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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 1-5989

Anixter International Inc.

2301 Patriot Blvd.

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     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 þ          No o

     Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulations 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 o          No þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

     The aggregate market value of the shares of Registrant’s Common Stock, $1 par value, held by nonaffiliates of Registrant was approximately $795,762,000 as of July 4, 2003.

     At March 1, 2004, 36,586,661 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 2004 Annual Meeting of Stockholders of Anixter International Inc. are incorporated by reference into Part III. This document consists of 67 pages. Exhibit List begins on page 58.

TABLE OF CONTENTS

(i)

Table of Contents

PART I

(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 the distribution of communications and specialty wire and cable products and fasteners and other small parts (“C” class inventory components) through Anixter Inc. and its subsidiaries (collectively “Anixter”).

      In the third quarter of 2003, the Company purchased 100% of the stock of Walters Hexagon Group Limited (“Walters Hexagon”), a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services to a range of markets and industries. Walters Hexagon operates a network of ten service centers in the United Kingdom and France and employs approximately 290 people.

      In September 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc. (“Pentacon”), also a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services, pursuant to Pentacon’s plan of reorganization filed under Chapter 11 of the United States Bankruptcy Code. See Note 3 “Acquisition of Businesses” in the Notes to the Consolidated Financial Statements for additional information on the acquisitions of Walters Hexagon and Pentacon.

      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. The European Integration business was sold in the fourth quarter of 1998. In 1999, the Company completed the disposal of the Integration segment, with North America Integration being sold in the first quarter of 1999 followed by the sale of Asia Pacific Integration in the fourth quarter of 1999.

(b) Financial Information about Industry Segments

      The Company is engaged in the distribution of communications and specialty wire and cable products and “C” class inventory components from top suppliers to contractors and installers and to end users, including manufacturers, natural resources companies, utilities and original equipment manufacturers. The Company is organized by geographic regions, and accordingly, has identified North America (United States and Canada), Europe and Emerging Markets (Asia Pacific and Latin America) as reportable segments. The Company obtains and coordinates financing, legal, tax, information technology and other related services, certain of which are rebilled to subsidiaries. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis.

      In 2001, 10.3% of total sales were to Lucent Technologies and its subsidiaries. No other customer accounted for 10% or more of sales in 2003, 2002 or 2001. For certain financial information concerning the Company’s business segments, see Note 12 “Business Segments” in the Notes to the Consolidated Financial Statements.

(c) Narrative Description of Business

Overview

      The Company is a leader in the provision of advanced inventory management services including procurement, just-in-time delivery, quality assurance testing, advisory engineering services, component kit production, small component assembly and e-commerce and electronic data interchange to a broad spectrum of customers. The Company’s comprehensive supply chain management solutions are designed to reduce customer procurement and management costs and enhance overall production efficiencies. Inventory management services are frequently provided under customer contracts for some periods in excess of one year and

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      Through a combination of its service capabilities and a portfolio of products from industry leading manufacturers, Anixter is the leading global distributor of data, voice, video and security network communication products. In addition, Anixter is the largest North American distributor of specialty wire and cable products. Through its recent purchases of Walters Hexagon and Pentacon, Anixter also distributes “C” class inventory components. “C” class inventory components are incorporated into a wide variety of end use applications and include screws, bolts, nuts, washers, pins, rings, fittings, springs, electrical connectors and similar small parts, many of which are specialized or highly engineered for particular applications.

Customers

      The Company sells products to over 85,000 active customers. These customers include international, national, regional and local companies that include end users of the Company’s products, installers and resellers of the Company’s products and original equipment manufacturers who use the Company’s products as a component of their end product. Customers for the Company’s products cover all industry groups including manufacturing, telecommunications, internet service, finance, education, health care, transportation, utilities and government as well as contractors, installers, system integrators, value added resellers, architects, engineers and wholesale distributors.

