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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 JANUARY 2, 1998
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
------------------- ---------------------
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 $800,000,000 as
of March 16, 1998.
At March 16, 1998, 47,310,177 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 1998 Annual
Meeting of Stockholders of Anixter International Inc. are incorporated by
reference into Part III. This document consists of 51 pages. Exhibit List begins
on page 34.
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TABLE OF CONTENTS
PAGE
----
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......... 6
Executive Officers of the Registrant........................ 6
PART II.
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters....................................... 6
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...................................................... 14
Item 8. Consolidated Financial Statements and Supplementary Data.... 14
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 14
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 providing
networking and cabling solutions for private network infrastructure requirements
through Anixter Inc. and its subsidiaries (collectively "Anixter") and Accu-Tech
Corporation and its subsidiaries (collectively "Accu-Tech"). As of January 2,
1998, the Company also owned approximately 19% of ANTEC Corporation and its
subsidiaries (collectively "ANTEC"), a broadband communications technology
company. This percentage was reduced from 31% in February, 1997, by the issuance
of additional stock by ANTEC in connection with a merger.
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
1997, 53 weeks in 1996 and 52 weeks in 1995. 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").
In 1994, the Company sold its remaining interests in its rail car leasing
business conducted by Itel Rail Corporation ("Rail"). In 1994, 1993 and 1992,
the Company sold all of its other transportation services assets.
In 1994, the Company sold its 9% investment in the common stock of Catellus
Development Corporation ("Catellus").
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
For certain financial information concerning the Registrant's business
segments, see Note 14 ("Business Segments") of the Notes to the Consolidated
Financial Statements of this report.
(C) NARRATIVE DESCRIPTION OF BUSINESS
Anixter is a leading distributor of wiring systems, networking and
internetworking products for voice, data and video networks and electrical power
applications in North America, Europe, Asia and Latin America. Anixter stocks
and/or sells a full line of these products from a network of 89 locations in the
United States, 22 in Canada, 14 in the United Kingdom, 36 in Continental Europe,
17 in Latin America, 4 in Australia, and 16 in Asia. Anixter sells approximately
63,000 products to 100,000 active customers and works with over 1,100 active
suppliers. Its customers include international, national, regional and local
organizations that are end users of these products and engage in manufacturing,
communications, finance, education, health care, transportation, utilities and
government. Also, Anixter sells products to resellers such as contractors,
installers, system integrators, value added resellers, architects, engineers and
wholesale distributors. The average order size is about $1,800.
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. Anixter sells
products, along with integration and support services, that are incorporated in
local area networks ("LANs"), and the internetworking of LANs to form wide area
networks ("WANs") and enterprise networks. Anixter's products also include
electrical wiring system products used for the transmission of electrical energy
and control/monitoring of industrial processes.
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Prior to 1989, Anixter's operations were primarily limited to North America
and the United Kingdom. Beginning 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. While most of the European distribution
businesses have achieved operating profits, the Pacific Rim and Latin American
expansion programs continue to operate in a start-up mode.
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 48% of the Anixter's purchases
in 1997 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 services 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 and possibly rapid changes in applicable technologies. 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.
Increasingly, Anixter's end user customer base for networking products is
seeking complete solutions to their network infrastructure needs. As result,
over the past few years Anixter has invested in the business of providing
services for the design, deployment and support of network infrastructures
("Integration"). Integration functions as a single point-of-contact for
multi-vendor network solutions by providing a wide array of services across the
full life cycle of the network including assessment and planning, network
design, sourcing, deployment and implementation and operational support and
evolution. In addition to its rapidly growing service offerings, Anixter
leverages its long-standing relationships with suppliers to provide a
comprehensive product offering for its customers. The combination of
Integration's design and implementation expertise, strong multi-vendor
relationships, multi-national capabilities and ability to offer high quality,
ongoing technical support provide Anixter with a compelling platform from which
to compete. Participation in a customer's network design affords Anixter
specific knowledge and understanding of the customers' networking requirements
and infrastructure and significantly enhances the ability to capture future
revenue from network upgrades and systems maintenance.
During the last three years, Integration has been experiencing a shift in
product mix from low-end products such as chassis and stackable hubs, adapter
cards, voice and workstation accessories, to more high-end offerings such as
switches, routers, diagnostic tools and services. These value-added products and
services require a high level of technical expertise and resource commitment
that is generally uneconomical for a user to develop and support on an in-house
basis. In addition, new technology is introduced faster than can be assimilated
by customers. As a result, a gap exists between the pace of today's
technological growth and the
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rate at which customers can assimilate the new technology in order to gain a
competitive advantage. Integration believes that its multi-vendor product
offerings and strong engineering capabilities across the network life cycle
uniquely position it to take advantage of these dynamics in the marketplace.
The network services industry is comprised of a large number of
participants including systems integrators, value-added resellers, local and
regional network service firms, telecommunication providers, network equipment
vendors, computer systems vendors and enterprise systems providers. Anixter's
ability to offer a broad portfolio of multi-vendor products and a higher level
of value added services than its competitors gives it a significant competitive
advantage.
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.
As of January 2, 1998, and January 3, 1997, the Company's interest in ANTEC
was approximately 19% and 31%, respectively. On February 6, 1997, a wholly-owned
subsidiary of ANTEC was merged into TSX Corporation. Under the terms of the
transaction, TSX Corporation shareholders received one share of ANTEC
Corporation stock for each share of TSX Corporation stock that they owned. The
transaction was accounted for as a pooling of interests. Upon consummation of
this transaction the Company's ownership interest in ANTEC was reduced to
approximately 19% which resulted in the cessation of equity method accounting
for this investment after February 6, 1997. As of January 2, 1998, the market
value of the Company's 7,113,500 shares of ANTEC was $112.0 million. The Company
carries its investment in ANTEC at fair value. All unrealized gains and losses,
net of taxes, are recorded in stockholders' equity until realized.
Assets Held for Sale
Assets held for sale consist of Signal Capital and various other
discontinued businesses. Remaining assets held for sale relating to Signal
Capital, as of January 2, 1998, and January 3, 1997, were $3.2 million and $21.4
million, respectively. No income or loss has been recognized for discontinued
operations in 1997, 1996 or 1995.
Miscellaneous
The Company and its subsidiaries employed approximately 6,300 people and
5,600 people at January 2, 1998 and January 3, 1997, respectively. Backlog
orders are not significant as a large 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 14 ("Business Segments") of this
report.
ITEM 2. PROPERTIES.
The Company has approximately 200 locations substantially all of which 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.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of 1997, no matters were submitted to a vote of
the security holders.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the name, age as of March 17, 1998, 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/her successor by the Board of Directors.
Rod F. Dammeyer, 57 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, 37 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; Associate
General Counsel and Assistant Secretary from May
1993 to July 1994; Associate General Counsel from
January 1990 to May 1993.
James M. Froisland, 47 Vice President -- Controller of the Company since
February 1996; Vice President -- Corporate
Controller of Budget Rent a Car Corporation from
March 1992 to February 1996.
Robert W. Grubbs Jr., 41 President and Chief Executive Officer of the
Company since February 1998; President and Chief
Executive Officer of Anixter since July 1994;
President Anixter U.S.A. from August 1993 to July
1994; Executive Vice President, Sales and Marketing
of Anixter from August 1992 to August 1993.
James E. Knox, 60 Senior Vice President, General Counsel and
Secretary of the Company since 1986.
Dennis J. Letham, 46 Chief Financial Officer, Senior Vice
President -- Finance of the Company since January
1995; Chief Financial Officer, Executive Vice
President of Anixter since July 1993; Chief
Financial Officer, Vice President of National
Intergroup, Inc. from March 1991 to July 1993;
Chief Financial Officer, Senior Vice President of
FoxMeyer, Inc. from September 1990 to July 1993.
Lisa Kearns Lanz, 45 Vice President -- Treasurer of the Company since
August 1997; Vice President -- Treasurer of Premark
International Inc. from May 1994 to June 1996; Vice
President Planning and Analysis of Premark
International, Inc. from February 1991 to May 1994.
Philip F. Meno, 39 Vice President -- Taxes of the Company since May
1993; Director of Taxes from January 1990 to May
1993.
Samuel Zell, 56 Chairman of the Board of Directors of the Company
since January 1993.
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 16
("Quarterly Summary (unaudited)") of this report. As of March 16, 1998, the
Registrant had 5,586 shareholders of record.
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ITEM 6. SELECTED FINANCIAL DATA.
