<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 2, 1999
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, August 6, 1999 there were 35,990,369 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)
(In millions, except per share amounts)
13 WEEKS ENDED 26 WEEKS ENDED
JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998
------- ------- -------- --------
Net sales $ 658.5 $ 584.6 $1,253.6 $1,146.7
Cost of goods sold 502.6 440.8 948.4 861.8
------- ------- -------- --------
Gross profit 155.9 143.8 305.2 284.9
Operating expenses 125.5 119.7 250.9 235.9
Amortization of goodwill 1.9 1.7 3.8 3.3
------- ------- -------- --------
Operating income 28.5 22.4 50.5 45.7
Interest expense (7.5) (7.2) (16.1) (14.5)
Gain on ANTEC investment - 15.9 - 24.3
Foreign exchange and other, net - (.6) (.1) (.3)
------- ------- -------- --------
Income before income taxes 21.0 30.5 34.3 55.2
Income tax expense 8.8 12.7 14.4 23.0
------- ------- -------- --------
Income from continuing
operations 12.2 17.8 19.9 32.2
Discontinued operations:
Income from discontinued
operations, net of tax 1.0 3.7 (.5) 4.9
Gain on disposal of
discontinued operations,
net of tax - - 45.9 11.1
------- ------- -------- --------
Net income $ 13.2 $ 21.5 $ 65.3 $ 48.2
======= ======= ======== ========
Basic income per common share:
Continuing operations $ .33 $ .38 $ .51 $ .69
Discontinued operations .03 .08 1.17 .34
------- ------- -------- --------
Net income $ .36 $ .46 $ 1.68 $ 1.03
======= ======= ======== ========
Diluted income per common share:
Continuing operations $ .33 $ .38 $ .51 $ .68
Discontinued operations .03 .08 1.15 .34
------- ------- -------- --------
Net income $ .36 $ .46 $ 1.66 $ 1.02
======= ======= ======== ========
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 3
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions) JULY 2, JANUARY 1,
1999 1999
-------- --------
(UNAUDITED)
Cash $ 14.3 $ 20.5
Accounts receivable (less allowances of $10.1
in 1999 and $11.0 in 1998) 517.0 455.9
Inventories 462.4 417.2
Income taxes receivable - 5.1
Other current assets 14.8 8.4
-------- --------
Total current assets 1,008.5 907.1
Property and equipment, at cost 148.2 144.1
Accumulated depreciation (92.2) (86.5)
-------- --------
Net property and equipment 56.0 57.6
Goodwill (less accumulated amortization
of $74.8 in 1999 and $71.0 in 1998) 232.1 233.8
Net assets of discontinued operations - 87.3
Other assets 39.5 36.0
-------- --------
$1,336.1 $1,321.8
======== ========
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 4
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions) JULY 2, JANUARY 1,
1999 1999
-------- --------
(UNAUDITED)
Current liabilities:
Accounts payable $ 288.6 $ 246.7
Accrued expenses 124.8 94.3
Income taxes payable 20.6 -
-------- --------
Total current liabilities 434.0 341.0
Deferred taxes, net 14.4 15.0
Other liabilities 13.3 10.7
Long-term debt 476.1 543.6
-------- --------
Total liabilities 937.8 910.3
Stockholders' equity:
Common stock 36.0 41.8
Accumulated other comprehensive income (36.8) (39.7)
Retained earnings 399.1 409.4
-------- --------
Total stockholders' equity 398.3 411.5
-------- --------
$1,336.1 $1,321.8
======== ========
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In millions)
26 WEEKS ENDED
JULY 2, JULY 3,
1999 1998
-------- --------
Operating activities:
Net income $ 65.3 $ 48.2
Adjustments to reconcile net income
to net cash provided by operating
activities from continuing operations:
Income from discontinued operations (45.4) (16.0)
Depreciation and amortization 13.1 12.7
Gain on ANTEC investment - (24.3)
Deferred income taxes (.6) 3.9
Changes in current assets and liabilities, net (14.6) (67.6)
Other, net 3.8 (.1)
-------- --------
Net cash provided by (used for) operating
activities from continuing operations 21.6 (43.2)
Investing activities:
Capital expenditures (9.0) (14.3)
Proceeds from sale of ANTEC - 104.3
Business acquisitions, net of cash acquired - (38.2)
Other .7 -
-------- --------
Net cash (used) provided by investing activities (8.3) 51.8
-------- --------
Net cash provided before financing activities 13.3 8.6
Financing activities:
Borrowings 408.7 392.2
Reduction in borrowings (472.0) (373.0)
Proceeds from issuance of common stock 4.0 3.0
Purchases of treasury stock (85.6) (50.6)
Other, net (4.1) (2.4)
-------- --------
Net cash used by financing activities (149.0) (30.8)
Cash provided by discontinued operations 129.5 24.3
-------- --------
Cash (used) provided (6.2) 2.1
Cash at beginning of period 20.5 10.6
-------- --------
Cash at end of period $ 14.3 $ 12.7
======== ========
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 1, 1999. 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 and restated to
conform to the 1999 presentation and to reflect the discontinuance of the
Integration business. The impact on net income is not significant.
