Anixter International Inc. Reports Third Quarter 2017 Results

Diluted EPS of $1.11 from continuing operations

Adjusted diluted EPS of $1.30 from continuing operations

Third Quarter Highlights

  • Record third quarter sales of $2.0 billion, up 3.1% YOY
  • Strong growth in UPS segment, up 11.0%, 10.5% on an organic basis
  • Hurricanes and earthquakes negatively impacted sales

GLENVIEW, Ill.--()--Anixter International Inc. (NYSE: AXE) today reported sales of $2.0 billion for the quarter ended September 29, 2017, a 3.1% increase compared to the prior year quarter. Organic sales increased 1.5% year-over-year, excluding the impact of the following items:

  • $19.9 million favorable impact from the higher average price of copper
  • $11.1 million favorable impact from the fluctuation in foreign currencies

Both the current and prior year quarters had 63 billing days.

All commentary in this release reflects results from continuing operations unless otherwise noted. Please refer to the tables at the end of this release for the reconciliations from our reported results prepared in accordance with U.S. GAAP to the non-GAAP measures.

Net income of $37.6 million includes amortization of intangible assets, as well as acquisition and integration costs, which combined had a $9.9 million pre-tax and $6.6 million after-tax impact. Prior year third quarter net income of $40.3 million included amortization of intangible assets, acquisition and integration costs, and a favorable tax benefit, which combined had a $9.9 million pre-tax and $6.0 million after-tax impact. Excluding the impacts of the above items, adjusted net income of $44.2 million compares to third quarter 2016 adjusted net income of $46.3 million.

Diluted earnings per share of $1.11 compares to $1.20, and adjusted diluted earnings per share of $1.30 compares to $1.38, both versus the prior year quarter.

Current quarter adjusted EBITDA of $102.7 million, or 5.1% of sales, compares to $108.2 million, or 5.5% of sales, in the prior year quarter.

Year-to-date cash flow from operations was $110.1 million. Working capital was 18.2% of sales in the third quarter, a 40 basis point improvement from the prior year quarter, as we continue to focus on working capital efficiency.

"Third quarter 2017 year-over-year organic sales growth of 1.5% reflected continued strong organic growth in our Utility Power Solutions segment, as we continue to build our industry-leading utility distribution platform. Sales performance in our NSS and EES segments was impacted by a reduction in capital project spend in North America and disruption caused by hurricanes and earthquakes," commented Bob Eck, Chief Executive Officer. "Driven by performance with our multi-national customers, we were pleased to deliver strong organic growth in both our EMEA and Emerging Markets regions for the third consecutive quarter, validating our belief that our specialized distribution model delivers value to our customers and suppliers on a worldwide basis. Our unique business model, differentiated by our global footprint, supply chain capabilities and technical expertise, positions us for sustainable growth as we help our customers reduce cost and complexity in their global supply chains."

Income Statement Detail

Gross margin of 19.7% compares to 20.3% in the prior year quarter, and 19.8% in the second quarter of 2017. The year-over-year margin decline was due to customer, product and segment mix.

Operating expense of $316.2 million, or 15.7% of sales, compares to prior year operating expense of $309.4 million, or 15.8% of sales. Excluding current and prior year quarter expense of $9.9 million, detailed above, adjusted operating expense of $306.3 million compares to third quarter 2016 adjusted operating expense of $299.5 million. Current quarter adjusted operating expense was 15.2% of sales, a 10 basis point improvement versus 15.3% in the third quarter of 2016.

Operating income of $81.0 million, or 4.0% of sales, compares to $87.3 million, or 4.5% of sales, in the prior year quarter. Excluding operating expense items outlined above, third quarter 2017 adjusted operating income was $90.9 million compared to $97.2 million in the third quarter of 2016. Adjusted operating margin of 4.5% compares to 5.0% in the prior year quarter.

Interest expense of $18.9 million compares to $19.8 million in the prior year quarter, reflecting the ongoing reduction in debt. Foreign exchange and other income of $0.3 million compares to $2.1 million of expense in the prior year quarter.

Third quarter 2017 U.S. GAAP effective tax rate ("ETR") of 39.7% compares to 38.4% in the third quarter of 2016. Third quarter 2017 non-GAAP ETR of 38.8% compares to 38.5% in the prior year quarter. Our year-to-date 2017 non-GAAP effective tax rate of 37.6% differs from our second quarter effective tax rate of 36.9% and 2016 effective tax rate of 37.7% primarily due to country mix of earnings. The higher non-GAAP tax rate in the third quarter negatively impacted adjusted EPS by $0.04.

Segment Update

Network & Security Solutions ("NSS") sales of $1,049.2 million compares to $1,049.9 million in the prior year quarter. Adjusted for the $6.2 million favorable impact from foreign exchange, NSS organic sales decreased 0.7%, due to a reduction in large project activity and the impact of hurricanes and earthquakes, combined with strong project billings in the prior year quarter. On a sequential basis, sales increased 1.9%.

