<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 APRIL 3, 1998
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.)
4711 Golf Road
Skokie, Illinois 60076
-------------------------------
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code:(847) 677-2600
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 May 12, 1998 there were 47,322,427 shares of Common Stock, $1.00 par value,
of the registrant outstanding.
<PAGE> 2
PART I.
ITEM 1. FINANCIAL STATEMENTS
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
(UNAUDITED)
<TABLE>
<CAPTION>
(In millions, except per share amounts) 13 WEEKS ENDED
------------------
APRIL 3, APRIL 4,
1998 1997
-------- --------
<S> <C> <C>
Net sales $748.5 $658.7
Cost of goods sold 563.4 495.9
------ ------
Gross profit 185.1 162.8
Operating expenses 155.7 136.1
Amortization of goodwill 1.6 1.6
------ ------
Operating income 27.8 25.1
Interest expense and other, net (8.1) (7.4)
Gain on ANTEC investment 8.4 2.2
------ ------
Income before income taxes 28.1 19.9
Income tax expense 11.7 8.8
------ ------
Income from continuing operations 16.4 11.1
Income from discontinued operations 11.1 -
------ ------
Net income $27.5 $11.1
====== ======
Basic and diluted income per common share:
Continuing operations $.35 $.23
Discontinued operations .23 -
------ ------
Net income $.58 $.23
====== ======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 3
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(In millions) APRIL 3, JANUARY 2,
1998 1998
------- ---------
(UNAUDITED)
<S> <C> <C>
Cash $12.5 $10.6
Accounts receivable (less allowances of $11.6 in 1998
and $11.3 in 1997) 559.2 551.1
Inventories 429.9 440.7
Other current assets 10.5 11.6
-------- --------
Total current assets 1,012.1 1,014.0
Property and equipment, at cost 162.4 152.1
Accumulated depreciation (94.6) (87.8)
-------- --------
Net property and equipment 67.8 64.3
Goodwill (less accumulated amortization
of $60.8 in 1998 and $59.2 in 1997) 203.1 203.1
Assets held for sale, net 8.1 20.6
Investment in ANTEC 76.8 112.0
Other assets 28.9 26.7
-------- --------
$1,396.8 $1,440.7
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 4
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(In millions) APRIL 3, JANUARY 2,
1998 1998
----------- ----------
<S> <C> <C>
(UNAUDITED)
Current liabilities:
Accounts payable $294.3 $324.3
Accrued expenses 92.3 110.3
Income taxes payable 18.4 13.5
-------- --------
Total current liabilities 405.0 448.1
Deferred taxes, net 31.3 33.4
Other liabilities 13.3 13.4
Long-term debt 446.5 468.8
-------- --------
Total liabilities 896.1 963.7
Stockholders' equity:
Common stock 47.3 47.3
Capital surplus 47.3 47.1
Retained earnings 417.4 389.9
Accumulated other comprehensive income (11.3) (7.3)
-------- --------
Total stockholders' equity 500.7 477.0
-------- --------
$1,396.8 $1,440.7
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In millions)
13 WEEKS ENDED
--------------------------
APRIL 3, APRIL 4,
1998 1997
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 27.5 $ 11.1
Adjustments to reconcile net income
to net cash provided (used) by
operating activities from continuing operations:
Income from discontinued operations (11.1) -
Depreciation and amortization 7.8 7.8
Gain on ANTEC investment (8.4) (2.2)
Deferred income taxes 1.7 (1.5)
Changes in current assets and liabilities, net (28.4) .8
Other, net (4.7) (2.3)
-------- --------
Net cash (used) provided by operating
activities from continuing operations (15.6) 13.7
Investing activities:
Capital expenditures, net (9.7) (6.4)
Proceeds from sale of ANTEC 20.3 -
-------- --------
Net cash provided (used) by investing activities 10.6 (6.4)
-------- --------
Net cash (used) provided before financing activities (5.0) 7.3
Financing activities:
Borrowings 490.8 272.0
Reduction in borrowings (512.4) (275.3)
Proceeds from issuance of common stock .2 -
Purchases of treasury stock - (9.6)
Other, net (2.7) (1.7)
-------- --------
Net cash used by financing activities (24.1) (14.6)
Cash provided (used) by discontinued operations 31.0 (1.7)
-------- --------
Cash provided (used) 1.9 (9.0)
Cash at beginning of period 10.6 18.2
-------- --------
Cash at end of period $ 12.5 $ 9.2
======== ========
</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 condensed 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 2, 1998. 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. The results of operations of any interim period are not
necessarily indicative of the results that may be expected for a full fiscal
year. Certain amounts for the prior year have been reclassified to conform to
the 1998 presentation.