NOTE 2. INCOME PER SHARE
The following table sets forth the computation of basic and diluted income per
common share from continuing operations:
(In millions, except per share amounts)
13 WEEKS ENDED 26 WEEKS ENDED
------------------- ---------------------
JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998
------- ------- -------- --------
Numerator:
Income from continuing
operations $ 12.2 $ 17.8 $ 19.9 $ 32.2
Denominator:
Basic common shares
outstanding 36.4 46.3 39.0 46.8
Effect of dilutive securities:
Stock options and warrants .4 .4 .3 .4
------- ------- -------- --------
Diluted common shares
outstanding 36.8 46.7 39.3 47.2
======= ======= ======== ========
Income per share from
continuing operations:
Basic $ .33 $ .38 $ .51 $ .69
Diluted $ .33 $ .38 $ .51 $ .68
6
<PAGE> 7
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. COMPREHENSIVE INCOME
For the 13 and 26 weeks ended July 2, 1999, total comprehensive income amounted
to $18.6 million and $68.2 million respectively. For the 13 and 26 weeks ended
July 3, 1998, total comprehensive income amounted to $1.7 million and $25.3
million, respectively. The difference between net income and comprehensive
income is the change in cumulative translation adjustments and for 1998,
unrealized gains on marketable equity securities.
NOTE 4. DISCONTINUED OPERATIONS
In the fourth quarter of 1998, the Company decided to exit its Integration
segment and accordingly, the Integration segment is reflected as a discontinued
operation in these financial statements. Interest expense has been allocated to
discontinued operations based on the percentage of total identifiable assets.
The sale of the North American Integration business was completed on April 2,
1999, following the sale of the European Integration business in the fourth
quarter of 1998. Total proceeds received were $215.8 million. This resulted in a
one-time after-tax gain of $45.9 million, which is net of $11.0 million of costs
associated primarily with the closing of selected Latin American and Asian
Integration locations and severance costs associated with staff reductions
necessitated by discontinuing the Integration segment.
In the first quarter of 1998, the Company disposed of certain discontinued
railcar assets which had been classified as assets held for sale. The
disposition of these assets resulted in net proceeds of $29 million and an
after-tax gain of $11.1 million.
Net sales for discontinued operations are as follows:
13 WEEKS ENDED 26 WEEKS ENDED
------------------- ---------------------
JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998
Net sales $ 17.9 $ 198.8 $ 177.9 $ 385.2
7
<PAGE> 8
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5. INVESTMENT IN ANTEC
During the first quarter of 1998, the Company sold 2.2 million shares of ANTEC
Corporation 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. In the second quarter of 1998, the
Company sold its remaining 4.9 million shares of ANTEC stock which resulted in
net after-tax proceeds of approximately $68 million and an after-tax gain of
$9.5 million.
NOTE 6. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
The Company has an approximate 99% ownership interest in Anixter Inc. at July 2,
1999 and January 1, 1999 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
JULY 2, JANUARY 1,
(In millions) 1999 1999
-------- --------
(UNAUDITED)
Assets:
Current assets $1,004.3 $ 863.0
Property, net 56.0 54.6
Goodwill 232.1 212.1
Net assets of discontinued operations - 98.3
Other assets 36.3 38.2
-------- --------
$1,328.7 $1,266.2
======== ========
Liabilities and Stockholders' Equity:
Current liabilities $ 422.0 $ 333.9
Other liabilities 9.3 8.6
Long-term debt 476.1 524.1
Subordinated notes payable to parent 5.8 7.0
Stockholders' equity 415.5 392.6
-------- --------
$1,328.7 $1,266.2
======== ========
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
(UNAUDITED)
13 WEEKS ENDED 26 WEEKS ENDED
------------------- ---------------------
JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998
------- ------- -------- --------
(In millions)
Net sales $ 658.6 $ 559.7 $1,228.5 $1,101.9
Operating income $ 29.0 $ 22.0 $ 51.7 $ 45.1
Income before income tax expense $ 21.4 $ 13.2 $ 35.7 $ 27.5
Income from continuing
operations $ 11.2 $ 4.5 $ 19.5 $ 9.3
Income (loss) from
discontinued operations,
net of tax $ 1.0 $ 4.4 $ (.5) $ 7.6
Gain on disposal of
discontinued operations,
net of tax $ - $ - $ 45.9 $ -
Net income $ 12.2 $ 8.9 $ 64.9 $ 16.9
9
<PAGE> 10
ITEM 2.