Third quarter NSS security sales of $437.5 million, which represents approximately 42% of segment sales, increased 4.0% from the prior year quarter. Adjusted for the $3.3 million favorable currency impact, organic security sales growth was 3.3%.

NSS operating income of $67.5 million compares to $74.9 million in the third quarter of 2016 and $64.9 million in the second quarter of 2017. NSS adjusted EBITDA of $72.3 million compares to $79.1 million in the prior year quarter and $69.8 million in the second quarter of 2017. The corresponding adjusted EBITDA margin of 6.9% compares to 7.5% in the prior year quarter and 6.8% in the second quarter of 2017.

Electrical & Electronic Solutions (“EES”) sales of $555.0 million compares to $535.1 million in the prior year quarter, an increase of 3.7%. Adjusted for the $3.3 million favorable impact from foreign exchange and the $19.6 million favorable impact from higher average copper prices, EES organic sales decreased 0.6%, as continued weakness in large industrial project activity and the impact of hurricanes offset ongoing growth with OEM customers and synergistic growth from sales of low voltage products to legacy Anixter customers.

EES operating income of $26.8 million compares to $28.7 million in the prior year quarter and $29.6 million in the second quarter of 2017. EES adjusted EBITDA of $29.7 million compares to $31.4 million in the prior year quarter and $32.8 million in the second quarter of 2017. The corresponding adjusted EBITDA margin of 5.4% in the current quarter compares to 5.9% in the prior year quarter and 5.8% in the second quarter of 2017.

Utility Power Solutions (“UPS”) sales of $412.2 million compares to $371.3 million in the prior year quarter, an increase of 11.0%. Adjusted for the $1.6 million favorable impact from foreign exchange and the $0.3 million favorable impact from higher average copper prices, UPS organic sales increased 10.5%, driven by synergistic sales to support a new investor owned electric utility customer and strong growth with existing investor-owned utility and public power customers.

UPS operating income of $19.8 million compares to $15.8 million in the prior year quarter and $21.3 million in the second quarter of 2017. UPS adjusted EBITDA of $24.8 million increased 17.7% from $21.1 million in the prior year quarter, and compares to $25.9 million in the second quarter of 2017. The corresponding adjusted EBITDA margin of 6.0% in the current quarter increased 30 basis points versus 5.7% in the prior year quarter, and compares to 6.3% in the second quarter of 2017. The performance of adjusted EBITDA and adjusted EBITDA margin versus the prior year quarter was driven by strong operating profit leverage.

Cash Flow and Leverage

We generated $110.1 million in cash flow from operations year-to-date through the third quarter of 2017, which compares to $238.6 million in the comparable year-ago period. The decrease is primarily due to higher working capital investment to support growth in the business. We continue our focus on improving working capital efficiency, further improving our efficiency level in the quarter to 18.2% of sales. We continue to estimate full year 2017 cash flow from operations in the range of $200 - $220 million. Year-to-date we have invested $30.9 million in capital expenditures, which compares to $24.9 million in the prior year period. For the full year we expect to invest $45 - $50 million in capital expenditures.

"In addition to our focus on our strategic initiatives, including delivering on our synergy goals, we continue to improve our cost structure and working capital efficiency," commented Ted Dosch, Executive Vice President - Finance and CFO. "Turning to our capital structure, the strong free cash flow we are generating from our repositioned platform, combined with working capital initiatives, enabled us to return our debt-to-capital ratio to our target range of 45-to-50% in the first quarter of 2017 and we expect to reduce our debt-to-adjusted EBITDA below 3.0 times by early 2018."

Key capital structure and credit-related statistics for the quarter:

  • Debt-to-total capital ratio improved to 46.6% from 51.6% at the end of 2016
  • Debt-to-adjusted EBITDA ratio improved to 3.2 times from 3.5 times at the end of 2016
  • Weighted average cost of borrowed capital of 5.4% compares to 4.7% in the prior year quarter
  • $685.9 million available under revolving lines of credit and secured accounts receivable and inventory facilities

Business Outlook

"Year-to-date, organic sales growth on a per day basis of 3.2% reflects strong 11.2% per day growth in our UPS segment, combined with low growth in both our NSS and EES segments. While industry growth in our end markets remains slow, especially in the US, we have experienced solid performance in our day-to-day business, in small and mid-sized projects, and in our international business. While the recovery in large capital project activity in North America has been slower than we expected, based on improving backlog trends and pipeline activity, we are cautiously optimistic that project activity will accelerate over the next several quarters," commented Bill Galvin, President and Chief Operating Officer. "As we enter the final quarter of 2017, our focus remains on our growth initiatives which include global accounts, synergistic sales and new product initiatives. Reflecting our current sales and backlog trends through early October, we expect fourth quarter 2017 organic sales growth in the 2.5 - 3.5% range. For the full year 2017 we now expect organic sales growth on a per day basis in the 3.0 - 3.5% range."

