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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR
[ ] 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE.
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [ ] No [X]
The aggregate market value of the shares of Registrant's Common Stock, $1
par value, held by nonaffiliates of Registrant was approximately $683,477,000 as
of March 1, 2000.
At March 1, 2000, 35,390,392 shares of Registrant's Common Stock, $1 par
value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the Registrant's Proxy Statement for the 1999 Annual
Meeting of Stockholders of Anixter International Inc. are incorporated by
reference into Part III. This document consists of 42 pages. Exhibit List begins
on page 33.
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business of the Company..................................... 3
Item 2 Properties.................................................. 5
Item 3. Legal Proceedings........................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......... 5
Executive Officers of the Registrant........................ 6
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 7
Item 6. Selected Financial Data..................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 13
Item 8. Consolidated Financial Statements and Supplementary Data.... 13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 13
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 33
Item 11. Executive Compensation...................................... 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 33
Item 13. Certain Relationships and Related Transactions.............. 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.................................................... 33
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PART I
ITEM 1. BUSINESS OF THE COMPANY.
(A) GENERAL DEVELOPMENT OF BUSINESS
Anixter International Inc. (the "Company"), formerly known as Itel
Corporation, which was incorporated in Delaware in 1967, is engaged in the
distribution of communications and specialty wire and cable products through
Anixter Inc. and its subsidiaries (collectively "Anixter").
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. The European Integration business was
sold in the fourth quarter of 1998. In 1999, the Company completed the disposal
of the Integration segment with North America Integration being sold in the
first quarter of 1999 followed by the sale of Asia Pacific Integration in the
fourth quarter of 1999.
In 1998, the Company sold its remaining 19% interest in ANTEC Corporation
and its subsidiaries (collectively "ANTEC"), a broadband communications
technology company. As of January 2, 1998, the Company owned approximately 19%
of ANTEC, which was reduced from 31% in February 1997, by the issuance of
additional stock by ANTEC in connection with a merger.
In June 1998, the Company purchased 100% of the outstanding common stock of
Pacer Electronics, Inc., a distributor of wire and cable products along with
value added services to original equipment manufacturers in the electronic
industry.
In August 1997, the Company purchased approximately 93% of the outstanding
common stock of Accu-Tech Corporation, a networking and wiring systems
specialist distributing products for data, voice, video and electrical
applications.
In 1996, the Company changed its fiscal year end from a calendar year
ending December 31 to the Friday nearest December 31 and included 52 weeks in
1999, 1998, 1997, and 53 weeks in 1996. This change did not have a significant
effect on the results of operations for the year ended January 3, 1997.
In 1995, the Company largely completed its strategy of selling its non-core
businesses and investments including the sale of its 9% investment in the common
stock of Santa Fe Energy Resources, Inc. ("Energy").
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
For certain financial information concerning the Registrant's business
segments, see Note 12 "Business Segments" of the Notes to the Consolidated
Financial Statements of this report.
(C) NARRATIVE DESCRIPTION OF BUSINESS
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. All narrative descriptions and year to
year comparisons have been restated to exclude Integration.
Anixter is a leading global distributor of communication products used in
building enterprise and Service Provider (companies that offer
telecommunications services, including internet service providers, cable
companies and wireless communications providers), data, voice and video
networks. In addition, Anixter is a leading distributor of specialty wire and
cable products to original equipment manufacturers ("OEM") and to industrial
companies for maintenance and repair operations ("MRO"). Anixter stocks and/or
sells a full line of these products from a network of 86 locations in the United
States, 19 in Canada, 10 in the United Kingdom, 27 in Continental Europe, 17 in
Latin America, 4 in Australia, and 13 in Asia. Anixter sells approximately
65,000 products to 85,000 active customers and works with over 1,000 active
suppliers. Its customers include international, national, regional and local
companies that are end users of these products and engage in manufacturing,
telecommunications, Internet service, finance, education, health care,
transportation, utilities and government. Also, Anixter sells products to
resellers such as contractors, installers, system
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integrators, value added resellers, architects, engineers and wholesale
distributors. The average order size is approximately $1,700.
The products distributed by Anixter include communication (voice, data and
video) products used to connect personal computers, peripheral equipment,
mainframe equipment and various networks to each other. The products include an
assortment of transmission media (copper and fiber optic cable) and components,
as well as active data components for networking applications. In the Enterprise
Network Communications market, Anixter sells products that are incorporated in
local area networks ("LANs"), the internetworking of LANs to form wide area
networks ("WANs") and enterprise networks. In the service provider market,
Anixter provides the installation-related materials that support central
switching offices, web hosting sites and remote transmission sites. Anixter's
products also include electrical wiring system products used for the
transmission of electrical energy and control/monitoring of industrial
processes.
Anixter also provides contractual supply chain management of installation
and repair-related materials for customers who install and/or maintain
communication equipment ("Integrated Supply"). Such contracts are generally for
time periods in excess of one year and include interfacing of Anixter and
customer information systems, the procurement, warehousing and delivery of goods
by Anixter, and in certain cases, the maintenance of dedicated warehouse
facilities.
Prior to 1989, Anixter's operations were primarily limited to North America
and the United Kingdom. In 1989, Anixter made a major commitment to expand its
operations into the international voice, data and video communications markets.
Since then, Anixter has opened businesses throughout Western and Central Europe
and in significant markets in the Pacific Rim (other than Japan) and Latin
America.
An important element of Anixter's overall business strategy is to develop
and maintain close relationships with its key suppliers, which include the
world's leading manufacturers of networking, communications cabling and
electrical wiring systems products. Such relationships stress joint product
planning, inventory management, technical support, advertising and marketing. In
support of this strategy, Anixter does not compete with its suppliers in product
design or manufacturing activities. Approximately 47% of Anixter's dollar volume
purchases in 1999 were from its five largest suppliers.
Anixter cost-effectively serves its customers' needs through its
proprietary computer system, which connects all of its warehouses and sales
offices throughout the world. The system is designed for sales support, order
entry, inventory status, order tracking, credit review and material management.
In addition, Anixter operates a series of large modern hub warehouses in key
distribution centers in North America, Europe, Asia and Latin America which
provide for cost effective and reliable storage and delivery of products to its
customers. The hub warehouses store the bulk of the Company's inventory and are
to a certain degree specialized by broad product category. Some smaller
warehouses are also maintained to provide for the local pick-up needs of
customers in certain cities. Anixter has also developed close relationships with
certain freight, package delivery and courier services to minimize transit times
between its facilities and customer locations. The combination of its
information systems, distribution network and delivery partnerships allows
Anixter to provide a high level of customer service while maintaining a
reasonable level of investment in inventory and facilities.
The Company competes with distributors and manufacturers who sell products
directly or through existing distribution channels to end users or other
resellers. In addition, future performance could be subject to economic
downturns, possible rapid changes in applicable technologies or regulatory
changes, which substantially change the cost and/or accessibility of public
network bandwidth. To guard against inventory obsolescence, the Company has
negotiated various return and price protection agreements with its key
suppliers. Although relationships with its suppliers are good, the loss of a
major supplier could have a temporary adverse effect on the Company's business,
but would not have a lasting impact since comparable products are available from
alternate sources.
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INVESTMENT IN ANTEC
ANTEC is a communications technology company, specializing in the design
and engineering of hybrid fiber/coax (HFC) broadband networks and the
manufacturing, materials management and distribution of products for these
networks.
During the first half of 1998, the Company sold its remaining 7.1 million
shares of ANTEC stock, resulting in net after tax proceeds of approximately $100
million. 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 February 6,
1997.
MISCELLANEOUS
At December 31, 1999, the Company and its subsidiaries employed
approximately 5,200 people. Backlog orders are not material as a significant
amount of orders are shipped within 24 to 48 hours of receipt.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
For information concerning foreign and domestic operations and export
sales, see Note 9 "Income Taxes" and Note 12 "Business Segments" of this report.
ITEM 2. PROPERTIES.
Substantially all of the Company's facilities are leased.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, the Company and its subsidiaries became
involved as plaintiffs or defendants in various legal proceedings. The claims
and counterclaims in such litigation, including those for punitive damages,
individually in certain cases and in the aggregate, involve amounts which may be
material. However, it is the opinion of the Company's management, based upon the
advice of its counsel, that the ultimate disposition of pending litigation will
not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of 1999, no matters were submitted to a vote of
the security holders.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the name, age as of March 7, 2000, position,
offices and certain other information with respect to the executive officers of
the Company. The term of office of each executive officer will expire upon the
appointment of his successor by the Board of Directors.
Rod F. Dammeyer, 59............... Vice Chairman of the Company since February 1998; Chief
Executive Officer and President of the Company from January
1993 to February 1998.
John A. Dul, 39................... General Counsel of the Company since May 1998; Assistant
Secretary of the Company since May 1995; General Counsel and
Secretary of Anixter since January 1996; Associate General
Counsel and Secretary from July 1994 to January 1996.
Robert W. Grubbs Jr., 43.......... President and Chief Executive Officer of the Company since
February 1998; President and Chief Executive Officer of
Anixter since July 1994.
Lisa Kearns Lanz, 47.............. Vice President--Controller of the Company since July 1999;
Vice President--Treasurer of the Company from August 1997 to
July 1999; Vice President--Treasurer of Premark
International Inc. from May 1994 to June 1996.
James E. Knox, 62................. Senior Vice President--Law and Secretary of the Company
since 1986.
Dennis J. Letham, 48.............. Chief Financial Officer, Senior Vice President--Finance of
the Company since January 1995; Chief Financial Officer,
Executive Vice President of Anixter since July 1993.
Philip F. Meno, 41................ Vice President--Taxes of the Company since May 1993.
Rod Shoemaker, 42................. Vice President--Treasurer of the Company and Anixter since
July 1999; Assistant Treasurer of the Company and Anixter
from October 1994 to July 1999.
Samuel Zell, 58................... Chairman of the Board of Directors of the Company since
January 1993.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Anixter International Inc.'s Common Stock is traded on the New York Stock
Exchange under the symbol AXE. Stock price information is set forth in Note 14
("Quarterly Summary (unaudited)") of this report. As of March 1, 2000, the
Registrant had 4,221 shareholders of record.
ITEM 6. SELECTED FINANCIAL DATA.