FISCAL YEAR
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Results of operations(a):
Revenues -- Anixter...................... $2,805.2 $2,475.3 $2,194.8 $1,732.6 $1,328.6
-- ANTEC....................... -- -- -- -- 427.6
-------- -------- -------- -------- --------
Consolidated revenues.................... $2,805.2 $2,475.3 $2,194.8 $1,732.6 $1,756.2
======== ======== ======== ======== ========
Operating income -- Anixter.............. $ 111.1 $ 88.4 $ 99.6 $ 69.8 $ 45.8
-- ANTEC.............. -- -- -- -- 22.4
-------- -------- -------- -------- --------
Consolidated operating income............ $ 111.1 $ 88.4 $ 99.6 $ 69.8 $ 68.2
======== ======== ======== ======== ========
Interest expense and other, net.......... $ (33.7) $ (27.7) $ (21.6) $ (27.1) $ (58.9)
Equity in income (loss) of ANTEC......... 2.2 4.1 (.6) 7.9 --
Non-recurring items, net(b).............. -- -- -- 59.0 71.8
Marketable equity securities losses,
principally write-downs(c)............ -- -- (3.0) (39.6) (25.0)
Income (loss) from continuing
operations............................ 45.3 36.1 39.1 46.2 28.8
Income (loss) from discontinued
operations............................ -- -- -- 200.7 (14.0)
Extraordinary items, net(d).............. -- -- -- -- (16.0)
Net income (loss)........................ 45.3 36.1 39.1 246.9 (1.2)
Basic income (loss) per common share(g):
Continuing operations................. $ .95 $ .73 $ .71 $ .72 $ .43
Before extraordinary items............ .95 .73 .71 3.85 .20
Extraordinary item.................... -- -- -- -- (.27)
Basic net income per common share..... .95 .73 .71 3.85 (.07)
Diluted income (loss) per common
share(g):
Continuing operations................. $ .95 $ .72 $ .70 $ .72 $ .42
Before extraordinary items............ .95 .72 .70 3.84 .19
Extraordinary item.................... -- -- -- -- (.26)
Diluted net income per common share... .95 .72 .70 3.84 (.07)
Financial position at year end(a):
Total assets............................. $1,440.7 $1,261.0 $1,184.7 $1,110.9 $1,380.6
Total debt............................... $ 468.8 $ 468.4 $ 333.7 $ 280.5 $ 494.8
Stockholders' equity(e)(f)............... $ 477.0 $ 435.5 $ 449.0 $ 543.9 $ 405.3
Diluted book value per common share(g)... $ 9.98 $ 8.72 $ 8.05 $ 8.49 $ 6.10
Diluted common shares (in
thousands)(g)......................... 47,775 49,949 55,784 64,089 60,657
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Notes:
(a) 1993 financial information reflects ANTEC as a consolidated subsidiary of
the Company. See Note 1 of the Notes to the Consolidated Financial
Statements.
(b) The non-recurring items in 1994 include a $48.2 million pre-tax gain on the
May 1994 public offering of shares of common stock of ANTEC and a $10.8
million pre-tax gain relating to ANTEC's issuance of common stock in
connection with an acquisition in November 1994. Non-recurring items in
1993 principally include an $84.5 million pre-tax gain on the 1993 initial
public offering of shares of common stock of ANTEC and a $6.4 million
pre-tax gain on other investments offset by a pre-tax loss of approximately
$19.1 million relating to the liquidation of the Company's equity
investment in Q-TEL.
(c) In 1994 and 1993, the Company wrote down the value of its investments in
marketable equity securities by $34.4 million and $25.0 million,
respectively. The remaining $5.2 million pre-tax charge in 1994 relates to
the loss on sale of the Company's investment in Catellus. The remaining
marketable securities were sold in 1995 resulting in a pre-tax loss of $3
million.
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(d) Extraordinary items in 1993 represent the after tax loss on early
extinguishment of senior and subordinated debt at the Company and its
subsidiaries.
(e) Stockholders' equity reflects treasury stock purchases and common stock
repurchase commitments of $14.2 million, $52.1 million, $152.6 million,
$138.9 million and $.3 million in 1997, 1996, 1995, 1994 and 1993,
respectively. No dividends on common stock were declared or paid during any
of the periods shown.
(f) Stockholders' equity includes unrealized after tax gains (losses) on
marketable equity securities of $19.8 million, $(7.2) million and $(23.7)
million at January 2, 1998, and December 31, 1994, and 1993, respectively.
(g) All share and per share data has been adjusted to reflect the dividend paid
in the form of a two-for-one stock split on October 25, 1995.
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.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
Asset Sales and Other Dispositions
Recapitalization Program: In 1990, the Company began a program of modifying
its capital structure by reducing certain senior and subordinated debt and
repurchasing common stock. In the intervening years, the Company also
implemented a program of selling or otherwise monetizing certain assets to fund
the recapitalization program. Since the program began, the Company has used
proceeds to eliminate all debt at the Parent company, temporarily reduce
borrowings at the subsidiary level and to repurchase approximately $809 million
of outstanding common stock. The financial liquidity and capital resources in
1997 and 1996 reflect the impact of the Company's recapitalization program.
ANTEC Investment: As of January 2, 1998, and January 3, 1997, the Company's
interest in ANTEC was approximately 19% and 31%, respectively. On February 6,
1997, a wholly-owned subsidiary of ANTEC was merged into TSX Corporation. Under
the terms of the transaction, TSX Corporation shareholders received one share of
ANTEC Corporation stock for each share of TSX Corporation stock that they owned.
The transaction was accounted for as a pooling of interests. Upon consummation
of this transaction the Company's ownership interest in ANTEC was reduced to
approximately 19% which resulted in the cessation of equity method accounting
for this investment after February 6, 1997. As of January 2, 1998, the market
value of the Company's 7,113,500 shares of ANTEC was $112.0 million compared
with a carrying value of $77.8 million. The Company carries its investment in
ANTEC at fair value. All unrealized gains and losses, net of taxes, are recorded
in stockholders' equity until realized.
Liquidation of Assets held for Sale: Signal Capital has been classified as
assets held for sale since its acquisition in 1988. Subsequent to the purchase,
the Company sold or liquidated $1.4 billion of the portfolio. The remaining
portfolio was $3.2 million and $21.4 million at January 2, 1998, and January 3,
1997, respectively. Proceeds were used to repay indebtedness. The Company
continues to liquidate the acquired Signal Capital portfolio in an orderly
manner that maximizes its value to the Company's shareholders and no material
amounts of new loans or investments are being made by Signal.
In the first quarter 1998, the Company sold a portion of the remaining
other assets held for sale related to discontinued operations for approximately
$36 million.
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In 1995 the Company sold its investment in Energy for approximately $72.6
million. Proceeds were used to reduce debt and repurchase the Company's common
stock.
Cash Flow
Year ended January 2, 1998: Consolidated net cash provided by continuing
operating activities was $43.5 million in 1997 compared to $39.8 million used in
1996. Cash provided by continuing operating activities increased primarily as
the result of the timing of inventory payments and an increase in net income.
Consolidated net cash used by investing activities was $56.4 million in 1997
versus $32.9 million in 1996. In 1997, the Company purchased Accu-Tech for $27.6
million in cash and assumed $15.2 million of additional debt. Capital
expenditures were $27.8 million and $32.9 million in 1997 and 1996,
respectively. Capital expenditures are expected to be approximately $25 to $30
million in 1998. Consolidated net cash used by financing activities was $18.0
million for 1997 in comparison to $80.8 million provided in 1996. The net change
in borrowings in 1997 was a paydown of $5.4 million, versus an increase in long
term debt of $161.1 million in 1996. Treasury stock purchases declined to $14.2
million in 1997 from $75.5 million in 1996.
Year ended January 3, 1997: Consolidated net cash used by continuing
operating activities was $39.8 million for the year ended January 3, 1997,
compared to $38.3 million in 1995. Cash used by continuing operating activities
increased primarily as a result of increased working capital investment
resulting from increased sales volume and a decrease in income from continuing
operations. Consolidated net cash used by investing activities was $32.9 million
in 1996 versus $37.5 million provided in 1995. Consolidated investing activities
in 1995 included approximately $72.6 million of proceeds from the sale of the
Company's investment in Energy. Capital expenditures were $32.9 million and
$31.3 million for 1996 and 1995, respectively. Consolidated cash provided by net
financing activities was $80.8 million for 1996 in comparison to $74.1 million
used in 1995. The consolidated net financing activities in 1996 and 1995 include
$75.5 million and $129.2 million, respectively of treasury stock purchases and
net increases in borrowings of $161.1 million in 1996 versus $50.1 million in
1995. Discontinued operations used $.4 million in 1996, while providing $71.2
million in 1995.
Interest Expense: Consolidated net interest expense and other was $33.7
million, $27.7 million and $24.6 million for 1997, 1996 and 1995, 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 75% of debt
obligations at January 2, 1998, is fixed or capped. The impact of interest rate
swaps and caps for 1997, 1996 and 1995, was to increase interest expense by
approximately $.8 million, $.9 million and $.9 million, respectively.
Financings
In November, 1995, the Company terminated its $115 million senior bank term
loan facility. Effective with this termination, all existing financing
facilities are maintained by the operating subsidiaries of the Company. The
Company guarantees substantially all of the debt of its subsidiaries.
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.
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. Proceeds of the offering were
used to reduce the amount of debt outstanding under Anixter's revolving line of
credit.
At January 2, 1998, $225 million was available under the bank revolving
lines of credit at Anixter and AccuTech, of which $23 million was available to
the Company for general corporate purposes.
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NOL Carryforwards
As of January 2, 1998, the Company had no NOL or ITC carryforwards for
federal income tax purposes due to the sale in 1994 of the Company's rail car
leasing business which exhausted virtually all carryforwards in 1994. The
availability of tax benefits of NOL and ITC carryforwards to reduce the
Company's federal income tax liability is subject to various limitations under
the Internal Revenue Code. Certain of the carryforwards used in 1994 are
currently being examined by the IRS and, therefore, may still be subject to
adjustment.
As a result of the 1995 sale of the Energy shares, the Company generated a
capital loss of approximately $80 million, most of which was carried back and
offset against the 1994 gain on the Rail sale. This carryback generated cash
refunds of $12.2 million in 1996 and also caused $9.0 million of the ITC's
claimed in 1994 to be available for carryforward to 1995. Approximately $2.4
million of the ITC's claimed in 1994 expired as a result of the carryback of the
Energy loss.
At January 2, 1998, various foreign subsidiaries of the Company had
aggregate cumulative NOL carryforwards for foreign income tax purposes of
approximately $97.0 million which are subject to various tax provisions of each
respective country. Approximately $36.8 million of this amount expires between
1998 and 2007 and $60.2 million of the amount has an indefinite life.
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 revenues due to the continued growth
of the North American communications, electrical wire and cable and to the
development of its integration businesses, along with its continuing worldwide
expansion. Anixter competes with distributors and manufacturers who sell
products directly or through existing distribution channels to end users or
other resellers. In addition, Anixter's future performance could be affected by
economic downturns and possible rapid changes in applicable technologies.