Financial Results from Continuing Operations

  Three Months Ended   Nine Months Ended
(In millions, except per share amounts) September 29,
2017
  September 30,
2016
 

Percent
Change

September 29,
2017
  September 30,
2016
 

Percent
Change

Net Sales $ 2,016.4 $ 1,956.3 3 % $ 5,913.6 $ 5,728.2 3 %
Operating Income $ 81.0 $ 87.3 (7 )% $ 232.7 $ 204.3 14 %
Net Income $ 37.6 $ 40.3 (7 )% $ 108.6 $ 84.3 29 %
Diluted Earnings Per Share $ 1.11 $ 1.20 (8 )% $ 3.20 $ 2.52 27 %
Diluted Weighted Shares 34.0 33.6 1 % 34.0 33.5 1 %
 

Third Quarter Earnings Call Details

We will host a conference call to discuss these results beginning at 9:30 a.m. Central Time today. The call will be available as a live audio webcast and can be accessed at the Investor Relations portion of our website at anixter.com/investor. Dial-in numbers for the call are as follows:

U.S./Canada toll-free dial-in:         (833) 235-7649
International dial-in: (647) 689-4538
Conference ID: 8484 8339
 

A replay of the call will be available at anixter.com/investor for 15 days following the call. Prior to the beginning of the call a supplemental presentation titled “Third Quarter 2017 Highlights and Operating Results” will be available on the Investor Relations section of our website.

About Anixter

Anixter International is a leading global distributor of Network & Security Solutions, Electrical & Electronic Solutions and Utility Power Solutions. We help build, connect, protect, and power valuable assets and critical infrastructures. From enterprise networks to industrial MRO supply to video surveillance applications to electric power distribution, we offer full-line solutions, and intelligence, that create reliable, resilient systems that sustain businesses and communities. Through our unmatched global distribution network along with our supply chain and technical expertise, we help lower the cost, risk and complexity of our customers’ supply chains.

Anixter adds value to the distribution process by providing our customers access to 1) innovative supply chain solutions, 2) nearly 600,000 products and over $1.0 billion in inventory, 3) over 300 warehouses/branch locations with approximately 9.0 million square feet of space and 4) locations in over 300 cities in approximately 50 countries. Founded in 1957 and headquartered near Chicago, Anixter trades on the New York Stock Exchange under the symbol AXE.

Safe Harbor Statement

The statements in this release other than historical facts are forward-looking statements made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of factors that could cause our actual results to differ materially from what is indicated here. These factors include but are not limited to general economic conditions, the level of customer demand particularly for capital projects in the markets we serve, changes in supplier relationships or in supplier sales strategies or financial viability, risks associated with the sale of nonconforming products and services, political, economic or currency risks related to foreign operations, inventory obsolescence, copper price fluctuations, customer viability, risks associated with accounts receivable, the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, information security risks, risks associated with substantial debt and restrictions contained in financial and operating covenants in our debt agreements, the impact and the uncertainty concerning the timing and terms of the withdrawal by the United Kingdom from the European Union, and risks associated with integration of acquired companies, including, but not limited to, the risk that the acquisitions may not provide us with the synergies or other benefits that were anticipated. These uncertainties may cause our actual results to be materially different than those expressed in any forward looking statements. We do not undertake to update any forward looking statements. Please see our Securities and Exchange Commission (“SEC”) filings for more information.

Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) above, this release includes certain financial measures computed using non-GAAP components as defined by the SEC. Specifically, net sales comparisons to the prior corresponding period, both worldwide and in relevant segments, are discussed in this release both on an U.S. GAAP and non-GAAP basis. We believe that by providing non-GAAP organic growth, which adjusts for the impact of acquisitions (when applicable), foreign exchange fluctuations, copper prices and the number of billing days, both management and investors are provided with meaningful supplemental sales information to understand and analyze our underlying trends and other aspects of our financial performance. Historically and from time to time, we may also exclude other items from reported financial results (e.g., impairment charges, inventory adjustments, restructuring charges, tax items, currency devaluations, pension settlements, etc.) in presenting adjusted operating expense, adjusted operating income, adjusted income taxes and adjusted net income so that both management and financial statement users can use these non-GAAP financial measures to better understand and evaluate our performance period over period and to analyze the underlying trends of our business. As a result of the recent acquisitions we have also excluded amortization of intangible assets associated with purchase accounting from acquisitions from the adjusted amounts for comparison of the non-GAAP financial measures period over period.