FISCAL YEAR
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1999 1998 1997 1996 1995
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(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Results of operations:
Sales....................................... $2,670.0 $2,348.5 $2,090.9 $1,816.5 $1,659.1
Operating income............................ 112.8 87.0 91.1 62.2 51.6
Interest expense and other, net............. (34.6) (34.8) (28.5) (24.0) (19.2)
Gain on ANTEC investment.................... -- 24.3 2.2 4.1 (0.6)
Loss on sale of marketable equity
securities............................... -- -- -- -- (3.0)
Income from continuing operations (a)....... 69.7 44.7 37.4 22.6 11.7
Income from discontinued operations......... 54.5 20.9 7.9 13.5 27.4
Net income.................................. 124.2 65.6 45.3 36.1 39.1
Basic income per share (b):
Continuing operations.................... $ 1.86 $ 1.00 $ 0.79 $ 0.46 $ 0.21
Net income per share..................... 3.31 1.46 0.95 0.73 0.71
Diluted income per share (b):
Continuing operations.................... $ 1.83 $ 0.99 $ 0.78 $ 0.45 $ 0.21
Net income per share..................... 3.26 1.45 0.95 0.72 0.70
Financial position at year-end:
Total assets................................ $1,434.7 $1,335.1 $1,333.6 $1,182.5 $1,131.4
Total debt.................................. $ 468.0 $ 543.6 $ 468.8 $ 468.4 $ 333.7
Stockholders' equity (c) (d)................ $ 456.4 $ 411.5 $ 477.0 $ 435.5 $ 449.0
Diluted book value per share (b)............ $ 11.99 $ 9.09 $ 9.98 $ 8.72 $ 8.05
Diluted shares (in thousands) (b)........... 38,078 45,263 47,775 49,949 55,784
Year end outstanding shares (in
thousands)............................... 35,924 41,878 47,297 48,007 52,488
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Notes:
(a) In the third quarter of 1999, the Company recorded a $24.3 million tax
benefit in continuing operations for the reversal of previously established
tax reserves determined to be no longer necessary.
(b) All shares and per share data have been adjusted to reflect the dividend
paid in the form of a two-for-one stock split on October 25, 1995.
(c) Stockholders' equity reflects treasury stock purchases, including, in 1995,
common stock repurchase commitments, of $91.9 million, $101.8 million, $14.2
million, $52.1 million and $152.6 million in 1999, 1998, 1997, 1996, and
1995, respectively.
(d) Stockholders' equity includes unrealized after-tax gains on marketable
equity securities available-for-sale of $19.8 million at January 2, 1998.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations may contain various "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which can be
identified by the use of forward-looking terminology such as "believes",
"expects", "prospects", "estimated", "should", "may" or the negative thereof or
other variations thereon or comparable terminology indicating the Company's
expectations or beliefs concerning future events. The Company cautions that such
statements are qualified by important factors that could cause actual results to
differ materially from those in the forward-looking statements, a number of
which are identified in the discussion which follows. Other factors could also
cause actual results to differ materially from expected results included in
these statements.
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. The information contained in this
financial review should be read in conjunction with the consolidated financial
information on pages 16 to 32 of this Report.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
Asset Sales and Other Dispositions
ANTEC Investment: During the first half of 1998, the Company sold its
remaining 7.1 million shares of ANTEC stock, resulting in net after tax proceeds
of approximately $100 million. As of January 2, 1998, the Company's interest in
ANTEC was approximately 19%. 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
February 6, 1997.
Discontinued Operations and Assets held for Sale: 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. The European Integration business was sold in the fourth quarter of
1998. In 1999, the Company completed the disposal of the Integration segment.
The North America Integration business was sold in the first quarter of 1999 and
the Asia Pacific Integration business was sold in the fourth quarter of 1999.
Total proceeds received from the sale of the Integration business were $238
million, resulting in an after-tax gain of $50.6 million. (Loss)/Income from
discontinued operations was $(2.5) million, $7.7 million and $7.9 million in
1999, 1998 and 1997, respectively. See Note 3 "Discontinued Operations" in the
Notes to the Consolidated Financial Statements for further information.
The Company sold certain other assets for $25.1 million and $43.0 million,
resulting in an after-tax loss/(gain) of $2.0 million and ($13.2) million in
1999 and 1998, respectively.
Cash Flow
Year ended December 31, 1999: Consolidated net cash provided by continuing
operating activities was $3.8 million in 1999 compared to $44.0 million used in
1998. Cash provided by continuing operating activities increased primarily as a
result of an increase in operating income and timing of inventory payments.
Consolidated net cash used by investing activities was $15.9 million in 1999
versus $39.4 million provided in 1998. The decline in proceeds from investing
activities resulted from the sale of the Company's remaining investment in ANTEC
for $104.3 million in 1998. This was partially offset in 1998 by the acquisition
of Pacer Electronics, Inc. for $38.1 million. In the fourth quarter of 1999, the
Company acquired a small specialty wire and cable company in Europe for $2.6
million. Capital expenditures were $13.8 million and $26.4 million in 1999 and
1998, respectively. Capital expenditures are expected to be approximately
$15-$18 million in 2000. Consolidated net cash used by financing activities was
$160.3 million for 1999 in comparison to $30.0 million
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in 1998. The change primarily resulted from a net paydown of long term debt of
$73.0 million in 1999 versus net proceeds from the issuance of long-term debt of
$73.3 million in 1998. Proceeds of $238 million received from the sale of the
Integration business were used to paydown long term debt and purchase treasury
stock.
Year ended January 1, 1999: Consolidated net cash used by continuing
operating activities was $44.0 million in 1998 compared to $48.1 million
provided in 1997. Cash used by continuing operating activities increased
primarily as the result of the timing of inventory payments and a decline in
operating net income. Consolidated net cash provided by investing activities was
$39.4 million in 1998 versus $51.1 million used in 1997. The increase in
proceeds by investing activities resulted from the sale of the investment in
ANTEC for $104.3 million. This was partially offset by the acquisition of Pacer
Electronics, Inc. for $38.1 million. In 1997, the Company purchased Accu-Tech
for $27.6 million in cash and assumed $15.2 million of additional debt. Capital
expenditures were $26.4 million and $22.5 million in 1998 and 1997,
respectively. Consolidated net cash used by financing activities was $30.0
million for 1998 in comparison to $22.3 million in 1997. The change resulted
from $101.8 million being used to purchase treasury stock in 1998 compared to
$14.2 million in 1997. Net proceeds from the issuance of long-term debt was
$73.3 million in 1998 versus a net paydown of $10.1 million in 1997. Proceeds
were used to fund higher working capital requirements.
Interest Expense: Interest expense from continuing operations was $34.9
million, $31.7 million and $27.9 million for 1999, 1998 and 1997, respectively.
The Company has entered into interest rate agreements which effectively fix or
cap, for a period of time, the interest rate on a portion of its floating-rate
obligations. As a result, the interest rate on approximately 65% of debt
obligations at December 31, 1999, is fixed or capped. The impact of interest
rate swaps and caps for 1999, 1998 and 1997, was to increase interest expense by
$1.3 million, $.5 million and $.8 million, respectively.
Financings
In September 1996, the Company increased Anixter's secured domestic
revolving line of credit to $550 million, obtained a release of collateral
making the facility unsecured, lowered the interest rate spreads, and extended
the expiration to 2001. Anixter filed a shelf registration statement with the
Securities and Exchange Commission to offer from time to time up to $200 million
aggregate principal amount of unsecured notes. On September 17, 1996, Anixter
issued $100 million of these notes due September 2003. The notes, which bear
interest at 8%, contain various restrictions with respect to secured borrowings
and are unconditionally guaranteed by the Company.
At December 31, 1999, $202 million was available under the bank revolving
lines of credit at Anixter and Accu-Tech, of which $25.4 million was available
to the Company for general corporate purposes.
Income Taxes
During the third quarter of 1998, the Internal Revenue Service completed
its examination for the years 1993 to 1995, which included an examination of net
operating losses and credit carryforwards dating back to 1979. As a result of
the lapsing, during the third quarter of 1999, of all relevant statutes of
limitations on assessment relating to that 17-year period of time, the Company
recorded a $24.3 million tax benefit in continuing operations for the reversal
of previously established tax reserves determined to be no longer necessary.
Various foreign subsidiaries of the Company had aggregate cumulative NOL
carryforwards for foreign income tax purposes of approximately $163.6 million at
December 31, 1999, which are subject to various tax provisions of each
respective country. Approximately $52.7 million of this amount expires between
2000 and 2009 and $110.9 million of the amount has an indefinite life. Of the
$163.6 million NOL carryforwards of foreign subsidiaries, $84.9 million relates
to losses that have already provided a tax benefit in the U.S. due to rules
permitting flow-through of such losses in certain circumstances. Without such
losses included, the cumulative NOL carryforwards at December 31, 1999 are
approximately $78.7 million, which are subject to various provisions of each
respective country. Approximately $39.5 million of this amount expires between
2000 and 2009 and $39.2 million of the amount has an indefinite life. The
deferred tax asset, and valuation
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allowance, relating to foreign NOL carryforwards have been adjusted to reflect
only the carryforwards in which the Company has not taken a tax benefit in the
U.S.
Liquidity Considerations and Other
Certain debt agreements entered into by the Company's operating
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.
RESULTS OF OPERATIONS
The Company has experienced increased sales due to the continued growth of
the North American communications and electrical wire and cable businesses,
along with its continuing worldwide expansion. 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 future
performance could be affected by economic downturns, possible rapid changes in
applicable technologies or regulatory changes that substantially change the cost
and/or availability of public networking bandwidth.
Year ended December 31, 1999: Income from continuing operations was $69.7
million in 1999 compared with $44.7 million in 1998. The comparative results
were favorably impacted by a 14% growth in sales and lower operating expenses as
a percentage of sales. 1998 results were favorably impacted by a $24.3 million
gain realized on the sale of the Company's investment in ANTEC. In 1999, the
Company repurchased 6.5 million of its outstanding shares for $91.9 million.
Excluding the repurchases, diluted income per share from continuing operations
would have been $1.63 as compared to $1.83 reported.
Net sales grew by 14% to $2.7 billion. The North American sales from
continuing operations experienced 19% growth to $2.0 billion from $1.7 billion
in 1998. Improvement was a result of strong growth in the core Enterprise
Network Communications and Electrical Wire and Cable product sets along with
over $100 million of new volume from the Service Provider sector and a 72%
increase in Integrated Supply. Improvement in Electrical Wire and Cable resulted
from both volume increases and higher copper prices. In Europe, sales of $518.7
million were flat compared to last year. Excluding the effect of changes in
exchange rates, sales improved 3%. Europe was negatively impacted by soft
networking product sales and a stronger dollar. Asia Pacific and Latin America
net sales were down 4% to $141.2 million in 1999 from $147.2 million in 1998.
The decline is a result of soft economic conditions along with weaker local
currencies for the first three quarters of 1999. Asia Pacific and Latin America
ended the year with sales up 12% in the fourth quarter over 1998.
Net sales by major market are presented in the following table:
YEARS ENDED
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DECEMBER 31, JANUARY 1,
1999 1999
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(IN MILLIONS)
North America............................................ $2,010.1 $1,683.2
Europe................................................... 518.7 518.1
Asia and Latin America................................... 141.2 147.2
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$2,670.0 $2,348.5
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In 1999, operating income increased to $112.8 million from $87.0 million in
1998. Gross margin declined to 23.5% in 1999 from 24.5% in 1998. The very strong
sales growth of the Service Provider and Logistic Service businesses, both of
which have lower gross margins, have reduced the overall gross margin rate.