The Company had a 19% and 31% investment in ANTEC at fiscal year end 1997
and 1996, respectively. The Company carries its investment in ANTEC at fair
value. All unrealized gains and losses, net of taxes, are recorded in
stockholders' equity until realized. Consolidated results for 1996 and 1995
include ANTEC as an equity investment in the results of operations.
Year ended January 2, 1998: Net income was $45.3 million in 1997 compared
with $36.1 million in 1996. The results for 1997 were favorably impacted by a
13% growth in revenues and a reduction in operating expenses as a percentage of
revenues as further described below.
Revenues grew by 13% to $2.8 billion. The North American communications
business experienced a 12% growth to $1.7 billion from $1.5 billion in 1996.
Improvement was a result of continued growth in demand for all major product
sets. In Europe, sales of $556.7 million represented growth of 16% as compared
to 11% in 1996. Excluding the effect of changes in exchange rates, revenue
growth in Europe was 24%. The improved revenue growth is a result of higher
demand for all product sets, continued expansion and increased market
penetration. Revenue growth in 1996 was negatively impacted by efforts to build
network integration capabilities, reorganization of the salesforce and loss of
business due to competition in the network integration business.
North American electrical wire and cable distribution revenues of $371.4
million represented a 7% increase from $348.2 million in 1996. Improvement was a
result of higher overall demand for electrical and electronic cables partially
offset by a reduction in prices due to lower copper prices. Asia Pacific and
Latin America revenues increased by a combined 37% to $189.3 million due to
increased market penetration and
10
11
expansion within these areas. Excluding the effect of changes in exchange rates,
revenue growth for Asia Pacific and Latin America was 43%.
Revenues by major market are presented in the following table:
YEARS ENDED
------------------------
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
(IN MILLIONS)
North America............................................... $2,059.2 $1,859.4
Europe...................................................... 556.7 478.2
Asia and Latin America...................................... 189.3 137.7
-------- --------
$2,805.2 $2,475.3
======== ========
In 1997, operating income increased to $111.1 million from $88.4 million in
1996. Gross margins declined to 24.8% in 1997 from 25.2% in 1996. The decline
was primarily a result of unfavorable inventory adjustments in Europe and
pricing pressures in several foreign markets due to the unfavorable effects of
the stronger U.S. dollar. Operating expenses as a percent of sales improved to
20.6% in 1997 from 21.3% in 1996 in large part due to better utilization of the
staff and other resources that were put into place in 1996 to support the
evolution of Integration. In addition, the Company realized $7.1 million of
income primarily related to a gain on the sale of an investment in a start-up
telecommunications company and management fees relating to the collection of
certain receivables. In North America, operating margins improved due to a
combination of higher sales and improved utilization of the Integration
infrastructure investments of 1996. Europe reported an operating loss of $.8
million in 1997 versus a profit of $2.8 million in 1996 due to continued start
up losses in the Integration business, $4.2 million increase in corporate
allocations and $2.6 million in inventory-related charges. In Asia Pacific and
Latin America, despite an increase in revenue, operating losses increased by $.7
million from 1996. In Latin America, higher volume driven gross profits were
offset by an increase in corporate allocations of $1.4 million and by an overall
increase in headcount of 44%. For Asia Pacific, improvements in Australia were
offset by start-up costs for new locations in China and Korea and $2.5 million
increase in corporate expense allocations.
Operating income (loss) by major market is presented in the following
table:
YEARS ENDED
------------------------
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
(IN MILLIONS)
North America............................................... $132.7 $105.7
Europe...................................................... (.8) 2.8
Asia and Latin America...................................... (20.8) (20.1)
------ ------
$111.1 $ 88.4
====== ======
Consolidated net interest expense and other rose to $33.7 million in 1997
from $27.7 million in 1996. The increase was a result of higher working capital
levels and the replacement of $100 million of short term borrowings with an
average cost of 6.3% in 1996 with seven year term 8% Senior Notes.
The 1997 effective income tax rate was 43.0% as compared with 44.3% in
1996. 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 3, 1997: Net income was $36.1 million in 1996 compared
with $39.1 million in 1995. The results for 1996 were negatively impacted as a
result of increased operating expenses as further described below.
Revenues grew by 13% to $2.5 billion. The North American communications
business experienced 11% growth to $1.9 billion as compared to 23% growth in
1995. The slower growth was attributed to the
11
12
combination of disruptions caused by a salesforce reorganization, substantial
changes in industry wide availability from manufacturers of certain teflon
coated communication cables and an industry wide slowing of shared media hub
market growth. In Europe, sales of $478.2 million represented growth of 11% as
compared to 35% in 1995. The slower growth rates were principally attributable
to efforts to build network integration capabilities that compete with a number
of our customers, the separation of the salesforce in connection with these
efforts and the loss of business due to competition with some of our customers
in the network integration area.
North American electrical wire and cable distribution revenues of $346.6
million represented a 10% increase as compared to 28% growth in 1995. Despite a
17% volume increase, lower copper prices in much of 1996 were the principal
factor in the lower year over year sales growth. Asia Pacific and Latin America
revenues increased by a combined 43% to $137.7 million due to increased market
penetration and expansion within these areas.
Revenues by major markets are presented in the following table:
YEARS ENDED
--------------------------
JANUARY 3, DECEMBER 31,
1997 1995
---------- ------------
(IN MILLIONS)
North America............................................... $1,859.4 $1,669.3
Europe...................................................... 478.2 429.1
Asia and Latin America...................................... 137.7 96.4
-------- --------
$2,475.3 $2,194.8
======== ========
In 1996, operating income declined to $88.4 million from $99.6 million in
1995. Gross margins remained constant at 25.2% in each year. The drop in
operating earnings is attributable to operating expenses increases outpacing
revenue growth. In North America, $11.0 million was spent in excess of related
revenues to build our technical services capabilities in the form of our
Customer Service Center, staging facilities and network engineering staffs and
technical training. In Latin America, the initial startup of businesses in
Argentina, Brazil and Colombia resulted in operating losses of $5.9 million. In
Asia Pacific, the further staffing of businesses initiated in 1994 and 1995 and
the enhancement of the regional headquarters staff resulted in over 150 new
hires in 1996 which generated further start-up losses of $14.6 million in 1996
compared to losses of $5.4 million in 1995. Lastly, approximately $19.8 million
was spent in the initiation of a network integration business in Europe in 1996.
These costs, along with the disruption caused by the salesforce reorganization
and the loss of business which resulted from competition with some of our
customers, reduced operating income from 1995.
Operating income (loss) by major markets is presented in the following
table:
YEARS ENDED
--------------------------
JANUARY 3, DECEMBER 31,
1997 1995
---------- ------------
(IN MILLIONS)
North America............................................... $105.7 $89.7
Europe...................................................... 2.8 17.6
Asia and Latin America...................................... (20.1) (7.7)
------ -----
$ 88.4 $99.6
====== =====
Consolidated net interest expense and other rose to $27.7 million in 1996
from $24.6 million in 1995 as a result of higher working capital levels. Overall
costs of borrowings increased in September 1996 as $100 million of short term
borrowings, which had an average cost of 6.3% in 1996 was replaced with seven
year term debt at a cost of 8%. In addition, 1995 includes a $3 million loss on
sale of marketable securities.
12
13
The 1996 effective income tax rate was approximately 44% as compared with
approximately 47% in 1995. 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 for the losses. Both of these effects are reduced by
the reassessment and adjustment of prior year tax accounts.
Impact of Inflation: Inflation is currently not an important determinant of
Anixter's results of operations due, in part, to rapid inventory turnover.
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment and developed a modification plan
to modify its software so that its computer systems will function properly with
respect to dates in the year 2000 and thereafter. The Company is also assessing
hardware and systems software for Year 2000 compliance. The total Year 2000
project cost is estimated at approximately $4.5 million, of which an estimated
$.8 million will be capitalized. To date, the Company has incurred and expensed
approximately $.5 million, primarily for assessment of the Year 2000 issue, the
development of a modification plan and the pilot project for code modifications.
The Company has initiated formal communications with all of its significant
suppliers to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. The Company's total Year 2000 project cost and estimates to complete
include the estimated costs and time associated with the impact of third party
Year 2000 issues based on presently available information. However, there can be
no guarantee that the systems of other companies on which the Company's systems
rely will be timely converted and would not have an adverse effect on the
Company's systems.
The project is estimated to be completed by June, 1999, which is prior to
any anticipated impact on its operating systems. The Company believes that with
modifications to existing software the Year 2000 issue will not pose significant
operational problems for its computer systems. However, if such modifications
and conversions are not made, or are not completed timely, the Year 2000 issue
could have a material impact on the operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, the success of third parties modifying
their own systems and similar uncertainties.
The Company believes it should have no material exposure to contingencies
related to the Year 2000 issue for the products it has sold. The Company's
belief is based on the Company's practice of giving to its customers only those
warranties which the Company receives from its suppliers. To the extent such
warranties are breached, liability resulting therefrom will be the ultimate
responsibility of the Company's suppliers. However, there can be no guarantee
that such suppliers will be able to defend and indemnify the Company. Specific
factors that might cause the Company to incur liability include, but are not
limited to, insolvency of its suppliers, the existence of contractual
limitations on the suppliers' liability, and uncertainties regarding judicial
interpretation of the law regarding implied warranties.
