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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
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EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 1, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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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:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE 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
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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
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The aggregate market value of the shares of Registrant's Common Stock, $1 par
value, held by nonaffiliates of Registrant was approximately $455,571,000 as of
March 23, 1999.
At March 23, 1999, 40,950,159 shares of Registrant's Common Stock, $1 par value,
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the Registrant's Proxy Statement for the 1999 Annual Meeting
of Stockholders of Anixter International Inc. are incorporated by reference into
Part III. This document consists of 50 pages. Exhibit List begins on page 35.
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TABLE OF CONTENTS
PART I. Page
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Item 1. Business of the Company .......................................... 3
Item 2. Properties ....................................................... 5
Item 3. Legal Proceedings ................................................ 5
Item 4. Submission of Matters to a Vote of Security Holders .............. 5
Executive Officers of the Registrant ............................ 6
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters ................................... 7
Item 6. Selected Financial Data .......................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................... 8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ....... 14
Item 8. Consolidated Financial Statements and Supplementary Data ......... 15
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ........................................ 15
PART III
Item 10. Directors and Executive Officers of the Registrant ............... 35
Item 11. Executive Compensation ........................................... 35
Item 12. Security Ownership of Certain Beneficial Owners and
Management ...................................................... 35
Item 13. Certain Relationships and Related Transactions ................... 35
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K ........................................................ 35
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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
cabling solutions for private network infrastructure requirements through
Anixter Inc. and its subsidiaries (collectively "Anixter") and Accu-Tech
Corporation and its subsidiary (collectively "Accu-Tech"). In 1998, the Company
sold its remaining 19% interest in ANTEC Corporation and its subsidiaries
(collectively "ANTEC"), a broadband communications technology company. As of
January 2, 1998, the Company owned approximately 19% of ANTEC which was reduced
from 31% in February 1997, by the issuance of additional stock by ANTEC in
connection with a merger.
In February 1999, the Company announced the agreement to sell its North
American Network Integration business which followed the sale of the European
Network Integration business in the fourth quarter of 1998. As a result, the
Company will no longer be in the business of providing services for the design,
deployment and support ("Integration") of network infrastructures and,
accordingly, this business has been reported as a discontinued operation in the
financial statements.
In June 1998, the Company purchased 100% of the outstanding common
stock of Pacer Electronics, Inc., a distributor of wire and cable products along
with value added services to original equipment manufacturers in the electronic
industry.
In August 1997, the Company purchased approximately 93% of the
outstanding common stock of Accu-Tech Corporation, a networking and wiring
systems specialist distributing products for data, voice, video and electrical
applications.
In 1996, the Company changed its fiscal year end from a calendar year
ending December 31 to the Friday nearest December 31 and included 52 weeks in
1998 and 1997, and 53 weeks in 1996. This change did not have a significant
effect on the results of operations for the year ended January 3, 1997.
In 1995, the Company largely completed its strategy of selling its
non-core businesses and investments including the sale of its 9% investment in
the common stock of Santa Fe Energy Resources, Inc. ("Energy").
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 12 ("Business Segments") of the Notes to the Consolidated
Financial Statements of this report.
(c) NARRATIVE DESCRIPTION OF BUSINESS
In the fourth quarter of 1998, the Company decided to exit its
Integration segment and accordingly, the Integration segment is reflected as a
discontinued operation in these financial statements. All narrative descriptions
and year to year comparisons have been restated to exclude Integration.
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Anixter is a leading distributor of wiring systems 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 98 locations in the United States, 18 in Canada, 11 in the
United Kingdom, 26 in Continental Europe, 18 in Latin America, 4 in Australia,
and 14 in Asia. Anixter sells approximately 54,000 products to 80,000 active
customers and works with over 800 active suppliers. Its customers include
international, national, regional and local companies 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 $1,700.
The products distributed by Anixter include communication (voice, data
and video) products used to connect personal computers, peripheral equipment,
mainframe equipment and various networks to each other. The products include an
assortment of transmission media (copper and fiber optic cable) and components,
as well as active data components for networking applications. Anixter sells
products that are incorporated in local area networks ("LANs"), 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.
Prior to 1989, Anixter's operations were primarily limited to North
America and the United Kingdom. In 1989, Anixter made a major commitment to
expand its operations into the international voice, data and video
communications markets. Since then, Anixter has opened businesses throughout
Western and Central Europe and in significant markets in the Pacific Rim (other
than Japan) and Latin America.
An important element of Anixter's overall business strategy is to
develop and maintain close relationships with its key suppliers, which include
the world's leading manufacturers of networking, communications cabling and
electrical wiring systems products. Such relationships stress joint product
planning, inventory management, technical support, advertising and marketing. In
support of this strategy, Anixter does not compete with its suppliers in product
design or manufacturing activities. Approximately 44% of the Anixter's purchases
in 1998 were from its five largest suppliers.
Anixter cost-effectively serves its customers' needs through its
proprietary computer system which connects all of its warehouses and sales
offices throughout the world. The system is designed for sales support, order
entry, inventory status, order tracking, credit review and material management.
In addition, Anixter operates a series of large modern hub warehouses in key
distribution centers in North America, Europe, Asia and Latin America which
provide for cost effective and reliable storage and delivery of products to its
customers. The hub warehouses store the bulk of the Company's inventory and are
to a certain degree specialized by broad product category. Some smaller
warehouses are also maintained to provide for the local pick up needs of
customers in certain cities. Anixter has also developed close relationships with
certain freight, package delivery and courier services to minimize transit times
between its facilities and customer locations. The combination of its
information systems, distribution network and delivery partnerships, allows
Anixter to provide a high level of customer service while maintaining a
reasonable level of investment in inventory and facilities.
The Company competes with distributors and manufacturers who sell
products directly or through existing distribution channels to end users or
other resellers. In addition, future performance could be subject to economic
downturns 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.
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INVESTMENT IN ANTEC
ANTEC is a communications technology company, specializing in the
design and engineering of hybrid fiber/coax (HFC) broadband networks and the
manufacturing, materials management and distribution of products for these
networks.
During the first half of 1998, the Company sold its remaining 7.1
million shares of ANTEC stock, resulting in net after tax proceeds of
approximately $100 million. 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.
MISCELLANEOUS
At January 1, 1999, the Company and its subsidiaries employed
approximately 4,800 people in the continuing distribution business and 1,200
people in the discontinued Integration business. Backlog orders are not material
as a significant amount of orders are shipped within 24 to 48 hours of receipt.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
For information concerning foreign and domestic operations and export
sales, see Note 9 ("Income Taxes") and Note 12 ("Business Segments") of this
report.
ITEM 2. PROPERTIES.
Substantially all of the Company's facilities are leased.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, the Company and its subsidiaries
became involved as plaintiffs or defendants in various legal proceedings. The
claims and counterclaims in such litigation, including those for punitive
damages, individually in certain cases and in the aggregate, involve amounts
which may be material. However, it is the opinion of the Company's management,
based upon the advice of its counsel, that the ultimate disposition of pending
litigation will not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of 1998, no matters were submitted to a vote
of the security holders.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the name, age as of March 19, 1999, position,
offices and certain other information with respect to the executive officers of
the Company. The term of office of each executive officer will expire upon the
appointment of his successor by the Board of Directors.
Rod F. Dammeyer, 58 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, 38 General Counsel of the Company since May 1998; Assistant Secretary of the Company since
May 1995; General Counsel and Secretary of Anixter since January 1996; Associate General
Counsel and Secretary from July 1994 to January 1996; Associate General Counsel and
Assistant Secretary from May 1993 to July 1994.
James M. Froisland, 48 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., 42 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.
James E. Knox, 61 Senior Vice President--Law and Secretary of the Company since 1986.
Dennis J. Letham, 47 Chief Financial Officer, Senior Vice President--Finance of the Company since January
1995; Chief Financial Officer, Executive Vice President of Anixter since July 1993.
Lisa Kearns Lanz, 46 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, 40 Vice President--Taxes of the Company since May 1993.
Samuel Zell, 57 Chairman of the Board of Directors of the Company since January 1993.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Anixter International Inc.'s Common Stock is traded on the New York
Stock Exchange under the symbol AXE. Stock price information is set forth in
Note 14 ("Quarterly Summary (unaudited)") of this report. As of March 23, 1999,
the Registrant had 5,420 shareholders of record.
ITEM 6. SELECTED FINANCIAL DATA.
