SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
---
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
COMMISSION FILE NUMBER: 1-5989
ANIXTER INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1658138
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4711 GOLF ROAD
SKOKIE, ILLINOIS 60076
(847) 677-2600
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---
At November 2, 2001, 36,852,062 shares of the registrant's Common
Stock, $1.00 par value, were outstanding.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 15
* No reportable information under this item.
THIS REPORT MAY CONTAIN VARIOUS "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH
CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"BELIEVES", "EXPECTS", "PROSPECTS", "ESTIMATED", "SHOULD", "MAY" OR THE
NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY
INDICATING THE COMPANY'S EXPECTATIONS OR BELIEFS CONCERNING FUTURE
EVENTS. THE COMPANY CAUTIONS THAT SUCH STATEMENTS ARE QUALIFIED BY
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE IN THE FORWARD-LOOKING STATEMENTS, A NUMBER OF WHICH ARE
IDENTIFIED IN THIS REPORT. OTHER FACTORS COULD ALSO CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM EXPECTED RESULTS INCLUDED IN THESE
STATEMENTS. THESE FACTORS INCLUDE GENERAL ECONOMIC CONDITIONS,
TECHNOLOGY CHANGES, CHANGES IN SUPPLIER OR CUSTOMER RELATIONSHIPS,
EXCHANGE RATE FLUCTUATIONS AND NEW OR CHANGED COMPETITORS.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
FOR THE 13 WEEKS ENDED FOR THE 39 WEEKS ENDED
--------------------------------- ------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2001 2000 2001 2000
------------- ------------- ------------- -------------
NET SALES $ 761.5 $ 971.8 $ 2,481.6 $ 2,651.5
Cost of goods sold 590.8 754.1 1,898.4 2,038.1
------------- ------------- ------------- -------------
Gross profit 170.7 217.7 583.2 613.4
Operating expenses 146.8 161.7 461.9 465.8
Amortization of goodwill 2.2 2.1 6.7 6.2
Restructuring costs 31.7 - 31.7 -
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) (10.0) 53.9 82.9 141.4
Interest expense (6.5) (12.5) (24.7) (33.9)
Other, net (3.2) (0.5) (11.4) 0.3
------------- ------------- ------------- -------------
Income (loss) before income taxes and extraordinary loss (19.7) 40.9 46.8 107.8
Income tax expense (benefit) (8.0) 16.9 18.9 45.0
------------- ------------- ------------- -------------
Income (loss) before extraordinary loss (11.7) 24.0 27.9 62.8
Extraordinary loss on early extinguishment of debt
(net of income tax benefit of $.1 and $.7, respectively) (0.2) - (1.0) -
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (11.9) $ 24.0 $ 26.9 $ 62.8
============= ============= ============= =============
BASIC INCOME (LOSS) PER SHARE:
Income (loss) before extraordinary loss $ (0.32) $ 0.65 $ 0.76 $ 1.73
Extraordinary loss (0.01) - (0.03) -
Net income (loss) $ (0.33) $ 0.65 $ 0.74 $ 1.73
DILUTED INCOME (LOSS) PER SHARE:
Income (loss) before extraordinary loss $ (0.32) $ 0.59 $ 0.74 $ 1.63
Extraordinary loss (0.01) - (0.03) -
Net income (loss) $ (0.33) $ 0.59 $ 0.71 $ 1.63
See accompanying notes to the condensed consolidated financial statements.
