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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _____
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 Identification No.)
incorporation or organization)
2301 PATRIOT BLVD.
Glenview, Illinois 60025
(224) 521-8000
(Address and telephone number of principal executive offices)
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 whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [X] No [ ]
At May 4, 2004, 36,732,514 shares of the registrant's Common Stock, $1.00
par value, were outstanding.
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ANIXTER INTERNATIONAL INC.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................................................ 1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk.................................. *
Item 4. Controls and Procedures..................................................................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .......................................................................... *
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities............ *
Item 3. Defaults Upon Senior Securities............................................................. *
Item 4. Submission of Matters to a Vote of Security Holders......................................... *
Item 5. Other Information........................................................................... *
Item 6. Exhibits and Reports on Form 8-K............................................................ 18
*No reportable information under this item.
This report 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 this report. Other factors could also cause actual results to
differ materially from expected results included in these statements. These
factors include general economic conditions, technology changes, changes in
supplier or customer relationships, exchange rate fluctuations and new or
changed competitors.
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
13 WEEKS ENDED
-------------------
APRIL 2, APRIL 4,
(IN MILLIONS, EXCEPT SHARE AMOUNTS) 2004 2003
-------- --------
NET SALES ............................................. $ 764.2 $ 662.2
Cost of operations:
Cost of goods sold ................................. 581.5 501.4
Operating expenses ................................. 153.1 137.8
Amortization of intangibles ........................ 0.6 0.4
------- -------
Total costs and expenses ...................... 735.2 639.6
------- -------
OPERATING INCOME ...................................... 29.0 22.6
Other expense:
Interest expense ................................... (3.0) (3.4)
Extinguishment of debt ............................. -- (0.4)
Other, net ......................................... (3.1) (1.3)
------- -------
Income before income taxes and extraordinary gain...... 22.9 17.5
Income tax expense .................................... 8.9 7.3
------- -------
Income before extraordinary gain ...................... 14.0 10.2
Extraordinary gain, net of tax of $0.6 ................ 4.1 --
------- -------
NET INCOME ............................................ $ 18.1 $ 10.2
======= =======
BASIC INCOME PER SHARE:
Income before extraordinary gain ................... $ 0.38 $ 0.28
Extraordinary gain ................................. $ 0.11 $ --
Net income ......................................... $ 0.50 $ 0.28
DILUTED INCOME PER SHARE:
Income before extraordinary gain ................... $ 0.37 $ 0.27
Extraordinary gain ................................. $ 0.11 $ --
Net income ......................................... $ 0.48 $ 0.27
DIVIDEND PER COMMON SHARE ............................. $ 1.50 $ --
See accompanying notes to the condensed consolidated financial statements.
1
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 2, JANUARY 2,
2004 2004
-------- ----------
(IN MILLIONS, EXCEPT SHARE AMOUNTS) (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents .............................................. $ 38.4 $ 101.4
Accounts receivable (less allowances of $16.4 and $17.3
in 2004 and 2003, respectively) ..................................... 327.9 255.5
Note receivable-- unconsolidated subsidiary ............................ 39.0 56.5
Inventories ............................................................ 500.6 499.1
Deferred income taxes .................................................. 16.5 16.5
Other current assets ................................................... 12.6 18.9
-------- --------
Total current assets ......................................... 935.0 947.9
Property and equipment, at cost .......................................... 178.8 180.7
Accumulated depreciation ................................................. (136.8) (137.6)
-------- --------
Net property and equipment ................................... 42.0 43.1
Goodwill ................................................................. 279.1 278.5
Other assets ............................................................. 107.2 101.9
-------- --------
$1,363.3 $1,371.4
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ....................................................... $ 335.5 $ 304.4
Accrued expenses ....................................................... 71.0 80.8
-------- --------
Total current liabilities .................................... 406.5 385.2
Long-term debt ........................................................... 241.4 239.2
Other liabilities ........................................................ 56.5 56.2
-------- --------
Total liabilities ............................................ 704.4 680.6
STOCKHOLDERS' EQUITY
Common stock -- $1.00 par value, 100,000,000 shares authorized,
36,646,294 and 36,376,411 shares issued and outstanding in 2004
and 2003, respectively .............................................. 36.6 36.4
Capital surplus ........................................................ 28.5 21.8
Retained earnings ...................................................... 600.5 638.2
Accumulated other comprehensive loss:
Foreign currency translation ........................................ (5.8) (4.8)
Minimum pension liability ........................................... (0.5) (0.5)
Unrealized loss on foreign exchange contracts ....................... (0.4) (0.3)
-------- --------
Total accumulated other comprehensive loss ........................ (6.7) (5.6)
-------- --------
Total stockholders' equity ................................... 658.9 690.8
-------- --------
$1,363.3 $1,371.4
======== ========
See accompanying notes to the condensed consolidated financial statements.
