<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 JULY 4, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
Commission file number 1-5989
------
ANIXTER INTERNATIONAL INC.
(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 August 11, 1997 there were 47,530,094 shares of Common Stock, $1.00 par
value, of the registrant outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JULY 4, JAUARY 3,
1997 1997
---------- ----------
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Current assets:
Cash and equivalents $21,600 $18,200
Accounts receivable (net of allowance for doubtful
accounts of $9,000) 513,700 441,100
Inventories, primarily finished goods 387,800 397,300
Other assets 12,100 11,900
---------- ----------
Total current assets 935,200 868,500
Property, at cost 140,500 128,400
Accumulated depreciation (78,300) (66,800)
---------- ----------
Net property 62,200 61,600
Goodwill (net of accumulated amortization
of $60,700 and $57,600 respectively) 183,000 183,100
Assets held for sale, net 39,400 44,000
Investment in ANTEC 81,400 77,800
Other assets 27,100 26,000
---------- ----------
$1,328,300 $1,261,000
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 3
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 4, JANUARY 3,
1997 1997
----------- ----------
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Accounts payable $ 265,700 $209,200
Accrued expenses 95,300 97,100
Income taxes payable 6,300 7,200
---------- ----------
Total current liabilities 367,300 313,500
Deferred taxes, net 28,600 29,800
Other liabilities 14,000 13,800
Long-term debt 477,800 468,400
---------- ----------
Total liabilities 887,700 825,500
Stockholders' equity:
Common stock 47,300 48,000
Capital surplus 48,500 57,100
Retained earnings 366,100 344,500
Cumulative translation adjustments (22,100) (14,100)
---------- ----------
439,800 435,500
Unrealized gain on investment in ANTEC
(net of deferred income taxes) 800 -
---------- ----------
Total stockholders' equity 440,600 435,500
---------- ----------
$1,328,300 $1,261,000
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 4
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS SIX-MONTH PERIODS
ENDED ENDED
---------------------- -----------------------
JULY 4, JUNE 28, JULY 4, JUNE 28,
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $682,600 $611,800 $1,341,300 $1,179,200
Cost of goods sold (513,300) (460,200) (1,009,200) (881,800)
---------- ---------- ----------- ----------
Gross profit 169,300 151,600 332,100 297,400
Operating expenses (141,900) (129,700) (278,000) (250,600)
Amortization of goodwill (1,500) (1,600) (3,100) (3,100)
---------- ---------- ----------- ----------
Operating income 25,900 20,300 51,000 43,700
Interest expense and other, net (7,200) (6,400) (14,600) (11,900)
Equity in ANTEC earnings - 900 2,200 1,700
---------- ---------- ----------- ----------
Income before income taxes 18,700 14,800 38,600 33,500
Income tax expense (8,300) (6,700) (17,100) (15,100)
---------- ---------- ----------- ----------
Net income $10,400 $8,100 $21,500 $18,400
========== ========== =========== ==========
Net income per common and common
equivalent share: $.22 $.16 $.45 $.36
========== ========== =========== ==========
Weighted average common and
common equivalent shares 47,300 50,300 47,600 51,200
========== ========== =========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX-MONTH PERIODS
ENDED
--------------------
JULY 4, JUNE 28,
1997 1996
--------- ---------
<S> <C> <C>
Operating activities:
Net income $21,500 $18,400
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation 12,700 9,600
Amortization of goodwill 3,100 3,100
Deferred income tax expense (2,800) 200
Other, net (1,500) 300
Changes in current assets and liabilities, net (21,800) (87,000)
--------- ---------
Net cash provided (used) by operating
activities 11,200 (55,400)
Investing activities:
Purchases of property, net (14,400) (21,400)
Cash provided (used) by assets held for sale, net 4,600 (1,600)
Other investments (1,100) -
--------- ---------
Net cash used by investing activities (10,900) (23,000)
--------- ---------
Net cash provided (used) before financing activities 300 (78,400)
Financing activities:
Borrowings 671,600 402,300
Reduction in borrowings (655,400) (268,000)
Proceeds from issuance of common stock 300 100
Purchases of treasury stock (9,600) (58,600)
Other, net (3,800) 400
--------- ---------
Net cash provided by financing activities 3,100 76,200
--------- ---------
Cash provided (used) 3,400 (2,200)
Cash and equivalents at beginning of period 18,200 10,500
--------- ---------
Cash and equivalents at end of period $21,600 $8,300
========= =========
Supplemental cash flow information:
Interest paid during the period $15,700 $11,400
========= =========
Income taxes paid during the period $19,300 $8,300
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 6
ANIXTER INTERNATIONAL INC.