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS) SEPTEMBER 28, DECEMBER 29,
ASSETS 2001 2000
------------- ------------
(UNAUDITED)
CURRENT ASSETS
Cash $ 6.6 $ 20.8
Accounts receivable (less allowances of
$19.4 and $14.8 in 2001 and 2000, respectively) 243.2 293.3
Note receivable - unconsolidated subsidiary 112.6 126.1
Inventories 568.8 738.4
Inventories returnable to vendor, net - 120.0
Deferred income taxes 26.1 25.5
Other current assets 11.0 10.3
------------- ------------
Total current assets 968.3 1,334.4
Property and equipment, at cost 173.9 167.1
Accumulated depreciation (115.6) (110.6)
------------- ------------
Property and equipment, net 58.3 56.5
Goodwill (less accumulated amortization of
$93.4 and $86.8 in 2001 and 2000, respectively) 234.0 239.3
Other assets 75.7 55.8
------------- ------------
$ 1,336.3 $ 1,686.0
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 316.4 $ 499.1
Accrued expenses 92.6 139.6
Accrued restructuring costs 17.2 -
Income taxes payable 5.0 8.1
------------- ------------
Total current liabilities 431.2 646.8
Long-term debt 304.0 451.9
Other liabilities 46.8 32.4
------------- ------------
Total liabilities 782.0 1,131.1
STOCKHOLDERS' EQUITY
Common stock 36.8 37.7
Capital surplus 24.3 46.9
Accumulated other comprehensive income (56.6) (52.6)
Retained earnings 549.8 522.9
------------- ------------
Total stockholders' equity 554.3 554.9
------------- ------------
Total liabilities and stockholders' equity $ 1,336.3 $ 1,686.0
============= ============
See accompanying notes to the condensed consolidated financial statements.
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions) FOR THE 39 WEEKS ENDED
--------------------------------------
SEPTEMBER 28, SEPTEMBER 29,
2001 2000
------------- -------------
Operating activities
Net income $ 26.9 $ 62.8
Adjustments to reconcile net income to net cash
provided by (used in) continuing operating activities:
Extraordinary loss 1.0 -
Non-cash restructuring costs 6.6 -
Loss on disposal of fixed assets 0.3 -
Depreciation and amortization 23.2 20.3
Accretion of zero-coupon convertible notes 11.0 -
Deferred income taxes (0.4) (2.0)
Changes in current assets and liabilities, net 100.9 (307.8)
Restructuring costs 23.3 -
Other, net 4.7 0.6
------------- -------------
Net cash provided by (used in) continuing operating activities 197.5 (226.1)
INVESTING ACTIVITIES
Capital expenditures (19.5) (13.2)
Acquisitions and divestitures - (3.7)
------------- -------------
Net cash used in continuing investing activities (19.5) (16.9)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 743.5 1,155.9
Repayment of long-term borrowings (868.6) (903.0)
Repayment of notes payable (33.6) -
Proceeds from issuance of common stock 20.3 30.8
Purchases of common stock for treasury (46.9) (15.4)
Debt issuance costs (0.1) (6.4)
Other, net (2.2) (6.2)
------------- -------------
Net cash (used in) provided by continuing financing activities (187.6) 255.7
------------- -------------
(DECREASE) INCREASE IN CASH FROM CONTINUING OPERATIONS (9.6) 12.7
Cash used in discontinued operations (4.6) (11.8)
Cash at beginning of period 20.8 17.5
------------- -------------
Cash at end of period $ 6.6 $ 18.4
============= =============
See accompanying notes to the condensed consolidated financial statements.
ANIXTER INTERNATIONAL INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION AND PRESENTATION
The accompanying condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements included in
Anixter International Inc.'s ("the Company") Annual Report on Form 10-K for the
year ended December 29, 2000. The condensed consolidated financial information
furnished herein reflects all adjustments (consisting of normal recurring
accruals) which are, in the opinion of management, necessary for a fair
presentation of the condensed consolidated financial statements for the periods
shown. The results of operations of any interim period are not necessarily
indicative of the results that may be expected for a full fiscal year. Certain
amounts for the prior year have been reclassified to conform to the 2001
presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2000, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an amendment of SFAS No.
133." These statements outline the accounting treatment for all derivative
activity. The Company adopted these standards in the first quarter of fiscal
2001. The impact of adoption on the consolidated results of operations or
financial position was not significant. 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 uses
derivatives, both fair value and cash flow hedges, in order to minimize these
risks, but not for trading purposes. The Company does not enter into derivative
transactions that are ineffective or expect to recognize significant gains and
losses associated with SFAS No. 138. During the second quarter of 2001, the
Company incurred $1.7 million in interest expense related to the cancellation of
certain of its interest rate hedge agreements for which there were no longer
outstanding borrowings. At September 28, 2001, the fair market value of the
derivatives were included in "Other assets" on the condensed consolidated
balance sheet.