13
14
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE
----
Report of Independent Auditors.............................. 15
Consolidated Statement of Operation......................... 16
Consolidated Balance Sheet.................................. 17
Consolidated Statement of Cash Flow......................... 18
Consolidated Statement of Stockholders' Equity.............. 19
Notes to the Consolidated Financial Statements.............. 20
Summary Quarterly Financial Information (Unaudited)......... 32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
14
15
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 January 2, 1998, and January 3, 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended January 2, 1998. 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 generally accepted auditing
standards. 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 January 2, 1998, and January 3, 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended January 2, 1998, in conformity with generally accepted accounting
principles. 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 9, 1998
15
16
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED
----------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 31,
1998 1997 1995
---------- ---------- ------------
Revenues................................................ $ 2,805.2 $ 2,475.3 $ 2,194.8
Cost of operations:
Cost of sales......................................... (2,109.7) (1,852.6) (1,641.1)
Operating expenses.................................... (578.1) (528.2) (448.1)
Amortization of goodwill.............................. (6.3) (6.1) (6.0)
--------- --------- ---------
Total costs and expenses...................... (2,694.1) (2,386.9) (2,095.2)
--------- --------- ---------
Operating income........................................ 111.1 88.4 99.6
Other (expenses) income:
Interest expense...................................... (33.5) (29.9) (24.8)
Interest income and other............................. (.2) 2.2 .2
Equity in income (loss) of ANTEC...................... 2.2 4.1 (0.6)
--------- --------- ---------
Income before income taxes.............................. 79.6 64.8 74.4
Income tax expense...................................... (34.3) (28.7) (35.3)
--------- --------- ---------
Net income.............................................. $ 45.3 $ 36.1 $ 39.1
========= ========= =========
Basic income per common share........................... $ .95 $ .73 $ .71
Diluted income per common share......................... $ .95 $ .72 $ .70
See accompanying notes to the consolidated financial statements.
16
17
ANIXTER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
ASSETS
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
Current assets:
Cash...................................................... $ 10.6 $ 18.2
Accounts receivable (less allowances of $11.3 in 1997 and
$9.0 in 1996).......................................... 551.1 441.1
Inventories............................................... 440.7 397.3
Other current assets...................................... 11.6 11.9
-------- --------
Total current assets.............................. 1,014.0 868.5
Property and equipment, at cost............................. 152.1 128.4
Accumulated depreciation.................................... (87.8) (66.8)
-------- --------
Net property & equipment.......................... 64.3 61.6
Goodwill (less accumulated amortization of $63.9 in 1997 and
$57.6 in 1996)............................................ 203.1 183.1
Assets held for sale, net................................... 20.6 44.0
Investment in ANTEC......................................... 112.0 77.8
Other assets................................................ 26.7 26.0
-------- --------
$1,440.7 $1,261.0
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 324.3 $ 209.2
Accrued expenses.......................................... 110.3 97.1
Income taxes payable...................................... 13.5 7.2
-------- --------
Total current liabilities......................... 448.1 313.5
Deferred income taxes....................................... 33.4 29.8
Other liabilities........................................... 6.5 7.6
Long-term debt.............................................. 468.8 468.4
-------- --------
Total liabilities................................. 956.8 819.3
Minority interest........................................... 6.9 6.2
Stockholders' equity:
Common stock -- $1.00 par value, 100,000,000 shares
authorized, 47,297,052 and 48,006,614 shares issued and
outstanding............................................ 47.3 48.0
Capital surplus........................................... 47.1 57.1
Cumulative translation adjustments........................ (27.1) (14.1)
Unrealized gain on marketable equity securities, net...... 19.8 --
Retained earnings......................................... 389.9 344.5
-------- --------
Total stockholders' equity........................ 477.0 435.5
-------- --------
$1,440.7 $1,261.0
======== ========
See accompanying notes to the consolidated financial statements.
17
18
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CASH FLOW
(IN MILLIONS)
YEARS ENDED
----------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 31,
1998 1997 1995
---------- ---------- ------------
Operating activities:
Net Income...................................... $ 45.3 $ 36.1 $ 39.1
Adjustments to reconcile income from continuing
operations to net cash provided (used) by
continuing operating activities:
Depreciation and amortization................ 31.9 26.9 21.7
Deferred income taxes........................ (8.6) (4.8) 17.0
Changes in assets and liabilities:
Accounts receivable........................ (114.1) (39.5) (75.7)
Inventory.................................. (43.8) (33.2) (88.3)
Accounts payable and accruals.............. 137.0 (19.1) 61.6
Other, net................................. (4.2) (6.2) (13.7)
-------- -------- -------
Net cash provided (used) by continuing
operating activities.................. 43.5 (39.8) (38.3)
-------- -------- -------
Investing activities:
Capital Expenditures............................ (27.8) (32.9) (31.3)
Acquisition of businesses....................... (28.6) -- --
Sales of securities............................. -- -- 72.6
Other, net...................................... -- -- (3.8)
-------- -------- -------
Net cash (used) provided by continuing
investing activities.................. (56.4) (32.9) 37.5
-------- -------- -------
Financing activities:
Proceeds from long-term borrowings.............. 1,304.1 1,191.1 836.4
Repayment of long-term borrowings............... (1,309.5) (1,030.0) (786.3)
Proceeds from issuance of common stock.......... 3.5 4.8 10.1
Purchase of treasury stock...................... (14.2) (75.5) (129.2)
Other, net...................................... (1.9) (9.6) (5.1)
-------- -------- -------
Net cash (used) provided by continuing
financing activities.................. (18.0) 80.8 (74.1)
-------- -------- -------
Cash provided (used) by discontinued operations... 23.3 (.4) 71.2
-------- -------- -------
Cash (used) provided.............................. (7.6) 7.7 (3.7)
Cash at beginning of year......................... 18.2 10.5 14.2
-------- -------- -------
Cash at end of year............................... $ 10.6 $ 18.2 $ 10.5
======== ======== =======
See accompanying notes to the consolidated financial statements.
18
19
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN MILLIONS)
UNREALIZED
CUMULATIVE (LOSSES)
COMMON CAPITAL RETAINED TRANSLATION GAINS ON
STOCK SURPLUS EARNINGS ADJUSTMENTS SECURITIES TOTAL
------ ------- -------- ----------- ---------- -------
BALANCE AT DECEMBER 31, 1994........ $29.4 $ 262.5 $269.3 $(10.1) $(7.2) $ 543.9
Net income........................ -- -- 39.1 -- -- 39.1
Issuance of common stock.......... 0.5 12.6 -- -- -- 13.1
Foreign currency translation
adjustments.................... -- -- -- (1.7) -- (1.7)
Purchase and retirement of
treasury stock................. (4.2) (125.0) -- -- -- (129.2)
Common stock repurchase
commitment..................... -- (23.4) -- -- -- (23.4)
Two-for-one stock split........... 26.8 (26.8) -- -- -- --
Net change in unrealized losses on
marketable equity securities... -- -- -- -- 7.2 7.2
----- ------- ------ ------ ----- -------
BALANCE AT DECEMBER 31, 1995........ 52.5 99.9 308.4 (11.8) -- 449.0
Net income........................ -- -- 36.1 -- -- 36.1
Issuance of common stock.......... 0.2 4.6 -- -- -- 4.8
Foreign currency translation
adjustments.................... -- -- -- (2.3) -- (2.3)
Purchase and retirement of
treasury stock................. (4.7) (47.4) -- -- -- (52.1)
----- ------- ------ ------ ----- -------
BALANCE AT JANUARY 3, 1997.......... 48.0 57.1 344.5 (14.1) -- 435.5
Net income........................ -- -- 45.3 -- -- 45.3
Issuance of common stock.......... .3 3.2 -- -- -- 3.5
Foreign currency translation
adjustments.................... -- -- -- (13.0) -- (13.0)
Purchase and retirement of
treasury stock................. (1.0) (13.2) -- -- -- (14.2)
Net change in unrealized gains on
marketable equity securities... -- -- -- -- 19.8 19.8
----- ------- ------ ------ ----- -------
BALANCE AT JANUARY 2, 1998.......... $47.3 $ 47.1 $389.9 $(27.1) $19.8 $ 477.0
===== ======= ====== ====== ===== =======
See accompanying notes to the consolidated financial statements.
19
20
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") and Accu-Tech
Corporation and its subsidiaries (collectively, "Accu-Tech"). As of January 2,
1998, the Company also owned approximately 19% of ANTEC Corporation and its
subsidiaries (collectively "ANTEC"), a broadband communications technology
company.
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 1997, 53 weeks in 1996 and 52 weeks in 1995.
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
1997 presentation.
Inventories: Inventories, consisting primarily of finished goods, are
stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
Property and Equipment: Properties, primarily equipment, are stated at
cost. Depreciation is calculated using the straight-line method over the
estimated useful lives ranging from 3 to 10 years. Leasehold improvements are
depreciated over the term of the related lease. Upon the sale or retirement of
property and equipment a gain or loss is recognized. Expenditures for
maintenance and repairs are charged to expense.
Goodwill: Goodwill 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 40 years.
Marketable equity securities available-for-sale: Realized losses on
dispositions of securities were determined using the average cost method.
Realized pre-tax losses, before related interest carrying costs, were $3.0
million in 1995.
Investment in ANTEC: On February 6, 1997, a wholly-owned subsidiary of
ANTEC was merged into TSX Corporation. Under the terms of the transaction, TSX
Corporation shareholders received one share of ANTEC Corporation stock for each
share of TSX Corporation stock that they owned. The transaction was accounted
for as a pooling of interests. Upon consummation of this transaction the
Company's ownership interest in ANTEC was reduced to approximately 19% which
resulted in the cessation of equity method accounting for this investment after
that date. As a result of this change, the Company recorded a $1.2 million after
tax gain. The Company carries its investment in ANTEC at fair value. All
unrealized gains and losses, net of taxes, are recorded in stockholders' equity
until realized. As of January 2, 1998, the market value of the Company's
investment in ANTEC was $112.0 million.