Products

      Anixter sells over 225,000 products. These products include communications (voice, data, video and security) products used to connect personal computers, peripheral equipment, mainframe equipment, security equipment and various networks to each other. The products consist of an assortment of transmission media (copper and fiber optic cable), connectivity products, support and supply products, and security surveillance and access control products. These products are incorporated in enterprise networks, physical security networks, central switching offices, web hosting sites and remote transmission sites. Anixter also provides industrial wire and cable products, including electrical and electronic wire and cable, control and instrumentation cable and coaxial cable that is used in a wide variety of maintenance and repair and construction related applications. The Company also provides a wide variety of electrical and electronic wire and cable products, fasteners and other small components that are used by original equipment manufacturers in manufacturing a wide variety of products. The acquisitions of Walters Hexagon and Pentacon have increased the Company’s product portfolio in 2002 and 2003.

Suppliers

      The Company sources products from over 3,000 suppliers. However, approximately 34% of Anixter’s dollar volume purchases in 2003 were from its five largest suppliers. 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 communication cabling, connectivity, support and supply products, electrical wiring systems, and fasteners. 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.

      Significant terms of the Company’s typical distribution agreement are described as follows:

	•	A non-exclusive right to re-sell products to any customer in a geography (typically defined as a country);
	•	Usually cancelable upon 90 days notice by either party for any reason;
	•	Excludes any minimum purchase agreements, although pricing may change with volume on a prospective basis; and
	•	The right to pass through the manufacturer’s warranty to Anixter’s customers.

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Distribution and Service Platform

      Anixter cost-effectively serves its customers’ needs through its proprietary computer system, which connects most 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. Customers may also conduct business through Anixter’s e-commerce platform, one of the most comprehensive, user-friendly and secure websites in the industry.

      Anixter operates a series of large modern hub warehouses in key distribution centers in North America, Europe, Asia and Latin America that provide for cost-effective and reliable storage and delivery of products to its customers. The hub warehouses store the bulk of Anixter’s inventory. Some smaller warehouses are also maintained to maximize transportation efficiency and to provide for the local pick-up needs of customers in certain cities. This network consists of 107 locations in the United States, 17 in Canada, 23 in the United Kingdom, 23 in Continental Europe, 11 in Latin America, 10 in Asia and 5 in Australia/ New Zealand.

      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.

Employees

      At January 2, 2004, the Company and its subsidiaries employed approximately 5,000 people. Less than one percent of the Company’s employees are covered by collective bargaining agreements.

Competition

      Given the Company’s role as an aggregator of many different types of products from many different sources and the fact that these products are sold to many different industry groups, there is no well defined industry group against which the company competes. The Company views the competitive environment as highly fragmented with hundreds of distributors and manufacturers that sell products directly or through multiple distribution channels to end users or other resellers. Competition is based primarily on breadth of products, quality, services, price and geographic proximity. Anixter believes that it has a significant competitive advantage due to its comprehensive product and service offerings, highly skilled workforce and global distribution network. The Company can ship 99% of orders for delivery within 24 to 48 hours to all major global markets. In addition, the Company has common systems and processes throughout most of its operations in 42 countries worldwide that provide its customers and suppliers global consistency.

      Anixter enhances its value proposition to both key suppliers and customers through its specifications and testing facilities and numerous quality assurance certification programs such as ISO 9002 and QSO 9000. The Company uses its testing facilities in conjunction with suppliers to develop product specification and to test quality compliance. In the case of its suburban Chicago data network testing lab, the Company also works with customers to design and test various product configurations to optimize network design and performance specific to the customers’ needs.

      In addition to competitive factors, future performance could be subject to economic downturns and possible rapid changes in applicable technologies. Although relationships with its suppliers are good, the loss of a major supplier could have a temporary adverse effect on the Company’s business. However, it would not have a lasting impact since comparable products are available from alternate sources.

      Many of the Company’s competitors are privately held and, as a result, reliable competitive information is not available.

Contract Sales and Backlog

      The Company has a number of customers who purchase products under long-term (generally 3 to 5 year) contractual arrangements. In such circumstances, the relationship with the customer typically involves a high

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      Backlog orders are not material as a significant amount of orders are shipped within 24 to 48 hours of receipt.