EBITDA is defined as net income from continuing operations before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and other non-operating expense and non-cash stock-based compensation, excluding the other items from reported financial results, as defined above. Adjusted EBITDA leverage is defined as the percentage change in Adjusted EBITDA divided by the percentage change in net sales. We believe that adjusted operating income, EBITDA, Adjusted EBITDA and Adjusted EBITDA leverage provide relevant and useful information, which is widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and business segment performance. Adjusted operating income provides an understanding of the results from the primary operations of our business by excluding the effects of certain items that do not reflect the ordinary earnings of our operations. We use adjusted operating income to evaluate our period-over-period operating performance because we believe this provides a more comparable measure of our continuing business excluding certain items that are not reflective of expected ongoing operations. This measure may be useful to an investor in evaluating the underlying performance of our business. EBITDA provides us with an understanding of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA further excludes the effects of foreign exchange and other non-cash stock-based compensation, and certain items that do not reflect the ordinary earnings of our operations and that are also excluded for purposes of calculating adjusted net income, adjusted earnings per share and adjusted operating income. EBITDA and Adjusted EBITDA are used by our management for various purposes including as measures of performance of our operating segments and as a basis for strategic planning and forecasting. Adjusted EBITDA and Adjusted EBITDA leverage may be useful to an investor because this measure is widely used to evaluate a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending on the accounting methods, book value of assets, capital structure and the method by which the assets were acquired, among other factors. They are not, however, intended as an alternative measure of operating results or cash flow from operations as determined in accordance with generally accepted accounting principles.

Non-GAAP financial measures provide insight into selected financial information and should be evaluated in the context in which they are presented. These non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP, and non-GAAP financial measures as reported by us may not be comparable to similarly titled amounts reported by other companies. The non-GAAP financial measures should be considered in conjunction with the Condensed Consolidated Financial Statements, including the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this release. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

Additional information about Anixter is available at anixter.com

   
 
ANIXTER INTERNATIONAL INC.
Condensed Consolidated Statements of Operations (Unaudited)        
   
Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

(In millions, except per share amounts)
Net sales $ 2,016.4 $ 1,956.3 $ 5,913.6 $ 5,728.2
Cost of goods sold 1,619.2   1,559.6   4,741.0   4,567.3  
Gross profit 397.2 396.7 1,172.6 1,160.9
Operating expenses 316.2   309.4   939.9   956.6  
Operating income 81.0 87.3 232.7 204.3
Other expense:
Interest expense (18.9 ) (19.8 ) (55.7 ) (59.7 )
Other, net 0.3   (2.1 ) (0.9 ) (5.7 )
Income from continuing operations before income taxes 62.4 65.4 176.1 138.9
Income tax expense from continuing operations 24.8   25.1   67.5   54.6  
Net income from continuing operations 37.6 40.3 108.6 84.3
Income (loss) from discontinued operations before income taxes 0.2 (1.0 )
Income tax expense (benefit) from discontinued operations   0.1     (0.4 )
Net income (loss) from discontinued operations   0.1     (0.6 )
Net income $ 37.6   $ 40.4   $ 108.6   $ 83.7  
Income (loss) per share:
Basic:
Continuing operations $ 1.12 $ 1.21 $ 3.24 $ 2.53
Discontinued operations       (0.02 )
Net Income $ 1.12   $ 1.21   $ 3.24   $ 2.51  
Diluted:
Continuing operations $ 1.11 $ 1.20 $ 3.20 $ 2.52
Discontinued operations   0.01     (0.02 )
Net Income $ 1.11   $ 1.21   $ 3.20   $ 2.50  
 
Weighted-average common shares outstanding:
Basic 33.6 33.4 33.6 33.4
Diluted 34.0 33.6 34.0 33.5
 
Reportable Segments
Net sales:
Network & Security Solutions $ 1,049.2 $ 1,049.9 $ 3,063.5 $ 3,043.7
Electrical & Electronic Solutions 555.0 535.1 1,643.9 1,596.2
Utility Power Solutions 412.2   371.3   1,206.2   1,088.3  
$ 2,016.4   $ 1,956.3   $ 5,913.6   $ 5,728.2  
Operating income:
Network & Security Solutions $ 67.5 $ 74.9 $ 194.2 $ 198.6
Electrical & Electronic Solutions 26.8 28.7 84.3 75.1
Utility Power Solutions 19.8 15.8 57.3 42.1
Corporate (33.1 ) (32.1 ) (103.1 ) (111.5 )
$ 81.0   $ 87.3   $ 232.7   $ 204.3  
 
 
ANIXTER INTERNATIONAL INC.
Condensed Consolidated Balance Sheets
    (Unaudited)  

September 29,
2017

December 30,
2016

(In millions)
 
ASSETS
Current assets:
Cash and cash equivalents $ 76.9 $ 115.1
Accounts receivable, net 1,482.5 1,353.2
Inventories 1,231.9 1,178.3
Other current assets 46.2   41.9
Total current assets 2,837.5 2,688.5
Property and equipment, net 150.9 140.3
Goodwill 779.3 764.6
Intangible assets, net 394.4 415.4
Other assets 90.4   84.8
Total assets $ 4,252.5   $ 4,093.6
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,107.3 $ 1,006.0
Accrued expenses 264.4   257.9
Total current liabilities 1,371.7 1,263.9
Long-term debt 1,270.1 1,378.8
Other liabilities 154.4   158.7
Total liabilities 2,796.2 2,801.4
Total stockholders' equity 1,456.3   1,292.2
Total liabilities and stockholders' equity $ 4,252.5   $ 4,093.6
 