Interest rate agreements: In addition to the fixed rate 8% debentures, the
Company has entered into interest rate agreements which effectively fix or cap,
for a period of time, the LIBOR component of the interest rate on a portion of
its floating rate obligations. As a result, the interest rate on approximately
75% and 85%, of debt obligations at January 2, 1998, and January 3, 1997,
respectively, is fixed or capped. At January 2, 1998, and January 3, 1997, the
Company had interest rate cap agreements outstanding with notional amounts
aggregating $50 million and $100 million, respectively. These interest rate cap
agreements effectively entitle the Company to receive from the banks the amount
by which the LIBOR component of the
20
21
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest payments on $50 million of its floating rate debt exceeds 7.5% at
January 2, 1998, and January 3, 1997. At January 3, 1997, the Company had an
additional cap on $50 million floating rate debt for interest payments exceeding
6.0%. The $2.3 million of premiums paid in 1995 for these interest rate cap
agreements are included in other current assets and are being amortized to
interest expense over the life of the respective interest rate cap agreements
which expire in 1998. Payments received as a result of the interest rate cap
agreements are recognized as a reduction of interest expense. At January 2,
1998, the Company had an interest rate swap agreement outstanding with a
notional amount of $50 million. This swap agreement obligates the Company to pay
a fixed rate of 6.0% through June 1998. The Company has three additional
interest rate swap agreements with a notional amount aggregating $100 million
that obligate the Company to pay a fixed rate of approximately 6.11% through
July 2000. At January 2, 1998, the Company also has one interest rate collar
agreement with a notional amount of $50 million. This interest rate agreement
entitles the Company to receive from the bank the amount by which the LIBOR
component of the floating rate interest payments exceed 6.50% and for the
Company to pay the bank the difference between 6.30% and the floating rate when
interest rates fall below 5.30%. This interest rate collar matures in January
2002. The fair value of all of the Company's interest rate agreements at January
2, 1998, and January 3, 1997, is $(.8) million and $1.1 million, respectively.
The fair value of interest rate agreements is the estimated amount that the
Company would pay or receive to enter into the interest rate agreements at the
reporting date, taking into account current interest rates. The impact of
interest rate agreements for the years ended January 2, 1998, January 3, 1997,
and December 31, 1995, was to increase interest expense by approximately $.8
million, $.9 million and $.9 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 1997, 1996 and 1995. The
forward contracts are revalued at current foreign exchange rates, with the
changes in valuation reflected directly in income. At January 2, 1998, and
January 3, 1997, the Company had approximately $26.8 million and $45.7 million,
respectively, in foreign currency forward contracts outstanding.
Revenue recognition: Sales and related cost of sales are recognized
primarily upon shipment of products. Service revenues are recognized ratably
over the term of the agreements.
Advertising and sales promotion: Advertising and sales promotion costs are
expensed as incurred.
Income taxes: Provisions for income taxes include deferred taxes resulting
from temporary differences in determining income for financial and tax purposes
using the liability method. Such temporary differences result primarily from
differences in the carrying value of assets and liabilities.
New Accounting Pronouncement: In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 131 (SFAS
No. 131) "Disclosures about Segments of an Enterprise and Related Information,"
effective for financial statements for periods beginning after December 15,
1997. This Statement establishes new standards for the way public business
enterprises report information about operating segments in the annual financial
statements and interim financial reports issued to shareholders. Generally, SFAS
No. 131 requires financial information to be reported on the basis that it is
used internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company is currently evaluating the impact that SFAS
No. 131 may have on its financial statements.
21
22
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. INCOME PER SHARE
All share and per share data other than amounts displayed on the balance
sheets and consolidated statements of stockholders' equity have been adjusted to
reflect the two-for-one stock split in the form of a stock dividend paid October
25, 1995. The following table sets forth the computation of basic and diluted
income per share:
1997 1996 1995
------- ------- -------
Numerator (in millions):
Net Income............................................ $ 45.3 $ 36.1 $ 39.1
Denominator (in thousands):
Basic common shares outstanding....................... 47,533 49,717 55,411
Effect of dilutive securities:
Stock options and warrants............................ 242 232 373
Diluted common shares outstanding....................... 47,775 49,949 55,784
Basic income per common share........................... $ .95 $ .73 $ .71
Diluted income per common share......................... $ .95 $ .72 $ .70
NOTE 3. DISCONTINUED AND ASSETS HELD FOR SALE
Assets held for sale consist of Signal Capital and various other
discontinued businesses. Remaining assets held for sale relating to Signal
Capital, as of January 2, 1998 and January 3, 1997, were $3.2 million and $21.4
million, respectively. No income or loss has been recognized for discontinued
operations in 1997, 1996 or 1995.
NOTE 4. ACQUISITION OF ACCU-TECH CORPORATION
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.
22
23
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
The Company has an approximately 99% ownership interest in Anixter Inc. at
January 2, 1998, and January 3, 1997, which is included in the consolidated
financial statements of the Company. The following summarizes the financial
information for Anixter Inc.:
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
(IN MILLIONS)
Assets:
Current assets............................................ $ 980.4 $ 857.7
Property, net............................................. 61.0 61.6
Goodwill.................................................. 181.1 183.1
Other assets.............................................. 36.6 34.1
-------- --------
$1,259.1 $1,136.5
======== ========
Liabilities and Stockholders' Equity:
Current liabilities....................................... $ 423.7 $ 304.0
Other liabilities......................................... 10.7 11.4
Long-term debt............................................ 450.4 468.4
Subordinated notes payable to parent...................... 19.0 29.0
Stockholders' equity...................................... 355.3 323.7
-------- --------
$1,259.1 $1,136.5
======== ========
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
YEARS ENDED
------------------------
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
(IN MILLIONS)
Revenues.................................................... $2,777.8 $2,475.3
Operating income............................................ $ 104.0 $ 87.1
Income before income tax expense............................ $ 68.8 $ 56.9
Net income.................................................. $ 33.8 $ 23.4
23
24
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. SUMMARIZED FINANCIAL INFORMATION OF ANTEC
On February 6, 1997, a wholly-owned subsidiary of ANTEC was merged into TSX
Corporation. Under the terms of the transaction, TSX Corporation shareholders
received one share of ANTEC Corporation stock for each share of TSX Corporation
stock that they owned. The transaction was accounted for as a pooling of
interests. Upon consummation of this transaction the Company's ownership
interest in ANTEC was reduced from 31% to approximately 19% which resulted in
the cessation of equity method accounting for this investment. The following
summarizes the 1996 financial information for ANTEC which has been restated to
reflect the accounting for the pooling of interests:
ANTEC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 29,
1996
-------------
(IN MILLIONS)
Assets:
Current assets............................................ $282.5
Property, net............................................. 35.9
Goodwill.................................................. 167.1
Other assets.............................................. 24.7
------
$510.2
======
Liabilities and Stockholders' Equity:
Current liabilities....................................... $ 97.2
Long-term debt............................................ 102.6
Stockholders' equity...................................... 310.4
------
$510.2
======
ANTEC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
YEAR ENDED
-------------
DECEMBER 29,
1996
-------------
(IN MILLIONS)
Net Sales................................................... $690.9
Operating income............................................ $ 46.1
Income before income tax expense............................ $ 42.4
Net income.................................................. $ 26.4
NOTE 7. ACCRUED EXPENSES
Accrued expenses consists of the following:
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
(IN MILLIONS)
Interest.................................................... $ 6.4 $ 4.9
Wages, salaries and related................................. 64.9 50.9
Taxes other than income..................................... 12.3 10.4
Other....................................................... 26.7 30.9
------ -----
$110.3 $97.1
====== =====
24
25
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. DEBT
Debt is summarized below:
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
(IN MILLIONS)
Bank revolving lines of credit.............................. $357.1 $368.4
8% Senior notes............................................. 100.0 100.0
Other....................................................... 11.7 --
------ ------
Total debt........................................ $468.8 $468.4
====== ======
Anixter and Accu-Tech have various revolving bank lines of credit worldwide
which provide for up to $582 million of borrowings. At January 2, 1998,
approximately $357 million was borrowed and $225 million was available under the
bank revolving lines of credit, of which $23 million was available for general
corporate purposes. These lines of credit reduce or mature at various dates from
1999 through 2001. 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 January 2, 1998, and January 3, 1997, for bank revolving lines of credit was
6.4% and 5.8%, 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. Proceeds of the offering were
used to reduce the amount of debt outstanding under Anixter's revolving line of
credit.
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 $291.5 million and
$268.5 million at January 2, 1998 and January 3, 1997, respectively.
Aggregate annual maturities of debt are as follows: 1998 -- none;
1999 -- $5.6 million; 2000 -- $18.7 million; 2001 -- $334.3 million;
2002 -- none; $110.2 million thereafter.
Interest paid in 1997, 1996 and 1995 was $31.0 million, $22.8 million and
$24.0 million, respectively.
The carrying amount of the Company's debt approximates fair value.
NOTE 9. INCOME TAXES
The Company and its U.S. subsidiaries file their federal income tax return
on a consolidated basis. As of January 2, 1998, the Company had no NOL or ITC
carryforwards for federal income tax purposes due to the sale of the Company's
rail car leasing business which exhausted virtually all carryforwards in 1994.
The availability of tax benefits of NOL and ITC carryforwards to reduce the
Company's federal income tax liability is subject to various limitations under
the Internal Revenue Code of 1986, as amended. These carryforwards are currently
being examined by the Internal Revenue Service and, therefore, may still be
subject to adjustment. In addition, at January 2, 1998, various foreign
subsidiaries of the Company had aggregate cumulative NOL carryforwards for
foreign income tax purposes of approximately $97.0 million which are subject to
various provisions of each respective country. Approximately $36.8 million of
this amount expires between 1998 and 2007 and $60.2 million of the amount has an
indefinite life.