Available Information

      The Company maintains an Internet website at http://www.anixter.com that includes links to the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Code of Ethics and all amendments to these reports. These forms are available without charge as soon as reasonably practical following the time they are filed with or furnished to the SEC. Shareholders and other interested parties may request email notifications of the posting of these documents through the Investor Relations section of the Company’s website.

(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” in the Notes to the Consolidated Financial Statements.

      The Company’s distribution network consists of 151 warehouses in 42 countries with more than 4.5 million square feet. There are 12 regional distribution centers (100,000 — 575,000 square feet), 23 local distribution centers (35,000 — 100,000 square feet) and 116 service centers. Additionally, the Company has 45 sales offices throughout the world. All these facilities are leased. No one facility is material to operations, and the Company believes there is ample supply of alternative warehousing space available on similar terms and conditions in each of its markets.

      From time to time, 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 that 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.

      During the fourth quarter of 2003, no matters were submitted to a vote of the security holders.

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PART II

      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 13 “Selected Quarterly Financial Data (Unaudited)” in the Notes to the Consolidated Financial Statements. As of March 1, 2004, the Registrant had 3,780 shareholders of record.

* In the third quarter of 2003, the Company purchased 100% of the stock of Walters Hexagon for $42.7 million, inclusive of legal and advisory fees. On September 20, 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc.(“Pentacon”) for $111.4 million, including transaction-related costs. The acquisitions were accounted for as purchases and the results of operations of the acquired businesses are included in the consolidated financial statements from the date of acquisition. Walter Hexagon’s operations in 2003 and Pentacon’s operations in 2002 were not significant to the Company. In 2003, Pentacon contributed sales and operating income of $184.8 million and $4.8 million, respectively. See Note 3 “Acquisitions of Businesses” in the Notes to the Consolidated Financial Statements for further information.

Notes:

(a)	In the third quarter of 2001, the Company incurred a restructuring charge of $31.7 million associated with reducing its workforce, closing or consolidating certain facilities and exiting the Korean market. Additionally, 2001, 2000 and 1999 include goodwill amortization of $9.0 million, $8.4 million and $7.4 million, respectively.
(b)	In the fourth quarter of 2000, the Company incurred an $8.8 million charge relating to the discount on the initial non-recourse sale of accounts receivable to an unconsolidated wholly owned special purpose corporation in connection with an accounts receivable securitization program.
(c)	Prior years have been restated to reflect our adoption of Statement of Financial Accounting Standards No. 145.
(d)	In the third quarter of 1999, the Company recorded a $24.3 million tax benefit in continuing operations for the reversal of previously established tax reserves determined to be no longer necessary.
(e)	Stockholders’ equity reflects treasury stock purchases of $35.6 million, $46.9 million, $15.4 million and $91.9 million in 2003, 2001, 2000 and 1999, respectively. The Company did not purchase any treasury shares in 2002.

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      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. These statements 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 also could 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. The information contained in this financial review should be read in conjunction with the consolidated financial statements, including the notes thereto, on pages 26 to 55 of this Report.

Acquisitions of Walters Hexagon and Pentacon, Inc.

      In the third quarter of 2003, the Company purchased 100% of the stock of Walters Hexagon Group Limited (“Walters Hexagon”). Headquartered in Worcester, England, Walters Hexagon is a leading distributor of fasteners and other small parts to original equipment manufacturers and provides inventory management services to a range of markets and industries. Walters Hexagon operates a network of ten service centers in the United Kingdom and France and employs approximately 290 people. The Company believes Walters Hexagon’s business model and position as a value-added distributor complements its current business. The Company purchased Walters Hexagon for $42.7 million, inclusive of legal and financial advisory fees, acquiring tangible assets with a fair value of approximately $16.2 million. The tangible net assets primarily consist of accounts receivable, inventory, office and warehouse equipment and furnishings, accounts payable and select operating liabilities. Based upon a third party valuation, assets and liabilities have been recorded at estimated fair value based on a preliminary allocation of the purchase price. At January 2, 2004, intangible assets have also been recorded at an estimated fair value as follows:

	•	$8.3 million of intangible assets with a finite life of 10 years (customer relationships); and
	•	$18.2 million of goodwill.