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 Anixter International Inc.'s ("Company") Annual Report on Form 10-K
for the year ended January 3, 1997. 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 a leading supplier of
wiring systems, networking and internetworking products for voice, data, and
video networks and electrical power applications.
Principles of consolidation: The condensed consolidated financial statements
include the accounts of Anixter International Inc. and its subsidiaries after
elimination of intercompany transactions.
NOTE 2. SUMMARIZED FINANCIAL INFORMATION OF ANTEC
The Company's ownership interest in ANTEC at July 4, 1997 and June 28,
1996 was approximately 19% and 31%, respectively. On February 6, 1997 a
wholly-owned subsidiary of ANTEC was merged into TSX Corporation. Under the
terms of the transaction, TSX Corporation shareholders received one share of
ANTEC Corporation stock for each share of TSX Corporation stock that they
owned. The transaction was accounted for as a pooling of interests. Upon
consummation of this transaction the Company's ownership interest in ANTEC was
reduced to approximately 19% which resulted in a cessation of equity method
accounting for this investment after that date. As a result of this change,
the Company recorded a $1.2 million after tax gain in the first quarter of
1997.
NOTE 3. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
The Company has an approximately 99% ownership interest in Anixter Inc. at July
4, 1997 and January 3, 1997 which is included in the consolidated financial
statements of the Company. The following summarizes the financial information
for Anixter Inc.
6
<PAGE> 7
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 4, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
JULY 4, JANUARY 3,
1997 1997
----------- ----------
(UNAUDITED)
Assets:
<S> <C> <C>
Current assets $933.3 $857.7
Property, net 62.2 61.6
Goodwill 183.0 183.1
Other assets 35.5 34.1
----------- ----------
$1,214.0 $1,136.5
=========== ==========
Liabilities and Stockholders' Equity:
Current liabilities $354.8 $304.0
Other liabilities 10.7 11.4
Long-term debt 477.8 468.4
Subordinated notes payable to parent 38.0 29.0
Shareholders' equity 332.7 323.7
----------- ----------
$1,214.0 $1,136.5
=========== ==========
</TABLE>
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED SIX-MONTHS ENDED
JULY 4, JUNE 28, JULY 4, JUNE 28,
1997 1996 1997 1996
--------- --------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues $682.6 $611.8 $1,341.3 $1,179.2
====== ====== ======== ========
Operating income $ 25.1 $ 20.7 $ 48.1 $ 42.9
====== ====== ======== ========
Income before income tax expense $ 17.4 $ 13.3 $ 32.6 $ 29.4
====== ====== ======== ========
Net income (loss) $ 8.7 $ 5.9 $ 16.4 $ 14.1
====== ====== ======== ========
</TABLE>
NOTE 4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement No. 128, Earnings per Share, which
is required to be adopted on December 31, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. The impact of Statement 128 is not
expected to be material.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW: Consolidated net cash provided by operating activities was
$11.2 million for the first six months of 1997 compared to $55.4 million used
for the same period in 1996. Cash provided by operating activities increased
primarily due to lower working capital investments and higher net income.
Consolidated cash used by investing activities was $10.9 million for the first
six months of 1997 versus $23.0 million for the same period in 1996 as a result
of a decrease in capital expenditures for 1997. Consolidated cash provided by
net financing activities was $3.1 million for the first half of 1997 in
comparison to $76.2 million in the first six months of 1996 due to the
reduction in cash required for working capital investments in 1997 and lower
capital expenditures. Cash provided by assets held for sale, net was $4.6
million in the first six months of 1997 versus $1.6 million used for the same
period in 1996.
Consolidated interest and other expense net was $14.6 million and $11.9 million
for the six months ended July 4, 1997 and June 28, 1996, respectively. The
increase is the result of higher costs associated with seven year 8% Senior
Notes which were issued in September 1996 and higher working capital borrowings
which occurred during the previous year. In addition to the fixed rate 8%
Senior Notes 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
73% of all debt obligations at July 4, 1997 is fixed or capped. The impact of
interest rate swaps and caps on interest expense, net for the six months ended
July 4, 1997 and June 28, 1996 was to increase interest expense by
approximately $.5 million in each period.
FINANCINGS:
At July 4, 1997, $211.9 million was available under the bank revolving lines of
credit at Anixter, of which $37.0 million was available to pay the Company for
intercompany liabilities.
8
<PAGE> 9
OTHER LIQUIDITY CONSIDERATIONS: Certain debt agreements entered into by the
Company's subsidiaries contain various restrictions including restrictions on
payments to the Company. Such restrictions have not had nor are expected to
have an adverse impact on the Company's ability to meet its cash obligations.