25
26
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of the 1995 sale of the Santa Fe Energy Resources, Inc.
("Energy") shares, the Company generated a capital loss of approximately $80
million, most of which was carried back and offset against the 1994 gain on the
Itel Rail Corporation sale. This carryback generated cash refunds of $12.2
million in 1996 and caused $9.0 million of the ITC's claimed in 1994 to be
available for carryforward to 1995. Approximately $2.4 million of the ITC's
claimed in 1994 expired as a result of the carryback of the Energy loss.
Domestic income before income taxes was $98.1 million, $77.6 million and
$63.3 million for 1997, 1996 and 1995, respectively. Foreign (loss) income
before income taxes was $(18.5) million, $(12.8) million and $11.1 million for
1997, 1996 and 1995, respectively.
The Company paid income taxes in 1997, 1996 and 1995 of $35.3 million,
$18.1 million and $24.6 million, respectively.
Significant components of the Company's deferred tax liabilities and assets
were as follows:
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
(IN MILLIONS)
ANTEC valuation............................................. $(12.2) $ --
Depreciation................................................ (2.3) (3.4)
Other....................................................... (66.5) (67.7)
------ ------
Gross deferred tax liabilities.............................. (81.0) (71.1)
------ ------
Foreign NOL carryforwards................................... 32.8 27.0
Deferred compensation....................................... 9.3 8.7
Allowance for doubtful accounts............................. 8.9 6.8
Discontinued operations..................................... 8.8 9.4
Investment reserves......................................... 6.7 2.0
Inventory reserves.......................................... 4.1 5.9
Other....................................................... 3.1 2.5
------ ------
Gross deferred tax assets................................... 73.7 62.3
Valuation allowance......................................... (26.1) (21.0)
------ ------
Net deferred tax liability.................................. $(33.4) $(29.8)
====== ======
Income tax (expense) benefit was comprised of:
YEARS ENDED
--------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 31,
1998 1997 1995
---------- ---------- ------------
(IN MILLIONS)
Current -- Foreign.................................... $ (7.7) $ (8.9) $ (8.5)
State...................................... (4.3) (3.9) (2.2)
Federal.................................... (29.4) (20.7) (7.6)
------ ------ ------
(41.4) (33.5) (18.3)
Deferred -- Foreign................................... 0.7 3.7 (.7)
State..................................... (0.6) (1.3) (3.1)
Federal................................... 7.0 2.4 (13.2)
------ ------ ------
7.1 4.8 (17.0)
------ ------ ------
$(34.3) $(28.7) $(35.3)
====== ====== ======
26
27
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reconciliation of income tax expense to the statutory corporate federal tax
rate of 35% are as follows:
YEARS ENDED
----------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 31,
1998 1997 1995
---------- ---------- ------------
(IN MILLIONS)
Statutory tax expense............................. $(27.9) $(22.7) $(26.0)
(Increase) reduction in taxes resulting from:
Amortization of goodwill........................ (1.9) (1.8) (1.8)
Losses on foreign operations.................... (2.8) (7.7) (4.0)
State income taxes.............................. (3.2) (3.4) (3.5)
Adjustment to prior year tax accounts........... 3.0 8.3 1.7
Other, net...................................... (1.5) (1.4) (1.7)
------ ------ ------
$(34.3) $(28.7) $(35.3)
====== ====== ======
NOTE 10. 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.
NOTE 11. 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 January 2, 1998 are as follows:
1998 -- $42.0 million; 1999 -- $33.2 million; 2000 -- $24.1 million;
2001 -- $18.4 million; 2002 -- $15.1 million; beyond 2002 -- $47.2 million.
Total rental expense was $41.4 million, $38.2 million and $30.0 million in 1997,
1996 and 1995, respectively.
NOTE 12. 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. 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.
Assets of the Company's plans at fair value were $64.1 million and $55.1
million at January 2, 1998 and January 3, 1997, respectively. Projected benefit
obligations of the Company's plans were $70.7 million and $61.7 million at
January 2, 1998, and January 3, 1997, respectively. The accumulated benefit
obligations of the Company's plans were $51.3 million and $47.4 million at
January 2, 1998, and January 3, 1997, respectively. The weighted-average assumed
discount rate used to measure the projected benefit obligation was 7.25% and
7.5% at January 2, 1998, and January 3, 1997, respectively. Pension expense,
including the cost of 401(k) plans, for 1997, 1996 and 1995 was $5.5 million,
$4.4 million and $4.6 million, respectively. The Company's liability for
post-retirement benefits other than pensions is immaterial.
NOTE 13. PREFERRED STOCK AND COMMON STOCK
Common Stock --
On October 25, 1995, the Company paid a dividend in the form of a
two-for-one stock split to shareholders of record on September 22, 1995, which
resulted in the issuance of 26,783,000 shares of stock.
27
28
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On June 27, 1995, the Company agreed to purchase up to 3.8 million shares
of its common stock from Sam Zell, the Company's Chairman, and other related
stockholders. The first 2.5 million shares were purchased on July 10, 1995, at
$18 per share. The remaining 1.3 million shares were to be purchased at $18 per
share plus an incremental increase of 6.5% per annum from the date of the
agreement. These shares were purchased in the first quarter of 1996 at $18.874
per share.
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
1997, 1996 and 1995.
Stock Options and Stock Grants --
The Company has Employee Stock Incentive Plans ("ESIP") which at inception
authorized an aggregate of 11.4 million stock options or restricted grants. In
1996, the Board of Directors adopted and the stockholders approved the 1996
Stock Incentive Plan which provides for the issuance of an additional 2.5
million shares of the Company's Common Stock. The Company also has a Director
Stock Option Plan ("DSOP") authorizing an aggregate of .4 million stock options.
Substantially all options and grants under these plans have been at or higher
than the fair market value of the common stock on the date of grant. One-fourth
to one-third of the options granted become exercisable each year after the year
of grant (except in the case of director options which vest fully in six months)
and the options expire ten years after the date of grant.
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 exercise price is the lower of 85% of the fair market value of the
common stock at the date of grant or at the later exercise date (currently one
year). Under the Plan, the Company sold 217,600 shares, 153,600 shares, and
137,700 shares to employees in 1997, 1996 and 1995, respectively.
The following table summarizes the 1997, 1996 and 1995 activity under the
ESIP and DSOP.
WEIGHTED WEIGHTED
AVERAGE AVERAGE
ESIP EXERCISE DSOP EXERCISE
OPTIONS PRICE OPTIONS PRICE
------- -------- ------- --------
(OPTIONS IN THOUSANDS)
Balance at December 31, 1994..................... 1,252.9 $10.89 500.0 $11.23
Granted.......................................... 3.0 17.25 100.0 20.69
Exercised........................................ (392.3) 10.32 (90.0) 9.89
------- -----
Balance at December 31, 1995..................... 863.6 11.17 510.0 13.32
Granted.......................................... 1,344.5 19.59 -- --
Exercised........................................ (12.0) 11.06 (30.0) 10.48
Canceled......................................... (28.0) 19.63 -- --
------- -----
Balance at January 3, 1997....................... 2,168.1 16.28 480.0 13.50
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 $16.00 420.0 $13.87
======= =====
Options Exercisable at year-end
1995........................................... 615.7 $ 9.92 410.0 $12.17
1996........................................... 728.0 $11.69 480.0 $13.50
1997........................................... 1,160.2 $13.63 420.0 $13.87
28
29
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information relating to options outstanding
and exercisable at January 2, 1998:
ESIP OPTIONS
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE
EXERCISE EXERCISE REMAINING
PRICES OUTSTANDING EXERCISABLE PRICE YEARS
-------- ----------- ----------- -------- ---------
(OPTIONS IN THOUSANDS)
$ 5.19-$12.13 ............................... 541.7 541.7 $ 9.39 3.0
$14.25-$19.63 ............................... 2,666.0 618.5 $17.35 8.2
DSOP OPTIONS
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE
EXERCISE EXERCISE REMAINING
PRICES OUTSTANDING EXERCISABLE PRICE YEARS
-------- ----------- ----------- -------- ---------
(OPTIONS IN THOUSANDS)
$ 8.38-$11.63 ............................... 200.0 200.0 $ 9.29 2.1
$15.00-$20.69 ............................... 220.0 220.0 $18.03 5.4
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 at fair
market value. These options vest over four years and terminate seven to ten
years from the date of grant. At January 2, 1998, the Company owned 99% of the
approximately 34.0 million shares of outstanding Anixter common stock. The
following table summarizes the 1997, 1996 and 1995 option activity:
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
-------- ---------
(OPTIONS IN THOUSANDS)
Balance at December 31, 1994................................ 1,867.6 $ 9.79
Granted..................................................... 419.1 14.50
Exercised................................................... (118.1) 9.02
Canceled.................................................... (88.7) 10.74
-------
Balance at December 31, 1995................................ 2,079.9 10.74
Exercised................................................... (304.9) 9.28
Canceled.................................................... (55.0) 10.91
-------
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
=======
Options Exercisable at year-end
1995...................................................... 770.6 $ 9.11
1996...................................................... 1,173.0 $10.12
1997...................................................... 1,209.6 $10.99
Exercise prices for options outstanding as of January 2, 1998, ranged from
$9.00 to $14.50 per share and had a weighted average remaining life of 5.4
years.
29
30
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Units --
In 1996, 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. The value of outstanding stock units as of January 2,
1998, ranged from $15.35 to $16.98 per unit.