      The stock purchase agreement provides for additional purchase considerations of up to a maximum of $5.8 million based on the future operating performance of Walters Hexagon. The purchase was funded with on-hand excess cash balances along with the assumption of $0.7 million of Walters Hexagon’s debt. Included in the results of the Company for 2003 are $19.0 million of sales and $0.6 million of operating income related to Walters Hexagon. Had this acquisition occurred at the beginning of the year, the impact on the Company’s operating results would not have been significant.

      On September 20, 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc. (“Pentacon”) pursuant to Pentacon’s plan of reorganization filed under Chapter 11 of the United States Bankruptcy Code. Pentacon is a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services and has 21 distribution and sales facilities in the United States, along with sales offices and agents in Europe, Canada, Mexico and Australia. The Company paid a total of $111.4 million, including transaction-related costs, for tangible assets with a fair value of approximately $74.7 million. The tangible net assets primarily consist of accounts receivable, inventory, office and warehouse equipment and furnishings, accounts payable and select operating liabilities.

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	•	$1.8 million intangible asset with an indefinite life (trade name),
	•	$13.8 million of intangible assets with an average finite life of 9.3 years (customer relationships); and
	•	$21.1 million of goodwill.

      In 2003 and 2002, Pentacon contributed sales of $184.8 million and $51.5 million, respectively, and operating income of $4.8 million and $0.5 million, respectively. Goodwill increased $7.0 million in 2003, as a result of the finalization of the purchase price allocation.

      These acquisitions were accounted for as purchases and the results of operations of the acquired business are included in the consolidated financial statements from the date of acquisition. Intangible amortization expense is expected to be approximately $2.3 million per year for the next five years.

Financial Liquidity and Capital Resources

Overview

      As a distributor, the Company’s use of capital is largely for working capital to support its revenue base. Capital commitments for property, plant and equipment are limited to information technology assets, warehouse equipment and office furniture and fixtures, since the Company operates from leased facilities. Therefore, in any given reporting period, the amount of cash consumed or generated by operations will primarily be a factor of the rate of sales increase or decline, due to the corresponding change in working capital.

      In periods when sales are increasing, the expanded working capital needs will be funded first by cash from operations, secondly from additional borrowings and lastly from additional equity offerings. Also, the Company will, from time to time, issue or retire borrowings or equity in an effort to maintain a cost-effective capital structure consistent with its anticipated capital requirements.

Cash Flow

      Year ended January 2, 2004: Consolidated net cash provided by continuing operating activities was $125.1 million in 2003, compared to $165.7 million for the same period in 2002. Excluding non-cash items, primarily depreciation and amortization and the accretion of the zero coupon convertible notes, net income generated cash of $82.0 million in 2003 compared to $76.3 million in 2002. Due to the decline in sales in 2002, working capital reductions provided $87.8 million compared to only $35.5 million in 2003 when sales, excluding acquired operations, were relatively flat. The significant reduction in the 2002 working capital was primarily driven by a $81.4 million reduction in inventory compared to only $33.9 million in 2003. The Company paid $2.9 million in the current period for leases, severance and outplacement costs associated with the 2001 restructuring, compared to $10.8 million for the corresponding period in 2002. In 2003, the Company ended the year in a net prepaid income tax position of $6.8 million compared to an accrual position of $4.7 million in 2002. The cash surrender value of company life insurance policies increased $5.4 million ($2.9 million due to premiums paid) in 2003 compared to a decline of $0.6 million in 2002. There were no premiums paid in 2002.