 
ANIXTER INTERNATIONAL INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
     
Nine Months Ended

September 29,
2017

September 30,
2016

(In millions)
 
Operating activities:
Net income $ 108.6 $ 83.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 21.5 21.1
Amortization of intangible assets 27.1 28.6
Stock-based compensation 13.3 12.4
Deferred income taxes 1.3 3.0
Accretion of debt discount 1.7 1.6
Amortization of deferred financing costs 1.6 1.8
Pension plan contributions (14.8 ) (16.8 )
Pension plan expenses 7.9 18.1
Changes in current assets and liabilities, net (53.9 ) 93.4
Other, net (4.2 ) (8.3 )
Net cash provided by operating activities 110.1 238.6
Investing activities:
Capital expenditures, net (30.9 ) (24.9 )
Other, net   (4.7 )
Net cash used in investing activities (30.9 ) (29.6 )
Financing activities:
Proceeds from borrowings 1,324.2 710.2
Repayments of borrowings (1,370.9 ) (879.2 )
Repayments of Canadian term loan (70.9 ) (58.5 )
Proceeds from stock options exercised 3.5 0.2
Other, net (0.2 ) (0.6 )
Net cash used in financing activities (114.3 ) (227.9 )
Decrease in cash and cash equivalents (35.1 ) (18.9 )
Effect of exchange rate changes on cash balances (3.1 ) (7.3 )
Cash and cash equivalents at beginning of period 115.1   151.3  
Cash and cash equivalents at end of period $ 76.9   $ 125.1  
 
 
ANIXTER INTERNATIONAL INC.
Financial Measures That Supplement U.S. GAAP (Unaudited)
                           
Third Quarter 2017 Sales Growth Trends
  Q3 2017   Q3 2016  
    Foreign     Organic
As Exchange Copper As As Growth/
(In millions) Reported Impact Impact Adjusted Reported (Decline)
Network & Security Solutions
North America $ 818.5 $ (2.8 ) $ $ 815.7 $ 845.3 (3.5 )%
EMEA 88.9 (1.9 ) 87.0 82.8 5.1 %
Emerging Markets 141.8   (1.5 )   140.3   121.8   15.2 %
NSS $ 1,049.2   $ (6.2 ) $   $ 1,043.0   $ 1,049.9   (0.7 )%
 
Electrical & Electronic Solutions
North America $ 433.8 $ (2.5 ) $ (15.7 ) $ 415.6 $ 432.8 (4.0 )%
EMEA 67.1 (0.3 ) (2.8 ) 64.0 59.3 8.1 %
Emerging Markets 54.1   (0.5 ) (1.1 ) 52.5   43.0   21.8 %
EES $ 555.0   $ (3.3 ) $ (19.6 ) $ 532.1   $ 535.1   (0.6 )%
 
Utility Power Solutions
North America $ 412.2   $ (1.6 ) $ (0.3 ) $ 410.3   $ 371.3   10.5 %
UPS $ 412.2   $ (1.6 ) $ (0.3 ) $ 410.3   $ 371.3   10.5 %
         
Total $ 2,016.4   $ (11.1 ) $ (19.9 ) $ 1,985.4   $ 1,956.3   1.5 %
 
Geographic Sales
North America $ 1,664.5 $ (6.9 ) $ (16.0 ) $ 1,641.6 $ 1,649.4 (0.5 )%
EMEA 156.0 (2.2 ) (2.8 ) 151.0 142.1 6.3 %
Emerging Markets 195.9   (2.0 ) (1.1 ) 192.8   164.8   17.0 %
Total $ 2,016.4   $ (11.1 ) $ (19.9 ) $ 1,985.4   $ 1,956.3   1.5 %
 
Note: There were 63 billing days in the third quarter of 2017 and 2016. Adjustment for billing days unnecessary.
     
 
ANIXTER INTERNATIONAL INC.
Financial Measures That Supplement U.S. GAAP (Unaudited)
                                   
September Year-to-Date 2017 Sales Growth Trends
YTD 2017   YTD 2016  
        Adjusted
Per Day
Foreign Organic Adjusted Organic
As Exchange Copper As As Growth/ 2016 for Growth/
(In millions) Reported Impact Impact Adjusted Reported (Decline) Extra Day   (Decline)
Network & Security Solutions
North America $ 2,403.6 $ (1.6 ) $ $ 2,402.0 $ 2,432.0 (1.2 )% $ 2,419.3 (0.7 )%
EMEA 268.3 5.1 273.4 250.0 9.4 % 248.7 9.9 %
Emerging Markets 391.6   1.6     393.2   361.7   8.7 % 359.8   9.3 %
NSS $ 3,063.5   $ 5.1   $   $ 3,068.6   $ 3,043.7   0.8 % $ 3,027.8   1.3 %
 