Operating expenses as a percent of sales decreased from 20.5% in 1998 to 19.0%
in 1999. The lower gross margins in the Service Provider and Logistic Service
businesses corresponds with the higher operating productivity that is inherent
in the nature of those businesses. 1999 expenses include $3.0 million for
headcount reductions and the write-down of inventory to net realizable value for
the Latin American operations. In 1998, the Company incurred $3.2 million of
expenses for the consolidation and relocation of
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certain distribution and office facilities in Europe, while Asia Pacific
incurred $1.0 million in costs primarily relating to headcount reductions.
In North America, operating margins declined to 5.3% in 1999 from 5.6% in
1998. The slight decline resulted primarily from higher spending on Year 2000
compliance efforts and retained overhead costs associated with the North
American Integration business. Europe operating margins improved from 2.5% in
1998 to 4.0% in 1999. Excluding the $3.2 million consolidation and relocation
costs noted above, 1998 operating margin was 3.1%. The improvement resulted from
realizing the benefits of the 1998 restructuring and continued aggressive
expense management in light of the weak sales growth. As noted above, excluding
the 1999 $3.0 million of costs for Latin America and the 1998 $1.0 million of
costs for Asia Pacific, the operating loss for Asia and Latin America was
reduced by 44%. The improvement primarily resulted from Asia, where the Company
realized the benefits from the 1998 restructuring and expense reduction efforts.
Operating income (loss) by major market is presented in the following
table:
YEARS ENDED
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DECEMBER 31, JANUARY 1,
1999 1999
------------ ----------
(IN MILLIONS)
North America............................................ $106.2 $94.7
Europe................................................... 20.6 12.9
Asia and Latin America................................... (14.0) (20.6)
------ -----
$112.8 $87.0
====== =====
Consolidated interest expense increased to $34.9 million in 1999 from $31.7
million in 1998. The increase resulted from higher working capital requirements.
Foreign exchange and other expense declined from $3.1 million expense in 1998 to
$.3 million income in 1999. The expense in 1998 primarily relates to the third
quarter devaluation of the Mexican peso.
Excluding the $24.3 million tax benefit previously discussed in "Financial
Liquidity and Capital Resources", the 1999 effective income tax rate on
continuing operations was 42.0% as compared with 41.6% in 1998. The effective
tax rate exceeds the combined federal and state rate of approximately 40%
primarily as a result of non-tax-deductible goodwill amortization and start-up
losses in some foreign countries where there is no current year benefit.
Year ended January 1, 1999: Income from continuing operations was $44.7
million in 1998 compared with $37.4 million in 1997. The 1998 results were
favorably impacted by a 12% growth in sales and the $24.3 million gain on the
sale of the Company's investment in ANTEC.
Net sales grew by 12% to $2.3 billion. The North American continuing
operations experienced a 16% growth to $1.7 billion from $1.5 billion in 1997.
Improvement was a result of continued growth in demand for all major product
sets. In addition, $93 million of the $227 million overall increase in 1998
sales is attributed to the inclusion of a full year for Accu-Tech, which was
acquired in August 1997, and Pacer Electronics, Inc., which was purchased in
June 1998. Lower copper prices resulted in lower sales prices, hindering the
growth of the Wire and Cable business. In Europe, sales of $518.1 million
represented growth of 6% as compared to 14% in 1997. The slowdown in sales
growth is largely attributed to soft sales growth in the U.K. Asia Pacific and
Latin America net sales were essentially flat to last year at $147.2 million.
Excluding the effect of changes in exchange rates, net sales grew 10%.
Significant volume growth in Latin America was offset by a decline in Asia
Pacific, which was negatively impacted by poor economic conditions in Southeast
Asia.
11
12
Net sales by major market are presented in the following table:
YEARS ENDED
-----------------------
JANUARY 1, JANUARY 2,
1999 1998
---------- ----------
(IN MILLIONS)
North America.............................................. $1,683.2 $1,456.4
Europe..................................................... 518.1 487.0
Asia and Latin America..................................... 147.2 147.5
-------- --------
$2,348.5 $2,090.9
======== ========
In 1998, operating income decreased to $87.0 million from $91.1 million in
1997. Gross margin declined to 24.5% in 1998 from 25.0% in 1997. The decline was
primarily a result of unfavorable inventory costing adjustments in Latin
America, poor economic conditions in Southeast Asia and planned price reductions
in North American communications in pursuit of greater market share. Operating
expenses as a percent of sales increased slightly from 20.3% in 1997 to 20.5% in
1998. In 1998, the Company incurred $3.2 million of expenses for the
consolidation and relocation of certain distribution and office facilities in
Europe to improve future productivity and lower costs. In addition, in 1997,
$7.1 million of income was realized on the sale of an investment in a start-up
telecommunications company and management fees relating to the collection of
certain receivables. Excluding these unusual items, operating expenses as a
percentage of sales continued to improve, declining from 20.7% in 1997 to 20.4%
in 1998. Improvement primarily relates to headcount reductions in Asia Pacific
and Europe, partially offset by increased operating expenses in North America.
In North America, operating margins declined to 5.6% in 1998 from 6.8% in
1997. Excluding the $7.1 million increase noted in the paragraph above, 1997
operating margin was 6.3%. North American communications margins declined,
resulting from the effects of lower copper prices on electrical wire and cable
products, higher facility costs and increased headcount in pursuing greater
market share. Europe operating margins improved from 2.2% in 1997 to 2.5% in
1998. Excluding the $3.2 million consolidation and relocation costs noted above,
1998 operating margin was 3.1%. The improvement resulted from reductions in
headcount and improved gross margins due to lower costs and favorable inventory
adjustments. Asia and Latin America continued to operate at a loss on flat sales
due to the poor economy in Southeast Asia and unfavorable year end inventory
adjustments in Latin America.
Operating income (loss) by major market is presented in the following
table:
YEARS ENDED
-----------------------
JANUARY 1, JANUARY 2,
1999 1998
---------- ----------
(IN MILLIONS)
North America.............................................. $94.7 $99.0
Europe..................................................... 12.9 10.7
Asia and Latin America..................................... (20.6) (18.6)
----- -----
$87.0 $91.1
===== =====
Consolidated interest expense increased to $31.7 million in 1998 from $27.9
million in 1997. The increase resulted from higher working capital requirements.
Foreign exchange and other expense rose to $3.1 million in 1998 from $.6 million
in 1997. The increase primarily relates to the third quarter devaluation of the
Mexican peso.
The 1998 effective income tax rate on continuing operations was 41.6% as
compared with 42.3% in 1997. The effective tax rate exceeds the combined federal
and state rate of approximately 40% primarily as a result of non-tax-deductible
goodwill amortization and start-up losses in some foreign countries where there
is no current year benefit.
Impact of Year 2000: In 1999, the Company completed upgrading the mainframe
operating system and modified software so that computer systems would function
properly with respect to dates in the year 2000 and thereafter. The Company also
completed the assessment of PC hardware and software systems and non-
12
13
information technology systems for Year 2000 compliance. Over the life of the
project, the Company incurred and expensed approximately $4.5 million, primarily
for assessment of the Year 2000 issue, mainframe operating system upgrades and
code modifications. The time and expense of the project did not have a material
impact on the Company's financial condition. As a result of these modifications,
the Company did not incur any significant problems relating to Year 2000 issues.
There was no interruption of business with key suppliers or downturn in economic
activity caused by problems with Year 2000 issues. As of March 1, 2000, the
Company has not been notified of any warranty issues relating to Year 2000 for
the products it has sold and therefore, 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 will continue to monitor its computer
applications and those of its suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.
Impact of Inflation: Inflation is currently not an important determinant of
Anixter's results of operations due, in part, to rapid inventory turnover.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to the impact of interest rate changes and
fluctuations in foreign currencies, as well as changes in the market value of
its financial instruments. The Company periodically enters into derivatives in
order to minimize these risks, but not for trading purposes.
The Company has entered into interest rate agreements which effectively fix
or cap the LIBOR component of the interest rate on a portion of its floating
rate obligations. As a result, the interest rate on approximately 65% and 40% of
debt obligations at December 31, 1999 and January 1, 1999, respectively, is
fixed or capped. See Note 1, "Interest Rate Agreements," and Note 7, "Debt," of
the consolidated financial statements for further detail on interest agreements
and debt obligations outstanding.
The Company prepared sensitivity analyses of its derivatives and other
financial instruments assuming a 1 percentage point adverse change in interest
rates and a 10 percent adverse change in the foreign currency contracts
outstanding. Holding all other variables constant, the hypothetical adverse
changes would increase interest expense by $2.8 million and foreign exchange
losses by $2.5 million. The effect of the interest change on the fair market
value of the outstanding debt is insignificant. These analyses did not consider
the effects of the reduced level of economic activity that could exist in such
an environment and certain other factors. Further, in the event of a change of
such magnitude, management would likely take actions to further mitigate its
exposure to possible changes. However, due to the uncertainty of the specific
actions that would be taken and their possible effects, the sensitivity analyses
assume no changes in the Company's financial structure.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE
----
Report of Independent Auditors.............................. 14
Consolidated Statement of Operations........................ 15
Consolidated Balance Sheet.................................. 16
Consolidated Statement of Cash Flows........................ 17
Consolidated Statement of Stockholders' Equity.............. 18
Notes to the Consolidated Financial Statements.............. 19
Selected Quarterly Financial Data (Unaudited)............... 32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
13
14
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Anixter International Inc.
We have audited the accompanying consolidated balance sheets of Anixter
International Inc. as of December 31, 1999, and January 1, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Anixter
International Inc. at December 31, 1999, and January 1, 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
February 7, 2000
14
15
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED
--------------------------------------
DECEMBER 31, JANUARY 1, JANUARY 2,
1999 1999 1998
------------ ---------- ----------
Net sales................................................. $2,670.0 $2,348.5 $2,090.9
Cost of operations:
Cost of products sold.................................. 2,042.7 1,772.9 1,568.6
Operating expenses..................................... 507.1 481.5 424.9
Amortization of goodwill............................... 7.4 7.1 6.3
-------- -------- --------
Total costs and expenses.......................... 2,557.2 2,261.5 1,999.8
-------- -------- --------
Operating income.......................................... 112.8 87.0 91.1
Other (expenses) income:
Interest expense....................................... (34.9) (31.7) (27.9)
Gain on ANTEC investment............................... -- 24.3 2.2
Other.................................................. 0.3 (3.1) (0.6)
-------- -------- --------
Income before income taxes................................ 78.2 76.5 64.8
Income tax expense........................................ 8.5 31.8 27.4
-------- -------- --------
Income from continuing operations......................... 69.7 44.7 37.4
Discontinued operations:
(Loss) Income from discontinued operations, net of
tax.................................................. (2.5) 7.7 7.9
Gain on disposal of discontinued operations, net of
tax.................................................. 57.0 13.2 --
-------- -------- --------
Net income................................................ $ 124.2 $ 65.6 $ 45.3
======== ======== ========
Basic income per share:
Continuing operations..................................... $1.86 $1.00 $0.79
Discontinued operations................................... 1.45 0.46 0.16
-------- -------- --------
Net income................................................ $3.31 $1.46 $0.95
======== ======== ========
Diluted income per share:
Continuing operations..................................... $1.83 $0.99 $0.78
Discontinued operations................................... 1.43 0.46 0.17
-------- -------- --------
Net income................................................ $3.26 $1.45 $0.95
======== ======== ========
See accompanying notes to the consolidated financial statements.