      Consolidated net cash used in investing activities decreased to $36.8 million in 2003 versus $122.4 million for the same period in 2002. During 2003, the Company spent $42.0 million to acquire Walters Hexagon as compared to $110.4 million used to acquire Pentacon in the same period of 2002. Capital expenditures increased $9.0 million during 2003 as compared to the corresponding period in 2002. The increase is primarily the result of the Company spending $18.4 million to complete the construction of the new corporate headquarters building. In the fourth quarter of 2003, the Company recovered approximately $27.0 million of capital that had been invested in this project during 2002 and 2003 through a sale and leaseback transaction. Capital expenditures are expected to be approximately $15.0 million in 2004.

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      Consolidated net cash used in financing activities was $4.5 million in 2003 compared to $48.8 million in the corresponding 2002 period. In 2003, the Company issued $328.8 million of 3.25% zero coupon convertible senior notes due 2033. Proceeds of $143.8 million were used to purchase $35.6 million of treasury stock and $80.2 million of its 7% zero coupon convertible notes and 8% senior notes. In the same period of 2002, the Company paid $118.3 million for the repurchase of its 7% zero coupon convertible notes and 8% senior notes. Net cash used to repay borrowings under the revolving credit agreements were $33.6 million during 2003 as compared to net proceeds from borrowing under the revolving credit agreements of $62.6 million in 2002. In 2003, the Company received $6.5 million from the issuance of 0.5 million shares of common stock for the exercise of stock options, stock units and the employee stock purchase plan compared to $7.5 million in 2002 for the issuance of 0.6 million shares.

      Cash used for discontinued operations was $1.5 million in 2003 compared to $2.6 million in 2002.

      Year ended January 3, 2003: Consolidated net cash provided by continuing operating activities was $165.7 million in 2002 compared to $288.5 million in 2001. Excluding non-cash items, primarily depreciation and amortization and the accretion of the zero coupon convertible notes, net income generated cash of $76.3 million in 2002 compared to $82.9 million in 2001. Cash provided by continuing operating activities decreased primarily because the decline in working capital in 2002 was less than the decline in 2001. In 2002, cash generated by the collection of receivables was almost entirely offset by the payments made on accounts payable and accrued expenses. Inventory was further reduced in 2002 by $81.4 million associated with the decline in sales. The Company paid $10.8 million for costs related to the 2001 restructuring. In 2001, accounts receivable decreased, providing cash of $128.5 million. Inventory declined $357.1 million in 2001 as the $120.0 million specifically identified at December 29, 2000 as “inventory returnable to vendor” was returned and the remaining decline was due to reduced purchases as lower levels of inventory were needed to support the reduced sales levels. The increase in cash flow generated by the reduction in inventory was partially offset by the related decrease of $296.7 million in accounts payable and accrued expenses. In 2001, the Company incurred a $31.7 million restructuring charge, $6.6 million of which was non-cash. At January 3, 2003, $6.9 million remained to be paid.

      Consolidated net cash used in investing activities was $122.4 million in 2002 versus $20.5 million in 2001. In the third quarter of 2002, the Company completed the acquisition of certain assets and liabilities of Pentacon for $110.4 million, including transaction related costs. Also in 2002, $2.9 million was received from the sale of real estate and other fixed assets and $2.0 million from the sale of securities. Capital expenditures decreased $5.1 million from 2001 as spending was reduced due to weak economic conditions. In 2002, capital expenditures included $11.6 million for the construction of a new corporate headquarters. Capital expenditures in 2001 were primarily for the upgrades of warehouse facilities and the purchase of software and computer equipment.

      Consolidated net cash used by financing activities was $48.8 million in 2002 in comparison to $255.8 million in 2001. In 2002, cash used in financing activities included $118.3 million for the repurchase of the 7% zero coupon convertible notes and 8% senior notes. Proceeds from borrowing under the revolving credit agreements were $62.6 million in 2002. The Company received $7.5 million for the issuance of 0.6 million shares of common stock relating to the exercise of stock options, stock units and the employee stock purchase program. In 2001, cash used in financing activities included a net repayment of long-term borrowings of $142.4 million, extinguishment of the 8% senior notes of $86.5 million and $46.9 million of treasury stock purchases, partially offset by proceeds of $22.3 million received from the issuance of 1.3 million shares of common stock for the exercise of stock options and the employee stock purchase plan.