In June 2001, the Financial Accounting Standards Board issued SFAS No.
141 "Business Combinations", and No. 142, "Goodwill and Other Intangible
Assets", effective for fiscal years beginning after December 15, 2001. Under the
new rules, goodwill will no longer be amortized, but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and
other intangible assets beginning in the first quarter of 2002. During 2002, the
Company will perform the first of the required impairment tests of goodwill as
of January 1, 2002, and does not anticipate that the effect of these tests will
be significant on the earnings and financial position of the Company.
NOTE 2. ACQUISITION AND DIVESTITURE OF BUSINESSES
In the first quarter of 2000, the Company acquired 100% of the stock of
allNET Technologies Pty. Limited ("allNET") for $6.7 million. allNET is a
structured cabling distributor located in Australia. In the third quarter of
2000, the Company sold the net assets of a wholly-owned subsidiary of Accu-Tech
Corporation for $4.6 million in cash and notes receivable. The effect of these
transactions on the operating results of the Company was not significant.
NOTE 3. INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted
income (loss) per common share:
FOR THE 13 WEEKS ENDED FOR THE 39 WEEKS ENDED
----------------------------- -----------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2001 2000 2001 2000
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BASIC INCOME (LOSS) PER SHARE
Income (loss) before extraordinary loss $ (11,728) $ 24,055 $ 27,892 $ 62,848
Extraordinary loss (189) - (1,039) -
------------- ------------- ------------- -------------
Net income (loss) (numerator) $ (11,917) $ 24,055 $ 26,853 $ 62,848
============= ============= ============= =============
Weighted- average common shares
outstanding (denominator) 36,438 36,975 36,524 36,321
Income (loss) before extraordinary loss $ (0.32) $ 0.65 $ 0.76 $ 1.73
Extraordinary loss (0.01) - (0.03) -
Net income (loss) $ (0.33) $ 0.65 $ 0.74 $ 1.73
DILUTED INCOME (LOSS) PER SHARE
Income (loss) before extraordinary loss $ (11,728) $ 24,055 $ 27,892 $ 62,848
Interest impact of assumed
conversion of convertible notes - 2,056 - 2,101
------------- ------------- ------------- -------------
Adjusted income (loss) before
extraordinary loss (numerator) (11,728) 26,111 27,892 64,949
Extraordinary loss (189) - (1,039) -
------------- ------------- ------------- -------------
Net income (loss) $ (11,917) $ 26,111 $ 26,853 $ 69,949
============= ============= ============= =============
Weighted-average common shares
outstanding 36,438 36,975 36,524 36,321
Effect of dilutive securities:
Stock options, warrants and
convertible notes - 7,519 1,274 3,450
------------- ------------- -------------- -------------
Weighted-average common shares
outstanding (denominator) 36,438 44,494 37,798 39,771
============= ============= ============== =============
Income (loss) before extraordinary loss $ (0.32) $ 0.59 $ 0.74 $ 1.63
Extraordinary loss (0.01) - (0.03) -
Net income (loss) $ (0.33) $ 0.59 $ 0.71 $ 1.63
NOTE 4. COMPREHENSIVE INCOME (LOSS)
Comprehensive income, net of tax, consisted of the following:
FOR THE 13 WEEKS ENDED FOR THE 39 WEEKS ENDED
------------------------------ -------------------------------
(IN MILLIONS) SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Net income (loss) $ (11.9) $ 24.0 $ 26.9 $ 62.8
Cumulative effect of adoption of SFAS No. 133 - - 2.7 -
Change in cumulative translation adjustment (1.4) (6.5) (8.6) (17.0)
Change in fair market value of derivatives 0.8 - 1.9 -
------------- ------------- ------------- -------------
Comprehensive income (loss) $ (12.5) $ 17.5 $ 22.9 $ 45.8