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR
-------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
Results of operations:
Sales $ 2,348.5 $ 2,090.9 $ 1,816.5 $ 1,659.1 $ 1,312.1
Operating income $ 87.0 $ 91.1 $ 62.2 $ 51.6 $ 35.4
Interest expense and other, net $ (34.8) $ (28.5) $ (24.0) $ (19.2) $ (24.6)
Gain on ANTEC investment 24.3 2.2 4.1 (0.6) 7.9
Non-recurring items, net (a) -- -- -- -- 59.0
Marketable equity securities losses,
principally write-downs (b) -- -- -- (3.0) (39.6)
Income from continuing operations 44.7 37.4 22.6 11.7 28.6
Income from discontinued operations 20.9 7.9 13.5 27.4 218.3
Net income 65.6 45.3 36.1 39.1 246.9
Basic income per common share (c):
Continuing operations $ 1.00 $ 0.79 $ 0.46 $ 0.21 $ 0.45
Basic net income per common share 1.46 0.95 0.73 0.71 3.85
Diluted income per common share (c):
Continuing operations $ 0.99 $ 0.78 $ 0.45 $ 0.21 $ 0.44
Diluted net income per common share 1.45 0.95 0.72 0.70 3.84
Financial position at year-end:
Total assets $ 1,321.8 $ 1,333.6 $ 1,182.5 $ 1,131.4 $ 1,090.5
Total debt $ 543.6 $ 468.8 $ 468.4 $ 333.7 $ 280.5
Stockholders' equity (d) (e) $ 411.5 $ 477.0 $ 435.5 $ 449.0 $ 543.9
Diluted book value per common share (c) $ 9.09 $ 9.98 $ 8.72 $ 8.05 $ 8.46
Diluted common shares (in thousands) (c) 45,263 47,775 49,949 55,784 64,301
Year end outstanding shares 41,878 47,297 48,007 52,488 58,852
Notes:
(a) 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.
(b) In 1994, the Company wrote down the value of its investments in
marketable equity securities by $34.4 million. 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 $3.0 million.
(c) All shares and per share data have been adjusted to reflect the
dividend paid in the form of a two-for-one stock split on October 25,
1995.
(d) Stockholders' equity reflects treasury stock purchases and common stock
repurchase commitments of $101.8 million, $14.2 million, $52.1 million,
$152.6 million, and $138.9 million in 1998, 1997, 1996, 1995, and 1994,
respectively.
(e) Stockholders' equity includes unrealized after tax gains (losses) on
marketable equity securities available-for-sale of $19.8 million and
$(7.2) million at January 2, 1998 and December 31, 1994, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations may contain various "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which can be identified by the use of forward-looking terminology such as
"believes", "expects", "prospects", "estimated", "should", "may" or the negative
thereof or other variations thereon or comparable terminology indicating the
Company's expectations or beliefs concerning future events. The Company cautions
that such statements are qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements, a
number of which are identified in the discussion which follows. Other factors
could also cause actual results to differ materially from expected results
included in these statements.
In the fourth quarter of 1998, the Company decided to exit its
Integration segment and accordingly, the Integration segment is reflected as a
discontinued operation in these financial statements. In February 1999, the
Company announced the agreement to sell its North American Network Integration
business which followed the sale of the European Network Integration business in
the fourth quarter of 1998. The information contained in this financial review
should be read in conjunction with the consolidated financial information on
pages 17 to 34 of this Report.
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 $838 million
of outstanding common stock. The financial liquidity and capital resources in
1998 and 1997 reflect the impact of the Company's recapitalization program.
ANTEC Investment: During the first half of 1998, the Company sold its
remaining 7.1 million shares of ANTEC stock, resulting in net after tax proceeds
of approximately $100 million. As of January 2, 1998, the Company's interest in
ANTEC was approximately 19%. On February 6, 1997, a wholly-owned subsidiary of
ANTEC was merged into TSX Corporation. Under the terms of the transaction, TSX
Corporation shareholders received one share of ANTEC Corporation stock for each
share of TSX Corporation stock that they owned. The transaction was accounted
for as a pooling of interests. Upon consummation of this transaction the
Company's ownership interest in ANTEC was reduced to approximately 19% which
resulted in the cessation of equity method accounting for this investment after
February 6, 1997.
Discontinued Operations and Assets held for Sale: In the fourth quarter
of 1998, the Integration segment was classified as a discontinued operation.
Income from discontinued operations was $7.7 million in 1998 versus $7.9 million
in 1997. Sales increased 3% over 1997, as North America improved 5% and Asia
Pacific increased 21%. Excluding Europe, which was sold in the fourth quarter of
1998, sales increased 6%. Operating income increased 26% to $25.2 million in
1998 from $20.0 million in 1997. Improved gross margins and lower operating
costs in North America, coupled with a reduction in operating losses due to the
sale of the European business, led to the improvement.
Signal Capital and other miscellaneous assets have been classified as
assets held for sale since their acquisition in 1988. Subsequently, the Company
sold or liquidated $1.4 billion of the Signal portfolio. As of January 1, 1999,
the Signal portfolio has been liquidated in all material respects. In the first
half of 1998, the Company sold certain
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other remaining assets held for sale for approximately $43 million, resulting in
an after tax gain of $13.2 million.
Cash flow from discontinued operations increased to $44.5 million in
1998 from $17.7 million in 1997. The increase is a result of the disposal of
certain assets held for sale and sale of the European Integration business,
partially offset by higher operating working capital investments. The
anticipated sale of the North American Integration segment is expected to
generate approximately $200 million in cash in the second quarter of 1999.
In 1995 the Company sold its investment in Energy for $72.6 million.
Proceeds were used to reduce debt or to repurchase the Company's common stock.
Cash Flow
Year ended January 1, 1999: Consolidated net cash used by continuing
operating activities was $42.9 million in 1998 compared to $43.4 million
provided in 1997. Cash used by continuing operating activities increased
primarily as the result of the timing of inventory payments and a decline in
operating net income. Consolidated net cash provided by investing activities was
$39.4 million in 1998 versus $51.1 million used in 1997. The increase in
proceeds by investing activities resulted from the sale of the investment in
ANTEC for $104.3 million. This was partially offset by the acquisition of Pacer
Electronics, Inc. for $38.1 million. In 1997, the Company purchased Accu-Tech
for $27.6 million in cash and assumed $15.2 million of additional debt. Capital
expenditures were $26.4 million and $22.5 million in 1998 and 1997,
respectively. Capital expenditures are expected to be approximately $20 million
in 1999. Consolidated net cash used by financing activities was $31.1 million
for 1998 in comparison to $17.6 million in 1997. The change resulted from $101.8
million being used to purchase treasury stock in 1998 compared to $14.2 million
in 1997. Net proceeds from the issuance of long term debt was $72.2 million in
1998 versus a net paydown of $5.4 million in 1997. Proceeds were used to fund
higher working capital requirements.
Year ended January 2, 1998: Consolidated net cash provided by
continuing operating activities was $43.4 million in 1997 compared to $47.3
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 $51.1 million
in 1997 versus $22.8 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 $22.5 million and $ 22.8 million in 1997 and 1996,
respectively. Consolidated net cash used by financing activities was $17.6
million for 1997 in comparison to $83.1 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.
Interest Expense: Interest expense from continuing operations was $31.7
million, $27.9 million and $26.2 million for 1998, 1997 and 1996, 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 40% of debt
obligations at January 1, 1999, is fixed or capped. The impact of interest rate
swaps and caps for 1998, 1997 and 1996, was to increase interest expense by
approximately $.5 million, $.8 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
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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 1, 1999, $149 million was available under the bank revolving
lines of credit at Anixter and Accu-Tech, of which $11 million was available to
the Company for general corporate purposes.
In the first quarter of 1999, the Company repurchased one million
shares at an average cost of $12.46.
NOL Carryforwards
As of January 1, 1999, 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
Company's federal income tax returns through 1995 have been examined by the
Internal Revenue Service. The Company's recorded tax reserves were adequate to
cover the asserted deficiencies.
At January 1, 1999, various foreign subsidiaries of the Company had
aggregate cumulative NOL carryforwards for foreign income tax purposes of
approximately $139.3 million which are subject to various tax provisions of each
respective country. Approximately $40.6 million of this amount expires between
1999 and 2008 and $98.7 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 sales due to the continued growth
of the North American communications and electrical wire and cable businesses,
along with its continuing worldwide expansion. The Company competes with
distributors and manufacturers who sell products directly or through existing
distribution channels to end users or other resellers. The Company's future
performance could be affected by economic downturns and possible rapid changes
in applicable technologies.
During the first half of 1998, the Company sold its remaining 7.1
million shares of ANTEC stock, which resulted in a pre-tax gain of $24.3
million. In 1997, the Company reported its investment in ANTEC at fair value,
with all net unrealized gains and losses recorded in stockholders' equity.
Consolidated results for 1996 include ANTEC as an equity investment in the
results of operations.
Year ended January 1, 1999: Income from continuing operations was $44.7
million in 1998 compared with $37.4 million in 1997. The results were favorably
impacted by a 12% growth in sales and the $24.3 million gain on the 1998 ANTEC
stock sale noted above.
Net sales grew by 12% to $2.3 billion. The North American continuing
operations experienced a 16% growth to $1.7 billion from $1.5 billion in 1997.
Improvement was a result of continued growth in demand for all major product
sets. In addition, $93 million of the $227 million overall increase in 1998
sales is attributed to the inclusion of a full year for Accu-Tech which was
acquired in August 1997 and Pacer Electronics, Inc. which was purchased in June
1998. Lower copper prices resulted in lower sales prices, hindering the growth
of the Wire and Cable business. In Europe, sales of $518.1 million represented
growth of 6% as compared to 14% in 1997. The slowdown in sales growth is largely
attributed to soft sales growth in the U.K., Asia Pacific and Latin America net
sales were essentially flat to last year at $147.2 million. Excluding the effect
of changes in exchange rates, net sales grew 10%. Significant volume growth in
Latin America was offset
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by a decline in Asia Pacific, which was negatively impacted by poor economic
conditions in Southeast Asia.