2
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
13 WEEKS ENDED
-----------------------
APRIL 2, APRIL 4,
(IN MILLIONS) 2004 2003
------ ------
OPERATING ACTIVITIES
Net income ................................................................. $ 18.1 $ 10.2
Adjustments to reconcile net income to net cash (used in)
provided by continuing operating activities:
Extraordinary gain .................................................... (4.1) --
Loss on extinguishment of debt ........................................ -- 0.4
Loss on sale or disposal of fixed assets and securities ............... -- 0.1
Depreciation .......................................................... 4.1 4.5
Amortization of restricted stock ...................................... 1.3 0.9
Amortization of intangible assets and deferred financing costs ........ 0.8 0.5
Accretion of zero coupon convertible notes ............................ 2.3 2.2
Deferred income taxes ................................................. (0.1) (0.1)
Changes in current assets and liabilities, net ........................ (29.9) 12.1
Restructuring and other charges ....................................... (0.5) (1.1)
Other, net ............................................................ (2.7) 2.6
------ ------
Net cash (used in) provided by continuing operating activities.... (10.7) 32.3
INVESTING ACTIVITIES
Capital expenditures ....................................................... (2.9) (12.6)
------ ------
Net cash used in continuing investing activities ................. (2.9) (12.6)
FINANCING ACTIVITIES
Proceeds from long-term borrowings ......................................... 20.8 121.4
Repayment of long-term borrowings .......................................... (20.8) (116.7)
Payment of cash dividend ................................................... (55.1) --
Proceeds from issuance of common stock ..................................... 6.1 0.5
Deferred financing costs ................................................... (0.2) (0.4)
Purchases of common stock for treasury ..................................... -- (17.3)
Retirement of notes payable ................................................ -- (2.0)
------ ------
Net cash used in continuing financing activities ................. (49.2) (14.5)
------ ------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS FROM
CONTINUING OPERATIONS ................................................... (62.8) 5.2
Cash used in discontinued operations ......................................... (0.2) (0.3)
Cash and cash equivalents at beginning of period ............................. 101.4 19.1
------ ------
Cash and cash equivalents at end of period ................................... $ 38.4 $ 24.0
====== ======
See accompanying notes to the condensed consolidated financial statements.
3
ANIXTER INTERNATIONAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in Anixter International Inc.'s ("the Company") Annual
Report on Form 10-K for the year ended January 2, 2004. The condensed
consolidated financial information furnished herein reflects all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the condensed consolidated
financial statements for the periods shown. The results of operations of any
interim period are not necessarily indicative of the results that may be
expected for a full fiscal year. Certain amounts for the prior year have been
reclassified to conform to the 2004 presentation.
STOCK BASED COMPENSATION: Beginning in 2003, the Company granted
restricted employee stock units in lieu of employee stock options. The fair
value of the restricted stock units is amortized over the four-year vesting
period from the date of grant. In the first quarter of 2004 and 2003, $0.9
million and $0.2 million was recognized as expense, respectively. Total expense
for fiscal 2004 is expected to be approximately $4.4 million as compared to $1.6
million in 2003.
Under the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," and SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure," an amendment of SFAS No. 123, the
Company has elected to continue to apply the intrinsic value method of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and its related interpretations in accounting for its stock-based
compensation plans. In accordance with the APB Opinion No. 25, compensation cost
of stock options issued were 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. The Company
applied the disclosure-only provisions of SFAS No. 123. Accordingly, no
compensation expense has been recognized in the condensed consolidated
statements of operations for the stock option plans.
The Black-Scholes option-pricing model was developed for 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. Had compensation costs for the plans been
determined based on the fair value at the grant date using the Black-Scholes
option pricing model and amortized over the respective vesting period, the
Company's net income would have been reduced to the pro forma amounts indicated
below:
13 WEEKS ENDED
-----------------------
APRIL 2, APRIL 4,
2004 2003
(IN MILLIONS, EXCEPT PER SHARE DATA) -------- --------
Net income as reported ............................................... $ 18.1 $ 10.2
Add: Stock-based employee compensation included in net income, net.... 0.8 0.6
Deduct: Stock-based employee compensation expense, net ............... (2.3) (2.6)
------ ------
Pro forma net income ................................................. $ 16.6 $ 8.2
====== ======
BASIC EARNINGS PER SHARE:
As reported ........................................................ $ 0.50 $ 0.28
Pro forma .......................................................... $ 0.45 $ 0.22
DILUTED EARNINGS PER SHARE:
As reported ........................................................ $ 0.48 $ 0.27
Pro forma .......................................................... $ 0.44 $ 0.22
4
ANIXTER INTERNATIONAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-- CONTINUED
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In December 2003, the Financial
Accounting Standards Board ("FASB") revised Statement of Financial Accounting
Standards ("SFAS") No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." This statement revises employers' disclosure about
pension plans and other postretirement benefit plans. It does not change the
measurement or recognition of those plans required by SFAS No. 87, "Employers'
Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination Benefits"
and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." It requires additional disclosures to those in the original SFAS No.
132. This statement is effective for financial statements with fiscal years
ending after December 15, 2003. The interim-period disclosures required by this
Statement are effective of the first quarter ending April 2, 2004. The
provisions of this statement have been disclosed in Note 9, "Pension Plans,
Post-Retirement Benefits and Other Benefits."
In January 2003, the FASB issued Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities", an Interpretation of Accounting
Research Bulletin ("ARB") 51, which subsequently has been revised by FIN 46-R.
The primary objectives of FIN 46-R are to provide guidance on the identification
of entities for which control is achieved through means other than through
voting rights (variable interest entities or VIEs) and how to determine when and
which business enterprise should consolidate the VIE (the primary beneficiary).
This new model for consolidation applies to an entity in which either (1) the
equity investors (if any) do not have a controlling financial interest or (2)
the equity investment at risk is insufficient to finance that entity's
activities without receiving additional subordinated financial support from
other parties. In addition, FIN 46-R requires that both the primary beneficiary
and all other enterprises with a significant variable interest in a VIE make
additional disclosures. FIN 46-R is effective for VIEs created after January 31,
2003 and is effective for all VIEs created before February 1, 2003 that are
Special Purpose Entities ("SPEs") in the first reporting period ending after
December 15, 2003 and for all other VIEs created before February 1, 2003 in the
first reporting period ending after March 15, 2004. The adoption of FIN 46-R has
not had any effect on the Company's financial position, cash flows or results of
operations.