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 from
continuing operations was $21.6 million for the 26 weeks ended July 2, 1999,
compared to $43.2 million used for the same period in 1998. Cash provided by
operating activities increased primarily due to the increase in accruals
associated with the collection of receivables on behalf of North American
Integration which was sold in the first quarter of 1999. Consolidated cash used
by investing activities was $8.3 million for the 26 weeks ended July 2, 1999,
versus $51.8 million provided for the same period in 1998 as a result of $104.3
million of proceeds received from the sale of ANTEC shares in 1998, partially
offset by $38.2 million used for the acquisition of Pacer Electronics, Inc. in
June of 1998. Consolidated cash used by net financing activities was $149.0
million for the 26 weeks ended July 2, 1999, in comparison to $30.8 million in
1998. The increase in cash used is primarily the result of the net paydown of
the revolving line of credit of $63.3 million in 1999 versus net borrowings of
$19.2 million in 1998. Treasury stock purchases in the 26 weeks ended July 2,
1999, were $85.6 million versus $50.6 million in 1998. Cash provided by
discontinued operations was $129.5 million in 26 weeks ended July 2, 1999,
compared to $24.3 million in 1998. The increase primarily relates to cash
received from the sale of the North American Integration business.
FINANCINGS:
At July 2, 1999, $194.8 million was available under the bank revolving lines of
credit at Anixter Inc., of which $20.0 million was available to pay the Company
for intercompany liabilities.
Consolidated interest expense was $7.5 million and $7.2 million for the second
quarter 1999 and 1998, respectively, and was $16.1 million and $14.5 million for
the first half of 1999 and 1998, respectively. The increase in interest expense
is due to higher average debt levels resulting from funding higher working
capital levels, partially offset by slightly lower interest rates.
As of July 2, 1999, the Company has authorized the repurchase of up to 7 million
shares in 1999, with the volume and timing to depend on market conditions.
Purchases were made in the open market or through other transactions and were
financed through available cash from the sale of the North American and European
Integration businesses. The Company has repurchased 6,225,234 shares, as of July
2, 1999, at an average cost of $13.75.
10
<PAGE> 11
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.
CAPITAL EXPENDITURES AND ACQUISITIONS
Consolidated net capital expenditures, were $9.0 million and $14.3 million for
the 26 weeks ended July 2, 1999 and July 3, 1998, respectively.
In June 1998, the Company purchased Pacer for $38.2 million, which resulted in
the addition of approximately $30 million to goodwill. Operating results of
Pacer in the first half of 1999 were not significant.
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 JULY 2, 1999: Income from continuing operations for the second
quarter of 1999 was $12.2 million compared with $17.8 million for the second
quarter of 1998.
The Company's sales during the first quarter of 1999 increased 12.6% to $658.5
million from $584.6 million in 1998. Net sales by major geographic market are
presented in the following table:
(In millions) 13 WEEKS ENDED
JULY 2, JULY 3,
1999 1998
-------- --------
North America $ 502.7 $ 422.6
Europe 122.2 123.3
Asia Pacific and Latin America 33.6 38.7
-------- --------
$ 658.5 $ 584.6
======== ========
11
<PAGE> 12
North America sales grew 19.0%, resulting from a significant growth in both the
core Structured Wiring and Electrical Wire and Cable product sets and the
Integrated Supply business along with the inclusion of Pacer Electronics, which
was acquired in June 1998. Europe sales declined .9% on a combination of lower
network product sales and a stronger dollar. Excluding the effect from changes
in exchange rates, Europe second quarter 1999 sales improved 2.4% over the
corresponding 1998 period. Asia Pacific and Latin America declined 13.2%, a
result of soft local economic conditions combined with weaker local currencies.
Operating income for the second quarter of 1999 increased to $28.5 million from
$22.4 million in 1998. Operating income by major geographic market is presented
in the following table:
(In millions) 13 WEEKS ENDED
JULY 2, JULY 3,
1999 1998
-------- --------
North America $ 26.9 $ 23.2
Europe 4.7 3.4
Asia Pacific and Latin America (3.1) (4.2)
-------- --------
$ 28.5 $ 22.4
======== ========
North America operating income increased 16.0% in the quarter. The improvement
primarily relates to higher sales volume and a reduction in operating expenses
as a percent of sales reflecting staff reductions over the last few quarters.
This improvement was partially offset by lower gross margin rates primarily a
result of lower margin project business and significant increases in the lower
gross margin public network and integrated supply business. Europe operating
income increased 39.0% for the second quarter of 1999, due to a reduction in
operating expenses associated with a 11.5% reduction in headcount. Asia Pacific
and Latin America operating loss was reduced by 28.1%, reflecting the
restructuring and expense reduction efforts of 1998.