Net sales by major market are presented in the following table:
YEARS ENDED
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JANUARY 1, JANUARY 2,
1999 1998
-------- --------
(In millions)
North America $1,683.2 $1,456.4
Europe 518.1 487.0
Asia and Latin America 147.2 147.5
-------- --------
$2,348.5 $2,090.9
======== ========
In 1998, operating income decreased to $87.0 million from $91.1 million
in 1997. Gross margin declined to 24.5% in 1998 from 25.0% in 1997. The decline
was primarily a result of unfavorable inventory costing adjustments in Latin
America, poor economic conditions in Southeast Asia and planned price reductions
in North American communications in pursuit of greater market share. Operating
expenses as a percent of sales increased slightly from 20.3% in 1997 to 20.5% in
1998. In 1998, the Company incurred $3.2 million of expenses for the
consolidation and relocation of certain distribution and office facilities in
Europe to improve future productivity and lower costs. In addition, in 1997,
$7.1 million of income was realized on the sale of an investment in a start-up
telecommunications company and management fees relating to the collection of
certain receivables. Excluding these unusual items, operating expenses as a
percentage of sales continued to improve, declining from 20.7% in 1997 to 20.4%
in 1998. Improvement primarily relates to headcount reductions in Asia Pacific
and Europe, partially offset by increased operating expenses in North America.
In North America, operating margins declined to 5.6% in 1998 from 6.8%
in 1997. Excluding the $7.1 million increase noted in the paragraph above, 1997
operating margin was 6.3%. North American communications margins declined,
resulting from the effects of lower copper prices on electrical wire and cable
products, higher facility costs and increased headcount in pursuing greater
market share. Europe operating margins improved from 2.2% in 1997 to 2.5% in
1998. Excluding the $3.2 million consolidation and relocation costs noted above,
1998 operating margin was 3.1%. The improvement resulted from reductions in
headcount and improved gross margins due to lower costs and favorable inventory
adjustments. Asia and Latin America continued to operate at a loss on flat sales
due to the poor economy in Southeast Asia and unfavorable year end inventory
adjustments in Latin America.
Operating income (loss) by major market is presented in the following
table:
YEARS ENDED
-----------
JANUARY 1, JANUARY 2,
1999 1998
------- -------
(In millions)
North America $ 94.7 $ 99.0
Europe 12.9 10.7
Asia and Latin America (20.6) (18.6)
------- -------
$ 87.0 $ 91.1
======= =======
Consolidated interest expense increased to $31.7 million in 1998 from
$27.9 million in 1997. The increase resulted from higher working capital
requirements. Foreign exchange and other expense rose to $3.1 million in 1998
from $.6 million in 1997. The increase primarily relates to the third quarter
devaluation of the Mexican peso.
The 1998 effective income tax rate on continuing operations was 41.6%
as compared with 42.3% in 1997. The effective tax rate exceeds the combined
federal and state rate of approximately 40% primarily as a result of
non-tax-deductible goodwill amortization and start-up losses in some foreign
countries where there is no current year benefit. Both of these effects are
reduced by the reassessment and adjustment of prior year tax accounts.
11
12
Year ended January 2, 1998: Income from continuing operations was $37.4
million in 1997 compared with $22.6 million in 1996. The results for 1997 were
favorably impacted by a 15% growth in revenues and a reduction in operating
expenses as a percentage of sales as further described below.
Net sales grew by 15% to $2.1 billion. The North American
communications business experienced a 16% growth to $1.5 billion from $1.3
billion in 1996. Improvement was a result of continued growth in demand for all
major product sets. Wire and Cable sales growth slowed down in the second half
of the year due to lower copper prices. In Europe, sales of $487.0 million
represented growth of 15% as compared to a 1% decline in 1996. The improved
sales growth is a result of higher demand for all product sets, continued
expansion and increased market penetration. Sales growth in 1996 was negatively
impacted by efforts to build the discontinued network integration capabilities
and reorganization of the salesforce. Asia Pacific and Latin America sales
increased by a combined 7% to $147.5 million due to increased market penetration
and expansion within these areas.
Net sales by major market are presented in the following table:
YEARS ENDED
-----------
JANUARY 2, JANUARY 3,
1998 1997
-------- --------
(In millions)
North America $1,456.4 $1,253.6
Europe 487.0 425.2
Asia and Latin America 147.5 137.7
-------- --------
$2,090.9 $1,816.5
======== ========
In 1997, operating income increased to $91.1 million from $62.2 million
in 1996. Gross margins declined to 25.0% in 1997 from 26.2% 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
20.3% in 1997 from 22.4% 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 the discontinued Integration business. 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 reduction in corporate overhead in 1997. Europe operating
profit decreased 52% to $10.7 million in 1997 primarily due to a $2.6 million
increase in corporate allocations and $2.6 million in inventory-related charges.
In Asia Pacific and Latin America, operating losses declined $1.5 million to an
$18.6 million loss. In Latin America, higher volume driven gross profits were
partially offset by an increase in corporate allocations of $1.4 million and by
a 44% overall increase in headcount. While sales volume was down in Asia
Pacific, the effect of changes in exchange rates lead to an improved operating
margin.
Operating income (loss) by major market is presented in the following
table:
YEARS ENDED
-----------
JANUARY 2, JANUARY 3,
1998 1997
--------- ----------
(In millions)
North America $ 99.0 $ 59.9
Europe 10.7 22.4
Asia and Latin America (18.6) (20.1)
------ ------
$ 91.1 $ 62.2
====== ======
12
13
Consolidated interest expense rose to $27.9 million in 1997 from $26.2
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 42.3% as compared with 46.6% 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.
Impact of Year 2000: Some of the Company's older computer programs were
written using two digits rather than four to define the applicable year. As a
result, those computer programs have time-sensitive software that recognizes a
date using "00" as the year 1900 rather than the year 2000. This could cause a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
The Company has completed an assessment, made upgrades to the mainframe
operating system and modified its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
Company is also assessing PC hardware and software systems and non-information
technology systems for Year 2000 compliance. The total Year 2000 project cost is
estimated at approximately $5.0 million. To date, the Company has incurred and
expensed approximately $2.4 million, primarily for assessment of the Year 2000
issue, mainframe operating system upgrades and code modifications. The project
is funded through the Company's information technology budget, and represents
less than six percent of that budget. The time and expense of the project has
not had, and is not expected to have, a material impact on the Company's
financial condition.
The Company has initiated formal communications with all of its
significant suppliers to confirm their Year 2000 compliance actions to be
sufficient to avoid any substantial disruptions in the Company's operations. The
Company has put a team together to continue to monitor this situation as the
information evolves. The Company believes most of the responses have been
designed to provide legal protection to the respondent as opposed to supplying
direct and reliable information; as such the Company makes no claim as to the
reliability of these responses. The Company intends to develop contingency plans
if and to the extent believed to be appropriate. The Company's total Year 2000
project cost and estimates to complete that project assume no significant costs
from the impact of third party Year 2000 issues based on presently available
information. However, there can be no guarantee the other companies on which the
Company relies will be Year 2000 compliant, and their failure to do so could
adversely impact the Company as described below.
The planning, assessment, and execution of substantially all of the
mainframe operating system upgrades and code modifications have been completed.
The remainder of the project, including verification of its effectiveness, PC
hardware and software upgrades, and the development of contingency plans, is
estimated to be complete by September 1999, which is prior to any anticipated
impact on the Company's operating systems. The Company believes that with
modifications to existing software and upgrades to certain hardware the Year
2000 issue will not pose significant operational problems for its computer
systems. However, if such modifications and upgrades are not made, or are
13
14
not completed timely, the Year 2000 issue could have a material impact on the
operations of the Company.
The severity of a failure of the Company or key suppliers to be Year
2000 compliant would depend on the nature of the problem and how quickly it
could be corrected or an alternative implemented, which is unknown at this time.
In the extreme, such failures could bring the Company to a standstill. Some
risks related to Year 2000 issues are beyond the control of the Company and its
suppliers. For example, no preparations or contingency plan will protect the
Company from a downturn in economic activity caused by the possible ripple
effect throughout the entire economy that could be caused by problems with Year
2000 issues.
The costs of the project and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, the success of third parties in
modifying their own systems and similar uncertainties.
The Company believes it should have no material exposure to
contingencies related to the Year 2000 issue for the products it has sold. The
Company's belief is based on the Company's practice of giving to its customers
only those warranties that the Company receives from its suppliers. To the
extent such warranties are breached, liability resulting therefrom will be the
ultimate responsibility of the Company's suppliers. However, there can be no
guarantee that such suppliers will be able to defend and indemnify the Company.
Specific factors that might cause the Company to incur liability include, but
are not limited to, insolvency of its suppliers, the existence of contractual
limitations on the suppliers' liability, and uncertainties regarding judicial
interpretation of the law regarding implied warranties.
Impact of Inflation: Inflation is currently not an important
determinant of Anixter's results of operations due, in part, to rapid inventory
turnover.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to the impact of interest rate changes and
fluctuations in foreign currencies, as well as changes in the market value of
its financial instruments. The Company periodically enters into derivatives in
order to minimize these risks, but not for trading purposes.
For the Company's foreign subsidiaries, the functional currency is the
local currency. The cumulative translation effect for the subsidiaries is
included in the accumulated other comprehensive income in stockholders' equity.
The Company uses foreign currency forward exchange contracts, which typically
expire within one year, to hedge transaction exposure related to United States
dollar-denominated assets and liabilities. Realized gains and losses on these
contracts are recognized in the same period as the hedged transaction. The
Company had foreign exchange forward contracts on hand at January 1, 1999 and
January 2, 1998 of $32.7 million and $26.8 million, respectively.
The Company has entered into interest rate agreements which effectively
fix or cap the LIBOR component of the interest rate on a portion of its floating
rate obligations. As a result, the interest rate on approximately 40% and 75% of
debt obligations at January 1, 1999 and January 2, 1998, respectively, are fixed
or capped. See note 1, "Interest Rate Agreements," and Note 7, "Debt," of the
consolidated financial statements for further detail on interest agreements and
debt obligations outstanding.
14
15
The Company prepared sensitivity analyses of its derivatives and other
financial instruments assuming the following: (i) a 1 percentage point adverse
change in interest rates and (ii) a 10 percent adverse change in the foreign
currency contracts outstanding. Holding all other variables constant, the
hypothetical adverse changes would increase interest expense by $2.8 million and
foreign exchange losses by $3.5 million. The effect of the interest change on
the fair market value of the outstanding debt is insignificant. These analyses
did not consider the effects of the reduced level of economic activity that
could exist in such an environment and certain other factors. Further, in the
event of a change of such magnitude, management would likely take actions to
further mitigate its exposure to possible changes. However, due to the
uncertainty of the specific actions that would be taken and their possible
effects, the sensitivity analyses assume no changes in the Company's financial
structure.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE
----
Report of Independent Auditors 16
Consolidated Statement of Operation 17
Consolidated Balance Sheet 18
Consolidated Statement of Cash Flows 19
Consolidated Statement of Stockholders' Equity 20
Notes to the Consolidated Financial Statements 21
Summary Quarterly Financial Information (Unaudited) 34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
15
16
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 1, 1999, and January 2, 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended January 1, 1999. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with 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 1, 1999, and January 2, 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended January 1, 1999, 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 22, 1999
16
17
ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED
------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1999 1998 1997
--------- --------- ---------
Net sales $ 2,348.5 $ 2,090.9 $ 1,816.5
Cost of operations:
Cost of products sold 1,772.9 1,568.6 1,340.2
Operating expenses 481.5 424.9 408.0
Amortization of goodwill 7.1 6.3 6.1
--------- --------- ---------
Total costs and expenses 2,261.5 1,999.8 1,754.3
--------- --------- ---------
Operating income 87.0 91.1 62.2
Other (expenses) income:
Interest expense (31.7) (27.9) (26.2)
Gain on ANTEC investment 24.3 2.2 4.1
Other (3.1) (.6) 2.2
--------- --------- ---------
Income before income taxes 76.5 64.8 42.3
Income tax expense 31.8 27.4 19.7
--------- --------- ---------
Income from continuing operations 44.7 37.4 22.6
Discontinued operations:
Income from operations 7.7 7.9 13.5
Net gain on disposal of discontinued operations 13.2 -- --
--------- --------- ---------
Net income $ 65.6 $ 45.3 $ 36.1
========= ========= =========
Basic income per common share:
Continuing operations $ 1.00 $ 0.79 $ 0.46
Discontinued operations 0.46 0.16 0.27
--------- --------- ---------
Net income $ 1.46 $ 0.95 $ 0.73
========= ========= =========
Diluted income per common share:
Continuing operations $ 0.99 $ 0.78 $ 0.45
Discontinued operations 0.46 0.17 0.27
--------- --------- ---------
Net income $ 1.45 $ 0.95 $ 0.72
========= ========= =========
See accompanying notes to the consolidated statements.
17
18
ANIXTER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
JANUARY 1, JANUARY 2,
1999 1998
-------- --------
ASSETS
Current assets:
Cash $ 20.5 $ 10.6
Accounts receivable, (less allowances
of $11.0 in 1998 and $10.0 in 1997) 455.9 405.9
Inventories 417.2 394.4
Income taxes receivable 5.1 --
Other assets 8.4 11.2
-------- --------
Total current assets 907.1 822.1
Property and equipment, at cost 144.1 129.9
Accumulated depreciation (86.5) (76.8)
-------- --------
Net property & equipment 57.6 53.1
Goodwill (less accumulated amortization of
$71.0 in 1998 and $63.9 in 1997) 233.8 203.1
Net assets of discontinued operations 87.3 96.3
Investment in ANTEC -- 112.0
Other assets 36.0 47.0
-------- --------
$1,321.8 $1,333.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 246.7 $ 239.6
Accrued expenses 94.3 86.8
Income taxes payable -- 13.5
-------- --------
Total current liabilities 341.0 339.9
Deferred income taxes 15.0 34.5
Other liabilities 7.6 6.5
Long-term debt 543.6 468.8
-------- --------
Total liabilities 907.2 849.7
Minority interest 3.1 6.9
Stockholders' equity:
Common stock--$1.00 par value, 100,000,000 shares
authorized, 41,877,659 and 47,297,052 shares
issued and outstanding in 1998 and 1997, respectively 41.8 47.3
Capital surplus -- 47.1
Accumulated other comprehensive income (39.7) (7.3)
Retained earnings 409.4 389.9
-------- --------
Total stockholders' equity 411.5 477.0
-------- --------
$1,321.8 $1,333.6
======== ========
See accompanying notes to the consolidated financial statements.
18
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ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
YEARS ENDED
----------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1999 1998 1997
-------- -------- --------
Operating activities:
Net Income $ 65.6 $ 45.3 $ 36.1
Adjustments to reconcile income from
continuing operations to net cash
(used) provided by continuing operating
activities:
Income from discontinued operations (20.9) (7.9) (13.5)
Gain on ANTEC investment (24.3) (2.2) (4.1)
Depreciation and Amortization 26.8 26.1 23.7
Deferred income taxes (7.4) (13.8) (4.4)
Changes in assets and liabilities:
Accounts receivable (41.7) (64.1) (20.8)
Inventory (17.8) (46.3) (22.6)
Accounts payable and accruals (10.0) 110.9 (39.3)
Other, net (13.2) (4.6) (2.4)
-------- -------- --------
Net cash (used) provided by continuing
operating activities (42.9) 43.4 (47.3)
-------- -------- --------
Investing activities:
Capital Expenditures (26.4) (22.5) (22.8)
Acquisition of businesses (38.1) (28.6) --
Proceeds from sale of ANTEC 104.3 -- --
Other, net (0.4) -- --
-------- -------- --------
Net cash provided (used) by continuing
investing activities 39.4 (51.1) (22.8)
-------- -------- --------
Financing activities:
Proceeds from long-term borrowings 1,348.4 1,304.1 1,191.1
Repayment of long-term borrowings (1,276.2) (1,309.5) (1,030.0)
Proceeds from issuance of common stock 3.1 3.5 4.8
Purchase of treasury stock (101.8) (14.2) (75.5)
Other, net (4.6) (1.5) (7.3)
-------- -------- --------
Net cash (used) provided in continuing
financing activities (31.1) (17.6) 83.1
-------- -------- --------
Cash provided by (used in) discontinued
operations 44.5 17.7 (5.3)
-------- -------- --------
Cash provided (used) 9.9 (7.6) 7.7
Cash at beginning of year 10.6 18.2 10.5
-------- -------- --------
Cash at end of year $ 20.5 $ 10.6 $ 18.2
======== ======== ========
See accompanying notes to the consolidated financial statements.
19
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ANIXTER INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN MILLIONS)
ACCUMULATED OTHER
COMPREHENSIVE INCOME
-------------------------
UNREALIZED
GAINS ON
CUMULATIVE MARKETABLE
COMMON CAPITAL RETAINED TRANSLATION EQUITY COMPREHENSIVE
STOCK SURPLUS EARNINGS ADJUSTMENTS SECURITIES INCOME
------- ------- -------- ----------- ---------- -------------
Balance at December 31, 1995 $ 52.5 $ 99.9 $308.5 $(11.8) $ --
Net income -- -- 36.1 -- -- $ 36.1
Other comprehensive income:
Foreign currency
translation adjustments -- -- -- (2.3) -- (2.3)
------
Comprehensive income $ 33.8
======
Issuance of common stock 0.2 4.6 -- -- --
Purchase and retirement
of treasury stock (4.7) (47.4) -- -- --
------ ------ ------ ------ ------
Balance at January 3, 1997 48.0 57.1 344.6 (14.1) --
Net income -- -- 45.3 -- -- $ 45.3
Other comprehensive income:
Foreign currency
translation adjustments -- -- -- (13.0) -- (13.0)
Change in unrealized gain
on marketable equity
securities (net of tax of
$12.2 million) -- -- -- -- 19.8 19.8
------
Comprehensive income $ 52.1
======
Issuance of common stock .3 3.2 -- -- --
Purchase and retirement
of treasury stock (1.0) (13.2) -- -- --
------ ------ ------ ------ ------
Balance at January 2, 1998 47.3 47.1 389.9 (27.1) 19.8
Net income -- -- 65.6 -- -- $ 65.6
Other comprehensive income:
Foreign currency
translation adjustments -- -- -- (12.6) -- (12.6)
Change in unrealized gain
on marketable equity
securities (net of tax of
$12.2 million) -- -- -- -- (19.8) (19.8)
------
Comprehensive income $ 33.2
======
Issuance of common stock .1 3.0 -- -- --
Purchase and retirement
of treasury stock (5.6) (50.1) (46.1) -- --
------ ------ ------ ------ ------
Balance at January 1, 1999 $ 41.8 $ -- $409.4 $(39.7) $ --
====== ====== ====== ====== ======
See accompanying notes to the consolidated financial statements.
20
21
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 subsidiary (collectively, "Accu-Tech"). In 1998, the Company
sold its remaining 19% interest in 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 1998 and 1997 and 53 weeks in 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Certain amounts for prior years have been reclassified to conform to
the current year presentation.
INVENTORIES: Inventories, consisting primarily of finished goods, are
stated at the lower of cost or market. Cost is determined using the average-cost
method.
PROPERTY AND EQUIPMENT: Capital expenditures, primarily equipment, are
recorded at cost and depreciated on the straight-line method over their
estimated useful lives ranging from 3 to 10 years. Leasehold improvements are
depreciated over the term of the related lease. Upon sale or retirement, the
cost and related depreciation are removed from the respective accounts, and any
gain or loss is included in income. Maintenance and repair costs are expensed
as incurred.
GOODWILL: Goodwill primarily relates to the excess of cost over the
fair value of the net tangible assets of businesses acquired. The Company
continually reviews goodwill to assess recoverability from estimated
undiscounted future cash flows at the aggregate business unit level. Goodwill is
amortized on a straight-line basis over 40 years.
INVESTMENT IN ANTEC: In 1998, the Company sold its remaining 7.1
million shares of ANTEC stock which resulted in net after tax proceeds of
approximately $100 million and an after tax gain of $14.6 million. On February
6, 1997, a wholly-owned subsidiary of ANTEC was merged into TSX Corporation.
Under the terms of the transaction, TSX Corporation shareholders received one
share of ANTEC Corporation stock for each share of TSX Corporation stock that
they owned. The transaction was accounted for as a pooling of interests. Upon
consummation of this transaction, the Company's ownership interest in ANTEC was
reduced to approximately 19%, which resulted in the cessation of equity method
accounting for this investment after that date. As a result of this change, the
Company recorded a $1.2 million after tax gain. As of January 2, 1998, the
market value of the Company's investment in ANTEC was $112.0 million. The
Company reported its investment in ANTEC at fair value. All unrealized gains and
losses, net of taxes, were recorded in stockholders' equity until realized.
21
22
INTEREST RATE AGREEMENTS: In addition to the fixed rate 8.0% Senior
Notes and the 6.6% bonds, the Company has entered into interest rate agreements
which effectively fix or cap, for a period of time, the LIBOR component of an
interest rate on a portion of its floating rate obligations. As a result, the
interest rate on approximately 40% and 75%, of debt obligations at January 1,
1999, and January 2, 1998, respectively, is fixed or capped. At January 1, 1999,
the Company had an interest rate swap agreement outstanding with a notional
amount of $25 million. This swap agreement obligated the Company to pay a fixed
rate of approximately 6.1% through January 2003. At January 1, 1999 and January
2, 1998, the Company also had one interest rate collar agreement with a notional
amount of $50 million which entitled the Company to receive from the bank the
amount by which the LIBOR component of the floating rate interest payments
exceed 6.5%. In addition, the Company is required to pay the bank the difference
between 6.3% and the floating rate when it is below 5.3%. This interest rate
collar matures in January 2002. At January 1, 1999 and January 2, 1998, the
Company had three additional interest rate swap agreements outstanding with a
notional amount aggregating $100 million that obligated the Company to pay a
fixed rate of approximately 6.1% through July 2000. At January 2, 1998, the
Company had an interest rate swap agreement outstanding with a notional amount
of $50 million. This swap agreement obligated the Company to pay a fixed rate of
6.0% through June 1998. At January 2, 1998, the Company had interest rate cap
agreements outstanding with notional amounts aggregating $50 million. These
interest rate cap agreements effectively entitled the Company to receive from
the lenders the amount by which the LIBOR component of the interest payments
exceeded 7.5% of its floating rate debt of $50 million. Payments received as a
result of the interest rate cap agreements were recognized as a reduction of
interest expense. The fair value, which is the estimated amount at the current
interest rate that the Company would pay or receive to enter into similar
interest rate agreements on the reporting date, of all of the Company's interest
rate agreements at January 1, 1999, and January 2, 1998, is $3.8 million and
$0.8 million, respectively. The impact of interest rate agreements for the
fiscal years 1998, 1997 and 1996, was to increase interest expense by
approximately $.5 million, $.8 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
1998, 1997 and 1996. The forward contracts are revalued at current foreign
exchange rates, with the changes in valuation reflected directly in income. At
January 1, 1999, and January 2, 1998, the Company had approximately $32.7
million and $26.8 million, respectively, in foreign currency forward contracts
outstanding.
REVENUE RECOGNITION: Sales and related cost of sales are recognized
primarily upon shipment of products.
ADVERTISING AND SALES PROMOTION: Advertising and sales promotion costs
are expensed as incurred. Advertising and promotion costs were $13.3 million,
$13.7 million and $9.5 million in 1998, 1997 and 1996, respectively.
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.
22
23
NEW ACCOUNTING PRONOUNCEMENTS
Comprehensive income: In 1998, the Company adopted Statement Of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which requires the disclosure of comprehensive income and its components,
as defined, be reported in a financial statement. Comprehensive income consists
of net income, foreign currency translation adjustments and unrealized gains and
losses on marketable equity securities, and is presented in the Company's
Consolidated Statement of Stockholders' Equity. The adoption of SFAS 130 had no
impact on the Company's net income or stockholders' equity. Prior year financial
statements have been reclassified to conform to the SFAS 130 requirements.
Industry Segment and Operations by Geographic Areas: In 1998, the
Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 changes the way the Company reports information about its
operating segments. The information for 1997 and 1996 has been restated from the
prior years' presentation in order to conform to the 1998 presentation. Prior to
1998, the Company had been investing in the business of providing services for
the design, deployment, and support of network infrastructures. Beginning in
1998, in order to align its business segments with the strategic focus of the
Company, operating results were reported in two segments. The larger segment,
Distribution, sells specialty wire and cable and structured wiring from top
suppliers to contractors, installers, and end-users, including manufacturers,
natural resource companies, utilities, and original equipment manufacturers. The
smaller segment, Integration, sold products and services for the assessment,
design, implementation and support of networking technologies to end-users. In
the fourth quarter of 1998, management decided to exit the Integration business.
Consequently, the European Network Integration business was sold in the fourth
quarter of 1998, followed by the announcement of our agreement to sell the
North America Network Integration business in February 1999. The sale is
expected to be completed in the second quarter of 1999. The effect of these
transactions has resulted in the Integration segment of the Company being
reported as a discontinued operation of a segment of a business in these
financial statements. See footnote 12 "Business Segments" for further segment
information.
Pension Disclosure: In 1998, the Company adopted Statement of Financial
Accounting Standards No. 132, "Employers Disclosures about Pensions and Other
Post-retirement Benefits." This statement standardizes the disclosure
requirements for pensions and other post-retirement benefits. Prior years'
information has been restated to conform with the requirements of this
statement.
Accounting for Derivatives Instruments and Hedging Activities: In June
1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted after June 15, 1999. Because of the Company's minimal use
of derivatives, management does not anticipate that the adoption of the new
Statement will have a significant effect on earnings or the financial position
of the Company.
23
24
NOTE 2. INCOME PER SHARE
The following table sets forth the computation of basic and diluted
income per share:
1998 1997 1996
------- ------- -------
Numerator (in millions):
Income from continuing operations
$ 44.7 $ 37.4 $ 22.6
======= ======= =======
Denominator (in thousands):
Basic common shares outstanding 44,877 47,533 49,717
Effect of dilutive securities:
Stock options and warrants 386 242 232
------- ------- -------
Dilutive potential common shares 45,263 47,775 49,949
======= ======= =======
Basic income per share
from continuing operations $ 1.00 $ .79 $ .46
Diluted income per share from
continuing operations $ .99 $ .78 $ .45
NOTE 3. DISCONTINUED OPERATIONS
In the fourth quarter of 1998, the Company decided to exit its
Integration segment and accordingly, the Integration segment is reflected as a
discontinued operation in these financial statements. In February 1999, the
Company announced the agreement to sell its North American Network Integration
business which followed the sale of the European Network Integration business in
the fourth quarter of 1998. The sale of the North American Network Integration
business is expected to be completed in the second quarter of 1999 at which time
management projects a gain to be recorded. Interest expense has been allocated
to discontinued operations based on the percentage of total identifiable assets.
In the first half of 1998, the Company sold certain of its discontinued
assets resulting in an aftertax gain of $13.2 million.