15
16
ANIXTER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, JANUARY 1,
1999 1999
------------ ----------
ASSETS
Current assets:
Cash...................................................... $ 17.5 $ 20.5
Accounts receivable, (less allowances of $10.3 in 1999 and
$11.0 in 1998)......................................... 537.5 455.9
Inventories............................................... 536.4 417.2
Deferred income taxes..................................... 18.2 13.3
Income taxes receivable................................... -- 5.1
Other assets.............................................. 11.5 8.4
-------- --------
Total current assets................................. 1,121.1 920.4
Property and equipment, at cost............................. 158.6 144.1
Accumulated depreciation.................................... (105.5) (86.5)
-------- --------
Net property & equipment............................. 53.1 57.6
Goodwill (less accumulated amortization of $78.4 in 1999 and
$71.0 in 1998)............................................ 229.1 233.8
Net assets of discontinued operations....................... -- 87.3
Other assets................................................ 31.4 36.0
-------- --------
$1,434.7 $1,335.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 340.4 $ 246.7
Accrued expenses.......................................... 149.1 94.3
Income taxes payable...................................... 6.0 --
-------- --------
Total current liabilities............................ 495.5 341.0
Deferred income taxes....................................... -- 28.3
Other liabilities........................................... 14.8 10.7
Long-term debt.............................................. 468.0 543.6
-------- --------
Total liabilities.................................... 978.3 923.6
Stockholders' equity:
Common stock -- $1.00 par value, 100,000,000 shares
authorized, 35,924,240 and 41,877,659 shares issued and
outstanding in 1999 and 1998, respectively............. 35.9 41.8
Accumulated other comprehensive income.................... (37.6) (39.7)
Retained earnings......................................... 458.1 409.4
-------- --------
Total stockholders' equity........................... 456.4 411.5
-------- --------
$1,434.7 $1,335.1
======== ========
See accompanying notes to the consolidated financial statements.
16
17
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
YEARS ENDED
--------------------------------------
DECEMBER 31, JANUARY 1, JANUARY 2,
1999 1999 1998
------------ ---------- ----------
Operating activities:
Net Income................................................ $ 124.2 $ 65.6 $ 45.3
Adjustments to reconcile income from continuing operations
to net cash provided by (used in) continuing operating
activities:
Income from discontinued operations.................... (54.5) (20.9) (7.9)
Gain on ANTEC investment............................... -- (24.3) (2.2)
Depreciation and amortization.......................... 26.0 26.8 26.1
Deferred income taxes.................................. (28.6) (7.4) (13.8)
Changes in assets and liabilities:
Accounts receivable.................................. (70.3) (41.7) (64.1)
Inventory............................................ (115.4) (17.8) (46.3)
Accounts payable and accruals........................ 124.9 (10.0) 110.9
Other, net........................................... (2.5) (14.3) 0.1
------- ------- -------
Net cash provided by (used in) continuing
operating activities............................ 3.8 (44.0) 48.1
------- ------- -------
Investing activities:
Capital expenditures...................................... (13.8) (26.4) (22.5)
Acquisition of businesses................................. (2.6) (38.1) (28.6)
Proceeds from sale of ANTEC............................... -- 104.3 --
Other, net................................................ 0.5 (0.4) --
------- ------- -------
Net cash (used in) provided by continuing
investing activities............................ (15.9) 39.4 (51.1)
------- ------- -------
Financing activities:
Proceeds from long-term borrowings........................ 897.2 945.8 801.7
Repayment of long-term borrowings......................... (970.2) (872.5) (811.8)
Proceeds from issuance of common stock.................... 10.5 3.1 3.5
Purchase of treasury stock................................ (91.9) (101.8) (14.2)
Other, net................................................ (5.9) (4.6) (1.5)
------- ------- -------
Net cash used in continuing financing
activities...................................... (160.3) (30.0) (22.3)
------- ------- -------
Cash provided by discontinued operations.................... 169.4 44.5 17.7
------- ------- -------
Cash (used) provided........................................ (3.0) 9.9 (7.6)
Cash at beginning of year................................... 20.5 10.6 18.2
------- ------- -------
Cash at end of year......................................... $ 17.5 $ 20.5 $ 10.6
======= ======= =======
See accompanying notes to the consolidated financial statements.
17
18
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN MILLIONS)
ACCUMULATED OTHER
COMPREHENSIVE INCOME
------------------------
UNREALIZED
GAINS ON
CUMULATIVE MARKETABLE
COMMON CAPITAL RETAINED TRANSLATION EQUITY COMPREHENSIVE
STOCK SURPLUS EARNINGS ADJUSTMENTS SECURITIES INCOME
------ ------- -------- ----------- ---------- -------------
Balance at January 3, 1997......... $48.0 $ 57.1 $344.6 $(14.1) $ --
Net income......................... -- -- 45.3 -- -- $ 45.3
Other comprehensive income:
Foreign currency translation
adjustments...................... -- -- -- (13.0) -- (13.0)
Change in unrealized gain on
marketable equity securities (net
of tax of $12.2 million)......... -- -- -- -- 19.8 19.8
------
Comprehensive income............... $ 52.1
======
Issuance of common stock and
related tax benefits............. 0.3 3.2 -- -- --
Purchase and retirement of treasury
stock............................ (1.0) (13.2) -- -- --
----- ------ ------ ------ ------
Balance at January 2, 1998......... 47.3 47.1 389.9 (27.1) 19.8
Net income......................... -- -- 65.6 -- -- $ 65.6
Other comprehensive income:
Foreign currency translation
adjustments...................... -- -- -- (12.6) -- (12.6)
Change in unrealized gain on
marketable equity securities (net
of tax of $12.2 million)......... -- -- -- -- (19.8) (19.8)
------
Comprehensive income............... $ 33.2
======
Issuance of common stock and
related tax benefits............. 0.1 3.0 -- -- --
Purchase and retirement of treasury
stock............................ (5.6) (50.1) (46.1) -- --
----- ------ ------ ------ ------
Balance at January 1, 1999......... 41.8 -- 409.4 (39.7) --
Net income......................... -- -- 124.2 -- -- $124.2
Other comprehensive income:
Foreign currency translation
adjustments...................... -- -- -- 2.1 -- 2.1
------
Comprehensive income............... $126.3
======
Issuance of common stock and
related tax benefits............. 0.6 9.9 -- -- --
Purchase and retirement of treasury
stock............................ (6.5) (9.9) (75.5) -- --
----- ------ ------ ------ ------
Balance at December 31, 1999....... $35.9 $ -- $458.1 $(37.6) $ --
===== ====== ====== ====== ======
See accompanying notes to the consolidated financial statements.
18
19
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION: Anixter International Inc., formerly known as Itel
Corporation, which was incorporated in Delaware in 1967, is engaged in providing
networking and cabling solutions for private network infrastructure requirements
through Anixter Inc. and its subsidiaries (collectively "Anixter").
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Anixter International Inc. and its majority-owned subsidiaries
(collectively "the Company") after elimination of intercompany transactions. The
Company's fiscal year ends on the Friday nearest December 31 and included 52
weeks in 1999, 1998 and 1997.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Certain amounts for prior years have been reclassified to conform to the
current year presentation.
INVENTORIES: Inventories, consisting primarily of finished goods, are
stated at the lower of cost or market. Cost is determined using the average-cost
method.
PROPERTY AND EQUIPMENT: Capital expenditures, primarily equipment, are
recorded at cost and depreciated on the straight-line method over their
estimated useful lives ranging from 3 to 10 years. Leasehold improvements are
depreciated over the term of the related lease. Upon sale or retirement, the
cost and related depreciation are removed from the respective accounts, and any
gain or loss is included in income. Maintenance and repair costs are expensed as
incurred.
GOODWILL: Goodwill primarily relates to the excess of cost over the fair
value of the net tangible assets of businesses acquired. The Company continually
reviews goodwill to assess recoverability from estimated undiscounted future
cash flows at the aggregate business unit level. Goodwill is amortized on a
straight-line basis over periods ranging from 20 to 40 years.
INVESTMENT IN ANTEC: In 1998, the Company sold its remaining 7.1 million
shares of ANTEC stock which resulted in net after tax proceeds of approximately
$100 million and an after-tax gain of $14.6 million. 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. As of January 2, 1998, the market value
of the Company's investment in ANTEC was $112.0 million. The Company reported
its investment in ANTEC at fair value. All unrealized gains and losses, net of
taxes, were recorded in stockholders' equity until realized.
INTEREST RATE AGREEMENTS: In addition to the fixed rate 8.0% Senior Notes,
the Company has entered into interest rate agreements which effectively fix or
cap, for a period of time, the LIBOR component of an interest rate on a portion
of its floating rate obligations. As a result, the interest rate on
approximately 65% and 40%, of debt obligations at December 31, 1999 and January
1, 1999, respectively, is fixed or capped. At December 31, 1999 and January 1,
1999, the Company had an interest rate swap agreement outstanding with a
notional amount of $25 million. This swap agreement obligated the Company to pay
a fixed rate of approximately 6.1% through January 2003. At December 31, 1999
and January 1, 1999, the Company also had one interest rate collar agreement
with a notional amount of $50 million which entitled the Company to receive from
the bank the amount by which the LIBOR component of the floating rate interest
payments exceed 6.5%. In addition, the Company is required to pay the bank the
difference between 6.3% and the floating rate when it is below 5.3%. This
interest rate collar matures in January 2002. At December 31, 1999 and January
1, 1999, the
19
20
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company had three additional interest rate swap agreements outstanding with a
notional amount aggregating $100 million that obligated the Company to pay a
fixed rate of approximately 6.1% through July 2000. At December 31, 1999, the
Company had an interest rate swap agreement outstanding with a notional amount
of $25 million. This swap agreement obligated the Company to pay a fixed rate of
6.1% through July 2002. At December 31, 1999, the Company had a cancelable
interest rate swap agreement outstanding with a notional amount of $50 million.
This swap agreement obligated the Company to pay a fixed rate of 5.7% through
August 2002. However, the counterparty exercised their right to cancel the swap
in February 2000. The fair value, which is the estimated amount at the current
interest rate that the Company would receive or pay to enter into similar
interest rate agreements on the reporting date, of all of the Company's interest
rate agreements at December 31, 1999, and January 1, 1999, would be to receive
$1.4 million and pay $3.8 million, respectively. The impact of these interest
rate agreements for fiscal years 1999, 1998 and 1997, was to increase interest
expense by $1.3 million, $.5 million and $.8 million, respectively. The Company
does not enter into interest rate transactions for speculative purposes.
FOREIGN CURRENCY FORWARD CONTRACTS: The Company has purchased short-term
foreign currency forward contracts to minimize the effect of fluctuating foreign
currencies on its reported income. The impact of these foreign currency forward
contracts on the income statement was insignificant in 1999, 1998 and 1997. The
forward contracts are revalued at current foreign exchange rates, with the
changes in valuation reflected directly in income. At December 31, 1999, and
January 1, 1999, the Company had approximately $24.3 million and $32.7 million,
respectively, in foreign currency forward contracts outstanding.