In the second quarter of 1998, the Company sold its remaining shareholdings in
ANTEC Corporation resulting in an after-tax gain of $9.5 million.
The consolidated tax provision on continuing operations in the second quarter
decreased to $8.8 million in 1999 from $12.7 million in 1998 due to lower
pre-tax earnings. The 1999 effective tax rate of 42% is based on pre-tax book
income adjusted primarily for amortization of nondeductible goodwill and losses
of foreign operations which are not currently deductible.
12
<PAGE> 13
26 WEEKS ENDED JULY 2, 1999: Income from continuing operations for the first
half of 1999 was $19.9 million as compared to $32.2 million for the first half
of 1998.
The Company's sales during the first half of 1999 increased 9.3% to $1,253.6
million from $1,146.7 million in 1998. Net sales by major geographic market are
presented in the following table:
(In millions) 26 WEEKS ENDED
JULY 2, JULY 3,
1999 1998
-------- --------
North America $ 925.6 $ 815.7
Europe 261.7 256.6
Asia Pacific and Latin America 66.3 74.4
-------- --------
$1,253.6 $1,146.7
======== ========
North America sales grew 13.5%, resulting from very strong second quarter growth
in the core Structured Wiring and Electrical Wire and Cable product sets along
with significant growth in the Integrated Supply business. 1999 results also
include Pacer Electronics which was acquired in June 1998. Europe sales grew
2.0% on the strength of the first quarter as sales continue to be negatively
impacted by soft networking product sales and a stronger dollar. Asia Pacific
and Latin America sales declined 10.8% to $66.3 million due to soft economic
conditions along with weaker local currencies.
Operating income for the first half of 1999 increased $4.8 million from $45.7
million in 1998. Operating income by major geographic market are presented in
the following table:
(In millions) 26 WEEKS ENDED
JULY 2, JULY 3,
1999 1998
-------- --------
North America $ 46.8 $ 47.2
Europe 10.2 8.4
Asia Pacific and Latin America (6.5) (9.9)
-------- --------
$ 50.5 $ 45.7
======== ========
13
<PAGE> 14
Operating income in North America declined slightly from 1998 as lower second
quarter expenses associated with staff reductions was more than offset by higher
spending on Year 2000 compliance efforts and retained costs associated with the
sale of the North American Integration business. Europe's operating profit
improved 21.2% from $8.4 million in 1998, reflecting savings generated from
headcount reductions. Despite the 10.8% decline in sales, the combined Asia
Pacific and Latin America operating loss was reduced by 33.9% reflecting the
restructuring and expense reduction efforts of 1998.
The first half of 1998 includes an after-tax gain of $14.6 million relating to
the sale of the Company's shareholdings of ANTEC Corporation.
The consolidated income tax provision on continuing operations for the first
half of 1999 decreased to $14.4 million from $23.0 million in 1998. The decrease
was due to lower pre-tax earnings. The 1999 effective tax rate of 42% is based
on pre-tax book income adjusted primarily for amortization of nondeductible
goodwill and losses of foreign operations which are not currently deductible.
14
<PAGE> 15
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognizes a date using "00"
as the year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment, made upgrades to the mainframe
operating system and modified its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter.
Renovation of all critical business systems is now complete. The Company has
also completed the assessment of PC hardware and software systems and
non-information technology systems for Year 2000 compliance. The total Year 2000
project cost is estimated at approximately $4.5 million. To date, the Company
has incurred and expensed approximately $3.8 million, primarily for assessment
of the Year 2000 issue, mainframe operating system upgrades and code
modifications. The project is funded through the Company's information
technology budget, and represents less than six percent of that budget. The time
and expense of the project has not had, and is not expected to have, a material
impact on the Company's financial condition.
The Company has initiated formal communications with all of its
significant suppliers to confirm their Year 2000 compliance actions will be
sufficient to avoid any substantial disruptions in the Company's operations. The
Company has put a team together to continue to monitor this situation as the
information evolves. The Company believes most of the responses have been
designed to provide legal protection to the respondent as opposed to supplying
direct and reliable information; as such the Company makes no claim as to the
reliability of these responses. The Company is developing contingency plans to
the extent believed to be appropriate. The Company's total Year 2000 project
cost and estimates to complete that project assume no significant costs from the
impact of third party Year 2000 issues based on presently available information.
However, there can be no guarantee the other companies on which the Company
relies will be Year 2000 compliant, and their failure to do so could adversely
impact the Company as described below.
15
<PAGE> 16
The planning, assessment, and execution of substantially all of the
mainframe operating system upgrades and code modifications have been completed.