============= ============= ============= =============
NOTE 5. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
The Company had an ownership interest of 99.9% in Anixter Inc. at
September 28, 2001, which is included in the consolidated financial statements
of the Company. The following summarizes the financial information for Anixter
Inc.:
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS) SEPTEMBER 28, DECEMBER 29,
2001 2000
--------- ---------
Assets: (UNAUDITED)
Current assets $ 954.3 $ 1,331.0
Property, net 58.3 56.5
Goodwill, net 234.0 239.3
Other assets 71.7 53.8
--------- ---------
$ 1,318.3 $ 1,680.6
========= =========
Liabilities and Stockholders' Equity:
Current liabilities $ 417.4 $ 645.1
Other liabilities 40.3 28.6
Long-term debt 86.0 244.9
Subordinated notes payable to parent 241.5 250.5
Stockholders' equity 533.1 511.5
--------- ---------
$ 1,318.3 $ 1,680.6
========= =========
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE 13 WEEKS ENDED FOR THE 39 WEEKS ENDED
---------------------------- ----------------------------
(IN MILLIONS) SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Net sales $ 761.5 $ 971.8 $ 2,481.6 $ 2,651.5
Operating income (loss) $ (9.4) $ 54.4 $ 84.1 $ 143.5
Income (loss) before income taxes
and extraordinary loss $ (19.1) $ 40.8 $ 47.2 $ 109.3
Net income (loss) $ (11.4) $ 23.0 $ 26.5 $ 61.6
NOTE 6. RESTRUCTURING COSTS
Due to increased economic softness and deteriorating market conditions
in the communications product market, the Company announced a restructuring
charge of $31.7 million during the third quarter of 2001. The components of the
charge are identified below.
STAFF REDUCTIONS - The Company plans to reduce approximately 700
employees across all business functions and geographic areas and communicated
these intentions to the employees in the third quarter. The reductions started
during the third quarter of 2001 and as of September 28, 2001, approximately 500
employees have been specifically terminated. During the quarter the Company
recorded a restructuring charge of $9.8 million primarily relating to severance
and fringe benefits of the approximately 700 employees to be terminated.
FACILITY RESTRUCTURING - The Company recorded a restructuring charge of
$13.9 million to cover primarily the future lease payments on the excess
facilities located in North America. Included in this amount was management's
assumption that certain facilities could be sublet for a total of $7.2 million.
In addition, the Company wrote-off related leasehold improvements and equipment
of $2.0 million.
KOREA - The Company has decided to leave the Korean market and has
recorded a restructuring charge of $6.2 million. The major components of this
charge include accounts receivable write-offs of $3.1 million and legal fees,
settlements and other shutdown costs of $3.1 million.
OTHER ITEMS - The Company wrote-off purchased software that it decided
not to implement and provided for legal fees associated with the restructuring.
The total charge for these items was $1.8 million.
The following table summarizes the restructuring costs:
TOTAL NON-CASH CASH ACCRUED
COSTS CHARGES PAYMENTS COSTS
Staff Reductions $ 9.8 $ - $ 1.5 $ 8.3
Facility Restructuring 13.9 2.0 .3 11.6
Korea 6.2 3.7 - 2.5
Other 1.8 0.9 - 0.9
----- ------ ------- ------
Total $31.7 $ 6.6 $ 1.8 $ 23.3
===== ====== ======= ======
Amounts related to the net lease expense due to the consolidation of
facilities will be paid over the respective lease terms through the year 2008.
We expect to substantially complete the implementation of the restructuring
initiative by the second quarter of 2002.
