<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-5989
ITEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1658138
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 North Riverside Plaza
Suite 1900
Chicago, Illinois 60606
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (312) 902-1515
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 period 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 ___
At April 30, 1995 there were 28,558,098 shares of Common Stock, $1.00 par
value, of the registrant outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
-------------- ----------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and equivalents $ 22,300 $ 14,200
Accounts receivable (net of allowances for doubtful
accounts of $6,500 and $6,000, respectively) 345,400 325,900
Inventories, primarily finished goods 287,800 275,800
Other assets 6,300 4,900
---------- ----------
Total current assets 661,800 620,800
Property, at cost 73,900 68,600
Accumulated depreciation (38,800) (35,200)
---------- ----------
Net property 35,100 33,400
Goodwill (net of accumulated amortization
of $47,000 and $45,500, respectively) 186,400 187,900
Discontinued and assets held for sale, net 108,200 105,400
Marketable equity securities available-for-sale
(cost of $75,600) 77,600 64,500
Investment in ANTEC 71,300 69,500
Other assets 37,300 29,400
---------- ----------
$1,177,700 $1,110,900
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 3
ITEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
-------------- ------------
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Accounts payable $ 192,200 $ 186,200
Accrued expenses 92,300 79,100
---------- ----------
Total current liabilities 284,500 265,300
Deferred taxes, net 5,400 1,800
Other liabilities, net 20,100 19,400
Long-term debt 336,400 280,500
---------- ----------
Total liabilities 646,400 567,000
Stockholders' equity:
Common stock 28,600 29,400
Capital surplus 231,600 262,500
Retained earnings 280,400 269,300
Cumulative translation adjustments (10,700) (10,100)
---------- ----------
529,900 551,100
Unrealized gain (loss) on marketable equity securities
available-for-sale (net of deferred income taxes) 1,400 (7,200)
---------- ----------
Total stockholders' equity 531,300 543,900
---------- ----------
$1,177,700 $1,110,900
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 4
ITEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED MARCH 31,
------------------------------
1995 1994
------ ------
<S> <C> <C>
Revenues $502,900 $362,800
Cost of goods sold (375,800) (268,400)
-------- --------
Gross profit 127,100 94,400
Operating expenses (101,800) (79,200)
Amortization of goodwill (1,500) (1,500)
-------- --------
Operating income 23,800 13,700
Interest expense and other, net (4,900) (7,700)
Equity earnings in ANTEC 1,800 2,800
Loss on sale of marketable equity securities - (5,200)
-------- --------
Income from continuing operations before income taxes 20,700 3,600
Income tax expense (9,600) (900)
-------- --------
Income from continuing operations 11,100 2,700
Loss from discontinued operations (net of related taxes) - (900)
-------- --------
Net income $ 11,100 $ 1,800
======== ========
Income per common and common
equivalent share:
Continuing operations $ .38 $ 0.08
Net income $ .38 $ 0.05
======== ========
Weighted average common and
common equivalent shares 28,912 33,217
======= ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
ITEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED MARCH 31,
------------------------
1995 1994
------ ------
<S> <C> <C>
Operating activities:
Income from continuing operations $ 11,100 $ 2,700
Adjustments to reconcile income from continuing
operations to net cash provided (used) by continuing
operating activities:
Depreciation 4,300 2,200
Amortization of goodwill 1,500 1,500
Deferred income tax expense (benefit) 1,400 (2,400)
Loss on sale of marketable equity securities - 5,200
Equity earnings in ANTEC (1,800) (2,800)
Non-cash financing expense 200 1,100
Other, net 2,200 1,700
Changes in assets and liabilities, net (18,100) (45,800)
-------- --------
Net cash provided (used) by continuing operating
activities 800 (36,600)
Discontinued operations and assets held for sale, net 2,500 2,900
-------- ---------
Net cash provided (used) by operating activities 3,300 (33,700)
Investing activities:
Sales of marketable equity securities - 47,800
Purchases of property, net (5,800) (3,300)
Receipts from Q-TEL - 1,700
Other investments (4,600) -
-------- ---------
Net investing activities (10,400) 46,200
-------- ---------
Net cash provided (used) before financing activities (7,100) 12,500
Financing activities:
Borrowings 320,100 609,600
Reductions in borrowings (267,900) (398,600)
Reductions in subordinated indebtedness - (229,200)
Proceeds from issuance of common stock 2,400 5,000
Purchases of treasury stock (38,800) (7,000)
Other, net (600) (800)
-------- ---------
Net financing activities 15,200 (21,000)
-------- ---------
Cash provided (used) 8,100 (8,500)
Cash and equivalents at beginning of period 14,200 31,000
-------- ---------
Cash and equivalents at end of period $ 22,300 $ 22,500
======== =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 6
ITEL CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying consolidated financial statements
should be read in conjunction with the consolidated financial statements
included in Itel Corporation's ("Itel") Annual Report on Form 10-K for the year
ended December 31, 1994. The condensed consolidated financial information
furnished herein reflects all adjustments (consisting of normal recurring
accruals) which are, in the opinion of management, necessary for a fair
presentation of the condensed consolidated financial statements for the periods
shown. All operating activities of the Company are carried out by its
principal subsidiary Anixter Inc. ("Anixter"), which is engaged in the sales
of networking products for voice, data, video and electrical power
applications.