A new general ledger system was implemented in April. The remainder of the
project, including verification of its effectiveness, PC hardware and software
upgrades, and the development of contingency plans, is estimated to be completed
by October 1999, which is prior to any anticipated impact on the Company's
operating systems. The Company believes that with modifications to existing
software and upgrades to certain hardware the Year 2000 issue will not pose
significant operational problems for its computer systems. However, if such
modifications and upgrades are not made, or are not completed timely, the Year
2000 issue could have a material impact on the operations of the Company.
The severity of a failure of the Company or key suppliers to be Year
2000 compliant would depend on the nature of the problem and how quickly it
could be corrected or an alternative implemented, which is unknown at this time.
In the extreme, such failures could bring the Company to a standstill. Some
risks related to Year 2000 issues are beyond the control of the Company and its
suppliers. For example, no preparations or contingency plan will protect the
Company from a downturn in economic activity caused by the possible ripple
effect throughout the entire economy that could be caused by problems with Year
2000 issues.
The costs of the project and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, the success of third parties in
modifying their own systems and similar uncertainties.
The Company believes it should have no material exposure to
contingencies related to the Year 2000 issue for the products it has sold. The
Company's belief is based on the Company's practice of giving to its customers
only those warranties that the Company receives from its suppliers. To the
extent such warranties are breached, liability resulting therefrom will be the
ultimate responsibility of the Company's suppliers. However, there can be no
guarantee that such suppliers will be able to defend and indemnify the Company.
Specific factors that might cause the Company to incur liability include, but
are not limited to, insolvency of its suppliers, the existence of contractual
limitations on the suppliers' liability, and uncertainties regarding judicial
interpretation of the law regarding implied warranties.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held May 26, 1999 the Directors of the
Company were elected as follows:
VOTES
---------------------------------
DIRECTORS FOR WITHHELD
---------- --------
Lord James Blyth 31,579,843 42,218
Robert L. Crandall 31,581,264 40,797
Rod F. Dammeyer 31,456,342 165,719
Robert E. Fowler, Jr. 31,453,943 168,118
Robert W. Grubbs, Jr. 31,453,044 169,017
F. Philip Handy 31,581,973 40,088
Melvyn N. Klein 31,583,373 38,688
John R. Petty 31,582,443 39,618
Sheli Z. Rosenberg 31,454,139 167,922
Stuart M. Sloan 31,454,795 167,266
Thomas C. Theobald 31,583,292 38,769
Samuel Zell 31,455,327 166,734
17
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Each management contract or compensation plan required to be
filed as an exhibit is identified by an asterisk (*).
(10) Material contracts
10.1 (A) Asset Purchase Agreement, dated February 22, 1999
(Incorporated by reference from Anixter
International Inc. Current Report on Form 8-K
dated April 2, 1999).
(B) First Amendment to Asset Purchase Agreement,
dated March 29, 1999 (Incorporated by reference
from Anixter International Inc. Current Report
on Form 8-K dated April 2, 1999).
10.20* Anixter International Inc. Enhanced Management
Incentive Plan for 1999-2000.
(27) Financial data schedule
27.1 Financial data schedule
(b) Reports on Form 8-K
On April 13, 1999, the Company filed a Current Report on Form 8-K
dated April 2, 1999, relating to the sale of the North American
Integration business to Ameritech Corporation.
18
<PAGE> 19
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 13, 1999 By: /s/ Robert W. Grubbs
--------------- ---------------------------------
Robert W. Grubbs
President and Chief Executive Officer
Date: August 13, 1999 By: /s/ Dennis J. Letham
--------------- ---------------------------------
Dennis J. Letham
Senior Vice President - Finance
and Chief Financial Officer
19
<PAGE> 1
EXHIBIT 10.20
THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993
ANIXTER INTERNATIONAL INC.
ENHANCED MANAGEMENT INCENTIVE PLAN FOR 1999-2000
1. PURPOSE AND EFFECTIVE DATE. Anixter International Inc. and its
subsidiary Anixter Inc. (together and individually, the "Company") have
established a Management Incentive Plan pursuant to the approval of the
Company's stockholders at their meeting on May 4, 1995. The annual incentive
bonus opportunity currently being provided by the Management Incentive Plan (the
"Regular Plan") is being enhanced for the 1999 and 2000 Bonus Years for certain
key participants in the Management Incentive Plan as provided in this Enhanced
Management Incentive Plan for 1999-2000 (the "Enhanced Plan"). To the extent
that the value of any award under the Enhanced Plan exceeds the applicable
limitations of the Management Incentive Plan that portion of the award shall be
considered as having been granted outside the Management Incentive Plan. The
effective date of the Enhanced Plan shall be January 1, 1999.