The following table summarizes the 1997 and 1996 activity under the DSUP:
DSUP
STOCK UNITS
(IN THOUSANDS) -----------
Balance at December 31, 1995................................ 0
Granted..................................................... 35.2
----
Balance at January 3, 1997.................................. 35.2
Granted..................................................... 28.3
Exercised................................................... (1.0)
Canceled.................................................... (2.9)
----
Balance at January 2, 1998.................................. 59.6
====
Accounting for Stock Based Compensation --
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123) Accounting for Stock Based
Compensation. Accordingly, no compensation expense has been recognized for the
stock option plans. Had compensation costs for the plans been determined based
on the fair value at the grant date for awards in 1997, 1996 and 1995 and
amortized over the respective vesting period, the Company's net income would
have been reduced to the pro forma amounts indicated below:
1997 1996 1995
NET INCOME (MILLIONS) ----- ----- -----
Reported.................................................... $45.3 $36.1 $39.1
Pro forma................................................... $41.9 $33.3 $38.0
Income per common share:
Basic
Reported............................................... $ .95 $ .73 $ .71
Pro forma.............................................. $ .88 $ .67 $ .69
Diluted
Reported............................................... $ .95 $ .72 $ .70
Pro forma.............................................. -- -- $ .68
Pro forma diluted income per common share has not been presented for 1997
and 1996, because assuming 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 $6.69 per share
in 1997 and $9.32 per share in 1996 and $9.80 per share in 1995) was estimated
at the date of grant using the Black-Scholes option pricing model with the
following assumptions for 1997, 1996 and 1995, respectively: expected stock
price volatility of 37%, 45% and 45%; expected dividend yield of zero; risk-free
interest rate of 6.6%, 6.1% and 6.1% and an expected 5 year life.
The pro forma effect on net income for 1997, 1996 and 1995, 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.
30
31
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Black-Scholes option pricing model was developed for use 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.
NOTE 14. BUSINESS SEGMENTS
The Company is engaged in one principal area of business: providing
networking and cabling solutions for business information and network
infrastructure requirements. The Company obtains and coordinates financing,
legal and other related services, certain of which are rebilled to subsidiaries.
The classification of the Company's 1997, 1996 and 1995 foreign operations
in the following table includes all revenues and related items of the Company's
non-U.S. operations. Sales to a single customer did not exceed 10 percent of
total sales. Export sales are insignificant.
WORLDWIDE (NON-U.S.) OPERATIONS
--------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
Revenues:
Europe................................................. $556.7 $478.2 $429.1
Other.................................................. 420.6 343.2 285.8
------ ------ ------
$977.3 $821.4 $714.9
====== ====== ======
Operating (loss) income:
Europe................................................. $ (.8) $ 2.8 $ 17.6
Other.................................................. (6.0) (8.9) 4.5
------ ------ ------
$ (6.8) $ (6.1) $ 22.1
====== ====== ======
Identifiable assets:
Europe................................................. $256.4 $226.3 $193.6
Other.................................................. 178.3 161.3 136.3
------ ------ ------
$434.7 $387.6 $329.9
====== ====== ======
Foreign operations' revenues were 35%, 33% and 33% of consolidated revenues
in 1997, 1996 and 1995, respectively. Foreign operations' operating (loss)
income were negatively impacted for all years due to start-up losses in
expansion markets. Aggregate start-up losses in expansion markets were $20.6
million, $22.6 million and $9.1 million in 1997, 1996 and 1995, respectively, as
Anixter continues to penetrate new markets in Europe, Asia Pacific and Latin
America. Operating income in Europe decreased substantially as a result of
start-up costs related to the network integration business, increase in
corporate allocations and inventory related charges.
NOTE 15. RELATED PARTY TRANSACTION
The Company is seeking the approval of the Small Business Administration of
an agreement to sell its interest in a small business investment company and
other related assets in a transaction in which an affiliate of Sam Zell and Rod
Dammeyer would be a purchaser. If the transaction had closed on March 31, 1996,
the purchase price would have been approximately $5.9 million, the net book
value of these assets on that date. The actual purchase price will reflect
events since that date and interest at the rate of seven percent per annum.
31
32
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. QUARTERLY SUMMARY (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 January 2, 1998, and January 3, 1997. 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 JANUARY 2, 1998
Revenues............................................... $ 658.7 $ 682.6 $ 726.5 $ 737.4
Cost of sales.......................................... (495.9) (513.3) (547.8) (552.7)
Operating income....................................... 25.1 25.9 29.3 30.8
Income before income taxes............................. 19.9 18.7 20.3 20.7
Net income............................................. 11.1 10.4 11.3 12.5
Basic income per common share.......................... .23 .22 .24 .26
Diluted income per common share........................ .23 .22 .24 .26
Composite stock price range:
High................................................. 17 1/4 18 1/4 18 5/8 19 5/8
Low.................................................. 12 1/8 12 1/2 16 1/8 15 13/16
Close................................................ 12 3/8 18 17 15/16 16 1/2
YEAR ENDED JANUARY 3, 1997
Revenues............................................... $ 567.4 $ 611.8 $ 631.5 $ 664.6
Cost of sales.......................................... (421.6) (460.2) (476.3) (494.5)
Operating income....................................... 23.4 20.3 20.5 24.2
Income before income taxes............................. 18.7 14.8 15.5 15.8
Net income............................................. 10.3 8.1 8.6 9.1
Basic income per common share.......................... .20 .16 .18 .19
Diluted income per common share........................ .20 .16 .17 .19
Composite stock price range:
High................................................. 19 7/8 18 7/8 15 7/8 17 3/4
Low.................................................. 16 1/2 14 7/8 12 5/8 13 3/8
Close................................................ 16 7/8 14 7/8 14 5/8 17 3/4
32
33
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
See Registrant's Proxy Statement for the 1998 Annual Meeting of
Stockholders -- "Election of Directors."
ITEM 11. EXECUTIVE COMPENSATION.
See Registrant's Proxy Statement for the 1998 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 1998 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 1998 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.............................. 15
Consolidated Statement of Operation for the years ended
January 2, 1998, January 3, 1997, and December 31, 1995... 16
Consolidated Balance Sheet at January 2, 1998, and January
3, 1997................................................... 17
Consolidated Statement of Cash Flow for the years ended
January 2, 1998, January 3, 1997, and December 31, 1995... 18
Consolidated Statement of Stockholders' Equity for the years
ended January 2, 1998, January 3, 1997, and December 31,
1995...................................................... 19
Notes to the Consolidated Financial Statements.............. 20
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.
Consolidated Schedules for the years ended January 2, 1998, January 3,
1997, and December 31, 1995, except as noted:
PAGE
----
I. Condensed financial information of Registrant........... 39
II. Valuation and qualifying accounts and reserves.......... 42
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.
3.1 -- 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)
3.2 -- 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)
(4) Instruments defining the rights of security holders, including indentures.
4.1 -- (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.)
-- (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)
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)
34
35
(10) Material contracts.
10.1 -- Form of the Company's Tax Allocation Agreement, dated
January 1, 1987. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987, Exhibit 10.1.)
10.2* -- 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.)
10.3* -- 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.)
10.4* -- Supplemental Pension Agreement, dated November 17, 1986,
between the Company and Rod F. Dammeyer. (Incorporated by
reference from Itel Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1986, Exhibit
10.14.)
10.5* -- (a) Company's Supplemental Retirement Benefits Plan,
dated January 1, 1987. (Incorporated by reference from
Itel Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987, Exhibit 10.16.)
* -- (b) Amendment No. 1, dated May 17, 1989 and effective as of
January 1, 1989, to the Company's Supplemental Retirement
Benefits Plan. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, Exhibit 10.9(b).)
* -- (c) Amendment No. 2, dated October 15, 1992, to the Company's
Supplemental Retirement Benefits Plan (Incorporated by
reference from Itel Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992, Exhibit
10.7(c).)
* -- (d) Amendment No. 3, dated February 25, 1993, to the Company's
Supplemental Retirement Benefits Plan. (Incorporated by
reference from Itel Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992, Exhibit
10.7(d).)
10.6* -- 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.)
10.7* -- Warrant Agreement, dated September 10, 1987, between the
Company and William A. Buzick, Jr., F. Philip Handy,
Harold Haynes, Jerome Jacobson, Melvyn N. Klein 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, 1988, Exhibit 10.15.)
10.8* -- Warrant Agreement, dated July 14, 1988, between the
Company and William A. Buzick, Jr., F. Philip Handy,
Harold Haynes, Jerome Jacobson, Melvyn N. Klein, Robert
H. Lurie, 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, 1989, Exhibit 10.19.)
10.9* -- Executive Supplemental Life Plan, dated June 15, 1989,
for the Company and participating subsidiaries.
(Incorporated by reference from Itel Corporation's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989, Exhibit 10.20.)
10.10* -- (a) Company's Supplemental Executive Retirement Plan, dated
January 18, 1990. (Incorporated by reference from Itel
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, Exhibit 10.23.)
35
36
* (b) Amendment No. 1 dated February 25, 1993, to Company's
Supplemental Executive Retirement Plan. (Incorporated by
reference from Itel Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992, Exhibit
10.13(b).)
10.11* -- Warrant Agreement, dated July 13, 1989, between Company
and Bernard F. Brennan, William A. Buzick, Jr., F. Philip
Handy, Harold Haynes, Jerome Jacobson, Melvyn N. Klein,
Robert H. Lurie, 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, 1990, Exhibit 10.21.)
10.12* -- 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.)
10.13* -- 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.)
10.14* -- (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).)
-- (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))
10.15* -- Agreement, dated November 1, 1992, with James E. Knox, as
amended (Incorporated by reference from Anixter
International Inc. Annual Report on Form 10-K for the
year ended December 31, 1995, Exhibit 10.18)
10.16* -- 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.)
10.17 -- Tax Allocation Agreement with ANTEC Corporation.