REVENUE RECOGNITION: Sales and related cost of sales are recognized upon
shipment of products.
ADVERTISING AND SALES PROMOTION: Advertising and sales promotion costs are
expensed as incurred. Advertising and promotion costs were $11.1 million, $13.3
million and $13.7 million in 1999, 1998 and 1997, respectively.
STOCK BASED COMPENSATION: In accordance with the Accounting Principles
Board Opinion 25, "Accounting for Stock Issued to Employees", compensation cost
of stock options is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the option exercise price
and is charged to operations over the vesting period. Income tax benefits
attributable to stock options exercised are credited to capital in excess of
par.
INCOME TAXES: Using the liability method, provisions for income taxes
include deferred taxes resulting from temporary differences in determining
income for financial and tax purposes. Such temporary differences result
primarily from differences in the carrying value of assets and liabilities.
NEW ACCOUNTING PRONOUNCEMENTS
Accounting for Derivatives Instruments and Hedging Activities: In June
1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in the first quarter of fiscal year 2001. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.
20
21
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. INCOME PER SHARE
The following table sets forth the computation of basic and diluted income
per share from continuing operations:
1999 1998 1997
---- ---- ----
Numerator (in millions):
Income from continuing operations......................... $ 69.7 $ 44.7 $ 37.4
====== ====== ======
Denominator (in thousands):
Basic shares outstanding.................................. 37,507 44,877 47,533
Effect of dilutive securities:
Stock options and warrants................................ 571 386 242
------ ------ ------
Dilutive potential shares................................... 38,078 45,263 47,775
====== ====== ======
Basic income per share from continuing operations........... $ 1.86 $ 1.00 $ 0.79
Diluted income per share from continuing operations......... $ 1.83 $ 0.99 $ 0.78
NOTE 3. 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. The European Integration business was
sold in the fourth quarter of 1998. In 1999, the Company completed the disposal
of the Integration segment with North America Integration being sold in the
first quarter of 1999 followed by the sale of Asia Pacific Integration in the
fourth quarter of 1999. Interest expense has been allocated to discontinued
operations based on the percentage of total identifiable assets.
The Company recorded an after-tax gain from the sale of discontinued assets
of $57.0 million and $13.2 million in 1999 and 1998, respectively. Included in
the fiscal year 1999 gain on sale of assets, is a tax benefit of $8.4 million
resulting from the reversal of certain tax reserves associated with prior years'
reported sales of discontinued assets. Total proceeds received from the sale of
the Integration business was $238 million.
Net sales and income from discontinued operations are as follows:
YEARS ENDED
--------------------------------------
DECEMBER 31, JANUARY 1, JANUARY 2,
1999 1999 1998
------------ ---------- ----------
(IN MILLIONS)
Net sales................................................... $196.3 $735.2 $714.3
Costs and expenses.......................................... (199.5) (710.0) (694.3)
------ ------ ------
Operating (loss) income..................................... (3.2) 25.2 20.0
Gain on sale of assets...................................... 81.1 22.0 --
Net interest expense and other.............................. (1.0) (4.8) (5.3)
Income tax expense.......................................... (22.4) (21.5) (6.8)
------ ------ ------
Income from discontinued operations......................... $ 54.5 $ 20.9 $ 7.9
====== ====== ======
NOTE 4. ACQUISITION OF PACER ELECTRONICS, INC. AND ACCU-TECH CORPORATION
In June 1998, the Company purchased Pacer Electronics, Inc. ("Pacer") for
approximately $38 million. Pacer is an electrical and data cabling distributor
largely centered in the Northeast portion of the United States, with additional
locations in North Carolina and Florida. The majority of Pacer's sales come from
the
21
22
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
sale of wire, cable, connectors and related products and value added services to
original equipment manufacturers in the electronics industry.
In August 1997, the Company purchased approximately 93% of the outstanding
common stock of Accu-Tech Corporation for $27.6 million in cash and assumed
$15.2 million of debt. Accu-Tech Corporation is a networking and wiring
specialist distributing products for data, voice, video and electrical
applications.
Both the Pacer acquisition and the Accu-Tech Corporation acquisition were
accounted for using the purchase method of accounting. Had these acquisitions
occurred at the beginning of their respective years of acquisition, the impact
on the Company's operating results would not have been significant.
NOTE 5. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
At December 31, 1999, and January 1, 1999, the Company had an ownership
interest of approximately 99% in Anixter Inc., which is included in the
consolidated financial statements of the Company. The following summarizes the
financial information of Anixter Inc. and reflects the Integration segment of
the Company as a discontinued operation:
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, JANUARY 1,
1999 1999
------------ ----------
(IN MILLIONS)
Assets:
Current assets............................................ $1,117.9 $ 872.3
Property, net............................................. 53.1 54.6
Goodwill.................................................. 229.1 212.1
Net assets of discontinued operations..................... -- 98.3
Other assets.............................................. 31.2 28.9
-------- --------
$1,431.3 $1,266.2
======== ========
Liabilities and Stockholders' Equity:
Current liabilities....................................... $ 486.4 $ 333.8
Other liabilities......................................... 9.9 8.7
Long-term debt............................................ 468.0 524.1
Subordinated notes payable to parent...................... 19.1 7.0
Stockholders' equity...................................... 447.9 392.6
-------- --------
$1,431.3 $1,266.2
======== ========
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
YEARS ENDED
-------------------------
DECEMBER 31, JANUARY 1,
1999 1999
------------ ----------
(IN MILLIONS)
Net sales................................................... $2,644.9 $2,240.2
Operating income............................................ $ 114.6 $ 84.3
Income before income tax expense............................ $ 79.9 $ 46.7
Income from continuing operations........................... $ 43.6 $ 15.7
Net income.................................................. $ 91.7 $ 25.0
22
23
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. ACCRUED EXPENSES
Accrued expenses consists of the following:
DECEMBER 31, JANUARY 1,
1999 1999
------------ ----------
(IN MILLIONS)
Interest.................................................... $ 7.4 $ 5.9
Salaries and fringe benefits................................ 70.3 60.3
Other....................................................... 71.4 28.1
------ -----
$149.1 $94.3
====== =====
NOTE 7. DEBT
Debt is summarized below:
DECEMBER 31, JANUARY 1,
1999 1999
------------ ----------
(IN MILLIONS)
Bank revolving lines of credit.............................. $362.8 $435.9
8% Senior notes............................................. 100.0 100.0
Other....................................................... 5.2 7.7
------ ------
Total debt............................................. $468.0 $543.6
====== ======
Anixter has various revolving bank lines of credit worldwide which provide
for up to $565 million of borrowings of which $550 million is domestic. At
December 31, 1999, approximately $363 million was borrowed and $202 million was
available under the bank revolving lines of credit, of which $25.4 million was
available for general corporate purposes. These lines of credit reduce or mature
at various dates from 2001 through 2002. The $550 million domestic revolving
line of credit matures in 2001. Floating and fixed interest rate options, based
on the prime or LIBOR rate, are available under these facilities. The weighted
average interest rate at December 31, 1999, and January 1, 1999, was 6.7% and
6.1%, respectively. Facility fees of .2% payable on the revolving lines of
credit were insignificant.
In September 1996, Anixter filed a shelf registration statement with the
Securities and Exchange Commission to offer from time to time up to $200 million
aggregate principal amount of unsecured notes. On September 17, 1996, Anixter
issued $100 million of these notes due September 2003. The notes, which bear
interest at 8%, contain various restrictions with respect to secured borrowings
and are unconditionally guaranteed by the Company.
Certain debt agreements entered into by the Company's subsidiaries contain
various restrictions including restrictions on payments to the Company. The
Company has guaranteed substantially all of the debt of its subsidiaries.
Restricted net assets of subsidiaries were approximately $372.9 million and
$362.5 million at December 31, 1999 and January 1, 1999, respectively.
Aggregate annual maturities of debt are as follows: 2000 - none; 2001 -
$362.8 million; 2002 - none; 2003 - $100.0 million; 2004 - none; and $5.2
million thereafter.
Interest paid in 1999, 1998, and 1997 was $34.5 million, $36.6 million, and
$31.0 million, respectively.
The carrying amount of the Company's debt generally approximates fair
value.
23
24
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. LEASE COMMITMENTS
Substantially all of the Company's office and warehouse facilities and
equipment are leased under operating leases. Certain of these leases are
long-term operating leases and expire at various dates through 2013. Minimum
lease commitments under operating leases at December 31, 1999 are as follows:
2000 -- $41.8 million; 2001 -- $32.1 million; 2002 -- $25.6 million;
2003 -- $16.4 million; 2004 -- $11.9 million; beyond 2004 -- $54.4 million.
Total rental expense was $41.9 million, $39.6 million and $35.6 million in 1999,
1998 and 1997, respectively.
NOTE 9. INCOME TAXES
The Company and its U.S. subsidiaries file their federal income tax return
on a consolidated basis. As of December 31, 1999, the Company had no NOL or ITC
carryforwards for federal income tax purposes. During the third quarter of 1998,
the Internal Revenue Service completed its examination for the years 1993 to
1995, which included an examination of net operating losses and credit
carryovers dating back to 1979. As a result of the lapsing, during the third
quarter of 1999, of all relevant statutes of limitations on assessment relating
to that 17-year period of time, the Company recorded a $24.3 million tax benefit
in continuing operations for the reversal of previously established tax reserves
which were determined to be no longer necessary.
At December 31, 1999, various foreign subsidiaries of the Company had
aggregate cumulative NOL carryforwards for foreign income tax purposes of
approximately $163.6 million, which are subject to various provisions of each
respective country. Approximately $52.7 million of this amount expires between
2000 and 2009 and $110.9 million of the amount has an indefinite life.
Of the $163.6 million NOL carryforwards of foreign subsidiaries mentioned
above, $84.9 million relates to losses that have already provided a tax benefit
in the U.S. due to rules permitting flow-through of such losses in certain
circumstances. Without such losses included, the cumulative NOL carryforwards at
December 31, 1999 are approximately $78.7 million, which are subject to various
provisions of each respective country. Approximately $39.5 million of this
amount expires between 2000 and 2009 and $39.2 million of the amount has an
indefinite life. The deferred tax asset and valuation allowance, shown below
relating to foreign NOL carryforwards, have been adjusted to reflect only the
carryforwards for which the Company has not taken a tax benefit in the U.S.
Domestic income from continuing operations before income taxes was $76.0
million, $84.0 million and $62.5 million for 1999, 1998 and 1997, respectively.
Foreign income (loss) from continuing operations before income taxes was $2.2
million, $(7.5) million and $2.3 million for 1999, 1998 and 1997, respectively.
The Company paid income taxes in 1999, 1998 and 1997 of $64.9 million,
$63.8 million and $35.3 million, respectively.