COMPREHENSIVE INCOME: In the first quarter 1998, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income",
(SFAS No. 130), which requires companies to report all changes in equity during
a period, except those resulting from investment by owners, in a financial
statement for the period in which they are recognized. The Company has chosen
to disclose comprehensive income, which encompasses net income, foreign
currency translation adjustments and unrealized gains and losses on marketable
equity securities, in the year-end Consolidated Statement of Stockholders'
Equity. The prior year has been restated to conform to the SFAS No. 130
requirements.
6
<PAGE> 7
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. INCOME PER SHARE
The following table sets forth the computation of basic and diluted income per
common share from continuing operations:
<TABLE>
<CAPTION>
13 WEEKS ENDED
------------------
(In millions, except per share amounts) APRIL 3, APRIL 4,
1998 1997
-------- --------
<S> <C> <C>
Numerator:
Income from continuing operations $16.4 $11.1
Denominator:
Basic common shares outstanding 47.3 47.8
Effect of dilutive securities:
Stock options and warrants .3 .3
-------- --------
Diluted common shares outstanding 47.6 48.1
Basic and diluted income per share
from continuing operations $.35 $.23
</TABLE>
NOTE 3. COMPREHENSIVE INCOME
SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
Statement had no impact on the Company's net income or shareholder's equity.
SFAS No. 130 requires unrealized gains or losses on the Company's marketable
equity securities and foreign currency translation adjustments, which prior to
adoption were reported separately in shareholder's equity, to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of SFAS No. 130.
During the first quarter of 1998 and 1997, total comprehensive income (loss)
amounted to $23.6 million and $(7.9) million, respectively.
7
<PAGE> 8
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. INVESTMENT IN ANTEC
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 the
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.
During the first quarter 1998, the Company sold 2.2 million shares of ANTEC
stock which resulted in net after tax proceeds of approximately $32 million and
an after tax gain of $5.1 million. The sale reduced the Company's ownership
interest to 12.4% at April 3, 1998.
The Company has also reached an agreement with ANTEC, whereby ANTEC will have
the right to acquire the remaining 4.9 million shares of ANTEC still owned by
Anixter at a price of $14.50 per share. Completion of this transaction is
subject to ANTEC's ability to secure financing for this transaction. When the
sale of these remaining shares is completed it is anticipated that the Company
will receive net proceeds of approximately $68 million and will report an
anticipated after tax gain of $9.5 million or $.20 per diluted share. This
gain will be reported in the period in which the anticipated sale closes.
NOTE 5. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
The Company has an approximate 99% ownership interest in Anixter Inc. at April
3, 1998 and January 2, 1998 which is included in the consolidated financial
statements of the Company. The following summarizes the financial information
for Anixter Inc:
8
<PAGE> 9
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 3, JANUARY 2,
(In millions) 1998 1998
----------- ----------
<S> <C> <C>
(UNAUDITED)
Assets:
Current assets $964.6 $980.4
Property, net 64.1 61.0
Goodwill 180.7 181.1
Other assets 39.0 36.6
----------- ----------
$1,248.4 $1,259.1
=========== ==========
Liabilities and Stockholders' Equity:
Current liabilities $381.0 $423.7
Other liabilities 10.7 10.7
Long-term debt 426.8 450.4
Subordinated notes payable to parent 64.5 19.0
Stockholders' equity 365.4 355.3
----------- ----------
$1,248.4 $1,259.1
=========== ==========
</TABLE>
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
------------------
APRIL 3, APRIL 4,
1998 1997
-------- --------
<S> <C> <C>
(In millions)
Net sales $728.6 $658.7
Operating income $ 27.6 $ 23.0
Income before income tax expense $ 17.6 $ 15.2
Net income (loss) $ 8.0 $ 7.7
</TABLE>
9
<PAGE> 10
NOTE 6. BUSINESS SEGMENTS
The Company has recently been investing in the business of providing products
and services for the design, development and support of network
Infrastructures. In order to align its business segments with the strategic
focus of the Company, operating results are now reported in two segments:
Distribution and Intregration. The largest segment, Distribution, sells
specialty wire and cable and structured wiring from top suppliers to
contractors, installers, manufacturers, natural resources companies, utilities
and original equipment manufacturers. The Integration segment sells products
and services for the assessment, design, implementation and support of
networking technologies.