(Incorporated by reference from Amendment No. 2 to ANTEC
Corporation's Registration Statement on Form S-1,
Registration Number 33-65488, filed August 20, 1993,
Exhibit 10.5.)
10.18 -- Registration Rights Agreement with ANTEC Corporation.
(Incorporated by reference from Amendment No. 3 to ANTEC
Corporation's Registration Statement on Form S-1,
Registration Number 33-65488, filed September 13, 1993,
Exhibit 10.9.)
10.19 -- Directors & Officers Insurance Agreement with ANTEC
Corporation. (Incorporated by reference to ANTEC
Corporation's Registration Statement on Form S-1,
Registration Number 33-65488, filed July 2, 1993, Exhibit
10.8.)
10.20 -- Stock Purchase Agreement, dated March 10, 1996, between
Anixter International Inc. and Great American Management
and Investment, Inc. and Supplementary Agreement thereto,
dated May 10, 1996, between Signal Capital Corporation
and Great American Management and Investment, Inc.
(Incorporated by reference from Anixter International
Inc. Annual Report on Form 10-K for the year ended
January 3, 1997, Exhibit 10.21)
10.21* -- 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)
36
37
10.22 -- Agreement, dated June 27, 1995, among Riverside Partners, SZRL Investments, Equity
Holdings and Company. (Incorporated by reference from Riverside Partners' Amendment
No. 20 to its Schedule 13D, filed for an event on June 27, 1995, relating to the
shares of Itel Corporation, Exhibit 1.)
10.23* -- 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)
10.24* -- 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)
10.25* -- 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)
10.26* -- 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)
10.27* -- 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)
(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, F.
Philip Handy, Melvyn N. Klein, John R. Petty, Sheli
Rosenberg, Stuart M. Sloan, Thomas C. Theobald and Samuel
Zell
(27) Financial data schedule.
27.1 -- Financial data schedule
This Annual Report on Form 10-K includes the following Financial Statement
Schedules:
ANIXTER INTERNATIONAL INC. AND SUBSIDIARIES --
FINANCIAL SCHEDULES
PAGE
----
Schedule I -- Condensed financial information of
Registrant................................................ 39
Schedule II -- Valuation and qualifying accounts and
reserves.................................................. 42
All other schedules are omitted because they are not required or are not
applicable or the required information is included in the consolidated financial
statements or notes thereto.
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.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, as amended,
the Registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the Registrant's Registration Statement on Form
S-8
37
38
Nos. 2-93173 (filed September 30, 1987), 33-13486 (filed April 15, 1987),
33-21656 (filed May 3, 1988), 33-38364 (filed May 18, 1998), 33-60676 (filed
April 5, 1993) and 33-05907 (filed June 12, 1996):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provision,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
38
39
ANIXTER INTERNATIONAL INC.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
STATEMENT OF OPERATION
(IN MILLIONS)
YEARS ENDED
----------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 31,
1998 1997 1995
---------- ---------- ------------
Operating income (loss)................................... $ 3.9 $ (.2) $(3.5)
Other (expenses) income:
Corporate interest expense.............................. -- (.5) (1.3)
Interest and investment income, including
intercompany......................................... 8.2 14.6 14.9
Marketable equity securities losses, principally
write-downs.......................................... -- -- (3.0)
----- ----- -----
8.2 14.1 10.6
----- ----- -----
Income from operations before income taxes and equity in
earnings of subsidiaries................................ 12.1 13.9 7.1
Income tax benefit........................................ 8.7 6.3 6.5
Equity in earnings of subsidiaries........................ 24.5 15.9 25.5
----- ----- -----
Net income................................................ $45.3 $36.1 $39.1
===== ===== =====
39
40
ANIXTER INTERNATIONAL INC.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
BALANCE SHEET
(IN MILLIONS)
ASSETS
JANUARY 2, JANUARY 3,
1998 1997
---------- ----------
Current assets:
Cash...................................................... $ -- $ 4.8
Accounts receivable....................................... .6 .1
Amounts currently due from affiliates, net................ 2.9 3.3
Other assets.............................................. .1 5.4
------ ------
Total current assets.............................. 3.6 13.6
Investment in ANTEC......................................... 112.0 77.8
Investment in and advances to subsidiaries.................. 433.0 399.3
Other assets................................................ 15.8 16.5
------ ------
$564.4 $507.2
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses, due currently........ $ 11.0 $ 15.4
Income taxes, net, primarily deferred....................... 76.4 56.3
------ ------
Total liabilities................................. 87.4 71.7
Stockholders' equity:
Common stock.............................................. 47.3 48.0
Capital surplus........................................... 47.1 57.1
Valuation allowance....................................... 19.8 --
Retained earnings......................................... 389.9 344.5
Cumulative translation adjustments........................ (27.1) (14.1)
------ ------
Total stockholders' equity........................ 477.0 435.5
------ ------
$564.4 $507.2
====== ======
40
41
ANIXTER INTERNATIONAL INC.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
STATEMENT OF CASH FLOW
(IN MILLIONS)
YEARS ENDED
--------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 31,
1998 1997 1995
---------- ---------- ------------
Operating activities:
Net income................................................ $ 45.3 $ 36.1 $ 39.1
Adjustments to reconcile net income to net cash provided
by operating activities:
Income tax benefit..................................... (8.7) (6.3) (6.5)
Marketable equity securities losses, principally
write-downs.......................................... -- -- 3.0
Equity in earnings of subsidiaries..................... (24.5) (15.9) (25.5)
Non-cash financing expense............................. -- -- (.1)
Change in other operating items........................ (6.7) 1.5 (6.6)
------ ------ ------
Net cash provided by operating activities......... 5.4 15.4 3.4
Investing activities:
Sales of securities....................................... -- -- 72.6
Net dividends from subsidiaries........................... -- -- 8.2
Loans from subsidiaries, net.............................. .5 57.9 37.3
Other, net................................................ -- (1.2) (4.0)
------ ------ ------
Net cash provided by investing activities......... .5 59.1 114.1
------ ------ ------
Financing activities:
Borrowings................................................ -- -- 50.0
Reductions in borrowings.................................. -- -- (50.0)
Purchase of treasury stock................................ (14.2) (75.5) (129.2)
Proceeds from issuance of common stock.................... 3.5 4.8 10.1
------ ------ ------
Net cash used in financing activities............. (10.7) (70.7) (119.1)
------ ------ ------
Cash (used) provided........................................ (4.8) 3.8 (1.6)
Cash at beginning of year................................... 4.8 1.0 2.6
------ ------ ------
Cash at end of year......................................... $ -- $ 4.8 $ 1.0
====== ====== ======
41
42
ANIXTER INTERNATIONAL INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED JANUARY 2, 1998, JANUARY 3, 1997 AND DECEMBER 31, 1995
(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 JANUARY 2, 1998:
Allowance for doubtful accounts.............. $ 9.0 $7.2 -- $ (4.9) $11.3
Allowance for deferred tax asset............. $21.0 $5.1 -- -- $26.1
YEAR ENDED JANUARY 3, 1997:
Allowance for doubtful accounts.............. $ 9.0 $4.8 $ .2 $ (5.0) $ 9.0
Allowance for deferred tax asset............. $13.5 $6.5 -- -- $21.0
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts.............. $ 6.0 $5.8 $ 1.2 $ (4.0) $ 9.0
Unrealized losses on marketable equity
securities(a)............................. $11.1 -- -- $(11.1) $ --
Allowance for deferred tax asset............. $12.5 $1.0 -- -- $13.5
- ---------------
(a) In 1995 the Company sold its marketable equity securities resulting in a $3
million loss.
42
43
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
Chicago, State of Illinois, on the 17th day of March, 1998.
ANIXTER INTERNATIONAL INC.
/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 17, 1998
- ----------------------------------------------------- (Principal Executive Officer)
Robert W. Grubbs
/s/ DENNIS J. LETHAM Senior Vice President -- Finance March 17, 1998
- ----------------------------------------------------- (Chief Financial Officer)
Dennis J. Letham
/s/ JAMES M. FROISLAND Vice President -- Controller (Chief March 17, 1998
- ----------------------------------------------------- Accounting Officer)
James M. Froisland
/s/ LORD JAMES BLYTH* Director March 17, 1998
- -----------------------------------------------------
Lord James Blyth
/s/ ROD F. DAMMEYER* Director March 17, 1998
- -----------------------------------------------------
Rod F. Dammeyer
/s/ ROBERT E. FOWLER, JR.* Director March 17, 1998
- -----------------------------------------------------
Robert E. Fowler, Jr.
/s/ ROBERT W. GRUBBS Director March 17, 1998
- -----------------------------------------------------
Robert W. Grubbs
/s/ F. PHILIP HANDY* Director March 17, 1998
- -----------------------------------------------------
F. Philip Handy
/s/ MELVYN N. KLEIN* Director March 17, 1998
- -----------------------------------------------------
Melvyn N. Klein
/s/ JOHN R. PETTY* Director March 17, 1998
- -----------------------------------------------------
John R. Petty
/s/ SHELI Z. ROSENBERG* Director March 17, 1998
- -----------------------------------------------------
Sheli Z. Rosenberg
/s/ STUART M. SLOAN* Director March 17, 1998
- -----------------------------------------------------
Stuart M. Sloan
43
44
/s/ THOMAS C. THEOBALD* Director March 17, 1998
- -----------------------------------------------------
Thomas C. Theobald
/s/ SAMUEL ZELL* Director March 17, 1998
- -----------------------------------------------------
Samuel Zell
*By /s/ DENNIS J. LETHAM
-------------------------------------------------
Dennis J. Letham
(Attorney in fact)
Dennis J. Letham, as attorney in fact for each person indicated.
44