2. ADMINISTRATION. The Enhanced Plan shall be administered by the Board
of Directors, or the Compensation Committee of the Company's Board of Directors
or such other Board committee as the Board may designate (the "Committee"). The
Committee has the authority and responsibility for the interpretation,
administration and application of the provisions of the Enhanced Plan, and the
Committee's interpretations of the Enhanced Plan, and all actions taken by it
and determinations made by it shall be binding on all persons. No Board or
Committee member shall be liable for any determination, decision or action made
in good faith with respect to the Enhanced Plan.
3. PARTICIPATION. The Participants of the Company listed on Exhibit B
who are notified in writing of their participation in the Enhanced Plan and any
additional Participants added to Exhibit B by the President and notified in
writing of their participation in the Enhanced Plan are the "Participants" in
the Enhanced Plan. The participation of the President and Senior Vice
President--Finance in the Management Incentive Plan, including the Enhanced
Plan, for the Bonus Year 2000 is conditioned upon approval of the stockholders
of the Company at their annual meeting in 2000 of the Management Incentive Plan,
including the Enhanced Plan, if the Company is subject to the limitations
imposed by the Omnibus Budget Reconciliation Act of 1993 on the deductibility of
executive compensation under Section 162(m) of the Internal Revenue Code.
4. ENHANCED INCENTIVE OPPORTUNITY. The annual incentive bonus
opportunity of each Participant under the Regular Plan shall be divided into two
equal portions. One portion shall continue to be governed by the provisions of
the Regular Plan and the payout matrices established from time to time pursuant
to that plan. This portion of the annual incentive bonus shall not be affected
by the Enhanced Plan. The other portion shall be eliminated from the annual
incentive
<PAGE> 2
bonus provided by the Regular Plan. This eliminated portion of the regular
annual incentive bonus, the "Fifty Percent of Regular Annual Bonus Opportunity,"
shall be governed solely by the Enhanced Plan. An additional annual incentive
bonus opportunity as specified for each Participant in Exhibit B, the
"Additional Bonus Opportunity," shall also be governed solely by the Enhanced
Plan. Together the Fifty Percent of Regular Annual Bonus Opportunity and the
Additional Bonus Opportunity shall be the Enhanced Incentive Opportunity and the
product of the dollar amount equal to the Enhanced Incentive Opportunity times
the percentage of this opportunity deemed earned by the Participant in
accordance with paragraph 5. shall be the Earned Enhanced Incentive.
5. EARNED ENHANCED INCENTIVE. How much, if any, of the Enhanced
Incentive Opportunity is earned is dependent on the Company's operating earnings
before non-recurring items for each Bonus Year ("Earnings"). The determination
of Earnings by the Committee shall be final and conclusive. In making this
determination the Committee shall not be bound by technical accounting rules or
how the Company chooses to report its Earnings. The payout grid for the Enhanced
Incentive is as follows:
EARNINGS FOR EARNINGS FOR
BONUS YEAR 1999 BONUS YEAR 2000
--------------- ---------------
(in millions) (in millions)
Threshold--50% earned 92 122
Target--100% earned 102 136
Maximum--150% earned 112 150
None of the Enhanced Incentive Opportunity will be earned for Earnings below the
Threshold. The percentage of the Enhanced Incentive Opportunity earned for
Earnings between the Threshold and the Maximum shall be determined by
interpolation. Earnings above the Maximum shall not affect the Enhanced
Incentive Opportunity.
6. PAYMENT OF EARNED ENHANCED INCENTIVE. The Earned Enhanced Incentive
shall be paid solely in Restricted Stock of the Company. The amount of
Restricted Stock shall be determined as follows: First, a value for a share of
Restricted Stock shall be determined by averaging the closing prices of the
Company's Shares for each trading day during the Bonus Year ("Per Share Value").
The Committee will in its sole judgment adjust this calculation as the Committee
determines to be appropriate for any increase or decrease in the number of
issued Shares or any change in the value of the Shares resulting from a
subdivision or consolidation of Shares, reorganization, recapitalization,
spin-off, payment of stock dividends on the Shares, or any other increase or
decrease in the number of issued Shares made without receipt of consideration by
the Company, or the payment of an extraordinary cash dividend. Second, 110% of
the Earned Enhanced Incentive that is attributable to Fifty Percent of Regular
Bonus and 100% of the Earned Enhanced Incentive that is attributable to
Additional Bonus Opportunity shall be added together to determine "Total Initial
Value of Restricted Stock." Third, the Total Initial Value of Restricted Stock
shall be divided by the Per Share Value to determine the number of Restricted
Shares to be awarded to Participant for the Enhanced Incentive Opportunity for
the Bonus Year. Fractional shares shall be rounded up or down to the nearest
whole share.
<PAGE> 3
7. RESTRICTED STOCK. Restricted Stock shall only be issued upon the
execution of a Restricted Stock Agreement in the form attached as Exhibit A. The
Restricted Stock will vest as provided in the Restricted Stock Agreement.