NOTE 2. COMPREHENSIVE INCOME
Comprehensive income, net of tax, consisted of the following:
13 WEEKS ENDED
--------------------
APRIL 2, APRIL 4,
(IN MILLIONS) 2004 2003
------- -------
Net income ................................... $18.1 $10.2
Change in cumulative translation adjustment... (1.0) 6.9
Change in fair market value of derivatives.... (0.1) (0.2)
----- -----
Comprehensive income ......................... $17.0 $16.9
===== =====
NOTE 3. EXTRAORDINARY GAIN
In December 2003, the Company received $4.7 million from an escrow account
established in connection with the 1983 bankruptcy of Itel Corporation, the
predecessor of the Company. As of January 2, 2004, the Company was unable to
determine the appropriate beneficiary of this receipt and was in the process of
an investigation to determine its proper disposition. As of January 2, 2004, the
Company had not recorded income associated with this receipt because of the
uncertainty of the beneficiary. During the first quarter of 2004, the Company
completed the investigation and concluded that the funds are the property of the
Company. Accordingly, in the first quarter of 2004 the Company recorded a $4.1
million extraordinary after-tax gain as a result of the receipt.
5
ANIXTER INTERNATIONAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-- CONTINUED
NOTE 4. INCOME PER SHARE
The following table sets forth the computation of basic and diluted income
per share:
13 WEEKS ENDED
-------------------------
APRIL 2, APRIL 4,
(IN MILLIONS, EXCEPT PER SHARE DATA) 2004 2003
-------- --------
BASIC INCOME PER SHARE:
Income before extraordinary gain ............. $ 14.0 $ 10.2
Extraordinary gain, net ...................... 4.1 --
------ ------
Net income ................................... $ 18.1 $ 10.2
====== ======
Weighted-average common shares outstanding.... 36.5 36.9
Income per share before extraordinary gain.... $ 0.38 $ 0.28
Extraordinary gain per share ................. $ 0.11 $ --
Net income per share ......................... $ 0.50 $ 0.28
DILUTED INCOME PER SHARE:
Income before extraordinary gain ............. $ 14.0 $ 10.2
Extraordinary gain ........................... 4.1 --
------ ------
Net income ................................... $ 18.1 $ 10.2
====== ======
Weighted-average common shares outstanding 36.5 36.9
Effect of dilutive securities:
Stock options and units ................... 1.1 0.9
------ ------
Weighted-average common shares outstanding 37.6 37.8
====== ======
Income per share before extraordinary gain $ 0.37 $ 0.27
Extraordinary gain per share ................. $ 0.11 $ --
Net income per share ......................... $ 0.48 $ 0.27
The Company excluded 6.6 million and 3.1 million, respectively, of common
stock equivalents, primarily relating to the 3.25% and 7% zero coupon
convertible notes ("Convertible Notes"), from its calculation of diluted income
per share because the effect would have been antidilutive. Because the
Convertible Notes were antidilutive, the related $1.4 million and $1.3 million
for the first quarter of 2004 and 2003, respectively, of net interest expense
was not excluded from the determination of income in the calculation of diluted
income per share.
NOTE 5. INCOME TAXES
The 2004 effective tax rate is 39.0% compared to 42.0% in 2003. The
decrease in the effective tax rate is primarily due to a change in the mix of
foreign income and losses by country as compared to country level net operating
loss positions. The change in tax rate increased income before extraordinary
gain and net income by $0.7 million or $0.02 per diluted share.
NOTE 6. SHARE REPURCHASE
In the first quarter of 2003, the Company repurchased 832,200 shares at an
average cost of $22.12. Purchases were made in the open market and were financed
from cash generated by operations. No shares were repurchased in 2004. The
Company has the authorization to purchase additional shares with the volume and
timing to depend on market conditions.
6
ANIXTER INTERNATIONAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-- CONTINUED
NOTE 7. SPECIAL DIVIDEND
On February 11, 2004, the Company's Board of Directors declared a special
dividend of $1.50 per common share, or $55.8 million, as a return of excess
capital to shareholders. On March 31, 2004, the Company paid $55.1 million of
the dividend to shareholders of record as of March 16, 2004. In addition, as
required by the plan documents, the remaining dividend of $0.7 million was
accrued at April 2, 2004 for payments on the vesting date to holders of employee
stock units and restricted stock.
In accordance with the provisions of the stock option plan, the exercise
price and number of options outstanding were adjusted to reflect the special
dividend. The average exercise price of outstanding options decreased from
$21.48 to $20.40 and the number of outstanding options increased from 4,331,975
to 4,561,424. These changes resulted in no additional compensation expense.
In accordance with the provisions of the enhanced incentive plan, stock
units granted in 2001 were adjusted to reflect the special dividend. The number
of outstanding stock units associated with the 2001 grant increased from 53,680
to 56,531. This change resulted in no additional compensation expense.
The conversion rate of the 3.25% zero coupon convertible notes due 2033
("Convertible Notes due 2033") was adjusted in March 2004 to reflect the special
dividend. Holders of the Convertible Notes due 2033 may convert each of them
into 13.5584 shares of the Company's common stock, of which the Company has
reserved 5.1 million shares based on the number of outstanding bonds, in any
calendar quarter if:
- - the sales price of our common stock reaches specified thresholds;
- - during any period in which the credit rating assigned to the Convertible
Notes is below a specified level;
- - the Convertible Notes due 2033 are called for redemption; or
- - specified corporate transactions have occurred.
Upon conversion, the Company has the right to deliver, in lieu of its
common stock, cash or a combination of cash and stock. The Convertible Notes due
2033 were not convertible at April 2, 2004, as none of the above conditions were
met.
NOTE 8. ACQUISITION OF BUSINESS
In the third quarter of 2003, the Company purchased 100% of the stock of
Walters Hexagon Group Limited ("Walters Hexagon"). Headquartered in Worcester,
England, Walters Hexagon is a leading distributor of fasteners and other small
parts to original equipment manufacturers and provides inventory management
services to a range of markets and industries. Walters Hexagon operates a
network of ten service centers in the United Kingdom and France and employs
approximately 300 people. The Company believes Walters Hexagon's business model
and position as a value-added distributor complements its current business. The
Company purchased Walters Hexagon for $42.7 million, inclusive of legal and
financial advisory fees, acquiring tangible assets with a fair value of
approximately $16.2 million. The tangible net assets primarily consist of
accounts receivable, inventory, office and warehouse equipment and furnishings,
accounts payable and select operating liabilities. Based upon a third party
valuation, assets and liabilities have been recorded at estimated fair value
based on a preliminary allocation of the purchase price. Intangible assets are
recorded at an estimated fair value as follows:
- - $8.3 million of intangible assets with a finite life of 10 years (customer
relationships); and
- - $18.2 million of goodwill.