24
25
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and
(liabilities) were as follows:
DECEMBER 31, JANUARY 1,
1999 1999
------------ ----------
(IN MILLIONS)
Gross deferred tax liabilities.............................. $(17.8) $(51.4)
Foreign NOL carryforwards................................... 29.9 26.1
Deferred compensation....................................... 9.4 9.3
Assets held for sale........................................ -- 6.4
Inventory reserves.......................................... 8.4 2.9
Investment reserves......................................... 4.5 5.3
Depreciation................................................ 5.1 2.5
Other....................................................... 6.6 7.9
------ ------
Gross deferred tax assets................................... 63.9 60.4
Valuation allowance......................................... (26.3) (24.0)
------ ------
Net deferred tax asset (liability).......................... $ 19.8 $(15.0)
====== ======
Income tax expense (benefit) was comprised of:
YEARS ENDED
--------------------------------------
DECEMBER 31, JANUARY 1, JANUARY 2,
1999 1999 1998
------------ ---------- ----------
(IN MILLIONS)
Current -- Foreign.......................................... $ 7.6 $ 7.6 $10.1
State........................................... 4.5 1.9 3.4
Federal......................................... 25.0 22.4 22.9
------ ----- -----
37.1 31.9 36.4
Deferred -- Foreign......................................... (1.5) 4.5 (0.7)
State.......................................... (1.1) 3.1 0.2
Federal........................................ (26.0) (7.7) (8.5)
------ ----- -----
(28.6) (.1) (9.0)
------ ----- -----
$ 8.5 $31.8 $27.4
====== ===== =====
Reconciliation of income tax expense to the statutory corporate federal tax
rate of 35% are as follows:
YEARS ENDED
--------------------------------------
DECEMBER 31, JANUARY 1, JANUARY 2,
1999 1999 1998
------------ ---------- ----------
(IN MILLIONS)
Statutory tax expense....................................... $27.4 $26.8 $22.7
Increase (reduction) in taxes resulting from:
Amortization of goodwill.................................. 2.2 2.1 1.9
Losses on foreign operations.............................. 2.5 8.4 2.4
State income taxes........................................ 2.3 3.2 2.3
Adjustment to prior year tax accounts..................... (24.3) (9.4) (3.0)
Other, net................................................ (1.6) 0.7 1.1
----- ----- -----
$ 8.5 $31.8 $27.4
===== ===== =====
25
26
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS
The Company's various pension plans are non-contributory and cover
substantially all full-time domestic employees and certain employees in other
countries. Retirement benefits are provided based on compensation as defined in
the plans. The Company's policy is to fund these plans as required by ERISA and
the Code. Plan assets consist primarily of equity securities and mutual fund
investments.
In 1999, the Company completed the disposal of the Integration segment
which resulted in a curtailment gain of $4.4 million, and accordingly, is
classified as a gain on disposal of discontinued operations.
PENSION BENEFITS
---------------------
1999 1998
---- ----
(IN MILLIONS)
Change in projected benefit obligation:
Beginning balance......................................... $ 110.4 $ 92.6
Service cost.............................................. 8.4 8.0
Interest cost............................................. 7.2 6.7
Actuarial (gain)loss...................................... (13.0) 5.5
Curtailment gain.......................................... (4.8) --
Benefits paid............................................. (4.0) (2.4)
------- -------
Ending balance............................................ $ 104.2 $ 110.4
======= =======
Change in plan assets at fair value:
Beginning balance......................................... $ 92.4 $ 85.8
Actual return on plan assets.............................. 9.3 6.6
Company contributions..................................... 0.1 2.4
Benefits paid............................................. (4.0) (2.4)
------- -------
Ending balance............................................ $ 97.8 $ 92.4
======= =======
Reconciliation of funded status:
Projected benefit obligation.............................. $(104.2) $(110.4)
Plan assets at fair value................................. 97.8 92.4
------- -------
Funded status............................................. (6.4) (18.0)
Unrecognized net actuarial gain........................... (15.8) (1.3)
Unrecognized prior service cost........................... 2.1 2.3
Unrecognized transition obligation........................ (1.2) (1.5)
------- -------
Accrued benefit cost...................................... $ (21.3) $ (18.5)
======= =======
Weighted average assumptions:
Discount rate............................................. 7.15% 7.17%
Expected return on plan assets............................ 8.63% 8.72%
Salary growth rate........................................ 5.26% 5.54%
PENSION COSTS
-----------------------------
1999 1998 1997
---- ---- ----
(IN MILLIONS)
Components of net periodic cost:
Service cost...................................... $ 8.4 $ 8.0 $ 6.9
Interest cost..................................... 7.2 6.7 5.9
Expected return on plan assets.................... (7.9) (7.5) (6.1)
Net amortization.................................. 0.2 (0.9) (0.5)
----- ----- -----
Periodic benefit cost prior to curtailment........ 7.5 6.3 6.2
Curtailment gain.................................. (4.4) -- --
----- ----- -----
Net periodic benefit cost......................... $ 3.1 $ 6.3 $ 6.2
===== ===== =====
26
27
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has several plans where the fair value of assets are in excess
of the projected benefit obligation. The fair value of the plans' assets were
$8.7 million and $7.3 million, and had projected benefit obligations of $6.4
million and $5.7 million in 1999 and 1998, respectively.
The Company has several savings plans. The Company's contributions to these
plans are based upon various levels of employee participation. The total cost of
these plans was $1.5 million in 1999, $1.9 million in 1998 and $1.7 million in
1997. The Company's liability for post-retirement benefits other than pensions
is not material.
NOTE 11. PREFERRED STOCK AND COMMON STOCK
Preferred Stock--
The Company has the authority to issue 15 million shares of preferred
stock, par value $1.00 per share, none of which was outstanding at the end of
1999 and 1998.
Stock Options and Stock Grants--
At December 31, 1999, the Company has stock incentive plans which authorize
2.0 million shares for additional stock option awards or stock grants. Options
granted under these plans have been granted with exercise prices at or higher
than the fair market value of the common stock on the date of grant. One-fourth
of the employee options granted become exercisable each year after the year of
grant. Employee restricted stock vests over a four year period. 2000 will be the
first year in which restricted stock will be issued. The director options fully
vest in one year. All options expire ten years after the date of grant.
The following table summarizes the 1999, 1998 and 1997 activity under the
employee and director option plans.
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EMPLOYEE EXERCISE DIRECTOR EXERCISE
(OPTIONS IN THOUSANDS) OPTIONS PRICE OPTIONS PRICE
---------------------- -------- -------- -------- --------
Balance at January 3, 1997................................ 2,168.1 $16.28 490.0 $13.57
Granted................................................... 1,144.1 15.55 -- --
Exercised................................................. (7.0) 12.04 (60.0) 10.91
Canceled.................................................. (97.5) 17.13 -- --
------- ------ ----- ------
Balance at January 2, 1998................................ 3,207.7 16.00 430.0 13.94
Granted................................................... 1,772.0 17.46 -- --
Exercised................................................. (34.1) 17.80 (40.0) 9.94
Canceled.................................................. (262.4) 17.09 -- --
------- ------ ----- ------
Balance at January 1, 1999................................ 4,683.2 16.48 390.0 14.35
Granted................................................... 1,115.5 12.70 -- --
Exercised................................................. (452.0) 13.35 (30.0) 11.63
Canceled.................................................. (163.1) 16.96 -- --
------- ------ ----- ------
Balance at December 31, 1999.............................. 5,183.6 $15.92 360.0 $14.57
======= ====== ===== ======
Options Exercisable at year-end
1997.................................................... 1,160.2 $13.63 430.0 $13.94
1998.................................................... 1,660.9 $14.78 390.0 $14.35
1999.................................................... 2,679.3 $16.49 360.0 $14.57
27
28
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information relating to options outstanding
and exercisable at December 31, 1999, using various ranges of exercise prices:
EMPLOYEE OPTIONS
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF EXERCISE REMAINING EXERCISE
EXERCISE PRICES OUTSTANDING PRICE YEARS EXERCISABLE PRICE
--------------- ----------- -------- --------- ----------- --------
(OPTIONS IN THOUSANDS)
$5.19-$9.11................. 271.3 $ 8.56 1.9 271.3 $ 8.56
$12.69-$15.75............... 2,266.0 $13.99 7.4 855.0 $15.08
$17.44-$21.13............... 2,646.3 $18.34 7.1 1,553.0 $18.66
DIRECTOR OPTIONS
WEIGHTED WEIGHTED
AVERAGE AVERAGE
RANGE OF OUTSTANDING & EXERCISE REMAINING
EXERCISE PRICES EXERCISABLE PRICE YEARS
--------------- ------------- -------- ---------
(OPTIONS IN THOUSANDS)
$8.38-$9.00.................................... 130.0 $ 8.56 1.2
$15.00-$20.69.................................. 230.0 $17.97 3.3
Additionally, the Company has an Employee Stock Purchase Plan ("ESPP")
covering most employees. Participants can request that up to 10% of their base
compensation be applied toward the purchase of common stock under the Company's
ESPP. The purchase price is the lower of 85% of the fair market value of the
common stock at the beginning of the ESPP year, July 1, 1999, or at the end of
the ESPP year, June 30, 2000. Under the ESPP, the Company sold 123,700 shares,
175,900 shares, and 217,600 shares to employees in 1999, 1998 and 1997,
respectively.
STOCK OPTION PLANS OF ANIXTER--
In 1995 and prior, Anixter granted to key employees options to purchase the
common stock of Anixter. Substantially all options have been granted with
exercise prices at the fair market value of the common stock on the date of
grant. These options vest over four years and terminate seven to ten years from
the date of grant.
28
29
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1999, the Company owned 99% of the approximately 32.6 million
shares of outstanding Anixter common stock. The following table summarizes the
1999, 1998 and 1997 option activity:
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
(OPTIONS IN THOUSANDS) ------- --------
Balance at January 3, 1997................................ 1,720.0 $10.99
Exercised................................................. (284.0) 9.48
Canceled.................................................. (107.6) 11.14
-------
Balance at January 2, 1998................................ 1,328.4 11.33
Exercised................................................. (253.8) 10.13
Canceled.................................................. (92.3) 11.77
-------
Balance at January 1, 1999................................ 982.3 11.57
Exercised................................................. (586.6) 11.21
Canceled.................................................. (26.2) 12.28
-------
Balance at December 31, 1999.............................. 369.5 $12.08
Options exercisable at year-end
1997................................................... 1,209.6 $10.99
1998................................................... 982.3 $11.57
1999................................................... 369.5 $12.08
Exercise prices for options outstanding as of December 31, 1999, range from
$9.00 to $14.50 per share and have a weighted average remaining life of 2.0
years.
Units--
The Company adopted a director stock unit plan ("DSUP") to pay its
non-employee directors annual retainer fees in the form of stock units. These
stock units convert to common stock of the Company at the pre-arranged time
selected by each director. Stock units were granted to nine directors in 1999,
having an aggregate value at grant date of $540 thousand.
The following table summarizes the 1999, 1998, and 1997 activity under the
DSUP.