NOTE 7. EXTINGUISHMENT OF DEBT
The Company repurchased $6.0 million and $32.2 million of its 8% senior
notes that mature in September, 2003, for $6.3 million and $33.6 million during
the 13 and 39 weeks ended September 28, 2001, respectively. Additionally, in the
39 week period ended September 28, 2001, the Company wrote-off $.3 million of
debt issuance costs associated with the cancellation of a $110.0 million
revolving credit agreement, due 2001. Accordingly, the Company recorded an
extraordinary loss on the early extinguishment of debt of $.3 million and $1.7
million ($.2 million and $1.0 million, net of tax), respectively, in its
condensed consolidated statements of operations for the 13 and 39 weeks ended
September 28, 2001.
NOTE 8. SUBSEQUENT EVENT
In October 2001, Anixter Inc. repurchased an additional $28.0 million
of its 8% senior notes that mature in September, 2003 for $30.3 million. The
Company will reflect an extraordinary loss of $1.4 million on the early
extinguishment of debt from this transaction in its condensed consolidated
statements of operations for the year ended December 28, 2001.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the historical results of operations and
financial condition of Anixter International Inc. (the "Company") and factors
affecting the Company's financial resources. This discussion should be read in
conjunction with the consolidated financial statements, including the notes
thereto, set forth herein under "Financial Statements" and the Company's Annual
Report on Form 10-K for the year ended December 29, 2000. This discussion
contains forward-looking statements, which are qualified by reference to, and
should be read in conjunction with, the Company's discussion regarding
forward-looking statements as set forth in this report.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
Consolidated net cash provided by continuing operating activities was $197.5
million for the 39 weeks ended September 28, 2001, compared to $226.1 million
used for the same period in 2000. Cash provided by operating activities
increased primarily due to a reduction in working capital required to support
the business. In 2000, inventory increased $324.2 million to support the growth
in the service provider and integrated supply markets and a significant CLEC
contract, while in 2001, inventory declined $289.6 million. Consolidated net
cash used in investing activities was $19.5 million for the 39 weeks ended
September 28, 2001, versus $16.9 million for the same period in 2000. For the 39
weeks ended September 28, 2001, the Company incurred $19.5 million of capital
expenditures, primarily for the upgrades of warehouse facilities and purchase of
software and computer equipment. Capital expenditures are expected to be
approximately $22.0 million in 2001. In the first quarter of 2000, the Company
purchased allNet Technologies Pty. Limited in Australia for $6.7 million. In the
third quarter of 2000, the Company sold the net assets of a wholly-owned U.S.
subsidiary of its structured cabling business for $4.6 million in cash and notes
receivable. Consolidated net cash used in financing activities was $187.6
million for the 39 weeks ended September 28, 2001, in comparison to $255.7
million provided in the corresponding 2000 period. The change is primarily the
result of a net decrease in long-term borrowings of $125.1 million,
extinguishment of senior notes of $33.6 million and $46.9 million of treasury
stock purchases, partially offset by proceeds of $20.3 million received from the
issuance of 1,167,027 shares for the exercise of stock options and employee
stock purchase plan. In 2000, long-term borrowings increased $252.9 million,
while treasury stock purchases were $15.4 million. In addition, in 2000 the
Company received $30.8 million from the issuance of 1,813,311 shares for the
exercise of stock options and employee stock purchase plan. Cash used in
discontinued operations was $4.6 million for the 39 weeks ended September 28,
2001, compared to $11.8 million used in the corresponding 2000 period.
FINANCINGS
At September 28, 2001, $403.6 million was available under the bank revolving
lines of credit at Anixter Inc., of which $16.2 million was available to pay the
Company for general corporate purposes. On April 24, 2001, Anixter Inc.
cancelled a $110 million 364-day revolving credit line.
As of September 28, 2001, Anixter Inc. has repurchased $32.2 million of its 8%
senior notes that mature in September, 2003, for $33.6 million. In October 2001,
Anixter Inc. repurchased an additional $28.0 million of its 8% senior notes for
$30.3 million.