      Cash used for discontinued operations was $2.6 million in 2002 compared to $5.8 million in 2001.

Financings

Convertible Notes Due 2033

      On July 1, 2003, the Company issued $328.8 million of 3.25% zero coupon convertible senior notes due 2033 (together with the overallotment, the “Convertible Notes due 2033”). Each Convertible Note due 2033

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      In connection with the issuance of the Convertible Notes due 2033, the Company granted the initial purchasers an option to purchase up to an additional $49.3 million of Convertible Notes due 2033 to cover overallotments. On July 9, 2003, the initial purchaser exercised its option in full. Net proceeds from the additional issuance on July 9, 2003 were $18.3 million and were used for general corporate purposes. Additional issuance costs of $0.5 million related to the exercise of the overallotment are being amortized through June 2033 using the straight-line method.

      Holders of the Convertible Notes due 2033 may convert each of them into 12.8773 shares of the Company’s common stock, of which the Company has reserved 4.9 million shares based on the number of outstanding bonds, in any calendar quarter commencing after October 3, 2003 if:

	•	The sales price of our common stock reaches specified thresholds;
	•	During any period in which the credit rating assigned to the Convertible Notes due 2033 is below a specified level;
	•	The Convertible Notes due 2033 are called for redemption; or
	•	Specified corporate transactions have occurred.

      Upon conversion, the Company has the right to deliver, in lieu of its common stock, cash or a combination of cash and stock. The 3.25% zero coupon convertible notes were not convertible at January 2, 2004, as none of the above conditions were met. In February 2004, the Company declared a special dividend of $1.50 per common share. As a result, the conversion rate of the convertible notes will be adjusted in March 2004, based on the stock price as provided for in the agreement.

      The Company may redeem the Convertible Notes due 2033, at any time in whole or in part, on July 7, 2011 for cash at the accreted value. Additionally, holders may require the Company to purchase all or a portion of their Convertible Notes on:

	•	July 7, 2007 at a price equal to $432.48 per Convertible Note due 2033;
	•	July 7, 2009 at a price equal to $461.29 per Convertible Note due 2033;
	•	July 7, 2011 at a price equal to $492.01 per Convertible Note due 2033;
	•	July 7, 2013 at a price equal to $524.78 per Convertible Note due 2033;
	•	July 7, 2018 at a price equal to $616.57 per Convertible Note due 2033;
	•	July 7, 2023 at a price equal to $724.42 per Convertible Note due 2033; and
	•	July 7, 2028 at a price equal to $851.13 per Convertible Note due 2033.

The Company may choose to pay the purchase price in cash or in common stock or a combination of both. See Exhibit 4.8 for the calculation of the purchase price if the Company were to choose to pay in common shares.

      The Company must pay contingent cash interest to the holders of the Convertible Notes due 2033 during any six-month period commencing July 7, 2011 if the average market price of a Convertible Note due 2033 for a five trading day measurement period preceding the applicable six-month period equals 120% or more of the sum of the original issuance price and accrued original issue discount for such Convertible Note due 2033 as of

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      The Convertible Notes due 2033 are structurally subordinated to the indebtedness of Anixter. At January 2, 2004, the face value of the Convertible Notes due 2033 outstanding was $378.1 million with a book value of $146.1 million.

Convertible Notes Due 2020

      On June 28, 2000, the Company issued $792.0 million 7% zero coupon convertible notes due 2020 (“Convertible Notes due 2020”). Each Convertible Note due 2020 has a principal value at maturity of $1,000. The net proceeds from the issue were $193.4 million and were initially used to repay working capital borrowings under the floating rate bank line of credit. The discount associated with the issuance is being amortized through June 28, 2020, using the effective interest rate method. Issuance costs of $1.3 million are being amortized through June 2020 using the straight-line method.