The stock purchase agreement provides for additional consideration of up
to a maximum of $5.8 million based on the future operating performance of
Walters Hexagon. The purchase was funded with on-hand excess cash balances along
with the assumption of $0.7 million of Walters Hexagon's debt. Included in the
results of the Company for the first quarter of 2004 are $23.7 million of sales
and $0.5 million of operating income related to Walters Hexagon.
This acquisition was accounted for as a purchase and the results of
operations of the acquired business are included in the consolidated financial
statements from the date of acquisition. Had this acquisition occurred at the
beginning of the year of acquisition, the impact on the Company's operating
results would not have been significant.
7
ANIXTER INTERNATIONAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-- CONTINUED
NOTE 9. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
The Company guarantees, fully and unconditionally, substantially all of
the debt of its subsidiaries, which include Anixter Inc. Certain debt agreements
entered into by Anixter Inc. contain various restrictions including restrictions
on payments to the Company. Such restrictions have not had nor are expected to
have an adverse impact on the Company's ability to meet its cash obligations.
The following summarizes the financial information for Anixter Inc.:
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 2, JANUARY 2,
(IN MILLIONS) 2004 2004
---------- ----------
(UNAUDITED)
ASSETS:
Current assets ........................ $ 919.3 $ 875.4
Property, net ......................... 41.5 43.1
Goodwill and other intangibles ........ 301.3 301.1
Other assets .......................... 115.4 109.6
-------- --------
$1,377.5 $1,329.2
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities ................... $ 412.0 $ 384.9
Subordinated notes payable to parent... 156.1 147.8
Long-term debt ........................ 30.0 30.0
Other liabilities ..................... 78.6 79.1
Stockholders' equity .................. 700.8 687.4
-------- --------
$1,377.5 $1,329.2
======== ========
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
13 WEEKS ENDED
-------------------
APRIL 2, APRIL 4,
(IN MILLIONS) 2004 2003
-------- --------
Net sales .................................. $764.2 $662.2
Operating income ........................... $ 30.1 $ 22.7
Income before income taxes.................. $ 23.3 $ 17.6
Net income ................................. $ 14.5 $ 10.2
NOTE 10. PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS
The Company has various defined benefit and defined contributory pension
plans. The plans of the Company are the Anixter Inc. Pension Plan and Anixter
Inc. Excess Benefit Plan ("Domestic Plans") and various pension plans covering
employees of foreign subsidiaries ("Foreign Plans"). The majority of the
Company's 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 both the
Domestic and Foreign Plans. The Company's policy is to fund all plans as
required by the Employee Retirement Income Security Act of 1974 ("ERISA"), the
Internal Revenue Service and applicable foreign laws. Anixter Inc. Pension Plan
assets consisted primarily of equity securities and fixed income fund
investments.
8
ANIXTER INTERNATIONAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-- CONTINUED
The expected long-term rate of return on our Anixter Inc. Pension Plan
assets reflects the average rate of earnings expected on the invested assets and
future assets to be invested to provide for the projected benefit obligation. We
have historically used a 9.0% rate of return since the average 10 year
historical return on our plan assets is approximately 10.4%. We reduced the
expected rate of return for 2004 to 8.5% due to the significant decline in the
equity market in 2001 and 2002. Components of net periodic pension cost is as
follows:
PENSION BENEFITS
---------------------------------------------------------------
DOMESTIC FOREIGN TOTAL
------------------- ------------------- -------------------
APRIL 2, APRIL 4, APRIL 2, APRIL 4, APRIL 2, APRIL 4,
2004 2003 2004 2003 2004 2003
-------- -------- -------- -------- -------- --------
(IN MILLIONS)
Service cost ..................... $ 1.5 $ 1.4 $ 1.1 $ 1.0 $ 2.6 $ 2.4
Interest cost .................... 1.8 1.8 0.8 0.7 2.6 2.5
Expected return on plan assets.... (1.6) (1.5) (0.7) (0.7) (2.3) (2.2)
Net amortization ................. 0.2 0.2 0.1 0.1 0.3 0.3
-------- -------- -------- -------- -------- --------
Net periodic cost ................ $ 1.9 $ 1.9 $ 1.3 $ 1.1 $ 3.2 $ 3.0
======== ======== ======== ======== ======== ========
The Company estimates that it will make contributions in 2004 of
approximately $4.5 million to $6.0 million to the Anixter Inc. Pension Plan and
approximately $4.0 million to $5.0 million to its Foreign Plans.
NOTE 11. BUSINESS SEGMENTS
The Company is engaged in the distribution of communications and specialty
wire and cable products and "C" class inventory components from top suppliers to
contractors and installers, and also to end users including manufacturers,
natural resources companies, utilities and original equipment manufacturers. The
Company is organized by geographic regions, and accordingly, has identified
North America (United States and Canada), Europe and Emerging Markets (Asia
Pacific and Latin America) as reportable segments. The Company obtains and
coordinates financing, tax, information technology, legal and other related
services, certain of which are rebilled to subsidiaries. Interest expense and
other non-operating items are not allocated to the segments or reviewed on a
segment basis.
Segment information for the 13 weeks ended April 2, 2004 and April 4, 2003
was as follows:
13 WEEKS ENDED
---------------------------
APRIL 2, APRIL 4,
(IN MILLIONS) 2004 2003
-------- --------
NET SALES:
United States ................................. $ 495.1 $ 457.2
Canada ........................................ 76.0 60.9
-------- --------
North America ........................... 571.1 518.1
Europe ........................................ 140.2 97.9
Emerging Markets .............................. 52.9 46.2
-------- --------
$ 764.2 $ 662.2
======== ========
OPERATING INCOME:
United States ................................. $ 19.1 $ 16.4
Canada ........................................ 3.9 2.7
-------- --------
North America ........................... 23.0 19.1
Europe ........................................ 4.5 3.0
Emerging Markets .............................. 1.5 0.5
-------- --------
$ 29.0 $ 22.6
======== ========
APRIL 2, JANUARY 2,
2004 2004
-------- ----------
TOTAL ASSETS:
United States ................................. $ 884.5 $ 906.1
Canada ........................................ 118.8 120.2
-------- --------
North America ........................... 1,003.3 1,026.3
Europe ........................................ 246.0 228.0
Emerging Markets .............................. 114.0 117.1
-------- --------
$1,363.3 $1,371.4
======== ========
9
ANIXTER INTERNATIONAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 12. SUBSEQUENT EVENT
On April 26, 2004, the Company announced plans to acquire substantially
all of the assets and operations of Distribution Dynamics, Inc., ("DDI") for $25
million in cash, subject to a working capital adjustment. DDI is a privately
held value-added distributor of fasteners, hardware and related products
specializing in inventory logistics management programs directed at supporting
the production lines of original equipment manufacturers across a broad spectrum
of industries. Headquartered in Eden Prairie, Minnesota, DDI employs two hundred
seventy-seven associates located in twenty locations in the United States,
Canada and Mexico, which the Company plans to make offers of employment. In its
fiscal year ended September 30, 2003 DDI had sales of $76 million.
The proposed sale is subject to approval by the United States Bankruptcy
Court for the District of Minnesota where DDI filed a petition for relief under
Chapter 11 on April 26, 2004. In connection with this proposed purchase, the
Company plans to assume certain obligations of DDI under facility and operating
leases that are used in conjunction with the operations that the Company is
proposing to purchase. The Company may offer to purchase certain valid,
unsecured pre-petition claims to the extent those claims apply to product sales
to the operations that will be acquired by the Company.
10
ANIXTER INTERNATIONAL INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following is a discussion of the historical results of operations and
financial condition of Anixter International Inc. (the "Company") and factors
affecting the Company's financial resources. This discussion should be read in
conjunction with the condensed consolidated financial statements, including the
notes thereto, set forth herein under "Financial Statements" and the Company's
Annual Report on Form 10-K for the year ended January 2, 2004.
ACQUISITION OF WALTERS HEXAGON
In the third quarter of 2003, the Company purchased 100% of the stock of
Walters Hexagon Group Limited ("Walters Hexagon"). Headquartered in Worcester,
England, Walters Hexagon is a leading distributor of fasteners and other small
parts to original equipment manufacturers and provides inventory management
services to a range of markets and industries. Walters Hexagon operates a
network of ten service centers in the United Kingdom and France and employs
approximately 300 people. The Company believes Walters Hexagon's business model
and position as a value-added distributor complements its current business. The
Company purchased Walters Hexagon for $42.7 million, inclusive of legal and
financial advisory fees, acquiring tangible assets with a fair value of
approximately $16.2 million. The tangible net assets primarily consist of
accounts receivable, inventory, office and warehouse equipment and furnishings,
accounts payable and select operating liabilities. Based upon a third party
valuation, assets and liabilities have been recorded at estimated fair value
based on a preliminary allocation of the purchase price. Intangible assets are
recorded at an estimated fair value as follows:
- $8.3 million of intangible assets with a finite life of 10 years
(customer relationships); and
- $18.2 million of goodwill.
The stock purchase agreement provides for additional consideration of up
to a maximum of $5.8 million based on the future operating performance of
Walters Hexagon. The purchase was funded with on-hand excess cash balances along
with the assumption of $0.7 million of Walters Hexagon's debt. Included in the
results of the Company for the first quarter of 2004 are $23.7 million of sales
and $0.5 million of operating income related to Walters Hexagon.
This acquisition was accounted for as a purchase and the results of
operations of the acquired business are included in the consolidated financial
statements from the date of acquisition. Had this acquisition occurred at the
beginning of the year of acquisition, the impact on the Company's operating
results would not have been significant.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
Overview
As a distributor, the Company's use of capital is largely for working
capital to support its revenue base. Capital commitments for property, plant and
equipment are limited to information technology assets, warehouse equipment and
office furniture and fixtures, since the Company operates from leased
facilities. Therefore, in any given reporting period, the amount of cash
consumed or generated by operations will primarily be a factor of the rate of
sales increase or decline, due to the corresponding change in working capital.
In periods when sales are increasing, the expanded working capital needs
will be funded first by cash from operations, secondly from additional
borrowings and lastly from additional equity offerings. Also, the Company will,
from time to time, issue or retire borrowings or equity in an effort to maintain
a cost-effective capital structure consistent with its anticipated capital
requirements.
11
ANIXTER INTERNATIONAL INC.
Cash Flow
Consolidated net cash used for operating activities was $10.7 million in
the first quarter of 2004, compared to cash provided by operating activities of
$32.3 million for the same period in 2003. The decrease in cash flow from
operations in 2004 is due to an increase in working capital of $29.9 million to
support the 15% growth in sales from the fourth quarter of 2003. Sales were flat
between the fourth quarter of 2002 and the first quarter of 2003, resulting in a
decline in working capital.
Consolidated net cash used in investing activities was $2.9 million in the
first quarter of 2004 versus $12.6 million for the same period in 2003. The
decrease is primarily the result of the Company spending $11.2 million in the
first quarter of 2003 to complete the construction of a new corporate
headquarters building. Capital expenditures are expected to be approximately
$15.0 million in 2004.
Consolidated net cash used in financing activities was $49.2 million in
the first quarter of 2004 compared to $14.5 million in the first quarter of
2003. During the 13 weeks ended April 2, 2004, the Company used $55.1 million to
fund the special dividend of $1.50 per common share that was paid on March 31,
2004 to shareholders of record on March 16, 2004. Proceeds from the issuance of
common stock relating to the exercise of stock options and stock units were $6.1
million in the first quarter of 2004 compared to $0.5 million in the first
quarter of 2003. In 2003, the Company had net proceeds from borrowings of $4.7
million. As a result of significant cash holdings at the end of 2003, the
Company did not need to increase its borrowings to fund its operations.
Financing
Certain debt agreements entered into by the Company's subsidiaries contain
various restrictions including restrictions on payments to the Company. Such
restrictions have not nor are expected to have an adverse impact on the
Company's ability to meet its cash obligations. At April 2, 2004, $245.0 million
was available under the bank revolving lines of credit at Anixter Inc., of which
$21.0 million was available to pay the Company for intercompany liabilities. Due
to the leverage ratio restriction, borrowings of only $159.6 million, of which
$45.1 million may be used to pay dividends to the Company, of the $245.0 million
available under bank revolving lines of credit at Anixter would be permitted as
of April 2, 2004.
At April 2, 2004, certain foreign subsidiaries had approximately $20.5
million available under bank revolving lines of credit, none of which was
outstanding.
During the first quarter of 2003, the Company retired $2.0 million of the
8% senior notes and cancelled $115.0 million of its available revolving credit
facility in order to reduce costs associated with the excess availability. As a
result, the Company recorded a pre-tax loss on extinguishment of debt of $0.4
million. Although no debt was repurchased during the first quarter of 2004, the
Company may continue to pursue opportunities to repurchase outstanding debt
securities, with the volume and timing to depend on market conditions.
Consolidated interest expense was $3.0 million and $3.4 million for the
first quarter of 2004 and 2003, respectively. The decrease is due to a lower
average cost of borrowings. The average outstanding long-term debt balance for
the first quarter of 2004 and 2003 was $241.1 million and $212.9 million,
respectively. The effective interest rate for the first quarter of 2004 and 2003
was 5.0% and 6.3%, respectively.
Off Balance Sheet Financing
On October 6, 2000, the Company entered into an account receivable
securitization program. The program is conducted through Anixter Receivables
Corporation ("ARC"), which is a wholly-owned unconsolidated subsidiary of the
Company. The investment is accounted for using the equity method. The program
allows the Company to sell, on an ongoing basis without recourse, a majority of
the accounts receivable originating in the United States to ARC at a discount of
2.12% and consists of a series of 364-day facilities. At April 2, 2004 and
January 2, 2004, the outstanding balance of accounts receivable sold to ARC
totaled $228.9 million and $245.7 million, respectively. Accordingly, these
accounts receivable were removed from the balance sheet.
12
ANIXTER INTERNATIONAL INC.
Included in the Condensed Consolidated Statements of Operations "Other,
net" classification, are net expenses/income incurred by ARC of $0.2 million of
income and $1.1 million of expense, for the first quarter of 2004 and 2003,
respectively. Included in the ARC net expense/income amount was interest expense
incurred by ARC of $0.6 million and $0.7 million for the first quarter of 2004
and 2003, respectively. Generally accepted accounting principles require that
the interest expense be classified as other expense as it is recorded as part of
the Company's investment adjustment related to its 100% ownership of ARC.
However, it is considered to be part of the Company's financing strategy and
therefore is viewed as interest expense by the Company. The average outstanding
debt incurred by ARC for the first quarter of 2004 and 2003 was $131.5 million
and $121.3 million, respectively. The effective interest rate on the ARC debt
was 1.7% and 2.3% for the first quarter of 2004 and 2003, respectively.
Share Repurchases
In the first quarter of 2003, the Company repurchased 832,200 shares at an
average cost of $22.12. Purchases were made in the open market and were financed
from cash generated by operations. Although no shares were repurchased in the
first quarter of 2004, the Company has the authorization to purchase additional
shares, with the volume and timing to depend on market conditions.
Liquidity Considerations and Other
In 2004, the Company estimates that it will have positive cash flow from
operating activities and after capital expenditures. The Company may continue to
pursue opportunities to acquire businesses and issue or retire borrowings or
equity in an effort to maintain a cost-effective capital structure consistent
with its anticipated capital requirements.
On February 11, 2004, the Company's Board of Directors declared a special
dividend of $1.50 per common share, or $55.8 million, as a return of excess
capital to shareholders. On March 31, 2004, the Company paid $55.1 million of
the dividend to shareholders of record as of March 16, 2004. In addition, as
required by the plan documents, the remaining dividend of $0.7 million was
accrued at April 2, 2004, for payments on the vesting date to holders of the
employee stock units and restricted stock.
On April 26, 2004, the Company announced plans to acquire substantially
all of the assets and operations of Distribution Dynamics, Inc., ("DDI") for $25
million in cash, subject to a working capital adjustment. The proposed sale is
subject to approval by the United States Bankruptcy Court for the District of
Minnesota where DDI filed a petition for relief under Chapter 11 on April 26,
2004. In connection with this proposed purchase, the Company plans to assume
certain obligations of DDI under facility and operating leases that are used in
conjunction with the operations that the Company is proposing to purchase. The
Company may offer to purchase certain valid, unsecured pre-petition claims to
the extent those claims apply to product sales to the operations that will be
acquired by the Company. In its fiscal year ended September 30, 2003 DDI had
sales of $76 million.
RESULTS OF OPERATIONS
The Company competes with distributors and manufacturers who sell products
directly or through existing distribution channels to end users or other
resellers. The Company's relationship with the manufacturers for which it
distributes products could be affected by decisions made by these manufacturers
as the result of changes in management or ownership as well as other factors.
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. In addition to competitive factors, future performance could be subject
to economic downturns and possible rapid changes in applicable technologies.
13
ANIXTER INTERNATIONAL INC.
OVERVIEW
In the first quarter of 2004, the Company saw net income, inclusive of an
extraordinary gain of $4.1 million, increase by $7.9 million, or 78.3%, on a
15.4% increase in sales from the first quarter of the prior year. Sales, gross
profits, operating expense and operating profits, all showed year-on-year
increases from a combination of the acquisition of Walters Hexagon in September
of 2003, exchange rate differences related to the weaker US dollar and combined
unit growth and commodity price driven price increases. Other expenses increased
in the current year due to larger foreign exchange losses, which in large part
were the result of the February 2004 devaluation of the Venezuelan Bolivar.
Foreign exchange losses totaled $3.1 million in the first quarter of this year.
In the prior year, other expenses included a loss of $0.4 million related to the
early retirement of debt and the write-off of debt issuance costs associated
with the cancellation of $115.0 million of the available revolving credit
facility. The Company's effective tax rate dropped to 39.0% from 42.0% in the
year ago quarter as a result of a change in the mix of income and losses by
country as compared to country level net operating loss positions. The
extraordinary gain was the result of monies received from an escrow account in
connection with the 1983 bankruptcy of Itel Corporation, the predecessor to the
Company.
CONSOLIDATED RESULTS OF OPERATIONS
13 WEEKS ENDED
-----------------------------
APRIL 2, APRIL 4, PERCENT
2004 2003 CHANGE
-------- -------- -------
(IN MILLIONS)
Net sales .......................... $764.2 $662.2 15.4%
Gross profit ....................... $182.7 $160.8 13.6%
Operating expenses ................. $153.7 $138.2 11.2%
Operating income ................... $ 29.0 $ 22.6 28.2%
Net Sales: The Company's net sales during the first quarter of 2004
increased 15.4% to $764.2 million from $662.2 million in the same period in
2003. The acquisition of Walters Hexagon in September 2003, along with favorable
effects from changes in exchange rates, accounted for $49.3 million of the
increase. Excluding the acquisition of Hexagon and the effects from changes in
exchange rates, the Company's net sales increased 8.0% during the 13 weeks ended
April 2, 2004 from the same period in 2003. The increase in net sales was due to
improved economic conditions, commodity driven price increases and an increase
in project business.
Gross Margins: Gross margins decreased to 23.9% in the first quarter of
2004 from 24.3% in the corresponding period in 2003. The decrease was a result
of an increase in larger capital projects during the first quarter of 2004, as
compared to the first quarter of 2003. Due to excess capacity in the industry,
pricing on these projects were extremely competitive, which reduced gross
margins.
Operating Income: As a result of higher sales, operating margins were 3.8%
for the first quarter of 2004 as compared to 3.4% in the first quarter of 2003.
Operating expenses increased $15.5 million in the first quarter 2004 from the
corresponding period in 2003. The Walters Hexagon acquisition increased
operating expenses by $6.1 million, while changes in exchange rates increased
operating expenses by $4.8 million. Excluding the above, operating expenses
increased $4.6 million, or 3.3%, primarily due to variable costs associated with
higher sales volumes and increases in healthcare costs, pension costs and costs
associated with additional restricted stock grants.
Interest Expense: Consolidated interest expense decreased to $3.0 million
in the first quarter of 2004 from $3.4 million in 2003. Interest expense
decreased due to a reduction in the average cost of borrowings. The average
long-term debt balance was $241.1 million and $212.9 million for the first
quarter of 2004 and 2003, respectively. The average interest rate for the first
quarter of 2004 and 2003, was 5.0% and 6.3%, respectively.
14
ANIXTER INTERNATIONAL INC.
Other, net income (expense):
13 WEEKS ENDED
----------------------
APRIL 2, APRIL 4,
2004 2003
------- --------
(MILLIONS)
Accounts receivable securitization ... $ 0.2 $ (1.1)
Foreign exchange ..................... (3.1) --
Other ................................ (0.2) (0.2)
------ -------
$ (3.1) $ (1.3)
====== =======
The accounts receivable securitization program had income of $0.2 million
for the 13 weeks ended April 2, 2004, compared to $1.1 million of net expenses
in 2003. The reduction in net expenses was primarily a result of reduced sales
of net accounts receivable to ARC which are sold at a 2.12% discount.
Foreign exchange had a net loss of $3.1 million in the 13 weeks ended
April 2, 2004. A significant portion of the net loss resulted from the February
2004 devaluation of the Venezuelan Bolivar.
Income Taxes: The consolidated tax provision increased to $8.9 million in
first quarter of 2004 from $7.3 million in the first quarter of 2003, primarily
due to an increase in income before taxes and extraordinary gain. The 2004
effective tax rate is 39.0% compared to 42.0% in 2003. The decrease in the
effective tax rate is primarily due to a change in the mix of foreign income and
losses by country as compared to country level net operating loss positions. The
change in tax rate increased income before extraordinary gain and net income by
$0.7 million or $0.02 per diluted share.
NORTH AMERICA RESULTS OF OPERATIONS
13 WEEKS ENDED
---------------------------------
APRIL 2, APRIL 4, PERCENT
2004 2003 CHANGE
-------- -------- -------
(IN MILLIONS)
Net sales .......................... $571.1 $518.1 10.2%
Gross profit ....................... $134.3 $125.6 6.9%
Operating expenses ................. $111.3 $106.5 4.4%
Operating income ................... $ 23.0 $ 19.1 20.4%
Net Sales: When compared to the corresponding period in 2003, North
America net sales for the 13 weeks ended April 2, 2004 increased 10.2% to $571.1
million. The combined Industrial Wire and Cable and North America Enterprise
Cabling sales increased $42.4 million in the first quarter of 2004 as compared
to the first quarter of 2003, due to improved economic conditions and price
increases driven by higher copper and data cabling prices. In the OEM supply
market, the Pentacon operations reported a 8.7% increase in sales on a
combination of improved customer demand and new contract additions. Sales to
telecom original equipment manufacturers showed their first year-on-year
increase in over two years.
Gross Margins: Gross margins decreased to 23.5% in the first quarter of
2004 from 24.3% for the same period in 2003. The decrease is primarily due to a
higher percentage of capital projects, which had lower gross margins due to
excess capacity in the industry.
Operating Income: Operating expenses increased $4.8 million in the first
quarter of 2004 from the corresponding period in 2003. The increase is primarily
due to variable costs associated with the increase in sales volume and higher
pension, healthcare and costs related to additional restricted stock grants.
Primarily as a result of higher daily sales and continued tight expense
controls, North America operating margins increased to 4.0% in the first quarter
of 2004 from 3.7% in the same period in 2003.
15
ANIXTER INTERNATIONAL INC.
EUROPE RESULTS OF OPERATIONS
13 WEEKS ENDED
-----------------------------------
APRIL 2, APRIL 4, PERCENT
2004 2003 CHANGE
-------- -------- -------
(IN MILLIONS)
Net sales .......................... $140.2 $ 97.9 43.2%
Gross profit ....................... $ 36.6 $ 25.8 42.1%
Operating expenses ................. $ 32.1 $ 22.8 40.9%
Operating income ................... $ 4.5 $ 3.0 50.8%
Net Sales: Europe net sales increased 43.2% in the first quarter of 2004
to $140.2 million from $97.9 million in the first quarter of 2003, including a
$14.6 million favorable effect from changes in exchange rates and an increase of
$23.7 million as a result of the acquisition of Walters Hexagon. The increase in
local currency sales of 4.0% reflects an increase in economic activity in
Europe.
Gross Margins: Europe's gross margins decreased to 26.1% in the first
quarter of 2004 from 26.3% in the same period in 2003. The slight decrease is
primarily due to a large project at reduced margins. Walters Hexagon added 30
basis points to Europe's gross margins in the first quarter of 2004.
Operating Income: Compared to the first quarter of 2003, Europe operating
expenses increased 40.9%, or $9.3 million, to $32.1 million in the first quarter
of 2004. Included in the increase are $6.1 million of expenses related to
Walters Hexagon and $3.0 million for changes in exchange rates. Excluding Waters
Hexagon and the exchange rate impact, operating expenses were $0.2 million or
1.1% higher than 2003. Tight expense controls resulted in the operating margin
increasing from 3.0% in 2003 to 3.2% in 2004. Exchange rate changes had a $0.6
million favorable impact on operating income.
EMERGING MARKETS RESULTS OF OPERATIONS
13 WEEKS ENDED
--------------------------------
APRIL 2, APRIL 4, PERCENT
2004 2003 CHANGE
-------- -------- -------
(IN MILLIONS)
Net sales .......................... $ 52.9 $ 46.2 14.7%
Gross profit ....................... $ 11.8 $ 9.4 25.0%
Operating expenses ................. $ 10.3 $ 8.9 15.5%
Operating income ................... $ 1.5 $ 0.5 182.4%
Net Sales: Emerging Markets (Asia Pacific and Latin America) net sales
were up 14.7%, to $52.9 million in the first quarter of 2004, from $46.2 million
in the first quarter of 2003, including a $1.6 million favorable impact from
changes in exchange rates. The increase reflects an overall improvement in the
economic environment and stronger market penetration.
Gross Margins: During the first quarter of 2004, Emerging Markets gross
margins increased to 22.2% from 20.4% in the corresponding period in 2003. The
improvement is primarily due to price increases in Venezuela.
Operating Income: Emerging Markets operating income increased $1.0 million
from $0.5 million in the first quarter of 2003 to $1.5 million in the first
quarter of 2004. The improvement reflects the higher sales levels and improved
gross margins. Exchange rate changes had a minimal impact on operating income.
16
ANIXTER INTERNATIONAL INC.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains a system of disclosure controls and procedures. The
Company's management, including the Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of April 2, 2004, pursuant to
paragraph (b) of Exchange Act Rule 13a-15(e) and 15d-15(e). Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective in ensuring
that material information required to be filed in this quarterly report has been
made known to them in a timely fashion. There was no change in the Company's
internal control over financial reporting that occurred during the 13 weeks
ended April 2, 2004 that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
17
ANIXTER INTERNATIONAL INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
(10) Material Contracts.
10.1 Purchase Agreement between Mesirow Realty
Sale-Leaseback, Inc. ("Buyer") and Anixter-Real Estate,
Inc., a subsidiary of the Company ("Seller").
(31) Rule 13a - 14(a) / 15d - 14(a) Certifications.
31.1 Robert W. Grubbs, President and Chief Executive Officer,
Certification Pursuant to Section 302, of the
Sarbanes-Oxley Act of 2002.
31.2 Dennis J. Letham, Senior Vice President-Finance and
Chief Financial Officer, Certification Pursuant to
Section 302, of the Sarbanes-Oxley Act of 2002.
(32) Section 1350 Certifications.
32.1 Robert W. Grubbs, President and Chief Executive Officer,
Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.2 Dennis J. Letham, Senior Vice President-Finance and
Chief Financial Officer, Certification Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
b) Reports on Form 8-K.
On February 6, 2004, the Company filed a Current Report on Form 8-K
under Item 7 "Financial Statements, Pro Forma Financial Information and
Exhibits" and Item 12 "Results of Operation and Financial Condition"
reporting its results for the fiscal quarter ended January 2, 2004.
18
ANIXTER INTERNATIONAL INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANIXTER INTERNATIONAL INC.
May 11, 2004
By: /s/ Robert W. Grubbs
---------------------------------------
Robert W. Grubbs
President and Chief Executive Officer
May 11, 2004
By: /s/ Dennis J. Letham
---------------------------------------
Dennis J. Letham
Senior Vice President - Finance
and Chief Financial Officer
19