Consolidated interest expense was $24.7 million and $33.9 million for the 39
weeks ended September 28, 2001 and September 29, 2000, respectively. The
decrease is due to lower debt levels, a result of the impact of the accounts
receivable securitization program implemented in the third quarter of fiscal
year 2000, lower working capital levels and a reduction in interest rates. In
2001, the Company incurred $1.7 million in interest expense related to the
cancellation of certain of its interest rate hedge agreements for which there
were no longer outstanding borrowings. For the 39 weeks ending September 28,
2001, the Company recorded other expense of $8.6 million related to the interest
expense incurred by Anixter Receivables Corporation, a wholly-owned
unconsolidated subsidiary.
The Company had authorized the purchase of up to 2.8 million shares of its
common stock, with the volume and timing to depend on market conditions. Through
September 28, 2001, the Company repurchased 2,079,000 shares at an average cost
of $22.57. Purchases were made in the open market and were financed from cash
generated by operations.
OTHER LIQUIDITY CONSIDERATIONS
Certain debt agreements entered into by the Company's subsidiaries contain
various restrictions including restrictions on payments to the Company. Such
restrictions have not had nor are expected to have an adverse impact on the
Company's ability to meet its cash obligations.
RESULTS OF OPERATIONS
The Company competes with distributors and manufacturers who sell products
directly or through existing distribution channels to end users or other
resellers. The Company's relationship with the manufacturers for which it
distributes products could be affected by decisions made by these manufacturers
as the result of changes in management or ownerships as well as other factors.
In addition, the Company's future performance could be affected by economic
downturns, potentially rapid changes in applicable technologies or regulatory
changes that substantially change the cost and/or availability of public
networking bandwidth.
QUARTER ENDED SEPTEMBER 28, 2001: Net loss for the third quarter of 2001 was
$11.9 million compared with net income of $24.0 million for the third quarter of
2000. Due to a combination of increased economic softness and continued
deterioration of market conditions in the communication products industry, the
Company incurred a one-time charge of $31.7 million in the third quarter of 2001
associated with reducing its workforce, closing or consolidating certain
facilities and exiting the Korean market. In addition, the Company recorded an
after-tax extraordinary loss of $189,000 for the early extinguishment of $6.0
million of Anixter Inc.'s 8% senior notes.
The Company's net sales during the third quarter of 2001 decreased 21.6% to
$761.5 million from $971.8 million in the same period in 2000. Net sales by
major geographic market are presented in the following table:
13 WEEKS ENDED
-----------------------------
(IN MILLIONS) SEPTEMBER 28, SEPTEMBER 29,
2001 2000
------------- -------------
North America $ 601.1 $ 760.8
Europe 107.4 162.9
Asia Pacific and Latin America 53.0 48.1
------------- -------------
$ 761.5 $ 971.8
============= =============
When compared to the corresponding period in 2000, North America sales for the
third quarter of 2001 decreased 21.0% to $601.1 million. In 2000, the Company's
sales included $60 million of non-recurring low gross margin fulfillment sales.
Excluding these sales, North America was down by 14.2%. This decrease reflects
the general economic softness in the United States, combined with significant
weakness in the telecom and technology related market places. Sales declines in
the Enterprise Network Communications and Electrical Wire and Cable markets were
partially offset by a significant increase in the Integrated Supply market.
Europe sales decreased 34.1%, as the general economic softness experienced in
the United States is also being felt by the international markets. Sales
declined in all significant customer markets. Excluding the effect of changes in
exchange rates, Europe sales declined 31.8%. Asia Pacific and Latin American net
sales were up 10.2% from the third quarter of 2000, reflecting strong sales
growth in Latin America. Excluding the effect of changes in exchange rates, Asia
Pacific and Latin America sales increased 13.2%.
The Company reported an operating loss of $10.0 million in 2001 compared to
$53.9 million of operating income in the third quarter of 2000. Due to a
combination of increased economic softness and continued deterioration of market
conditions in the telecom and technology related products industry, the Company
incurred a one-time charge of $31.7 million associated with reducing its
workforce, closing or consolidating some facilities and exiting the Korean
market. Operating income (loss) by major geographic market is presented in the
following table:
13 WEEKS ENDED
-----------------------------
(IN MILLIONS) SEPTEMBER 28, SEPTEMBER 29,
2001 2000
------------- -------------
North America $ (5.9) $ 47.6
Europe 1.6 5.7
Asia Pacific and Latin America (5.7) 0.6
------------- -------------
$ (10.0) $ 53.9
============= =============
North America reported an operating loss of $5.9 million for the third quarter
of 2001, reflecting a decrease of $53.5 million from the corresponding period in
2000. Excluding restructuring costs of $23.1 million and the non-recurring
fulfillment sales noted previously, operating profit declined 61.1%. Excluding
restructuring costs, operating margins were 2.9%, a decline of 3.4 percentage
points when compared to the same period in 2000. The decline in operating margin
primarily relates to the sharp decline in sales discussed previously and
incremental costs associated with facility expansions completed in late 2000.
Europe operating income decreased 73.8%. Excluding restructuring costs of $2.3
million, operating profit declined 32.6%, while operating margins remained flat.
The decline in operating income primarily relates to the decrease in sales
discussed previously, partially offset by lower operating expenses which are a
result of organizational changes and refocused marketing efforts over the past
two years. Excluding the effect of changes in exchange rates and the
restructuring charge, Europe's operating income decreased 29.1%. Asia Pacific
and Latin America reported an operating loss of $5.7 million compared to
operating income of $.6 million in the third quarter of 2000. Excluding
restructuring costs of $6.3 million, operating profit increased 3.4% and
operating margins remained flat. This resulted from the 10.2% improvement in
sales and a reduced cost structure following the changes made in staffing and
operations in recent years. Excluding the effect of changes in the exchange
rates and the restructuring charge, Asia Pacific and Latin America's operating
income increased 5.0%.
Net other expense totaled $3.2 million in the third quarter of 2001 compared to
$.5 million in the corresponding period in 2000. In the third quarter of 2001,
the Company incurred $1.7 million in costs associated with the accounts
receivable securitization program and $1.3 million of foreign exchange losses.
The consolidated tax provision on continuing operations reflects an income tax
benefit of $8.0 million in 2001 compared to expense of $16.9 million in the
third quarter of 2000. As previously mentioned, the Company incurred $31.7
million in restructuring costs during the third quarter of 2001 which generated
a tax benefit of $12.7 million. The third quarter 2001 effective tax rate was
40.5%. The full year anticipated effective tax rate of 40.5% is based on pre-tax
book income adjusted primarily for amortization of nondeductible goodwill and
losses of foreign operations for which no current benefit is available.
39 WEEKS ENDED SEPTEMBER 28, 2001: Net income for the 39 weeks ended September
28, 2001 was $26.9 million compared to $62.8 million in the corresponding period
in 2000. Due to a combination of increased economic softness and continued
deterioration of market conditions in the telecom and technology related
products industry, the Company incurred a one-time charge of $31.7 million in
the third quarter of 2001 associated with reducing its workforce, closing or
consolidating certain facilities and exiting the Korean market. The Company also
recorded an after-tax extraordinary loss of $1.0 million for the early
extinguishment of $32.2 million of its 8% senior notes and debt issuance costs
associated with the cancellation of a $110.0 million revolving credit agreement
due 2001.
The Company's net sales during the 39 weeks ended September 28, 2001 decreased
6.4% to $2,481.6 million from $2,651.5 million in the same period in 2000. Net
sales by major geographic market are presented in the following table:
39 WEEKS ENDED
-----------------------------
(IN MILLIONS) SEPTEMBER 28, SEPTEMBER 29,
2001 2000
------------- -------------
North America $ 1,920.1 $ 2,079.8
Europe 400.4 439.4
Asia Pacific and Latin America 161.1 132.3
------------- -------------
$ 2,481.6 $ 2,651.5
============= =============
When compared to the corresponding period in 2000, North America sales for the
39 weeks ended September 28, 2001 decreased 7.7%. Enterprise Network
Communications product set sales declined 5.7%, while the Electrical Wire and
Cable market declined 1%. The Service Provider sector was down 66%, partially
offset by a 74% increase in sales in the Integrated Supply market. Europe sales
decreased 8.9% when compared to the same period in 2000. Increased sales in the
Integrated Supply market partially offset declines across all other markets as
the general economic softness experienced in the United States is also being
felt by the international markets. Excluding the effect of changes in exchange
rates, Europe sales declined 3.7%. Asia Pacific and Latin American net sales
were up 21.8% from the same period in 2000, reflecting significant growth in
Latin America. Excluding the effect of changes in exchange rates, Asia Pacific
and Latin America net sales increased 25.4%.