The finance business of Signal Capital Corporation ("Signal Capital") has been
included in assets held for sale since acquisition in 1988. Subsequent to the
purchase, the Company sold or liquidated, through July 4, 1997, $1.4 billion of
the portfolio. The $20.0 million net portfolio at July 4, 1997 represents
approximately 1% of the original acquired Signal Capital portfolio. Proceeds
have been used to repay indebtedness and repurchase shares of the Company's
common stock. The Company continues to liquidate the acquired Signal Capital
portfolio in an orderly manner that maximizes its value to shareholders and no
material amounts of new loans or investments are being made by Signal Capital.
CAPITAL EXPENDITURES AND ACQUISITIONS
Consolidated capital expenditures were $14.4 million and $21.4 million for the
first six months of 1997 and 1996, respectively.
RESULTS OF OPERATIONS
The Company continues to experience increased revenue growth in all major
product lines, with the exception of shared media hubs in North America, and
solid growth across all geographies. The Company competes with distributors
and manufacturers who sell products directly or through existing distribution
channels to end users or other resellers. The Company's relationship with the
manufacturers for which it distributes products could be affected by decisions
made by these manufacturers as the result of changes in management or
ownership as well as other factors. In addition, the Company's future
performance could be affected by economic downturns and possible rapid changes
in applicable technologies.
EARNINGS PER SHARE: Weighted average common and common equivalent shares
outstanding decreased from June 28, 1996 to July 4, 1997 as a result of the
Company's treasury stock purchases. An increase in borrowing costs associated
with stock purchases offset the decrease in shares resulting in no significant
effect on earnings per share.
9
<PAGE> 10
QUARTER ENDED JULY 4, 1997: Net income for the second quarter of 1997 was
$10.4 million compared with $8.1 million for the second quarter of 1996.
The Company's revenues during the second quarter of 1997 increased 12% to
$682.6 million from $611.8 million in 1996 due to the continued growth in
demand for all major products sets worldwide, with the exception of shared
media hubs in North America where industry-wide growth has been flat to
slightly down. Market penetration in Asia and Latin America grew by 55% in the
quarter. While Europe sales grew by 25% in the current quarter they were at
the same time negatively impacted due to exchange rate fluctuations which
resulted in a five percentage point lower growth rate as compared to what it
would have been had 1997 exchange rates remained constant with those in 1996.
Revenues by major geographic market are presented in the following table:
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------
JULY 4, JUNE 28,
1997 1996
------- --------
(IN MILLIONS)
<S> <C> <C>
North America $497.5 $471.3
Europe 138.7 110.6
Asia and Latin America 46.4 29.9
------ ------
$682.6 $611.8
====== ======
</TABLE>
Gross profits increased consistent with the 12% rate of growth in sales as
gross profit margins were 24.8% for the second quarter of 1996 and 1997.
Operating expenses increased only 9% to $141.9 million, in support of a 12%
increase in revenues, as a result of headcount controls and reduced investments
in 1997. The operating expense ratio, before goodwill amortization, has
decreased to 20.8% in the second quarter of 1997 from 21.2% in the second
quarter of 1996.
Operating income increased to $25.9 million or 3.8% of sales in 1997 versus
$20.3 million or 3.3% of sales in the same quarter of 1996. Operating income
by major geographic markets is presented in the following table:
10
<PAGE> 11
<TABLE>
<CAPTION>
QUARTERS ENDED
-------------------------
JULY 4, JUNE 28,
1997 1996
------- --------
(IN MILLIONS)
<S> <C> <C>
North America $30.1 $26.6
Europe 1.2 (.6)
Asia and Latin America (5.4) (5.7)
----- -----
$25.9 $20.3
===== =====
</TABLE>
The increase in European profitability is due to 25% higher sales and resulting
gross profits and the controlled increase in operating expenses partially
offset by an increase in corporate allocations. The increase in corporate
allocations from $1.9 million in the second quarter of 1996 to $3.6 million in
the second quarter of 1997 is a result of the increased corporate expenses
relating to systems and personnel required to support an increased number of
transactions in 1997.
Losses in emerging markets decreased slightly as a result of increased
productivity at new locations added in the later part of 1996 partially offset
by an increase in corporate expense allocations from $.8 million in the second
quarter of 1996 to $1.8 million in the second quarter of 1997 resulting from
increased transactions.
Consolidated net interest expense for the second quarter of 1997 increased to
$7.2 million from $6.4 million in 1996 due to the increase in debt resulting
from working capital increases incurred in the previous year and the
replacement of $100 million of short term borrowings with an average cost of
6.3% in 1996 with seven year term 8% Senior Notes.
The consolidated tax provision increased to $8.3 million in 1997 from $6.7
million due to higher pre-tax earnings partially offset by a slight decrease in
the effective tax rate from the second quarter of 1996 to 1997. The 1997
effective tax rate of 44%, which is based on pre-tax book income adjusted
primarily for amortization of goodwill and losses of foreign operations which
are not currently deductible, approximates the overall rate for 1996.