Principles of consolidation: The condensed consolidated financial statements
include the accounts of Itel and its subsidiaries (collectively "the Company")
after elimination of intercompany transactions.
NOTE 2. SUPPLEMENTAL CASH FLOW INFORMATION
Continuing operations of the Company paid interest, including that portion
allocated to discontinued operations in 1994, of approximately $5.8 million and
$23.9 million for the first quarters of 1995 and 1994, respectively.
Approximately $2.0 million and $.3 million was paid for income taxes for the
first quarters of 1995 and 1994, respectively.
NOTE 3. LOSS ON SALE OF MARKETABLE EQUITY SECURITIES
In the first quarter of 1994, the Company recorded a $5.2 million pre-tax loss
on the sale of its investment in Catellus Development Corporation ("Catellus").
Proceeds were used to repay indebtedness.
6
<PAGE> 7
NOTE 4. SUMMARIZED FINANCIAL INFORMATION OF ANTEC
The Company's ownership interest in ANTEC at March 31, 1995 and 1994 was 30%
and 53%, respectively. This investment is accounted for under the equity
method. The following summarizes the financial information for ANTEC:
ANTEC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
-------- -------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Assets:
Current assets $264.7 $234.2
Property, net 25.4 22.4
Goodwill 166.4 167.4
Other assets 14.5 14.0
------ ------
$471.0 $438.0
====== ======
Liabilities and Shareholders' Equity:
Current liabilities $ 96.4 $ 83.1
Long-term debt 139.9 125.2
Shareholders' equity 234.7 229.7
------ ------
$471.0 $438.0
====== ======
</TABLE>
ANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS
ENDED MARCH 31,
------------------------
1995 1994
------ --------
(IN MILLIONS)
<S> <C> <C>
Revenues $158.8 $137.8
====== ======
Operating income $ 11.3 $ 10.0
====== ======
Income before income tax expense $ 8.5 $ 9.4
====== ======
Net income $ 4.4 $ 5.2
====== ======
</TABLE>
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
LIQUIDATION OF SIGNAL CAPITAL: The finance business of Signal Capital
Corporation ("Signal Capital") has been included as assets held for sale since
acquisition in 1988. Subsequent to the purchase, Itel sold or liquidated
portions of the portfolio including $855 million in 1989, $78 million in 1990,
$157 million in 1991, $82 million in 1992, $82 million in 1993, $60 million in
1994 and $2 million through March 31, 1995. The $107 million net portfolio at
March 31, 1995 represents approximately 7.5% of the original acquired Signal
Capital portfolio. The acquired Signal Capital portfolio is being liquidated
and no material amounts of new loans or investments are being made by Signal
Capital. The Company has had and continues to have discussions with third
parties for the sale of substantial portions of the acquired Signal Capital
portfolio of loans and leases. Absent such transactions, which the Company
continues to pursue, such orderly liquidation is expected to continue over
approximately the next two years. The Company continues to reduce the acquired
Signal Capital portfolio in an orderly manner that maximizes its value to Itel
shareholders.