Electrical & Electronic Solutions
North America $ 1,291.6 $ (1.3 ) $ (37.4 ) $ 1,252.9 $ 1,292.3 (3.1 )% $ 1,285.6 (2.5 )%
EMEA 193.4 11.6 (8.0 ) 197.0 176.2 11.8 % 175.3 12.4 %
Emerging Markets 158.9   1.1   (2.5 ) 157.5   127.7   23.3 % 127.0   24.0 %
EES $ 1,643.9   $ 11.4   $ (47.9 ) $ 1,607.4   $ 1,596.2   0.7 % $ 1,587.9   1.2 %
 
Utility Power Solutions
North America $ 1,206.2   $ (1.1 ) $ (0.7 ) $ 1,204.4   $ 1,088.3   10.7 % $ 1,082.6   11.2 %
UPS $ 1,206.2   $ (1.1 ) $ (0.7 ) $ 1,204.4   $ 1,088.3   10.7 % $ 1,082.6   11.2 %
           
Total $ 5,913.6   $ 15.4   $ (48.6 ) $ 5,880.4   $ 5,728.2   2.7 % $ 5,698.3   3.2 %
 
Geographic Sales
North America $ 4,901.4 $ (4.0 ) $ (38.1 ) $ 4,859.3 $ 4,812.6 1.0 % $ 4,787.5 1.5 %
EMEA 461.7 16.7 (8.0 ) 470.4 426.2 10.4 % 424.0 11.0 %
Emerging Markets 550.5   2.7   (2.5 ) 550.7   489.4   12.5 % 486.8   13.1 %
Total $ 5,913.6   $ 15.4   $ (48.6 ) $ 5,880.4   $ 5,728.2   2.7 % $ 5,698.3   3.2 %
 
Note: There were 191 billing days September YTD in 2017 compared to 192 billing days September YTD in 2016.
       
 
ANIXTER INTERNATIONAL INC.
Financial Measures That Supplement U.S. GAAP (Unaudited) - continued
           
(In millions, except per share amounts) Positive (Negative) impact
Three Months Ended Nine Months Ended

September 29,
2017

September 30,
2016

September 29,
2017

September 30,
2016

Continuing operations
Items impacting comparability of results:
Items impacting operating expense and operating income:
Amortization of intangible assets $ (9.1 ) $ (9.4 ) $ (27.1 ) $ (28.6 )
UK pension settlement (9.6 )
Restructuring charge 0.2 (5.4 )
Acquisition and integration costs (0.8 ) (0.7 ) (0.8 ) (4.3 )
Latin America bad debt provision       (7.6 )
Total of items impacting operating expense and operating income $ (9.9 ) $ (9.9 ) $ (27.9 ) $ (55.5 )
Total of items impacting pre-tax income $ (9.9 ) $ (9.9 ) $ (27.9 ) $ (55.5 )
Items impacting income taxes:
Tax impact of items impacting pre-tax income above $ 3.3 $ 1.8 $ 9.1 $ 16.6
Tax benefits related to prior year tax positions   2.1     2.1  
Total of items impacting income taxes $ 3.3   $ 3.9   $ 9.1   $ 18.7  
Net income impact of these items $ (6.6 ) $ (6.0 ) $ (18.8 ) $ (36.8 )
Diluted EPS impact of these items $ (0.19 ) $ (0.18 ) $ (0.55 ) $ (1.10 )
 
U.S. GAAP to Non-GAAP Net Income and EPS Reconciliation for continuing operations:
Net income from continuing operations – U.S. GAAP $ 37.6 $ 40.3 $ 108.6 $ 84.3
Items impacting net income from continuing operations 6.6   6.0   18.8   36.8  
Net income from continuing operations – Non-GAAP $ 44.2   $ 46.3   $ 127.4   $ 121.1  
 
Diluted EPS – U.S. GAAP $ 1.11 $ 1.20 $ 3.20 $ 2.52
Diluted EPS impact of these items 0.19   0.18   0.55   1.10  
Diluted EPS – Non-GAAP $ 1.30   $ 1.38   $ 3.75   $ 3.62  
     
Items Impacting Comparability of Operating Income by Segment Three Months Ended September 29, 2017
(In millions) NSS   EES   UPS   Corporate   Total
 
Operating income - U.S. GAAP $ 67.5 $ 26.8 $ 19.8 $ (33.1 ) $ 81.0
Operating margin - U.S. GAAP 6.4 % 4.8 % 4.8 % nm 4.0 %
         
Total of items impacting operating income $ 3.6   $ 2.2   $ 3.3   $ 0.8   $ 9.9  
 
Adjusted operating income - Non-GAAP $ 71.1 $ 29.0 $ 23.1 $ (32.3 ) $ 90.9
Adjusted operating margin - Non-GAAP 6.8 % 5.2 % 5.6 % nm 4.5 %
 