DSUP
STOCK UNITS
-----------
Balance at January 3, 1997................................ 35.2
Granted................................................... 28.3
Exercised................................................. (1.0)
Canceled.................................................. (2.9)
-----
Balance at January 2, 1998................................ 59.6
Granted................................................... 25.9
Exercised................................................. (3.9)
-----
Balance at January 1, 1999................................ 81.6
Granted................................................... 29.7
Exercised................................................. (3.5)
-----
Balance at December 31, 1999.............................. 107.8
=====
29
30
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accounting for Stock Based Compensation--
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation". Accordingly, no compensation expense has been recognized in the
income statement for the stock option plans. Had compensation costs for the
plans been determined based on the fair value at the grant date for awards
beginning in 1995 and amortized over the respective vesting period, the
Company's income from continuing operations would have been reduced to the pro
forma amounts indicated below:
1999 1998 1997
----- ----- -----
Income from continuing operations
--as reported........................................ $69.7 $44.7 $37.4
--pro forma.......................................... $64.0 $40.1 $34.0
Basic income per share from continuing operations
--as reported........................................ $1.86 $1.00 $0.79
--pro forma.......................................... $1.71 $0.89 $0.71
Diluted income per share from continuing operations
--as reported........................................ $1.83 $0.99 $0.78
--pro forma.......................................... -- -- --
Pro forma diluted income per share has not been presented for 1999, 1998
and 1997 as the conversion of stock options and warrants would have had an
anti-dilutive effect.
The fair value for the Company's stock options (which was $5.50 per share
in 1999, $7.63 per share in 1998 and $6.69 per share in 1997) was estimated at
the date of grant using the Black-Scholes option pricing model with the
following assumptions for 1999, 1998 and 1997, respectively: expected stock
price volatility of 39%, 42% and 37%; expected dividend yield of zero; risk-free
interest rate of 5.6%, 4.9% and 6.6% and an expected 5 year life.
The pro forma effect on income from continuing operations for 1997 is not
representative of the pro forma effect on earnings in future years because the
pro forma calculation, as required by SFAS No. 123, does not take into
consideration outstanding non-vested awards granted prior to 1995.
The Black-Scholes option pricing model was used in estimating the fair
value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of the Company's stock options.
30
31
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BUSINESS SEGMENTS
The Company is engaged in the distribution of communications and specialty
wire and cable products from top suppliers to contractors and installers and to
end users, including manufacturers, natural resources companies, utilities and
OEM's. The Company obtains and coordinates financing, legal and other related
services, certain of which are rebilled to subsidiaries.
The following table is a geographic breakdown of the Company's operations.
Sales to a single customer did not exceed 10 percent of total sales. Export
sales are insignificant.
WORLDWIDE OPERATIONS
------------------------------
1999 1998 1997
-------- -------- --------
(IN MILLIONS)
Net sales
United States............................................. $1,806.8 $1,500.2 $1,263.2
Europe.................................................... 518.7 518.1 487.0
Canada, Asia Pacific and Latin America.................... 344.5 330.2 340.7
-------- -------- --------
$2,670.0 $2,348.5 $2,090.9
======== ======== ========
Operating income
United States............................................. $ 93.3 $ 85.3 $ 84.2
Europe.................................................... 20.6 12.9 10.7
Canada, Asia Pacific and Latin America.................... (1.1) (11.2) (3.8)
-------- -------- --------
$ 112.8 $ 87.0 $ 91.1
======== ======== ========
Tangible long-lived assets
United States............................................. $ 65.3 $ 64.5 $ 51.9
Europe.................................................... 8.6 9.9 12.2
Canada, Asia Pacific and Latin America.................... 8.9 11.2 12.2
-------- -------- --------
$ 82.8 $ 85.6 $ 76.3
======== ======== ========
NOTE 13. CONTINGENCIES AND LITIGATION
In the ordinary course of business, the Company and its subsidiaries become
involved as plaintiffs or defendants in various legal proceedings. The claims
and counterclaims in such litigation, including those for punitive damages,
individually in certain cases and in the aggregate, involve amounts which may be
material. However, it is the opinion of the Company's management, based upon the
advice of its counsel, that the ultimate disposition of pending litigation will
not be material.
31
32
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the unaudited interim results of operations
and the price range of the common stock composite for each quarter in the years
ended December 31, 1999, and January 1, 1999. The Company has not paid cash
dividends on its common stock since 1979.
FIRST SECOND THIRD FOURTH
QUARTER* QUARTER QUARTER* QUARTER
-------- ------- -------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1999
Net sales................................................... $595.1 $658.5 $710.4 $706.0
Cost of sales............................................... (445.8) (502.6) (548.5) (545.8)
Operating income............................................ 22.0 28.5 33.2 29.1
Income before income taxes.................................. 13.3 21.0 24.2 19.7
Income from continuing operations........................... 7.7 12.2 38.3 11.5
Net income.................................................. 52.1 13.2 44.2 14.7
Basic income per share:
Continuing................................................ 0.19 0.33 1.06 0.32
Net income................................................ 1.25 0.36 1.23 0.41
Diluted income per share:
Continuing................................................ 0.19 0.33 1.04 0.31
Net income................................................ 1.25 0.36 1.20 0.40
Composite stock price range:
High...................................................... 19.81 18.69 23.25 23.44
Low....................................................... 11.13 13.56 18.13 19.00
Close..................................................... 12.38 18.69 23.25 20.63
YEAR ENDED JANUARY 1, 1999
Net sales................................................... $562.1 $584.6 $617.3 $584.5
Cost of sales............................................... (421.0) (440.8) (465.4) (445.7)
Operating income............................................ 23.3 22.4 28.9 12.4
Gain on ANTEC investment.................................... 8.4 15.9 -- --
Income before income taxes.................................. 24.7 30.5 15.9 5.4
Income from continuing operations........................... 14.4 17.8 9.3 3.2
Net income.................................................. 26.7 21.5 13.0 4.4
Basic income per share:
Continuing................................................ 0.31 0.38 0.21 0.07
Net income................................................ 0.57 0.46 0.30 0.10
Diluted income per share:
Continuing................................................ 0.30 0.38 0.21 0.07
Net income................................................ 0.56 0.46 0.29 0.10
Composite stock price range:
High...................................................... 20.25 22.13 19.88 20.31
Low....................................................... 15.75 17.19 15.56 11.88
Close..................................................... 19.44 19.00 15.75 20.31
- ---------------
* In the first quarter of 1999, the Company realized a $45.9 million net gain on
the disposal of discontinued operations from the sale of its North American
and European Integration business. In the third quarter of 1999, the Company
recorded a $24.3 million tax benefit in continuing operations for the reversal
of previously established tax reserves determined to be no longer necessary.
32
33
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
See Registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders -- "Election of Directors."
ITEM 11. EXECUTIVE COMPENSATION.
See Registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders--"Executive Compensation," "Compensation of Directors," "Employment
Contracts and Termination of Employment and Changes in Control Arrangements,"
and "Compensation Committee Interlocks and Insider Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See Registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders -- "Security Ownership of Management" and "Security Ownership of
Principal Stockholders."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders -- "Certain Relationships and Related Transactions."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Exhibits.
The exhibits listed below in Item 14(a)1, 2 and 3 are filed as part of
this annual report. Each management contract or compensatory plan
required to be filed as an exhibit is identified by an asterisk(*).
(b) Reports on Form 8-K.
None.
(A) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES.
(1) Financial Statements.
The following Consolidated Financial Statements of Anixter International
Inc. and Report of Independent Auditors are filed as part of this report.
PAGE
----
Report of Independent Auditors.............................. 14
Consolidated Statement of Operations for the years ended
December 31, 1999, January 1, 1999 and January 2, 1998.... 15
Consolidated Balance Sheet at December 31, 1999 and January
1, 1999................................................... 16
Consolidated Statement of Cash Flows for the years ended
December 31, 1999, January 1, 1999 and January 2, 1998.... 17
Consolidated Statement of Stockholders' Equity for the years
ended December 31, 1999, January 1, 1999 and January 2,
1998...................................................... 18
Notes to the Consolidated Financial Statements.............. 19
33
34
(2) Financial Statement Schedules.
The following financial statement schedules of Anixter International Inc.
are filed as part of this Report and should be read in conjunction with the
Consolidated Financial Statements of Anixter International Inc.:
PAGE
----
I. Condensed financial information of Registrant............... 37
II. Valuation and qualifying accounts and reserves.............. 40
All other schedules are omitted because they are not required or are not
applicable, or the required information is shown in the consolidated financial
statements or notes thereto.
(3) Exhibit List.
Each management contract or compensation plan required to be filed as an
exhibit is identified by an asterisk(*).
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
(3) Articles of Incorporation and by-laws.
Restated Certificate of Incorporation of Anixter
International Inc., filed with Secretary of State of
Delaware on September 29, 1987 and Certificate of Amendment
thereof, filed with Secretary of Delaware on August 31, 1995
(Incorporated by reference from Anixter International Inc.
Annual Report on Form 10-K for the year ended December 31,
1995, Exhibit 3.1)
3.1
By-laws of Anixter International Inc. as amended through
November 9, 1995 (Incorporated by reference from Anixter
International Inc. Annual Report on Form 10-K for the year
ended December 31, 1995, Exhibit 3.2)
3.2
(4) Instruments defining the rights of security holders, including
indentures.
(a) Amended and Restated Credit Agreement, dated March 11,
1994, among Anixter Inc., Chemical Bank, as Agent, and the
other banks named therein. (Incorporated by reference
from Itel Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, Exhibit 4.2.)
4.1
(b) Amendment, dated March 24, 1995, to Amended and Restated
Credit Agreement, dated March 11, 1994, among Anixter Inc.,
Chemical Bank, as Agent, and the other banks named
therein. (Incorporated by reference from Itel
Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, Exhibit 4.1.)
(c) Amendment dated September 6, 1996, to Amended and
Restated Credit Agreement, dated March 11, 1994, among
Anixter Inc., The Chase Manhattan Bank, as Agent, and
the other banks named therein. (Incorporated by
reference from Anixter International Inc. Quarterly
Report on Form 10-Q for the quarter ended September 27,
1996, Exhibit 4.2)
Indenture dated September 17, 1996, between Anixter Inc.,
Anixter International Inc. and the Bank of New York, as
Trustee, providing for 8% Senior Notes due 2003.
(Incorporated by reference from Amendment No. 1 to Anixter
Inc.'s Registration Statement on Form S-3, Registration
Number 333-09185, filed August 27, 1996, Exhibit 4.1)
4.2
(10) Material contracts.
(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)
10.1
(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)
34
35
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
Company's Management Incentive Plan, dated February 9, 1995.
(Incorporated by reference from Itel Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994, Exhibit 10.2.)
10.2 *
Company's 1983 Stock Incentive Plan as amended and restated
July 16, 1992. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Exhibit 10.3.)
10.3 *
Anixter International Inc. 1998 Stock Incentive Plan
(Incorporated by reference from Anixter International Inc.
Registration Statement on Form S-8, file number 333-56935.
Exhibit 4a.)