Net sales and income from discontinued operations are as follows:
In Millions
YEARS ENDED
JANUARY 1, JANUARY 2, JANUARY 3,
1999 1998 1997
-------- -------- --------
Net sales $ 735.2 $ 714.3 $ 658.8
Costs and expenses (710.0) (694.3) (632.6)
-------- -------- --------
Operating income 25.2 20.0 26.2
Gain on sale of assets 22.0 -- --
Net interest expense and other (4.8) (5.3) (3.7)
Income tax expense (21.5) (6.8) (9.0)
-------- -------- --------
Income from discontinued operations $ 20.9 $ 7.9 $ 13.5
======== ======== ========
NOTE 4. ACQUISITION OF PACER ELECTRONICS, INC. AND ACCU-TECH CORPORATION
In June 1998, the Company purchased Pacer Electronics, Inc. ("Pacer")
for approximately $38 million. Pacer is an electrical and data cabling
distributor largely centered in the Northeast portion of the United States, with
additional locations in North Carolina, Florida and California. The majority of
Pacer's sales come from the sale of
24
25
wire, cable, connectors and related products and value added services to
original equipment manufacturers in the electronic industry.
In August 1997, the Company purchased approximately 93% of the
outstanding common stock of Accu-Tech Corporation for $27.6 million in cash and
assumed $15.2 million of debt. Accu-Tech Corporation is a networking and wiring
specialist distributing products for data, voice, video and electrical
applications.
Both the Pacer acquisition and the Accu-Tech Corporation acquisition
were accounted for using the purchase method of accounting. Had these
acquisitions occurred at the beginning of their respective years of acquisition,
the impact on the Company's operating results would not have been significant.
NOTE 5. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
At January 1, 1999, and January 2, 1998, the Company had an ownership
interest of approximately 99% in Anixter Inc., which is included in the
consolidated financial statements of the Company. The following summarizes the
financial information of Anixter Inc. and reflects the Integration segment of
the Company as a discontinued operation:
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JANUARY 1, JANUARY 2,
1999 1998
-------- --------
(In millions)
Assets:
Current assets $ 863.0 $ 788.4
Property, net 54.6 49.9
Goodwill 212.1 181.1
Net assets of discontinued operations 98.3 96.3
Other assets 38.2 35.2
-------- --------
$1,266.2 $1,150.9
======== ========
Liabilities and Stockholders' Equity:
Current liabilities $ 328.4 $ 310.3
Other liabilities 14.1 15.9
Long-term debt 524.1 450.4
Subordinated notes payable to parent 7.0 19.0
Stockholders' equity 392.6 355.3
-------- --------
$1,266.2 $1,150.9
======== ========
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATION
YEARS ENDED
-----------
JANUARY 1, JANUARY 2,
1999 1998
-------- --------
(In millions)
Net sales $2,240.2 $2,063.5
Operating income $ 84.3 $ 84.0
Income before income tax expense $ 46.7 $ 54.1
Income from continuing operations $ 15.7 $ 30.1
Net income $ 25.0 $ 33.8
25
26
NOTE 6. ACCRUED EXPENSES
Accrued expenses consists of the following:
JANUARY 1, JANUARY 2,
1999 1998
------- -------
(In millions)
Salaries and fringe benefits $ 60.3 $ 58.3
Interest 5.9 6.4
Other 28.1 22.1
------- -------
$ 94.3 $ 86.8
======= =======
NOTE 7. DEBT
Debt is summarized below:
JANUARY 1, JANUARY 2,
1999 1998
------- -------
(In millions)
Bank revolving lines of credit $ 435.9 $ 357.1
8% Senior notes 100.0 100.0
Other 7.7 11.7
------- -------
Total debt $ 543.6 $ 468.8
======= =======
Anixter and Accu-Tech have various revolving bank lines of credit
worldwide which provide for up to $585 million of borrowings. At January 1,
1999, approximately $436 million was borrowed and $149 million was available
under the bank revolving lines of credit, of which $11 million was available
for general corporate purposes. These lines of credit reduce or mature at
various dates from 2000 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 1, 1999, and January 2, 1998, for bank
revolving lines of credit was 6.1% and 6.4%, 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 $300.4 million and
$291.5 million at January 1, 1999 and January 2, 1998, respectively.
Aggregate annual maturities of debt are as follows: 1999--none;
2000--$22.1 million; 2001--$413.8 million; 2002--none; 2003--$100.0; and $7.7
million thereafter.
Interest paid in 1998, 1997 and 1996 was $36.6 million, $31.0 million
and $22.8 million, respectively.
The carrying amount of the Company's debt generally approximates fair
value.
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27
NOTE 8. LEASE COMMITMENTS
Substantially all of the Company's office and warehouse facilities and
equipment are leased under operating leases. Certain of these leases are
long-term operating leases and expire at various dates through 2013. Minimum
lease commitments under operating leases at January 1, 1999 are as follows:
1999- $42.8 million; 2000 - $33.4 million; 2001 - $25.3 million; 2002 - $19.3
million; 2003 - $11.2 million; beyond 2003 - $46.4 million. Total rental expense
was $39.6 million, $35.6 million and $32.9 million in 1998, 1997 and 1996,
respectively.
NOTE 9. INCOME TAXES
The Company and its U.S. subsidiaries file their federal income tax
return on a consolidated basis. As of January 1, 1999, the Company had no NOL or
ITC carryforwards for federal income tax purposes. The Company's federal income
tax returns through 1995 have been examined by the Internal Revenue Service. The
Company's recorded tax reserves were adequate to cover the asserted
deficiencies.
At January 1, 1999, various foreign subsidiaries of the Company had
aggregate cumulative NOL carryforwards for foreign income tax purposes of
approximately $139.3 million which are subject to various provisions of each
respective country. Approximately $40.6 million of this amount expires between
1999 and 2008 and $98.7 million of the amount has an indefinite life.
Domestic income from continuing operations before income taxes was
$84.0 million, $62.5 million and $31.1 million for 1998, 1997 and 1996,
respectively. Foreign income (losses) before income taxes were $(7.5) million,
$2.3 million and $11.2 million for 1998, 1997 and 1996, respectively.
The Company paid income taxes in 1998, 1997 and 1996 of $63.8 million,
$35.3 million and $18.1 million, respectively.
Significant components of the Company's deferred tax liabilities and
assets were as follows:
JANUARY 1, JANUARY 2,
1999 1998
------- -------
(In millions)
ANTEC valuation $ -- $ (12.2)
Depreciation -- (2.3)
Other (51.4) (66.5)
------- -------
Gross deferred tax liabilities (51.4) (81.0)
------- -------
Foreign NOL carryforwards 45.5 32.8
Deferred compensation 9.3 9.3
Assets held for sale 6.4 8.8
Investment reserves 5.3 6.6
Allowance for doubtful accounts 4.4 8.6
Inventory reserves 2.9 3.3
Other 6.0 3.2
------- -------
Gross deferred tax assets 79.8 72.6
Valuation allowance (43.4) (26.1)
------- -------
Net deferred tax liability $ (15.0) $ (34.5)
======= =======
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28
Income tax expense (benefit) was comprised of:
YEARS ENDED
----------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1999 1998 1997
------- ------- -------
(In millions)
Current--Foreign $ 7.6 $ 10.1 $ 8.9
State 1.9 3.4 2.2
Federal 22.4 22.9 13.4
------- ------- -------
31.9 36.4 24.5
Deferred--Foreign 4.5 (0.7) (3.7)
State 3.1 0.2 1.3
Federal (7.7) (8.5) (2.4)
------- ------- -------
(.1) (9.0) (4.8)
------- ------- -------
$ 31.8 $ 27.4 $ 19.7
======= ======= =======
Reconciliation of income tax expense to the statutory corporate federal
tax rate of 35% are as follows:
YEARS ENDED
---------------------------------------
JANUARY 1, JANUARY 2, JANUARY 3,
1999 1998 1997
------- ------- -------
(In millions)
Statutory tax expense $ 26.8 $ 22.7 $ 14.8
Increase (reduction) in taxes resulting from:
Amortization of goodwill 2.1 1.9 1.8
Losses on foreign operations 8.4 2.4 7.7
State income taxes 3.2 2.3 2.3
Adjustment to prior year tax accounts (9.4) (3.0) (8.3)
Other, net .7 1.1 1.4
------- ------- -------
$ 31.8 $ 27.4 $ 19.7
======= ======= =======
NOTE 10. PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS
The Company's various pension plans are non-contributory and cover
substantially all full-time domestic employees and certain employees in other
countries. Retirement benefits are provided based on compensation as defined in
the plans. The Company's policy is to fund these plans as required by ERISA and
the Code.
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 132, "Employers Disclosures about Pensions and Other
Post-retirement Benefits." This statement standardizes the disclosure
requirements for pensions and other post-retirement benefits. Prior years'
information has been restated to conform with the requirements of this
statement.
28
29
PENSION BENEFITS
------------------------
1998 1997
-------- --------
(In millions)
Change in projected benefit obligation:
Beginning balance $ 88.0 $ 73.8
Service cost 7.4 6.4
Interest cost 6.3 5.6
Amendments -- 1.8
Actuarial loss 5.8 2.7
Benefits paid (2.3) (2.3)
-------- --------
Ending balance $ 105.2 $ 88.0
======== ========
Change in plan assets at fair value:
Beginning balance $ 79.6 $ 67.9
Actual return on plan assets 6.4 11.7
Company contributions 2.3 2.3
Benefits paid (2.3) (2.3)
-------- --------
Ending balance $ 86.0 $ 79.6
======== ========
Reconciliation of funded status:
Projected benefit obligation $ (105.2) $ (88.0)
Plan assets at fair value 86.0 79.6
-------- --------
Funded status (19.2) (8.4)
Unrecognized net actuarial loss 0.5 (6.3)
Unrecognized prior service cost 2.0 2.2
Unrecognized transition obligation (1.1) (1.4)
-------- --------
Accrued benefit $ (17.8) $ (13.9)
======== ========
Weighted average assumptions:
Discount rate 7.17% 7.38%
Expected return on plan assets 8.72% 8.35%
Salary growth rate 5.54% 5.53%
Plan assets consist primarily of equity securities and mutual fund investments.
PENSION BENEFITS
-------------------------------------
1998 1997 1996
------- ------- -------
(In millions)
Components of net periodic cost:
Service cost $ 7.4 $ 6.4 $ 5.7
Interest cost 6.3 5.6 5.0
Actual return on plan assets (6.4) (11.7) (5.9)
Net amortization and deferral (1.3) 5.5 .4
------- ------- -------
Net periodic benefit cost $ 6.0 $ 5.8 $ 5.2
======= ======= =======
The Company has several savings plans. The Company's contributions to
these plans are based upon various levels of employee participation. The total
cost of these plans was $1.9 million in 1998, $1.7 million in 1997 and $1.5
million in 1996. The Company's liability for post-retirement benefits other than
pensions is not material.
29
30
NOTE 11. PREFERRED STOCK AND COMMON STOCK
Preferred Stock--
The Company has the authority to issue 15 million shares of preferred
stock, par value $1.00 per share, none of which was outstanding at the end of
1998, 1997 and 1996.
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. In 1998, the Board of
Directors also adopted and the shareholders approved the 1998 Mid-level Plan and
the Stock Incentive Plan which provides for the issuance of an additional 3.4
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 granted with
exercise prices 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.
The following table summarizes the 1998, 1997 and 1996 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, 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
Granted 1,772.0 17.46 -- --
Exercised (34.1) 17.80 (40.0) 9.94
Canceled (262.4) 17.09 -- --
------- --------
Balance at January 1, 1999 4,683.2 $ 16.48 380.0 $ 14.29
======= =======
Options Exercisable at year-end
1996 728.0 $ 11.69 480.0 $ 13.50
1997 1,160.2 $ 13.63 420.0 $ 13.87
1998 1,660.9 $ 14.78 380.0 $ 14.29
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31
The following table summarizes information relating to options
outstanding and exercisable at January 1, 1999, using various ranges of exercise
prices:
ESIP OPTIONS
(options in thousands)
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE
EXERCISE EXERCISE REMAINING
PRICES OUTSTANDING EXERCISABLE PRICE YEARS
-------- ----------- ----------- -------- ---------
$ 5.19-$12.13 532.7 532.7 $ 9.40 2.3
$14.25-$21.13 4,150.5 1,128.3 $ 17.39 7.9
DSOP OPTIONS
(options in thousands)
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE
EXERCISE EXERCISE REMAINING
PRICES OUTSTANDING EXERCISABLE PRICE YEARS
-------- ----------- ----------- -------- ---------
$ 8.38-$11.63 160.0 160.0 $ 9.13 1.6
$15.00-$20.69 220.0 220.0 $18.03 4.4
Additionally, the Company has an Employee Stock Purchase Plan ("ESPP")
covering most employees. Participants can request that up to 10% of their base
compensation be applied toward the purchase of common stock under the Company's
ESPP. The purchase price is the lower of 85% of the fair market value of the
common stock at the June 30, 1998 or at the end of the ESPP year. Under the
ESPP, the Company sold 175,900 shares, 217,600 shares, and 153,600 shares to
employees in 1998, 1997 and 1996, respectively.
Stock Option Plans of Anixter--
In 1996 and prior, Anixter granted to key employees options to purchase
the common stock of Anixter. Substantially all options have been granted with
exercise prices at the fair market value of the common stock on the date of
grant. These options vest over four years and terminate seven to ten years from
the date of grant. At January 1, 1999, the Company owned 99% of the
approximately 34.9 million shares of outstanding Anixter common stock. The
following table summarizes the 1998, 1997 and 1996 option activity:
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
------- -------
(Options in thousands)
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
Exercised (253.8) 10.13
Canceled (92.3) 11.77
-------
Balance at January 1, 1999 982.3 $ 11.57
Options exercisable at year-end
1996 1,173.0 $ 10.12
1997 1,209.6 $ 10.99
1998 982.4 $ 11.57
Exercise prices for options outstanding as of January 1, 1999, ranged
from $9.00 to $14.50 per share and had a weighted average remaining life of 2.5
years.
31
32
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 1, 1999, ranged from $15.35 to $18.48 per unit.
The following table summarizes the 1998, 1997, and 1996 activity under
the DSUP.
DSUP
Stock Units
-----------
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
Granted 25.9
Exercised (3.9)
----
Balance at January 1, 1999 81.6
====
Accounting for Stock Based Compensation--
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 Accounting for Stock Based Compensation.
Accordingly, no compensation expense has been recognized for the stock option
plans. Had compensation costs for the plans been determined based on the fair
value at the grant date for awards beginning in 1995 and amortized over the
respective vesting period, the Company's income from continuing operations would
have been reduced to the pro forma amounts indicated below:
1998 1997 1996
---- ---- ----
Income from continuing operations
--as reported $44.7 $37.4 $22.6
--pro forma $40.1 $34.0 $19.8
Basic income per share from
continuing operations
--as reported $1.00 $0.79 $0.46
--pro forma $0.89 $0.71 $0.40
Diluted income per share from
continuing operations
--as reported $0.99 $0.78 $0.45
--pro forma -- -- $0.40
Pro forma diluted income per share has not been presented for 1998 and
1997 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 $7.63 per
share in 1998 and $6.69 per share in 1997 and $9.32 per share in 1996) was
estimated at the date of grant using the Black-Scholes option pricing model with
the following assumptions for 1998, 1997 and 1996, respectively: expected stock
price volatility of 42%, 37% and 45%; expected dividend yield of zero; risk-free
interest rate of 4.9%, 6.6% and 6.1% and an expected 5 year life.
The pro forma effect on income from continuing operations for 1997 and
1996 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.
32
33
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 12. BUSINESS SEGMENTS
The Company is engaged in the business of distribution of specialty
wire and cable and structured wiring from top suppliers to contractors and
installers and to end users, including manufacturers, natural resources
companies, utilities and original equipment manufacturers. The Company obtains
and coordinates financing, legal and other related services, certain of which
are rebilled to subsidiaries.
The following table is a geographic breakdown of the Company's
operations. Sales to a single customer did not exceed 10 percent of total sales.
Export sales are insignificant.
(In millions) WORLDWIDE OPERATIONS
-----------------------------------------------------
1998 1997 1996
-------- ------- ---------
Net sales
United States $1,500.2 $1,263.2 $1,090.7
Europe 518.1 487.0 425.3
Canada, Asia Pacific and Latin America 330.2 340.7 300.5
-------- -------- --------
$2,348.5 $2,090.9 $1,816.5
======== ======== ========
Operating income
United States $ 85.3 $ 84.2 $ 47.4
Europe 12.9 10.7 22.4
Canada, Asia Pacific and Latin America (11.2) (3.8) (7.6)
-------- -------- --------
$ 87.0 $ 91.1 $ 62.2
======== ======== ========
Tangible long-lived assets
United States $ 64.5 $ 51.9 $ 46.1
Europe 9.9 12.2 13.3
Canada, Asia Pacific and Latin America 11.2 12.2 13.8
-------- -------- --------
$ 85.6 $ 76.3 $ 73.2
======== ======== ========
NOTE 13. CONTINGENCIES AND LITIGATION
In the ordinary course of business, the Company and its subsidiaries
become involved as plaintiffs or defendants in various legal proceedings. The
claims and counterclaims in such litigation, including those for punitive
damages, individually in certain cases and in the aggregate, involve amounts
which may be material. However, it is the opinion of the Company's management,
based upon the advice of its counsel, that the ultimate disposition of pending
litigation will not be material.
33
34
NOTE 14. 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 1, 1999, and January 2, 1998. 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 1, 1999 *
Net sales $ 562.1 $ 584.6 $ 617.3 $ 584.5
Cost of sales (421.0) (440.8) (465.4) (445.7)
Operating income 23.3 22.4 28.9 12.4
Gain on ANTEC investment 8.4 15.9 -- --
Income before income taxes 24.7 30.5 15.9 5.4
Income from continuing operations 14.4 17.8 9.3 3.2
Net income 26.7 21.5 13.0 4.4
Basic income per common share:
Continuing 0.31 0.38 0.21 0.07
Net income 0.57 0.46 0.30 0.10
Diluted income per common share:
Continuing 0.30 0.38 0.21 0.07
Net income 0.56 0.46 0.29 0.10
Composite stock price range:
High 20 1/4 22 1/8 19 7/8 20 5/16
Low 15 3/4 17 3/16 15 9/16 11 7/8
Close 19 7/16 19 15 3/4 20 5/16
YEAR ENDED JANUARY 2, 1998 *
Net sales $ 492.6 $ 507.9 $ 544.8 $ 545.6
Cost of sales (370.3) (381.0) (409.8) (407.5)
Operating income 22.1 20.6 23.6 24.8
Gain on ANTEC investment 2.2 -- -- --
Income before income taxes 18.1 15.0 15.7 16.0
Income from continuing operations 10.5 8.6 9.1 9.2
Net income 11.1 10.4 11.3 12.5
Basic income per common share:
Continuing 0.22 0.18 0.19 0.19
Net income 0.23 0.22 0.24 0.26
Diluted income per common share:
Continuing 0.22 0.18 0.19 0.19
Net income 0.23 0.22 0.24 0.26
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
* Certain amounts have been restated to reflect the discontinuance of the
Integration business. The impact on net income is not significant.