      Holders of the remaining Convertible Notes due 2020 may convert at any time on or before the maturity date, unless the notes have previously been redeemed or purchased, into 7.4603 shares of the Company’s common stock for which the Company has reserved 1.4 million shares at January 2, 2004 based on the number of currently outstanding bonds. Additionally, holders may require the Company to purchase at book value, all or a portion of their Convertible Notes due 2020 on:

	•	June 28, 2005, at a price of $356.28 per Convertible Note due 2020;
	•	June 28, 2010, at a price of $502.57 per Convertible Note due 2020; and
	•	June 28, 2015, at a price of $708.92 per Convertible Note due 2020.

The Company may choose to pay the purchase price in cash or common stock or a combination of both. See Exhibit 4.2 for the calculation of the purchase price if the Company were to choose to pay in common shares.

      The Convertible Notes due 2020 are structurally subordinated to the indebtedness of Anixter. At January 2, 2004 and January 3, 2003, the remaining face value of the Convertible Notes due 2020 outstanding was $196.3 million and $413.3 million, respectively, with a book value of $63.1 million and $124.0 million, respectively.

      The Company recorded losses on the extinguishment of debt of $6.2 million and $0.3 million in its consolidated statements of operations for the years ended January 2, 2004 and January 3, 2003, respectively, for repurchases of these notes prior to their maturity and the write-off of associated debt issuance costs. No repurchase activity occurred in 2001. The repurchase activity for 2003 and 2002 is summarized below:

8% Senior Notes

      In September 1996, Anixter filed a shelf registration statement with the Securities and Exchange Commission to offer from time to time up to a $200.0 million aggregate principal amount of unsecured notes. On September 17, 1996, Anixter issued $100.0 million of these notes due September 2003. The notes, bearing

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      During 2003, the Company retired the last of the outstanding 8% senior notes at maturity of $8.0 million. The Company recorded a loss on the extinguishment of debt of $0.4 million and $5.2 million in 2002 and 2001, respectively, from repurchases of a portion of these notes prior to maturity. The repurchase activity for 2002 and 2001 is summarized below:

Revolving Lines of Credit

      On October 6, 2000, Anixter entered into a financing arrangement to support further business growth. The agreement consisted of a $500.0 million, senior unsecured, revolving credit agreement. This revolving credit line included a $390.0 million, five-year agreement, plus a $110.0 million, 364-day agreement. As a result of the economic slowdown experienced in 2001, 2002 and 2003, these facilities were scaled down to fit the Company’s revised anticipated needs through the remainder of the arrangements.

      On April 24, 2001, Anixter cancelled the $110.0 million, 364-day revolving credit line. In March 2003, Anixter cancelled $115.0 million of the five-year agreement in order to reduce costs associated with this excess availability. Accordingly, in 2003 and 2001, Anixter recorded a loss on the extinquishment of debt of approximately $0.4 million and $0.3 million, respectively, to expense the financing fees associated with this portion of the revolving credit agreement in its consolidated statements of operations. The activity related to the cancellation of credit lines and related debt issuance costs is summarized below:

      At January 2, 2004, the primary liquidity source for Anixter is the remaining $275.0 million, five-year revolving credit agreement, $30.0 million of which was outstanding and $16.3 million of which was available to pay the Company for intercompany liabilities. The borrowing rate on the revolving credit agreement is LIBOR plus 87.5 basis points and the interest rate on the $30.0 million outstanding balance was 2.1%. This revolving credit agreement requires certain covenant ratios to be maintained. The Company is in compliance with all of these covenant ratios and believes that there is adequate margin between the covenant ratios and the actual ratios given the current trends of the business. See Exhibit 4.3 for definitions of the covenant ratios. Due to the requirement of the leverage ratio, borrowings of only $139.8 million, of which $37.8 million may be used to pay dividends to the Company, of the $245.0 million available under bank revolving lines of credit at Anixter would be permitted as of January 2, 2004.

      At January 2, 2004, certain foreign subsidiaries had approximately $20.4 million available under bank revolving lines of credit, none of which was outstanding.

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Contractual Cash Obligations and Commitments

      The Company has the following contractual cash obligations as of January 2, 2004: