 12/27/97    Contractual Life  Exercise Price    at 12/27/97   Exercise Price
     ------    -----------    ----------------  --------------    -----------   --------------

<S>            <C>            <C>               <C>               <C>           <C>
 $    5.25       10,500            9 years        $    5.25              --       $    5.25
     10.00      262,100            3 years            10.00          87,034           10.00
     11.00       33,050            3 years            11.00           9,915           11.00
     14.00      334,000            9 years            14.00          79,500           14.00
                -------            -------          -------         -------       ---------

  Totals        639,650            6 years         $  12.06         176,449       $   11.86
                =======            =======         ========         =======       =========
</TABLE>

         During fiscal year 1996, the Company adopted SFAS No. 123. Under the
         provisions of the new standard, the Company elected to continue using
         the intrinsic-value method of accounting for stock-based compensation
         plans granted to employees under Accounting Principles Board Opinion
         No. 25 and provide pro-forma disclosure for the fair-value based method
         of accounting for compensation costs related to stock-option plans and
         other forms of stock-based compensation under SFAS No. 123.

         The Company estimated the weighted-average fair value of each option
         granted during 1997, 1996 and 1995 at $5.41, $7.34 and $8.27,
         respectively. The fair value of these options was computed at the date
         of grant using a Black-Scholes option pricing model with the following
         weighted-average assumptions for 1997, 1996 and 1995, respectively:
         risk-free interest rates of 6.3%, 6.2% and 6.3%; dividend yields of
         0.0% for all years presented, volatility factors of the expected market
         price of the Company's common stock of 33.0% for all years presented
         and a weighted-average expected life of the options of 5, 7 and 7
         years, respectively.



                                       22
<PAGE>   24
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(10)     STOCKHOLDERS' EQUITY (CONTINUED)

         The Black-Scholes option valuation model was developed for use in
         computing the fair value of traded options which have no vesting
         restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility. Because the Company's employee stock
         options have characteristics significantly different from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the existing models do not necessarily provide a reliable single
         measure of the fair value of its employee stock options.

         For purposes of pro forma disclosures, the computed fair value of the
         options is amortized to expense over the options' vesting period. The
         Company's pro forma information follows (in thousands, except per share
         data).


<TABLE>
<CAPTION>
                                                             1997               1996               1995
                                                             ----               ----               ----

<S>                                                    <C>                <C>                <C>
Pro forma net loss                                     $   (13,943)       $   (23,817)       $    (1,587)

Pro forma net loss per share - basic and diluted       $     (1.49)       $     (4.10)       $     (0.35)
</TABLE>


         In conjunction with the acquisition of NAD, the Company issued warrants
         to Martin-Brower. At December 27, 1997 and December 28, 1996, the
         warrants were exercisable for 283,425 shares of Class B common stock at
         $12.35 per share during the period from April 1, 1997 through March 31,
         2000, and upon consummation of certain transactions.

         On November 15, 1996, the Company completed the issuance of 3,400,000
         shares of Class A common stock (at a price of $14.00 per share) through
         an initial public offering, resulting in net proceeds to the Company of
         approximately $43.2 million, after deducting underwriting discounts and
         commissions, and other offering costs of approximately $4.4 million.
         The net proceeds of the offering were used: (i) to prepay $15 million
         in outstanding principal and $1.1 million in accrued interest under a
         subordinated note payable to Onex; (ii) to prepay, at a discount, $10
         million in outstanding principal and $0.1 million in accrued interest
         under a subordinated note payable to Martin-Brower for a total payment
         of $9.2 million and (iii) to repay $16.6 million of outstanding
         indebtedness under the Company's revolving-credit facility, after
         deducting a $1.3 million payment concurrent with the offering for the
         termination of a consulting agreement between the Company and certain
         former owners of an acquired company. Also in connection with the
         initial public offering, the Company incurred a noncash charge of $4
         million resulting from the issuance to Onex of 285,714 shares of Class
         B common stock valued at the initial public-offering price in exchange
         for the agreement of Onex to relinquish its rights to receive an annual
         fee, previously paid in cash, for management services rendered to the
         Company.

         Under the ProSource, Inc. 1997 Employee Stock Purchase Plan, which was
         approved by the shareholders in April 1997, employees of the Company
         purchased a total of 33,799 shares of Class A common stock at $6.035
         per share in 1997. In January 1998, an additional 30,336 shares of
         Class A common stock were purchased by employees at $6.035 per share
         under this plan.



                                       23
<PAGE>   25
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

(11)     CONTINGENCIES AND GUARANTEES

         The Company has guaranteed the principal due on certain loans obtained
         by its officers and employees in connection with the purchase of common
         stock under the Stock Plan. At December 27, 1997, such guarantees
         amounted to approximately $0.8 million and were covered by a letter of
         credit. At December 27, 1997, the Company was also obligated for $15.0
         million in other letters of credit issued on behalf of the Company
         primarily as a guarantee of payment for obligations arising from
         workers' compensation claims. At December 27, 1997, the Company had
         $9.2 million available in unused letters of credit under its Existing
         Credit Facilities.

         The Company and its subsidiaries are parties to various legal actions
         arising in the ordinary course of business. Management believes that
         the outcome of such cases will not have a material adverse effect on
         the consolidated results of operations or the financial position of the
         Company.

(12)     CONCENTRATIONS OF CREDIT RISK

         Burger King Corporation ("BKC") owned and franchisee-owned Burger King
         restaurants collectively accounted for 46%, 41% and 45% of the
         Company's sales in fiscal years 1997, 1996 and 1995, respectively.
         Sales to BKC-owned restaurants represented approximately 5% of sales
         for each of the aforementioned years. Amounts due from BKC-owned
         restaurants at December 27, 1997 and December 28, 1996 were $5.8
         million and $5.5 million, respectively.

         In addition, sales to Darden Restaurants, Inc. (owner of Red Lobster
         and Olive Garden restaurants) accounted for 21%, 20%, and 18% of the
         Company's sales in fiscal years 1997, 1996 and 1995, respectively.
         Amounts due from Darden Restaurants, Inc. at December 27, 1997 and
         December 28, 1996, were approximately $41.4 million and $41.1 million,
         respectively.

         Sales to Arby's restaurants (primarily franchisee-owned) accounted for
         10% of Company sales in fiscal years 1996 and 1995. No other customer
         or restaurant concept accounted for more than 10% of the Company's
         sales in fiscal years 1997, 1996 or 1995. The Company periodically
         performs credit evaluations on its customers' financial condition and
         generally does not require collateral.

(13)     CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE

         During the fourth quarter of 1997, the Financial Accounting Standards
         Board's Emerging Issues Task Force reached a consensus on Issue No.
         97-13, "Accounting for Costs Incurred in Connection with a Consulting
         Contract or an Internal Project that Combines Business Process
         Reengineering and Information Technology Transformation." The consensus
         requires that the cost of business process reengineering activities,
         whether done internally or by third parties, is to be expensed as
         incurred. As a result, any remaining unamortized portion of previously
         capitalized business process reengineering costs is required to be
         written off. The cumulative impact of initially conforming to this new
         standard in the fourth quarter of 1997 was reported as a change in
         accounting principle in the accompanying consolidated statements of
         operations, with a cumulative charge, net of tax, of $6.4 million, or
         $0.69 per share.

(14)     NET LOSS PER SHARE


                                       24
<PAGE>   26
                                 PROSOURCE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND DECEMBER 30, 1995

         For all years presented in the accompanying consolidated statements of
         operations, all stock options and other potential common shares were
         excluded from the calculation of diluted loss per share, since they
         would produce anti-dilutive results. As a result, there are no
         reconciling items to the numerator and denominator of the basic and
         diluted loss per share computations.

         The following were outstanding during fiscal 1997, but were excluded
         from the computation of diluted net loss per common share for fiscal
         1997.


<TABLE>
<CAPTION>
                                    Related Number of              Conversion
                                    Common Stock Shares            Price per Share   Expiration
                                    -------------------            ---------------   ----------

<S>                                <C>                            <C>                <C>
Options - 1995 Option Plan          288,650 shares - Class B       $10.00 or $11.00  December 2000
Options - 1996 Option Plan          340,500 shares - Class B       $   14.00         November 2006 to January 2007
Options - 1997 Directors Plan       10,500 shares - Class A        $    5.25         April 2007
Stock Warrants                      283,425 shares - Class B       $   12.35         March 2000
$0.5 million convertible
   subordinated note                25,000 shares - Class A        $   20.00         November 1999
</TABLE>

(15) SUBSEQUENT EVENT

         On January 29, 1998, the Company signed a definitive merger agreement
         with AmeriServe Food Distribution, Inc. ("AmeriServe"). Under the terms
         of the agreement, AmeriServe has agreed to pay $15.00 in cash for each
         outstanding share of the Company's common stock. In addition, under the
         agreement, all outstanding options will be accelerated and option
         holders will receive $15.00 less the applicable exercise for each share
         issuable upon exercise of the options. AmeriServe has indicated that it
         intends to refinance all of the Company's outstanding debt.

         The merger is subject to regulatory approvals and other customary
         conditions to closing. Onex Corporation and certain of its affiliates,
         which own approximately 61% of the Company's outstanding stock,
         representing approximately 85% of the voting power, have committed to
         vote in favor of the merger, which will assure the necessary
         shareholder approval. The merger is expected to close in the second
         quarter of fiscal 1998.




                                       25
<PAGE>   27


                                    SIGNATURE

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                         PROSOURCE, INC.

             Date:  April 30, 1998       By: /s/ David R. Parker
                                             -------------------
                                             David R. Parker
                                             Chairman of the Board of Directors
                                             (Principal Executive Officer)



                                       26