34
35
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
See Registrant's Proxy Statement for the 1999 Annual Meeting of
Stockholders--"Election of Directors."
ITEM 11. EXECUTIVE COMPENSATION.
See Registrant's Proxy Statement for the 1999 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 16
Consolidated Statement of Operation for the years ended
January 1, 1999, January 2, 1998 and January 3, 1997 17
Consolidated Balance Sheet at January 1, 1999 and January 2, 1998 18
Consolidated Statement of Cash Flows for the years ended
January 1, 1999, January 2, 1998 and January 3, 1997 19
Consolidated Statement of Stockholders' Equity for the years
ended January 1, 1999, January 2, 1998 and January 3, 1997 20
Notes to the Consolidated Financial Statements 21
35
36
(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 1, 1999, January 2,
1998 and January 3, 1997, except as noted:
PAGE
----
I. Condensed financial information of Registrant 41
II. Valuation and qualifying accounts and reserves 44
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)
36
37
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)
(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* (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.)
37
38
* (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).)
10.8* 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.)
10.9* 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.)
10.10* 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.)
10.11* (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))
10.12* 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.)
10.13 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.)
10.14* Form of Indemnity Agreement with all directors and
officers (Incorporated by reference from Anixter
International Inc. Annual Report on Form 10-K for the
year ended December 31, 1995, Exhibit 10.24)
10.15* 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)
10.16* 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)
10.17* 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)
10.18* 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)
38
39
10.19* 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. Page
----
21.1 List of Subsidiaries of the Registrant. 46
(23) Consents of experts and counsel.
23.1 Consent of Ernst & Young LLP 48
(24) Power of attorney.
24.1 Power of Attorney executed by Lord James Blyth,
James E. Knox, Robert E. Fowler, Jr., Robert W.
Grubbs, F. Philip Handy, Melvyn N. Klein, John R.
Petty, Sheli Rosenberg, Stuart M. Sloan and
Samuel Zell 49
(27) Financial data schedule.
27.1 Financial data schedule 50
39
40
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 41
Schedule II--Valuation and qualifying accounts and reserves 44
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 Nos. 2-93173 (filed September 30, 1987), 33-13486 (filed April 15,
1987), 33-21656 (filed May 3, 1988), 33-60676 (filed April 5, 1993), 33-05907
(filed June 12, 1996), 333-56815 (filed June 15, 1998) and 333-56935 (filed June
16, 1998):
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.
40
41
ANIXTER INTERNATIONAL INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
STATEMENT OF OPERATION
(IN MILLIONS)
YEARS ENDED
-----------
JAN 1, JAN 2, JAN 3,
1999 1998 1997
------- ------- -------
Operating (loss) income $ (1.5) $ 3.9 $ (.2)
Other (expenses) income:
Corporate interest expense -- -- (.5)
Gain on ANTEC investment 24.3 2.2 4.1
Interest and investment income, including
intercompany 7.2 6.0 10.5
------- ------- -------
Income from operations before income taxes
and equity in earnings of subsidiaries 30.0 12.1 13.9
Income tax benefit 4.2 8.7 6.3
Equity in earnings of subsidiaries 31.4 24.5 15.9
------- ------- -------
Net income $ 65.6 $ 45.3 $ 36.1
======= ======= =======
41
42
ANIXTER INTERNATIONAL INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
BALANCE SHEET
(IN MILLIONS)
ASSETS
JAN. 1, JAN. 2,
1999 1998
------- -------
Current assets:
Cash $ 3.3 $ --
Accounts receivable 1.7 .6
Amounts currently due (to) from affiliates, net 4.5 3.5
Other assets 5.5 .1
------- -------
Total current assets 15.0 4.2
Investment in ANTEC -- 112.0
Investment in and advances to subsidiaries 430.4 401.7
Other assets 14.3 15.8
------- -------
$ 459.7 $ 533.7
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses, due currently $ 10.1 $ 11.0
Income taxes, net, primarily deferred 38.1 45.7
------- -------
Total liabilities 48.2 56.7
Stockholders' equity:
Common stock 41.8 47.3
Capital surplus -- 47.1
Accumulated other comprehensive income (39.7) (7.3)
Retained earnings 409.4 389.9
------- -------
Total stockholders' equity 411.5 477.0
------- -------
$ 459.7 $ 533.7
======= =======
42
43
ANIXTER INTERNATIONAL INC.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ANIXTER INTERNATIONAL INC. (PARENT COMPANY)
STATEMENT OF CASH FLOWS
(IN MILLIONS)
YEARS ENDED
-------------------------------------------
JAN 1, JAN 2, JAN 3,
1999 1998 1997
------- ------- -------
Operating activities:
Net income $ 65.6 $ 45.3 $ 36.1
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on ANTEC investment (24.3) (2.2) (4.1)
Income tax expense (benefit) (4.2) (8.7) (6.3)
Equity in earnings of subsidiaries (31.4) (24.5) (15.9)
Change in other operating items 16.9 23.1 5.6
------- ------- -------
Net cash (used) provided by operating
activities 22.6 33.0 15.4
Investing activities:
Proceeds from sale of ANTEC 104.3 -- --
Acquisition of businesses (38.1) (27.6) --
Sale of Pacer Electronics, Inc. 14.2 -- --
Loans (to) from subsidiaries, net (1.0) .5 57.9
Other, net -- -- 1.2
------- ------- -------
Net cash provided by (used) investing
activities 79.4 (27.1) 59.1
------- ------- -------
Financing activities:
Purchase of treasury stock (101.8) (14.2) (75.5)
Proceeds from issuance of common stock 3.1 3.5 4.8
------- ------- -------
Net cash used in financing activities (98.7) (10.7) (70.7)
------- ------- -------
Cash provided (used) 3.3 (4.8) 3.8
Cash at beginning of year -- 4.8 1.0
------- ------- -------
Cash at end of year $ 3.3 $ -- $ 4.8
======= ======= =======
43
44
ANIXTER INTERNATIONAL INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED JANUARY 1, 1999, JANUARY 2, 1998 AND JANUARY 3, 1997
(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 1, 1999:
Allowance for
doubtful accounts $10.0 $ 4.2 $ .2 $(3.4) $11.0
Allowance for
deferred tax asset $26.1 $17.3 -- -- $43.4
Year ended January 2, 1998:
Allowance for
doubtful accounts $ 7.9 $ 7.1 $ (.6) $(4.4) $10.0
Allowance for
deferred tax asset $21.0 $ 5.1 -- -- $26.1
Year ended January 3, 1997:
Allowance for
doubtful accounts $ 7.9 $ 4.2 $ .2 $(4.4) $ 7.9
Allowance for deferred
tax asset $13.5 $ 7.5 -- -- $21.0
44
45
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 25TH DAY OF MARCH, 1999.
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
Robert W. Grubbs (Principal Executive Officer) March 25, 1999
/s/ DENNIS J. LETHAM Senior Vice President--Finance March 25, 1999
----------------------- (Chief Financial Officer)
Dennis J. Letham
/s/ JAMES M. FROISLAND Vice President--Controller
----------------------- (Chief Accounting Officer) March 25, 1999
James M. Froisland
/s/ LORD JAMES BLYTH* Director March 25, 1999
-----------------------
Lord James Blyth
/s/ ROD F. DAMMEYER* Director March 25, 1999
-----------------------
Rod F. Dammeyer
/s/ ROBERT E. FOWLER, JR.* Director March 25, 1999
-----------------------
Robert E. Fowler, Jr.
/s/ ROBERT W. GRUBBS Director March 25, 1999
-----------------------
Robert W. Grubbs
/s/ F. PHILIP HANDY* Director March 25, 1999
-----------------------
F. Philip Handy
/s/ MELVYN N. KLEIN* Director March 25, 1999
-----------------------
Melvyn N. Klein
/s/ JOHN R. PETTY* Director March 25, 1999
-----------------------
John R. Petty
/s/ SHELI Z. ROSENBERG* Director March 25, 1999
-----------------------
Sheli Z. Rosenberg
/s/ STUART M. SLOAN* Director March 25, 1999
-----------------------
Stuart M. Sloan
/s/ Director March 25, 1999
-----------------------
Thomas C. Theobald
/s/ SAMUEL ZELL* Director March 25, 1999
-----------------------
Samuel Zell
*By /s/ DENNIS J. LETHAM
-----------------------
Dennis J. Letham (Attorney in fact)
Dennis J. Letham, as attorney in fact for each person indicated.
45