CASH FLOW: Consolidated net cash provided (used) by continuing operating
activities was $.8 million for the first quarter of 1995 compared to ($36.6)
million for the same period in 1994. Cash provided (used) by continuing
operating activities increased due primarily to significantly improved
earnings, after elimination of the loss on marketable equity securities, and a
decrease in interest required to be paid. Consolidated net cash provided by
continuing operations in 1995 reflects an $18.1 million net working capital
investment used to fund a $140 million increase in revenues. Consolidated cash
provided (used) by net investing activities was ($10.4) million for the first
quarter of 1995 versus $46.2 million for the same period in 1994. Consolidated
investing activities in 1994 include approximately $47.8 million from the sale
of the Company's investment in Catellus. Consolidated cash provided (used) for
net financing activities was $15.2 million for the first quarter of 1995 in
comparison to ($21.0) million for the first quarter of 1994. The consolidated
net financing activities in 1994 include the paydown of a
8
<PAGE> 9
substantial amount of subordinated debt. The consolidated net financing
activities in 1995 and 1994 include $38.8 million and $7.0 million of treasury
stock purchases, respectively. Cash from discontinued operations and assets
held for sale, net was $2.5 million for the first quarter of 1995 versus $2.9
million for the same period in 1994. Cash from discontinued operations and
assets held for sale, net in both periods reflects cash received principally
from the reduction of Signal Capital assets which are held for sale.
Consolidated net interest expense was $5.5 million and $7.7 million for the
quarters ended March 31, 1995 and 1994, respectively. The Company has entered
into interest rate agreements which effectively fix or cap, for a period of
time, the interest rate on a portion of its floating rate obligations. As a
result, the interest rate on approximately 52% of debt obligations at March 31,
1995 is fixed or capped. The impact of interest rate swaps and caps on
interest expense, net for the quarters ended March 31, 1995 and 1994 was to
increase interest expense by approximately $.2 million and $2.3 million,
respectively.
FINANCINGS: On March 24, 1995, the Company increased Anixter's secured
domestic revolving line of credit to $425 million, lowered the interest rate
spreads and extended the maturity to 2000. The revolving line of credit is
non-recourse to Itel.
At March 31, 1995, $174 million was available under the bank revolving lines of
credit at Anixter, of which $19 million was available to pay Itel for
intercompany liabilities.
The $115 million senior bank term loan ("Corporate Loan"), which is secured by
the Company's investments in the capital stock of Anixter and ANTEC, had no
outstanding borrowings at March 31, 1995. All of the Corporate Loan is
available to Itel.
DEBT MATURITIES AND REPAYMENTS: In the first three months of 1994, the
Company retired approximately $221 million of the face value of subordinated
debt at Itel.
9
<PAGE> 10
OTHER LIQUIDITY CONSIDERATIONS: Certain debt agreements entered into by Itel's
subsidiaries contain various restrictions including restrictions on payments to
Itel. Such restrictions have not had nor are expected to have an adverse
impact on Itel's ability to meet its cash obligations.
At March 31, 1995, the market value of the Company's investment in Santa Fe
Energy Resources ("Resources") was above cost by $2.0 million. In accordance
with generally accepted accounting principles, the Company's investment in
marketable equity securities has been reflected at market value in the
consolidated balance sheet.
CAPITAL EXPENDITURES AND ACQUISITIONS
Consolidated capital expenditures were $5.8 million and $3.3 million for the
first quarter of 1995 and 1994, respectively.
RESULTS OF OPERATIONS
The Company has experienced increased revenues due to the continued growth of
the North American communications and electrical wire and cable businesses and
its continuing worldwide expansion. While the Company continues to believe
that its revenue base will grow and its worldwide expansion will result in both
increased revenues and operating profits, there can be no assurance of future
financial performance. The Company competes with distributors and
manufacturers who sell products directly or through existing distribution
channels to end users or other resellers. In addition, the Company's future
performance could be subject to economic downturns and possibly rapid changes
in applicable technologies.
Based upon discussions with financial analysts and similar disclosures provided
by competitors of Itel's business, the Company considers operating income
before amortization of goodwill to be a meaningful and readily comparable
measure of Itel's relative performance. Operating income before amortization
of goodwill was $25.3 million and $15.2 million for the first quarter of 1995
and 1994, respectively.
10
<PAGE> 11
EARNINGS PER SHARE: Weighted average common and common equivalent shares
outstanding decreased from March 31, 1994 to March 31, 1995 primarily as a
result of Itel's treasury stock purchases in 1994 and 1995. An increase in
borrowing costs associated with stock purchases offset the decrease in shares
resulting in no significant effect on earnings per share.
QUARTER ENDED MARCH 31, 1995: Income from continuing operations for the first
quarter of 1995 was $11.1 million compared with $2.7 million for the first
quarter of 1994. Results in 1994 include an after-tax loss of ($3.2) million
relating to the sale of the Company's investment in Catellus. Net income was
$11.1 million and $1.8 million in the first quarter of 1995 and 1994,
respectively.
The Company's revenues during the first quarter of 1995 increased 39% to $502.9
million from $362.8 million in 1994 due to (1) the continued strong demand for
its communication products in North America and Europe, (2) focused marketing
efforts on its electrical wiring systems products and (3) further market
penetration in the Asian and Latin American expansion markets. Revenues by
major geographic markets are presented in the following table.
<TABLE>
<CAPTION>
QUARTERS ENDED MARCH 31,
------------------------
1995 1994
---- ----
(IN MILLIONS)
<S> <C> <C>
North America $386.2 $281.7
Europe 100.1 70.9
Asia and Latin America 16.6 10.2
------ ------
$502.9 $362.8
====== ======
</TABLE>
The Company's gross profit increased 35% to $127.1 million in the first quarter
of 1995 from $94.4 million in the first quarter of 1994 due to volume increases
slightly offset by a shift in sales mix to lower margin products.
11
<PAGE> 12
Operating expenses increased 29% to $101.8 million due to increased volume,
increased spending for new service and logistic initiatives, principally in
North America, and geographic expansion in Asia and Latin America. Spending on
new initiatives and international expansion is planned to increase in future
quarters.
Operating income before amortization of goodwill increased 66% to $25.3 million
in 1995 from $15.2 million in the first quarter of 1994. Operating income
before amortization of goodwill by major geographic markets is presented in the
following table.
<TABLE>
<CAPTION>
QUARTERS ENDED MARCH 31,
------------------------
1995 1994
------- --------
(IN MILLIONS)
<S> <C> <C>
North America $21.5 $15.1
Europe 5.3 1.0
Asia and Latin America (1.5) (.9)
---- -----
$25.3 $15.2
===== =====
</TABLE>
The significant increase in European profitability is due to volume related
economies of scale and positive operating earnings contributions in all
countries in 1995. Changes in currency exchange rates in the first quarter
1995 versus 1994 also contributed about $.5 million to the European operating
results.
Consolidated net interest expense for the first quarter of 1995 declined to
$5.5 million from $7.7 million in 1994 due to a reduction of high-cost
corporate debt from the monetization of Itel's non-core assets partially offset
by increased short-term interest rates and increased working capital
borrowings.
The consolidated tax provision increased by $8.7 million to $9.6 due to the
sale of the Company's rail car leasing business in the second quarter of 1994
which exhausted virtually all previously existing NOL or ITC carryforwards.
The effective tax rate of 46.6% is based on pre-tax book income adjusted for
amortization of goodwill and losses of foreign operations which are not
currently deductible.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held May 4, 1995:
The Directors of the Company were elected as follows:
<TABLE>
<CAPTION>
VOTES
----------------------------------
DIRECTORS FOR WITHHELD
- --------- -------- -----------
<S> <C> <C>
Sir James Blyth 25,307,724 53,704
Bernard F. Brennan 25,310,771 50,657
Rod F. Dammeyer 25,292,121 69,307
Robert E. Fowler, Jr. 25,308,366 53,062
F. Philip Handy 25,309,900 51,528
Melyvn N. Klein 25,292,530 68,898
John R. Petty 25,310,437 50,991
John A. Pigott 25,291,702 69,726
Sheli Z. Rosenberg 25,291,480 69,948
Stuart M. Sloan 25,310,607 50,821
Samuel Zell 25,290,837 70,591
</TABLE>
The Management Incentive Plan for executive officers was approved by a vote of
24,743,472 shares "For", 569,947 shares "Against" and 47,971 shares "Abstain."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Amendment, dated March 24, 1995, to Amended and
Restated Credit Agreement, dated March 11, 1994, among
Anixter Inc., Chemical Bank, as Agent, and the other
banks named therein.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ITEL CORPORATION
Date: May 12, 1995 By:/s/ Rod F. Dammeyer
----------------------------------
Rod F. Dammeyer
President and Chief Executive Officer
Date: May 12, 1995 By:/s/ Dennis J. Letham
----------------------------------
Dennis J. Letham
Senior Vice President - Finance
and Chief Financial Officer
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
AMENDMENT NO. 3
TO
AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF MARCH 11, 1994
WITH
ANIXTER INC.
THIS AMENDMENT NO. 3 ("AMENDMENT") is entered into as of March 24,
1995 by and among Anixter Inc., a Delaware corporation ("BORROWER"), each of
the financial institutions listed on the signature pages hereof (the "LENDERS")
and Chemical Bank, in its separate capacity as agent for the Lenders (the
"AGENT").
WITNESSETH:
WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Amended and Restated Credit Agreement dated as of March 11, 1994, as
modified by that certain Waiver No. 1 dated as of April 4, 1994, as further
modified by that certain Amendment No. 1 dated as of July 29, 1994 and as
further modified by that certain Amendment No. 2 and Waiver No. 2 dated as of
October 21, 1994 (as so modified and as the same may from time to time be
further amended, modified, supplemented or restated, the "CREDIT AGREEMENT");
WHEREAS, the Borrower has requested that the Agent and the Lenders
enter into a further amendment to the Credit Agreement on the terms and
conditions set forth herein;
WHEREAS, the Lenders and the Agent have agreed to enter into this
Amendment on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Borrower, the Lenders and the Agent have agreed to amend the Credit
Agreement as set forth below. Capitalized terms used in this Amendment which
are not otherwise defined herein, shall have the meanings given such terms in
the Credit Agreement.
1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date hereof
and subject to the satisfaction of the conditions precedent set forth in
Section 2 below, on and after the date hereof, the parties hereto agree as
follows:
1.1. Section 1.1 of the Credit Agreement is hereby amended to delete
the definitions of "Initial Termination Date" and "Termination Date" contained
therein and to substitute the following for the definition of "Termination
Date":
"Termination Date" shall mean the earlier of (a) March 31,
2000 and (b) the date of termination of the Commitments pursuant to
Section 2.02(d) or Section 10.02(a).
1.2. The provisions of Section 2.02(e) of the Credit Agreement are
amended to delete the terms thereof in their entirety and to substitute the
following therefor.
<PAGE> 2
(e) Extension of Termination Date. This Agreement shall be
effective until the Termination Date. Notwithstanding the termination
of this Agreement on the Termination Date, until all of the
Obligations shall have been fully and indefeasibly paid and satisfied,
all financing arrangements among Borrower and the Lenders shall have
been terminated and all of the Letters of Credit shall have expired,
been cancelled or terminated, all of the rights and remedies under
this Agreement and the other Loan Documents shall survive and the
Agent shall be entitled to retain its security interest in and to all
existing and future Collateral for the benefit of itself and the
Holders of Secured Obligations.
1.3. The definitions of "Applicable Fees" and "Applicable Margins"
contained in Section 2.03 are amended to delete the terms thereof in their
entirety and to substitute the following therefor:
"Applicable Fees" and "Applicable Margins" shall mean the
Applicable Commitment Fee and/or the Applicable Letter of Credit Fee,
with respect to "Applicable Fees", and Applicable Base Rate Margin
and/or Applicable Eurodollar Rate Margin, with respect to "Applicable
Margins", as the case may be. The Applicable Fees and Applicable
Margins shall be determined, in accordance with the provisions of
Section 2.03(e), by reference to the following:
<TABLE>
<CAPTION>
BORROWER INTEREST SENIOR DEBT APPLICABLE APPLICABLE APPLICABLE APPLICABLE
RATIO COVERAGE RATINGS COMMITMENT LETTER OF EURODOLLAR BASE RATE
FEE CREDIT FEE MARGIN MARGIN
------------------ ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Less than or equal to Not Applic- 0.275% 1.00% 1.00% 0.00%
4.0 to 1.0 able
Greater than 4.0 to 1.0 Not Applic- 0.250% 0.75% 0.75% 0.00%
and less than or equal able
to 5.0 to 1.0
Greater than 5.0 to 1.0 BBB- 0.225% 0.625% 0.625% 0.00%
and less than or equal
to 6.5 to 1.0 OR
Greater than 6.5 to BBB 0.1875% 0.50% 0.50% 0.00%
1.0 OR
Not Applicable BBB+ 0.1875% 0.375% 0.375% 0.00%
</TABLE>
1.4. Section 7.10(a) of the Credit Agreement is amended to delete the
terms thereof in their entirety and to substitute the following therefor:
(a) Credit Support to Foreign Subsidiaries. Prior
to any Credit Support being provided to any Foreign Subsidiary, each
of the following conditions precedent shall be required to be
satisfied in connection therewith:
-2-
<PAGE> 3
(i) if requested by the Agent (which request shall
be required to be made if the Agent is so directed by the
Requisite Lenders), such Foreign Subsidiary shall execute a
Foreign Subsidiary Guaranty on terms and conditions reasonably
satisfactory to the Agent; provided, however, such guaranty
shall be limited in amount to the maximum amount of Credit
Support provided by Borrower to such Foreign Subsidiary;
provided, further, such guaranty shall not be required to the
extent the Borrower shall have demonstrated to the reasonable
satisfaction of the Agent that such a guaranty results in
material adverse tax consequences for the Borrower;
(ii) Borrower's proposed Credit Support to such
Foreign Subsidiary is in compliance with the terms of Section
8.03;
(iii) if requested by the Agent (which request shall
be required to be made if the Agent is so directed by the
Requisite Lenders), such Foreign Subsidiary shall have
executed and become a party to the Contribution Agreement;
(iv) if requested by the Agent (which request shall
be required to be made if the Agent is so directed by the
Requisite Lenders) unless the Release Event shall have
occurred, Borrower shall have executed or shall have caused
its appropriate Subsidiary to execute a Foreign Subsidiary
Pledge with respect to the stock of such Foreign Subsidiary;
(v) if requested by the Agent (which request shall
be required to be made if the Agent is so directed by the
Requisite Lenders) unless the Release Event shall have
occurred, if the stock of such Foreign Subsidiary is owned by
any Subsidiary which is not a Domestic Subsidiary (a "Foreign
Holding Company"), then Borrower shall have executed or shall
have caused the appropriate Subsidiary to execute a Foreign
Subsidiary Pledge with respect to the capital stock of such
Foreign Holding Company; provided, however, notwithstanding
the provisions of the definition of Foreign Subsidiary Pledge
which limit to 65% the total combined voting power pledged,
the Foreign Subsidiary Pledge for such Foreign Holding Company
shall be for one-hundred percent (100%) of the capital stock
of such Foreign Holding Company unless it shall have been
demonstrated to the reasonable satisfaction of the Agent that
such pledge would result in material adverse tax consequences
to the Borrower;
(vi) the Agent shall have received an opinion of
counsel qualified to practice in the jurisdiction of such
Foreign Subsidiary's incorporation, in form and substance
reasonably satisfactory to the Agent, covering such matters as
the Agent deems necessary relating to the Foreign Subsidiary
Guaranty, if any, executed and delivered to the Agent pursuant
to clause (i) above and, if applicable, the Foreign Subsidiary
Pledge executed and delivered to the Agent pursuant to clause
(iv) above;
(vii) unless the Release Event shall have occurred,
the Agent shall have received an opinion of counsel for the
pledgors with respect to each Foreign Subsidiary Pledge, if
any, executed and delivered to the Agent pursuant to clause
(vi) above;
- 3 -
<PAGE> 4
(viii) the Agent shall have received a compliance
certificate from a Financial Officer of the Borrower
certifying that after the issuance of such Credit Support for
such Foreign Subsidiary, no Event of Default or Potential
Event of Default exists; and
(ix) the Lenders shall have received such other
documents, instruments or agreements as are reasonably
requested by the Agent or the Requisite Lenders.
1.5. Clause (vi) of Section 8.03 of the Credit Agreement is amended to
delete the terms thereof in their entirety and to substitute the following
therefor:
(vi) Investments (other than such Investments made by any
Foreign Subsidiary which is not a Supported Foreign Subsidiary) made
after the Effective Date in any joint ventures, including the Joint
Ventures, which when aggregated with Investments made pursuant to
clause (v) above do not exceed $15,000,000 in the aggregate;
1.6. Section 9.01 of the Credit Agreement is amended to delete the
definitions of "Base Amount" and "EBITDA of the Borrower" contained therein in
their entirety and to substitute the following therefor:
"Base Amount" shall mean $241,300,000.
"EBITDA of the Borrower" shall mean, for any period, for the
Domestic Group (with all foreign subsidiaries being accounted for on
the equity investment method of accounting) determined on a combined
basis in accordance with Agreement Accounting Principles, (i) net
income (or loss) of the Domestic Group for such period taken as a
single accounting period, plus (ii) the provision for depreciation and
amortization expense for such period of the Domestic Group, plus (iii)
income taxes of the Domestic Group for such period, and plus (iv)
Domestic Interest Expense for such period; provided that there shall
be excluded therefrom (x) any non-operating gains or losses
(including, without limitation, extraordinary or unusual gains or
losses, gains or losses arising from the sale of capital assets or the
sale of owned buildings and properties and other non-recurring gains
or losses other than in connection with the discontinuance of
operations) of the Domestic Group during such period and (y) income or
loss from the operations of the Foreign Subsidiaries during such
period; provided, further, solely for purposes of calculating the
Borrower Interest Coverage Ratio under Section 9.04(a), there shall be
included, without duplication, the aggregate amount of cash dividends
received by the Borrower from the Borrower's Foreign Subsidiaries for
such period.
1.7.
Section 9.04 of the Credit Agreement is amended to delete the
terms thereof in their entirety and to substitute the following therefor:
9.04. Interest Coverage Ratios.
(a) Borrower Interest Coverage Ratio. Borrower covenants and
agrees that, on and after the date hereof so long as Borrower shall
have any Agreement Obligations or any Lender has any Commitment
hereunder or any Letter of Credit remains outstanding, Borrower shall
not permit the Borrower Interest Coverage Ratio calculated at the end
of each
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<PAGE> 5
Fiscal Quarter for the period of the immediately preceding four Fiscal
Quarters to be less than 3.25 to 1.00.
(b) Consolidated Interest Coverage Ratio. Borrower covenants
and agrees that, on and after the date hereof so long as Borrower
shall have any Agreement Obligations or any Lender has any Commitment
hereunder or any Letter of Credit remains outstanding, Borrower shall
not permit the Consolidated Interest Coverage Ratio calculated at the
end of each Fiscal Quarter for the period of the immediately preceding
four Fiscal Quarters to be less than the ratio set forth below with
respect to such Fiscal Quarter:
For each Fiscal Quarter
-----------------------
ending closest to the
----------------------
following periods Ratio
----------------- -----
March 31, 1995 through
December 31, 1995 3.25 to 1.0
March 31, 1996
and thereafter 3.50 to 1.0
1.8. Section 9.06 of the Credit Agreement is amended to delete the
terms thereof in their entirety and to substitute the following therefor:
9.06. Capital Expenditures. Borrower shall not and shall not
permit any of its Subsidiaries which are members of the Domestic
Group to, in any Fiscal Year, purchase, invest in or otherwise acquire,
including by Capital Leases, additional property, plant and equipment
or other fixed assets which capital expenditures, net of dispositions
of fixed assets during such Fiscal Year (determined based upon the
lesser of the book value of such disposed assets or the net cash
proceeds received), exceed the sum of $25,000,000 in the aggregate plus
the lesser of (a) $10,000,000 and (b) the difference, if positive,
between (1) the maximum aggregate amount of such capital expenditures
permitted pursuant to this Section 9.06 for the immediately preceding
Fiscal Year and (2) the aggregate amount of actual capital expenditures
for such preceding Fiscal Year.
1.9. Schedule A to the Credit Agreement is amended to delete such
Schedule in its entirety and to substitute the Schedule A attached hereto
therefor.
2. CONDITIONS OF EFFECTIVENESS OF THIS AMENDMENT. This Amendment
shall become effective and be deemed effective on the date first above written
subject to the Agent's receipt of each of the following:
(a) five (5) originals of this Amendment, duly executed by the
Borrower, the Agent and each of the Lenders; and
(b) an original Acknowledgement in the form of Exhibit A attached
hereto, duly executed by each of Anixter-Real Estate, Inc., Itel Corporation
and WireXpress, Inc.
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<PAGE> 6
3. FURTHER ASSURANCES. The Borrower hereby agrees from time to time,
as and when requested by the Agent, to execute and deliver or cause to be
executed and delivered, all such documents, instruments and agreements and to
take or cause to be taken such further or other action as the Agent may deem
necessary or desirable in order to carry out the intent and purposes of this
Amendment, the Credit Agreement or the other Loan Documents.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as previously executed
and as amended hereby, constitute legal, valid and binding obligations of the
Borrower and are enforceable against the Borrower in accordance with their
terms.
(b) Upon the effectiveness of this Amendment, the Borrower hereby
represents and warrants that the representations and warranties contained in
the Credit Agreement are true and correct on the date hereof as if set forth
herein and made on the date hereof and that, as of the effective date of this
Amendment and after giving effect hereto, no Event of Default or Potential
Event of Default has occurred and is continuing.
5. REFERENCE TO THE EFFECT ON THE CREDIT AGREEMENT.
(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically set forth above, the Credit Agreement, and
all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Agent or any Lender, nor constitute a waiver of any
provision of the Credit Agreement, or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
6. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. COUNTERPARTS; FACSIMILE SIGNATURES. This Amendment may be executed
by one or more of the parties to the Amendment on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. Each of the parties hereto agrees that
a signature transmitted by facsimile transmission shall be effective to bind
the party so transmitting its signature.
8. ENTIRE AGREEMENT. This Amendment, taken together with the Credit
Agreement and all of the other Loan Documents, embodies the entire agreement
and understanding of the parties hereto
- 6 -
<PAGE> 7
and supersedes all prior agreements and understandings, written and oral,
relating to the subject matter hereof.
9. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
10. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Amendment and the Credit
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Amendment and the Credit Agreement as hereby amended shall be
construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Amendment or the Credit Agreement.
[Remainder of this Page Intentionally Blank]
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, this Amendment No. 3 has been duly executed as of
the date set forth above.
ANIXTER INC.,
as Borrower
By:_________________________
Its:________________________
CHEMICAL BANK,
as Agent and as a Lender
By:_________________________
Its:________________________
THE BANK OF NEW YORK,
as a Lender
By:_________________________
Its:________________________
BANK OF MONTREAL,
as a Lender
By:_________________________
Its:________________________
S-1
<PAGE> 9
CITIBANK, N.A.,
as a Lender
By:_________________________
Its:________________________
WELLS FARGO BANK, N.A.,
as a Lender
By:_________________________
Its:________________________
BANQUE FRANCAISE DU
COMMERCE/EXTERIEUR,
as a Lender
By:_________________________
Its:________________________
By:_________________________
Its:________________________
CREDIT LYONNAIS CAYMAN
ISLAND BRANCH,
as a Lender
By:_________________________
Its:________________________
S-2
<PAGE> 10
CREDIT LYONNAIS CHICAGO BRANCH,
as a Lender
By:____________________________
Its:___________________________
FIRST BANK NATIONAL ASSOCIATION,
as a Lender
By:_____________________________
Its:____________________________
ABN AMRO BANK N.V.,
as a Lender
By:_____________________________
Its:____________________________
By:_____________________________
Its:____________________________
BANK OF AMERICA ILLINOIS
(successor by merger to
CONTINENTAL BANK N.A.),
as a Lender
By:_____________________________
Its:____________________________
S-3
<PAGE> 11
NBD BANK,
as a Lender
By:____________________________
Its:___________________________
THE BANK OF NOVA SCOTIA,
as a Lender
By:____________________________
Its:___________________________
PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By:__________________________
Its:_________________________
THE BANK OF CALIFORNIA, N.A.,
as a Lender
By:__________________________
Its:_________________________
CAISSE NATIONALE DE CREDIT
AGRICOLE,
as a Lender
By:__________________________
Its:_________________________
S-4
<PAGE> 12
BANQUE PARIBAS CHICAGO BRANCH,
as a Lender
By:_____________________________
Its:____________________________
By:_____________________________
Its:____________________________
THE MITSUBISHI TRUST & BANKING
CORPORATION,
as a Lender
By:_____________________________
Its:____________________________
NATIONSBANK OF NORTH CAROLINA,
N.A.,
as a Lender
By:____________________________
Its:___________________________
S-5
<PAGE> 13
EXHIBIT A
to
AMENDMENT NO. 1
ACKNOWLEDGEMENT
The undersigned hereby acknowledges receipt of a copy of Amendment No.
3 to Credit Agreement with Anixter Inc. dated as of March 24, 1995 (the
"AMENDMENT") and, without in any way establishing a course of dealing by the
Agent or any Lender, reaffirms the terms and conditions of [insert name and
date of guaranty, stock pledge agreement and subordination agreement, if
applicable] and acknowledges and agrees that such agreement[s] remain[s] in
full force and effect and [is] [are] hereby ratified and confirmed.
[Name]
By: _______________________________________________
Name: _____________________________________________
Title: ____________________________________________
<PAGE> 14
SCHEDULE A
LIST OF LENDERS, DOMESTIC AND EURODOLLAR LENDING OFFICES AND COMMITMENTS
ATTACHED
S-7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted from Itel's
Consolidated Financial Statements and is Qualified in its Entirety by Reference
to Such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 22,300
<SECURITIES> 0
<RECEIVABLES> 345,400
<ALLOWANCES> 6,500
<INVENTORY> 287,800
<CURRENT-ASSETS> 661,800
<PP&E> 73,900
<DEPRECIATION> 38,800
<TOTAL-ASSETS> 1,177,700
<CURRENT-LIABILITIES> 284,500
<BONDS> 0
<COMMON> 28,600
0
0
<OTHER-SE> 502,700
<TOTAL-LIABILITY-AND-EQUITY> 1,177,700
<SALES> 502,900
<TOTAL-REVENUES> 502,900
<CGS> 375,800
<TOTAL-COSTS> 479,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,500
<INCOME-PRETAX> 20,700
<INCOME-TAX> 9,600
<INCOME-CONTINUING> 11,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,100
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