10.4 *
Company's Key Executive Equity Plan, as amended and restated
July 16, 1992. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, Exhibit 10.8.)
10.5 *
Company's Director Stock Option Plan. (Incorporated by
reference from Itel Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991, Exhibit 10.24.)
10.6 *
Warrant Agreement, dated August 22, 1990, between the
Company and Bernard F. Brennan, William A. Buzick, Jr., F.
Philip Handy, Harold Haynes, Jerome Jacobson, Melvyn Klein,
John R. Petty and James D. Woods, individually.
(Incorporated by reference from Itel Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31,
1991, Exhibit 10.25.)
10.7 *
(a) Agreement, dated February 9, 1995, with Rod F. Dammeyer
(Incorporated by reference from Itel Corporation's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994, Exhibit 10.18(d).)
10.8 *
(b) Amended and Restated Agreement dated February 9, 1995
with Rod F. Dammeyer (Incorporated by reference from Anixter
International Inc. Annual Report on Form 10-K for the
year ended December 31, 1995, Exhibit 10.17 (b))
Form of Stock Option Agreement. (Incorporated by reference
from Itel Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, Exhibit 10.24.)
10.9 *
Form of Indemnity Agreement with all directors and officers
(Incorporated by reference from Anixter International Inc.
Annual Report on Form 10-K for the year ended December 31,
1995, Exhibit 10.24)
10.10*
Anixter International Inc. 1996 Stock Incentive Plan
(Incorporated by reference from Anixter International Inc.
Annual Report on Form 10-K for the year ended December 31,
1995, Exhibit 10.26)
10.11*
Form of Stock Option Grant (Incorporated by reference from
Anixter International Inc. Annual Report on Form 10-K for
the year ended December 31, 1995, Exhibit 10.27)
10.12*
Anixter Excess Benefit Plan (Incorporated by reference from
Anixter International Inc. Annual Report on Form 10-K for
the year ended December 31, 1995, Exhibit 10.28)
10.13*
Forms of Anixter Stock Option, Stockholder Agreement and
Stock Option Plan (Incorporated by reference from Anixter
International Inc. Annual Report on Form 10-K for the year
ended December 31, 1995, Exhibit 10.29)
10.14*
(a) Anixter Deferred Compensation Plan (Incorporated by
reference from Anixter International Inc. Annual Report on
Form 10-K for the year ended December 31, 1995, Exhibit
10.30)
10.15*
(b) Anixter 1999 Restated Deferred Compensation Plan
Anixter International Inc. Enhanced Management Incentive
Plan for 1999-2000 (Incorporated by reference from Anixter
International Inc. Quarterly Report on Form 10-Q for the
quarterly period ended July 2, 1999, Exhibit 10.20)
10.16*
35
36
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
Financial Advisory Agreement, dated August 4, 1999
(Incorporated by reference from Anixter International Inc.
Quarterly Report on Form 10-Q for the quarterly period ended
October 1, 1999, Exhibit 10.21)
10.17*
Employment Agreement with Robert W. Grubbs, dated July 22,
1999 (Incorporated by reference from Anixter International
Inc. Quarterly Report on Form 10-Q for the quarterly period
ended October 1, 1999, Exhibit 10.22)
10.18*
Employment Agreement with Dennis J. Letham, dated July 22,
1999 (Incorporated by reference from Anixter International
Inc. Quarterly Report on Form 10-Q for the quarterly period
ended October 1, 1999, Exhibit 10.23)
10.19*
(21) Subsidiaries of the Registrant.
21.1 List of Subsidiaries of the Registrant.
(23) Consents of experts and counsel.
23.1 Consent of Ernst & Young LLP
(24) Power of attorney.
24.1 Power of Attorney executed by Lord James Blyth, Rod
F. Dammeyer, Robert E. Fowler, Jr., Robert W. Grubbs, Melvyn
N. Klein, John R. Petty, Sheli Rosenberg, Thomas C.
Theobald, and Samuel Zell
(27) Financial data schedule.
27.1 Financial data schedule
Copies of other instruments defining the rights of holders of long-term
debt of the Company and its subsidiaries not filed pursuant to Item
601(b)(4)(iii) of Regulation S-K and omitted copies of attachments to plans and
material contracts will be furnished to the Securities and Exchange Commission
upon request.
36
37
ANIXTER INTERNATIONAL INC.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
STATEMENT OF OPERATION
(IN MILLIONS)
YEARS ENDED
---------------------------------------
DECEMBER 31, JANUARY 1, JANUARY 2,
1999 1999 1998
------------ ---------- ----------
Operating (loss) income..................................... $ (2.5) $(1.5) $ 3.9
Other income:
Gain on ANTEC investment............................... -- 24.3 2.2
Interest and investment income, including intercompany...... 3.1 7.2 6.0
------ ----- -----
Income from operations before income taxes and equity in
earnings of subsidiaries.................................. 0.6 30.0 12.1
Income tax benefit.......................................... 27.4 4.2 8.7
Equity in earnings of subsidiaries.......................... 96.2 31.4 24.5
------ ----- -----
Net income.................................................. $124.2 $65.6 $45.3
====== ===== =====
37
38
ANIXTER INTERNATIONAL INC.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
BALANCE SHEET
(IN MILLIONS)
DECEMBER 31, JANUARY 1,
1999 1999
------------ ----------
Current assets:
Cash...................................................... $ 0.4 $ 3.3
Accounts receivable....................................... -- 1.7
Amounts currently due from affiliates, net................ 6.3 4.5
Other assets.............................................. 0.1 0.4
------ ------
Total current assets.............................. 6.8 9.9
Investment in and advances to subsidiaries.................. 449.9 430.4
Other assets................................................ 12.3 14.3
------ ------
469$.0.... $454.6
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses, due currently........ $ 9.7 $ 10.1
Income taxes, net, primarily deferred....................... 2.9 33.0
------ ------
Total liabilities................................. 12.6 43.1
Stockholders' equity:
Common stock.............................................. 35.9 41.8
Accumulated other comprehensive income.................... (37.6) (39.7)
Retained earnings......................................... 458.1 409.4
------ ------
Total stockholders' equity........................ 456.4 411.5
------ ------
$469.0 $454.6
====== ======
38
39
ANIXTER INTERNATIONAL INC.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
STATEMENT OF CASH FLOWS
(IN MILLIONS)
YEARS ENDED
--------------------------------------
DECEMBER 31, JANUARY 1, JANUARY 2,
1999 1999 1998
------------ ---------- ----------
Operating activities:
Net income................................................ $124.2 $ 65.6 $45.3
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on ANTEC investment............................. -- (24.3) (2.2)
Income tax benefit................................... (27.4) (4.2) (8.7)
Equity in earnings of subsidiaries................... (96.2) (31.4) (24.5)
Change in other operating items...................... 51.3 16.9 23.1
------ ------- -----
Net cash provided by operating activities......... 51.9 22.6 33.0
Investing activities:
Proceeds from sale of businesses.......................... 28.3 14.2 --
Proceeds from sale of ANTEC............................... -- 104.3 --
Acquisition of businesses................................. -- (38.1) (27.6)
Loans (to) from subsidiaries, net......................... (1.7) (1.0) 0.5
------ ------- -----
Net cash provided by (used in) investing
activities........................................ 26.6 79.4 (27.1)
Financing activities:
Purchase of treasury stock................................ (91.9) (101.8) (14.2)
Proceeds from issuance of common stock.................... 10.5 3.1 3.5
------ ------- -----
Net cash used in financing activities................ (81.4) (98.7) (10.7)
------ ------- -----
Cash (used) provided........................................ (2.9) 3.3 (4.8)
Cash at beginning of year................................... 3.3 -- 4.8
------ ------- -----
Cash at end of year......................................... $ 0.4 $ 3.3 $ --
====== ======= =====
39
40
ANIXTER INTERNATIONAL INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1999, JANUARY 1, 1999 AND JANUARY 2, 1998
(IN MILLIONS)
ADDITIONS
-------------------
BALANCE AT CHARGED CHARGED BALANCE AT
BEGINNING OF TO TO OTHER END OF
DESCRIPTION THE PERIOD INCOME ACCOUNTS DEDUCTIONS THE PERIOD
----------- ------------ ------- -------- ---------- ----------
Year ended December 31, 1999:
Allowance for doubtful accounts........... $11.0 $ 5.7 $(0.9) $(5.5) $10.3
Allowance for deferred tax asset.......... $24.0 $ 2.3 -- -- $26.3
Year ended January 1, 1999:
Allowance for doubtful accounts........... $10.0 $ 4.2 $ 0.2 $(3.4) $11.0
Allowance for deferred tax asset.......... $16.7 $ 7.3 -- -- $24.0
Year ended January 2, 1998:
Allowance for doubtful accounts........... $ 7.9 $ 7.1 $(0.6) $(4.4) $10.0
Allowance for deferred tax asset.......... $21.0 $(4.3) -- -- $16.7
40
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Skokie,
State of Illinois, on the 7th day of March 7, 2000.
ANIXTER INTERNATIONAL INC.
By: /s/ DENNIS J. LETHAM
------------------------------------
Dennis J. Letham
Senior Vice President -- Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ ROBERT W. GRUBBS Chief Executive Officer and President March 7, 2000
- ------------------------------------ (Principal Executive Officer)
Robert W. Grubbs
/s/ DENNIS J. LETHAM Senior Vice President -- Finance March 7, 2000
- ------------------------------------ (Chief Financial Officer)
Dennis J. Letham
/s/ LISA KEARNS LANZ Vice President -- Controller March 7, 2000
- ------------------------------------ (Chief Accounting Officer)
Lisa Kearns Lanz
/s/ LORD JAMES BLYTH* Director March 7, 2000
- ------------------------------------
Lord James Blyth
Director March 7, 2000
- ------------------------------------
Robert L. Crandall
/s/ ROD F. DAMMEYER* Director March 7, 2000
- ------------------------------------
Rod F. Dammeyer
/s/ ROBERT E. FOWLER, JR.* Director March 7, 2000
- ------------------------------------
Robert E. Fowler, Jr.
/s/ ROBERT W. GRUBBS Director March 7, 2000
- ------------------------------------
Robert W. Grubbs
Director March 7, 2000
- ------------------------------------
F. Philip Handy
/s/ MELVYN N. KLEIN* Director March 7, 2000
- ------------------------------------
Melvyn N. Klein
/s/ JOHN R. PETTY* Director March 7, 2000
- ------------------------------------
John R. Petty
41
42
/s/ SHELI Z. ROSENBERG* Director March 7, 2000
- ------------------------------------
Sheli Z. Rosenberg
Director March 7, 2000
- ------------------------------------
Stuart M. Sloan
/s/ THOMAS C. THEOBALD* Director March 7, 2000
- ------------------------------------
Thomas C. Theobald
/s/ SAMUEL ZELL* Director March 7, 2000
- ------------------------------------
Samuel Zell
*By /s/ DENNIS J. LETHAM
-------------------------------
Dennis J. Letham
(Attorney in fact)
Dennis J. Letham, as attorney in fact for each person indicated.
42