8. EMPLOYMENT. The Enhanced Plan is not a contract of employment. If
the employment of a Participant shall terminate for any reason during a Bonus
Year, the Participant shall have no right to any Enhanced Incentive Opportunity
for that or, if applicable, the subsequent Bonus Year. A Participant whose
employment terminates during a Bonus Year shall be treated as if he was not a
Participant in Enhanced Plan at any time during the Bonus Year and that
Participant's entire annual incentive bonus opportunity, it any, for that Bonus
Year will be governed by the Regular Plan.
9. IMPACT ON OTHER PLANS. The value of any portion of an Earned
Enhanced Incentive shall not be considered in determining (a) a Participant's
pension benefit under any of the Company's retirement plans or (b) the amount
that a Participant can contribute to any savings plan maintained by the Company.
However, if a Participant is participating in a defined benefit pension plan
that provides for a pension that is affected by the amount of annual incentive
bonus earned by the Participant under the Regular Plan, the amount of annual
incentive bonus earned by that Participant under the Regular Plan for that Bonus
Year will be treated, to the extent permitted by law, for purposes of that
pension plan as if it were twice that amount.
10. AMENDMENT OF THE ENHANCED PLAN. The Board of Directors or the
Committee may from time to time suspend, terminate, revise or amend the Enhanced
Plan or the terms of any grant in any respect whatsoever. No such amendment
shall affect rights in Restricted Stock earned prior to the amendment or shall
reduce the total annual incentive bonus opportunity for that Bonus year below
the opportunity the Participant would have had for that Bonus Year if he or she
had not been Participant or, if a Change of Control as defined in Exhibit B has
occurred, shall reduce any Participant's Enhanced Incentive Opportunity for the
Bonus Year in which such amendment is made.
Executed as of the Effective Date.
Anixter International Inc.
By
-------------------------
Its President
<PAGE> 4
EXHIBIT A TO ENHANCED INCENTIVE ENHANCED PLAN
THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993
RESTRICTED STOCK GRANT AGREEMENT
This RESTRICTED STOCK GRANT AGREEMENT is entered into effective
__________ ("Date of Grant") by and between ANIXTER INTERNATIONAL INC (together
with its subsidiaries and individually, the "Company") and ______________
("Participant"), for the purpose of subjecting ______ shares of the common stock
of the Company and any distributions thereon (the "Stock") granted to
Participant as a Restricted Stock Grant under Company's _____ Stock Incentive
Plan to certain forfeiture provisions contained herein.
W I T N E S S E T H:
WHEREAS, Participant pursuant to Company's Enhanced Management
Incentive Plan for 1999-2000 has been granted the Stock subject to the
forfeiture provisions contained herein; and
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
Section 1 Vesting and Forfeiture. One third of the Stock shall vest on
each anniversary of the Date of Grant beginning with the second anniversary of
the Date of Grant. In the case of the President or Senior Vice
President--Finance, the number of shares of Stock vesting on each such
anniversary will be reduced to the number of shares of Stock that can vest
without the value thereof being subject to, or causing other compensation to be
subject to, the limitations imposed by the Omnibus Budget Reconciliation Act of
1993 on the deductibility of executive compensation under Section 162(m) of the
Internal Revenue Code, provided that any shares not vesting as scheduled will
vest on the earliest date thereafter that they can vest without triggering such
limitations and all of the Stock will vest no later than the fifth anniversary
of the Date of Grant All of the Stock will vest upon the death or permanent
total disability of Participant or upon any Change of Control of the Company. A
"Change of Control of the Company" shall occur if (a) substantially all the
assets of the Company are sold to a Third Party or a Third Party becomes the
Beneficial Owner of the greater of (I) 25%, or (ii) the percentage owned by Sam
Zell and his affiliates, of the Company's securities that vote for the election
of directors or (b) a majority of the Board of Directors of the Company were not
nominated for election by the Board of Directors. A "Third Party" is any Person,
other than Samuel Zell or his Affiliates and other than Anixter International
Inc. or its subsidiaries. "Person," "Affiliates," and "Beneficial Owner" shall
be defined as those terms are defined pursuant to the Securities Exchange Act of
1934, as amended. If at a time the Stock is not vested (i) Participant's
employment with Company is terminated by Company for good cause or by
Participant voluntarily or (ii) any transfer of the Stock shall be made in
<PAGE> 5
violation of this Agreement, the Stock and any distributions thereon may be
reacquired by the Company, upon notice to Participant or any permitted
transferee, at no cost to the Company. Such notice of forfeiture shall be given
by the Company no later than 90 days after the date on which the Company
receives actual notice of the occurrence of such event.