11
<PAGE> 12
SIX-MONTHS ENDED JULY 4, 1997: Net income for the first half of 1997 was $21.5
million compared with $18.4 million for the first half of 1996.
The Company's revenues during the first half of 1997 increased 14% to $1,341.3
million from $1,179.2 million in 1996 due to the continued growth in demand for
all major products sets in all geographies, with the exception of the shared
media hubs. Asia and Latin America sales grew by 55 percent year over year, the
same as in the second quarter. During the current period Europe's sales growth
was negatively impacted due to exchange rate fluctuations which resulted in a
four percentage point lower growth rate as compared to what it would have been
had 1997 exchange rates remained constant with those in 1996. Revenues by
major geographic market are presented in the following table:
<TABLE>
<CAPTION>
SIX-MONTHS ENDED
-----------------------
JULY 4, JUNE 28,
1997 1996
-------- ---------
(IN MILLIONS)
<S> <C> <C>
North America $ 980.9 $ 896.1
Europe 273.0 226.6
Asia and Latin America 87.4 56.5
-------- --------
$1,341.3 $1,179.2
======== ========
</TABLE>
Gross profits for the first half of 1997 increased at a lower rate than the 14%
rate of growth in sales principally due to first quarter softness in certain
European and Asian countries resulting from the stronger dollar and competitive
pressures. As a result gross profit margins were 24.8% versus 25.2% in 1996.
Operating expenses increased only 11% to $278.0 million, in support of a 14%
increase in revenues, as a result of headcount controls and reduced foreign
investments in 1997. The operating expense ratio, before goodwill amortization,
has decreased to 20.7% in the first half of 1997 from 21.3% in the first half
of 1996.
Operating income increased to $51.0 million in 1997 from $43.7 million in the
first half of 1996. Operating income by major geographic markets is presented
in the following table:
12
<PAGE> 13
<TABLE>
<CAPTION>
SIX-MONTHS ENDED
------------------------------
JULY 4, JUNE 28,
1997 1996
------- ---------
(IN MILLIONS)
<S> <C> <C>
North America $ 61.9 $ 50.3
Europe .3 3.3
Asia and Latin America (11.2) (9.9)
------- ------
$ 51.0 $ 43.7
======= ======
</TABLE>
The decrease in European profitability is due to the separation of the
distribution business from the network integration business which occurred at
the end of the first quarter of 1996, gross margin pressures and a $2.8 million
increase in corporate expense allocations for services provided to foreign
operations.
Increased losses in emerging markets primarily reflect the first quarter 1997
effect of increased staffing and new locations added in the later part of 1996,
planned increases in headcounts in 1997 required to penetrate the Asia and
Latin American markets and a $2.0 million increase in corporate expense
allocations.
Consolidated net interest expense for the first half of 1997 increased to $14.6
million from $11.9 million in 1996 due to the increase in debt resulting from
working capital increases incurred in the previous year and the $100 million of
8% short term borrowings previously discussed.
The consolidated tax provision increased to $17.1 million in 1997 from $15.1
million due to higher pre-tax earnings partially offset by a slight decrease in
the effective tax rate from the first half of 1996 to 1997.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE> 15
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.
ANIXTER INTERNATIONAL INC.
Date: August 14, 1997 By: /s/ Rod F. Dammeyer
--------------- -----------------------
Rod F. Dammeyer
President and Chief Executive Officer
Date: August 14, 1997 By: /s/ Dennis J. Letham
--------------- ------------------------
Dennis J. Letham
Senior Vice President - Finance
and Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contians summary financial information extracted from
Anixter International Inc.'s Consolidated Financial statements and is qualified
in its entirety by reference to such finacial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-START> JAN-04-1997
<PERIOD-END> JUL-04-1997
<CASH> 21,600
<SECURITIES> 0
<RECEIVABLES> 513,700
<ALLOWANCES> 9,000
<INVENTORY> 387,800
<CURRENT-ASSETS> 935,200
<PP&E> 140,500
<DEPRECIATION> 78,300
<TOTAL-ASSETS> 1,328,300
<CURRENT-LIABILITIES> 367,300
<BONDS> 0
0
0
<COMMON> 47,300
<OTHER-SE> 393,300
<TOTAL-LIABILITY-AND-EQUITY> 1,328,300
<SALES> 1,341,300
<TOTAL-REVENUES> 1,341,300
<CGS> 1,009,200
<TOTAL-COSTS> 1,290,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,600
<INCOME-PRETAX> 38,600
<INCOME-TAX> 17,100
<INCOME-CONTINUING> 21,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,500
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