Operating income for the 39 weeks ended September 28, 2001 decreased 41.4%, or
$58.5 million, from $141.4 million in the corresponding period of 2000. Due to a
combination of increased economic softness and continued deterioration of market
conditions in the telecom and technology related products industry, the Company
incurred a one-time charge of $31.7 million in the third quarter of 2001
associated with reducing its workforce, closing or consolidating certain
facilities and exiting the Korean market. Operating income by major geographic
market is presented in the following table:
39 WEEKS ENDED
-----------------------------
(IN MILLIONS) SEPTEMBER 28, SEPTEMBER 29,
2001 2000
------------- -------------
North America $ 70.5 $ 124.2
Europe 16.2 17.1
Asia Pacific and Latin America (3.8) 0.1
------------- -------------
$ 82.9 $ 141.4
============= =============
North America operating income for the 39 weeks ended September 28, 2001
decreased 43.2% from the corresponding period in 2000. Excluding restructuring
costs of $23.1 million and the non-recurring fulfillment sales impact on
operating profit of $6.9 million during 2000, operating profit declined 20.2%.
Excluding restructuring costs, operating margins were 4.9%, a decline of 1.1
percentage points when compared to the same period in 2000. The decline resulted
primarily from the decline in sales and incremental costs associated with
facility expansions completed in late 2000. Europe operating income decreased
5.5% when compared to 2000. Excluding restructuring costs of $2.3 million,
operating profit increased 8.1% and operating margins improved by .7 percentage
points. Excluding the effect of changes in exchange rates and the restructuring
charge, Europe operating profit increased 13.8%. Operating profit and margins
benefited from a significant reduction in operating expenses, reflecting
organizational changes and refocused marketing efforts. Asia Pacific and Latin
America recorded an operating loss of $3.8 million in 2001 compared to income of
$.1 million for 2000. Excluding restructuring costs of $6.3 million, operating
profit was $2.5 million and operating margin was 1.5 percentage points higher
than 2000. This resulted from the 21.8% improvement in sales and a reduced cost
structure following the corrections made over the last two years. Changes in
exchange rates had a minimal effect on operating income.
Net other expense totaled $11.4 million for the 39 weeks ended September 28,
2001 compared to income of $.3 million for the same period in 2000. In 2001, the
Company incurred $9.1 million in costs associated with the accounts receivable
securitization program and $2.3 million in foreign exchange losses.
The consolidated tax provision on continuing operations decreased to $18.9
million in 2001 from $45.0 million in 2000 due to lower pre-tax earnings and a
reduction in the income tax rate. The 2001 effective tax rate of 40.5% is based
on pre-tax book income adjusted primarily for amortization of nondeductible
goodwill and losses of foreign operations for which no current benefit is
available. The decline in the effective tax rate, from 41.7% in 2000, reflects
the anticipation of a higher percentage of certain foreign earnings having a
lower effective tax rate than domestic earnings due to the utilization of
operating loss carry-forwards.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
ANIXTER INTERNATIONAL INC.
Date: November 7, 2001 By: /S/ ROBERT W. GRUBBS
-------------------------------------
Robert W. Grubbs
President and Chief Executive Officer
Date: November 7, 2001 By: /S/ DENNIS J. LETHAM
-------------------------------------
Dennis J. Letham
Senior Vice President - Finance
and Chief Financial Officer