The Company obtains and coordinates financing, legal and other related
services, certain of which are rebilled to subsidiaries. Corporate expenses
are items not related to the operations of the segments. Corporate assets
consists of goodwill, assets held for sale, investment in ANTEC and
miscellaneous assets maintained for general corporate purposes.
<TABLE>
<CAPTION>
13 WEEKS ENDED
-------------------------
(In millions) APRIL 3, APRIL 4,
1998 1997
-------- --------
<S> <C> <C>
BUSINESS SEGMENTS
Net sales:
Distribution $562.1 $492.6
Integration 186.4 166.1
-------- --------
$748.5 $658.7
======== ========
Operating income:
Distribution $29.5 $26.0
Integration (1.4) (2.9)
Corporate (0.3) 2.0
-------- --------
$27.8 $25.1
======== ========
Identifiable assets:
Distribution $859.8 $730.6
Integration 205.6 211.7
Corporate 331.4 319.3
-------- --------
$1,396.8 $1,261.6
======== ========
</TABLE>
10
<PAGE> 11
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
13 WEEKS ENDED
-------------------------
APRIL 3, APRIL 4,
1998 1997
-------- --------
<S> <C> <C>
Net sales:
North America $548.4 $483.4
Europe 152.5 134.3
Asia and Latin America 47.6 41.0
-------- --------
$748.5 $658.7
======== ========
Operating Income:
North America $31.1 $31.8
Europe 2.9 (0.9)
Asia and Latin America (6.2) (5.8)
-------- --------
$27.8 $25.1
======== ========
</TABLE>
11
<PAGE> 12
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW: Consolidated net cash used by operating activities from continuing
operations was $15.6 million for the first quarter of 1998 compared to $13.7
million provided for the same period in 1997. Cash provided by operating
activities decreased primarily due to the timing of inventory payments.
Consolidated cash provided by investing activities was $10.6 million for the
first quarter of 1998 versus $6.4 million used for the same period in 1997 as a
result of proceeds received from the sale of ANTEC shares. Consolidated cash
used by net financing activities was $24.1 million for the first quarter of
1998 in comparison to $14.6 million in 1997. The increase is primarily the
result of the net paydown of the revolving line of credit of $21.6 million in
1998 versus $3.3 million in 1997. There were no treasury stock purchases in
the first quarter 1998 as compared to $9.6 million in 1997. As a result of the
sale of certain "assets held for sale", cash provided by discontinued
operations was $31.0 million in the first quarter 1998 versus $1.7 million used
for the same period in 1997.
Consolidated net interest expense and other was $8.1 million and $7.4 million
for the first quarter 1998 and 1997, respectively. The increase is the result
of higher working capital borrowings in January and February 1998, along with
$20 million of additional debt related to the Accu-Tech acquisition in
September 1997.
FINANCINGS:
At April 3, 1998, $249.5 million was available under the bank revolving lines
of credit at Anixter Inc., of which $73.3 million was available to pay the
Company for intercompany liabilities.
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.
12
<PAGE> 13
CAPITAL EXPENDITURES AND ACQUISITIONS
Consolidated capital expenditures were $9.7 million and $6.4 million for the
first quarter of 1998 and 1997, respectively.
RESULTS OF OPERATIONS
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 ownerships 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.
QUARTER ENDED APRIL 3, 1998: Income from continuing operations for the first
quarter of 1998 was $16.4 million compared with $11.1 million for the first
quarter of 1997.
The Company's sales during the first quarter of 1998 increased 13.6% to $748.5
million from $658.7 million in 1997. Distribution sales were up 14.1% over
last year reflecting sales growth in all sectors of the business. Integration
sales increased 12.2% over last year with significant improvement in the
service business, partially offset by declines in unit sales of shared media
hubs and product price declines.
Sales for North America, Europe and Emerging Markets (Latin America and Asia
Pacific) increased 13.4%, 13.6% and 16.3%, respectively. Excluding the impact
of foreign exchange, Europe and Emerging Markets would have been up 17.6% and
26.2%, respectively.
Operating income increased to $27.8 million in 1998 from $25.1 million in the
first quarter of 1997. Distribution operating income grew 13.6%, slightly
lower than its sales growth, due to increased costs related to recently
expanded distribution facilities in Dallas, Anaheim, Reno and Toronto along
with head count additions in support of market share growth. Operating profit
margins were 5.2% in 1998 versus 5.3% in 1997. Integration operating income
improved 51% from a loss of $2.9 million in 1997 reflecting higher margin
service revenues and improved utilization of staff and other resources in the
foreign operations.