Section 2 Prohibited Transfers. Any sale, hypothecation, encumbrance or
other transfer other than transfer by death of any of the shares of Stock
subject to forfeiture is prohibited unless the same shall have been consented to
in advance in writing by the Company (which consent may be withheld in the sole
discretion of the Company).
Section 3 Legends. Each instrument representing the Stock shall be
endorsed with the following legend and with any other legends required by law:
THE SALE OR TRANSFER OF SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE, WHETHER VOLUNTARY, OR BY OPERATION OF LAW, IS
SUBJECT TO THE RESTRICTIONS ON TRANSFER AND FORFEITURE
CONDITIONS (WHICH INCLUDE THE SATISFACTION OF CERTAIN
EMPLOYMENT SERVICE REQUIREMENTS) SET FORTH IN A RESTRICTED
STOCK GRANT AGREEMENT. A COPY OF SUCH AGREEMENT MAY BE
INSPECTED AT THE OFFICE OF THE SECRETARY OF THE CORPORATION.
Section 4 Withholding Taxes. As a condition to the grant or the vesting
of the Stock acquired hereunder, the Grantee shall make such arrangements as the
Company may require for the satisfaction of any Federal, state or local
withholding tax obligations that may arise in connection with such grant or
vesting.
Section 5. Retention of Certificate and Any Distributions. The
Secretary or any Assistant Secretary shall retain on behalf of Participant,
until the Stock is vested, all certificates and distributions pertaining to the
Stock. Upon vesting, the certificates and all distributions (with interest on
any cash distributions at 5%) shall be delivered to Participant.
Section 6 Parties in Interest. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, successors, assigns and personal representatives.
Section 7 Specific Performance. In the event of a breach of this
Agreement by any party hereto, any other party hereto shall be entitled to
secure specific performance of this Agreement in any court of competent
jurisdiction.
Section 8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
Section 9 Notices, etc. All notices and other communications required
or permitted hereunder will be in writing and will be mailed by first-class
mail, postage prepaid, addressed (a) if to Company at
4711 Golf Road
Skokie, Illinois 60076
Attn: General Counsel
<PAGE> 6
or at such other address as Company will have furnished to Participant in
writing, or
(b) if to Participant at
Then current address in
the records of Company
or at such other address as Participant will have furnished to Company in
writing in accordance with this Section.
All notices and other communications to be given hereunder shall be
given in writing. Except as otherwise specifically provided herein, all notices
and other communications hereunder shall be deemed to have been given if
personally delivered to the party being served, or two business days after
mailing thereof by registered mail, return receipt requested, postage prepaid,
to the requisite address set forth above (until notice of change thereof is
served in the manner provided in this Section).
Section 10 No Right to Employment. Nothing in this Agreement or in the
act of granting the Stock to Participant shall give Participant any rights to
continue to be employed by Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Company:
ANIXTER INTERNATIONAL INC.
a Delaware corporation
By
---------------------------------
Its
---------------------------------
Participant:
- ---------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE 26 WEEKS ENDED JULY 2, 1999 AND JULY 3, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDING
IN SUCH REPORTS. THE 26 WEEKS ENDED JULY 3, 1998 HAS BEEN RESTATED TO REFLECT
THE DISCONTINUANCE OF THE INTEGRATION SEGMENT.
</LEGEND>
<CIK> 0000052795
<NAME> ANIXTER INTERNATIONAL INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 JAN-01-1999
<PERIOD-START> JAN-02-1999 JAN-03-1998
<PERIOD-END> JUL-02-1999 JUL-03-1998
<CASH> 14,300 12,700
<SECURITIES> 0 0
<RECEIVABLES> 527,000 478,300
<ALLOWANCES> 10,100 11,000
<INVENTORY> 462,400 408,500
<CURRENT-ASSETS> 1,008,500 898,200
<PP&E> 148,200 144,500
<DEPRECIATION> 92,200 87,200
<TOTAL-ASSETS> 1,336,100 1,324,600
<CURRENT-LIABILITIES> 434,000 340,600
<BONDS> 0 0
0 0
0 0
<COMMON> 36,000 45,000
<OTHER-SE> 362,300 409,700
<TOTAL-LIABILITY-AND-EQUITY> 1,336,100 1,324,600
<SALES> 1,253,600 1,146,700
<TOTAL-REVENUES> 1,253,600 1,146,700
<CGS> 948,400 861,800
<TOTAL-COSTS> 1,203,100 1,101,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 16,100 14,500
<INCOME-PRETAX> 34,300 55,200
<INCOME-TAX> 14,400 23,000
<INCOME-CONTINUING> 19,900 32,200
<DISCONTINUED> 45,400 16,000
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 65,300 48,200
<EPS-BASIC> 1.68 1.03
<EPS-DILUTED> 1.66 1.02
</TABLE>