Items Impacting Comparability of Operating Income by Segment Nine Months Ended September 29, 2017
NSS EES UPS Corporate Total
 
Operating income - U.S. GAAP $ 194.2 $ 84.3 $ 57.3 $ (103.1 ) $ 232.7
Operating margin - U.S. GAAP 6.3 % 5.1 % 4.7 % nm 3.9 %
         
Total of items impacting operating income $ 10.8   $ 5.9   $ 10.0   $ 1.2   $ 27.9  
 
Adjusted operating income - Non-GAAP $ 205.0 $ 90.2 $ 67.3 $ (101.9 ) $ 260.6
Adjusted operating margin - Non-GAAP 6.7 % 5.5 % 5.6 % nm 4.4 %
nm - not meaningful                        
             
 
ANIXTER INTERNATIONAL INC.
Financial Measures That Supplement U.S. GAAP (Unaudited) - continued
                   
Items Impacting Comparability of Operating Income by Segment Three Months Ended September 30, 2016
(In millions) NSS EES UPS Corporate Total
 
Operating income - U.S. GAAP $ 74.9 $ 28.7 $ 15.8 $ (32.1 ) $ 87.3
Operating margin - U.S. GAAP 7.1 % 5.4 % 4.3 % nm 4.5 %
         
Total of items impacting operating income $ 3.2   $ 2.0   $ 4.0   $ 0.7   $ 9.9  
 
Adjusted operating income - Non-GAAP $ 78.1 $ 30.7 $ 19.8 $ (31.4 ) $ 97.2
Adjusted operating margin - Non-GAAP 7.4 % 5.7 % 5.3 % nm 5.0 %
 
Items Impacting Comparability of Operating Income by Segment Nine Months Ended September 30, 2016
NSS EES UPS Corporate Total
 
Operating income - U.S. GAAP $ 198.6 $ 75.1 $ 42.1 $ (111.5 ) $ 204.3
Operating margin - U.S. GAAP 6.5 % 4.7 % 3.9 % nm 3.6 %
         
Total of items impacting operating income $ 16.2   $ 11.3   $ 14.3   $ 13.7   $ 55.5  
 
Adjusted operating income - Non-GAAP $ 214.8 $ 86.4 $ 56.4 $ (97.8 ) $ 259.8
Adjusted operating margin - Non-GAAP 7.1 % 5.4 % 5.2 % nm 4.5 %
nm - not meaningful                        
           
 
ANIXTER INTERNATIONAL INC.
Financial Measures That Supplement U.S. GAAP (Unaudited) - continued            
                     
2017 and 2016 Effective Tax Rate – U.S. GAAP and Non-GAAP
Three Months Ended Nine Months Ended
September 29, September 30, September 29, September 30,
(In millions) 2017 2016 2017 2016
Income from continuing operations before taxes – U.S. GAAP $ 62.4 $ 65.4 $ 176.1 $ 138.9
Income tax expense – U.S. GAAP $ 24.8 $ 25.1 $ 67.5 $ 54.6
Effective income tax rate 39.7 % 38.4 % 38.3 % 39.3 %
 
Total of items impacting pre-tax income above $ 9.9   $ 9.9   $ 27.9   $ 55.5  
Total of items impacting income taxes above $ 3.3   $ 3.9   $ 9.1   $ 18.7  
 
Income from continuing operations before income taxes – Non-GAAP $ 72.3 $ 75.3 $ 204.0 $ 194.4
Income tax expense – Non-GAAP $ 28.1 $ 29.0 $ 76.6 $ 73.3
Adjusted effective income tax rate 38.8 % 38.5 % 37.6 % 37.7 %
 
 
2017 EBITDA by Segment
      Three Months Ended September 29, 2017
(In millions) NSS   EES   UPS   Corporate   Total
Net income from continuing operations $ 67.5 $ 26.8 $ 19.8 $ (76.5 ) $ 37.6
Interest expense 18.9 18.9
Income taxes 24.8 24.8
Depreciation 0.7 0.5 1.1 5.1 7.4
Amortization of intangible assets 3.6   2.2   3.3     9.1  
EBITDA $ 71.8   $ 29.5   $ 24.2   $ (27.7 ) $ 97.8  
EBITDA leverage nm -1.5x 1.5x nm 1.2x
EBITDA as a % of sales 6.8 % 5.3 % 5.9 % nm 4.9 %
 
Foreign exchange and other non-operating (income) $ $ $ $ (0.3 ) $ (0.3 )
Stock-based compensation 0.5 0.2 0.6 3.1 4.4
Acquisition and integration costs       0.8   0.8  
Adjusted EBITDA $ 72.3   $ 29.7     $ 24.8     $ (24.1 )   $ 102.7  
Adjusted EBITDA leverage nm -1.5x 1.6x nm -1.6x
Adjusted EBITDA as a % of sales 6.9 % 5.4 % 6.0 % nm 5.1 %
 
Nine Months Ended September 29, 2017
NSS EES UPS Corporate Total
Net income from continuing operations $ 194.2 $ 84.3 $ 57.3 $ (227.2 ) $ 108.6
Interest expense 55.7 55.7
Income taxes 67.5 67.5
Depreciation 2.2 1.7 3.1 14.5 21.5
Amortization of intangible assets 10.8   6.4   9.9     27.1  
EBITDA $ 207.2   $ 92.4   $ 70.3   $ (89.5 ) $ 280.4  
EBITDA leverage -2.0x 3.0x 2.0x nm 3.3x
EBITDA as a % of sales 6.8 % 5.6 % 5.8 % nm 4.7 %
 
Foreign exchange and other non-operating expense $ $ $ $ 0.9 $ 0.9
Stock-based compensation 1.5 1.0 1.2 9.6 13.3
Restructuring charge (0.5 ) 0.1 0.4
Acquisition and integration costs       0.8   0.8  
Adjusted EBITDA $ 208.7   $ 92.9     $ 71.6     $ (77.8 )   $ 295.4  
Adjusted EBITDA leverage -4.4x 1.2x 1.5x nm 0.2x
Adjusted EBITDA as a % of sales 6.8 % 5.6 % 5.9 % nm 5.0 %
 
nm - not meaningful                        
 
 
ANIXTER INTERNATIONAL INC.
Financial Measures That Supplement U.S. GAAP (Unaudited) - continued    
                         
2016 EBITDA by Segment
      Three Months Ended September 30, 2016
(In millions) NSS   EES   UPS   Corporate Total
Net income from continuing operations $ 74.9 $ 28.7 $ 15.8 $ (79.1 ) $ 40.3
Interest expense 19.8 19.8
Income taxes 25.1 25.1
Depreciation 0.8 0.5 1.0 4.8 7.1
Amortization of intangible assets 3.3   2.1   4.0     9.4  
EBITDA $ 79.0   $ 31.3   $ 20.8   $ (29.4 ) $ 101.7  
EBITDA leverage 1.8x -0.3x 0.4x nm 0.7x
EBITDA as a % of sales 7.5 % 5.8 % 5.6 % nm 5.2 %
 
Foreign exchange and other non-operating expense $ $ $ $ 2.1 $ 2.1
Stock-based compensation 0.2 0.2 0.3 3.2 3.9
Restructuring charge (0.1 ) (0.1 ) (0.2 )
Acquisition and integration costs       0.7   0.7  
Adjusted EBITDA $ 79.1   $ 31.4   $ 21.1   $ (23.4 ) $ 108.2  
Adjusted EBITDA leverage -0.2x -0.3x 0.4x nm 0.3x
Adjusted EBITDA as a % of sales 7.5 % 5.9 % 5.7 % nm 5.5 %
 
Nine Months Ended September 30, 2016
NSS EES UPS Corporate Total
Net income from continuing operations $ 198.6 $ 75.1 $ 42.1 $ (231.5 ) $ 84.3
Interest expense 59.7 59.7
Income taxes 54.6 54.6
Depreciation 2.5 2.0 3.1 13.5 21.1
Amortization of intangible assets 10.5   6.3   11.8     28.6  
EBITDA $ 211.6   $ 83.4   $ 57.0   $ (103.7 ) $ 248.3  
EBITDA leverage nm nm 0.4x nm 1.5x
EBITDA as a % of sales 7.0 % 5.2 % 5.2 % nm 4.3 %
 
Foreign exchange and other non-operating expense $ $ $ $ 5.7 $ 5.7
Stock-based compensation 1.3 0.7 1.0 9.4 12.4
UK pension settlement 9.6 9.6
Restructuring charge 1.8 1.3 2.2 0.1 5.4
Latin America bad debt provision 3.9 3.7 7.6
Acquisition and integration costs     0.3   4.0   4.3  
Adjusted EBITDA $ 218.6   $ 89.1   $ 60.5   $ (74.9 ) $ 293.3  
Adjusted EBITDA leverage nm nm 0.5x nm 1.2x
Adjusted EBITDA as a % of sales 7.2 % 5.6 % 5.6 % nm 5.1 %
 
nm - not meaningful                        

Contacts

Anixter International Inc.
INVESTOR CONTACTS
Ted Dosch
EVP - Finance & Chief Financial Officer
(224) 521-4281
or
Lisa M. Gregory, CFA
VP - Investor Relations
(224) 521-8895

Release Summary

Anixter International Inc. reports 3Q 2017 financial results

Contacts

Anixter International Inc.
INVESTOR CONTACTS
Ted Dosch
EVP - Finance & Chief Financial Officer
(224) 521-4281
or
Lisa M. Gregory, CFA
VP - Investor Relations
(224) 521-8895