13
<PAGE> 14
North America operating income declined 2.2% to $31.1 million in the first
quarter 1998. The decline was the result of increased headcount in pursuing
greater market share, additional warehouse facility costs and an unfavorable
comparison of corporate expenses due to a one-time gain on sale of assets in
1997. Europe's operating income increased $3.8 million from a $.9 million loss
in 1997. The improvement is the result of the strong sales growth, improved
gross margins and lower operating expenses in both the Distribution and
Integration segments. Emerging markets experienced a modest increase in
operating losses from $5.8 million in 1997 to $6.2 million in 1998. Soft
market conditions in Southeast Asia coupled with disappointing sales in Brazil
and Mexico lead to the decline.
The consolidated tax provision on continuing operations increased to $11.7
million in 1998 from $8.8 million in 1997 due to higher pre-tax earnings,
partially offset by a decrease in the effective tax rate from the first quarter
of 1997. The 1998 effective tax rate of 42%, which is based on pre-tax book
income adjusted primarily for amortization of nondeductible goodwill and
losses of foreign operations which are not currently deductible, approximates
the overall expected rate for all of 1998.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held May 7, 1998 the Directors of the
Company were elected as follows:
<TABLE>
<CAPTION>
VOTES
---------------------------
DIRECTORS FOR WITHHELD
- --------- ---------- --------
<S> <C> <C> <C>
Lord James Blyth 39,379,604 161,447
Rod F. Dammeyer 39,379,883 161,168
Robert E. Fowler, Jr. 39,379,586 161,465
Robert W. Grubbs, Jr. 39,372,701 168,350
F. Philip Handy 39,378,971 162,080
Melvyn N. Klein 39,380,571 160,480
John R. Petty 39,379,478 161,573
Sheli Z. Rosenberg 39,380,453 160,598
Stuart M. Sloan 39,379,907 161,144
Thomas C. Theobald 39,380,769 160,282
Samuel Zell 39,379,597 161,454
</TABLE>
The Company's 1998 Stock Incentive Plan was approved by a vote of 30,329,342
shares "For", 5,873,079 shares "Against" and 109,527 shares "Abstain."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
15
<PAGE> 16
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: May 14, 1998 By:
- ------------------- -------------------------------------
Robert W. Grubbs
President and Chief Executive Officer
Date: May 14, 1998 By:
- ------------------- -------------------------------------
Dennis J. Letham
Senior Vice President - Finance
and Chief Financial Officer
16
<PAGE> 17
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: May 14, 1998 By: /s/ Robert W. Grubbs
------------------ ------------------------------------
Robert W. Grubbs
President and Chief Executive Officer
Date: May 14, 1998 By: /s/ Dennis J. Letham
------------------ ------------------------------------
Dennis J. Letham
Senior Vice President - Finance
and Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE 13 WEEKS ENDED APRIL 3, 1998 AND APRIL 4, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDING IN SUCH REPORTS.
</LEGEND>
<CIK> 0000052795
<NAME> ANIXTER INTERNATIONAL INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-01-1999 JAN-02-1998
<PERIOD-START> JAN-03-1998 JAN-04-1997
<PERIOD-END> APR-03-1998 APR-04-1997
<CASH> 12,500 9,200
<SECURITIES> 0 0
<RECEIVABLES> 559,200 480,400
<ALLOWANCES> 11,600 9,000
<INVENTORY> 429,900 383,400
<CURRENT-ASSETS> 1,012,100 884,800
<PP&E> 162,400 133,100
<DEPRECIATION> 94,600 72,200
<TOTAL-ASSETS> 1,396,800 1,261,600
<CURRENT-LIABILITIES> 405,000 337,600
<BONDS> 0 0
0 0
0 0
<COMMON> 47,300 47,300
<OTHER-SE> 453,400 371,100
<TOTAL-LIABILITY-AND-EQUITY> 1,396,800 1,261,600
<SALES> 748,500 658,700
<TOTAL-REVENUES> 748,500 658,700
<CGS> 563,400 495,900
<TOTAL-COSTS> 720,700 633,600
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,100 7,400
<INCOME-PRETAX> 28,100 19,900
<INCOME-TAX> 11,700 8,800
<INCOME-CONTINUING> 16,400 11,100
<DISCONTINUED> 11,100 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 27,500 11,100
<EPS-PRIMARY> .58 .23
<EPS-DILUTED> .58 .23
</TABLE>
