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| 8-K - FORM 8-K - ANIXTER INTERNATIONAL INC | d408943d8k.htm |
 1
2nd Quarter 2012
Highlights and
Operating Review
Exhibit 99.1 |
 2
Safe Harbor and Non-GAAP
Financial Measures
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 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 consolidated financial statements, including the related notes, and Management’s
Discussion and Analysis of Financial Condition and Results of Operations included in our
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the SEC.
We do not use these non-GAAP financial measures for any purpose other than the reasons
stated above. This presentation includes certain
financial measures computed using non-Generally Accepted Accounting Principles (“non-
GAAP”) components as defined by the SEC. Certain profitability, earnings per share and cash flow
information in this presentation exclude special items which have been identified in our
earnings releases as we believe that by reporting such information, both management and
investors are provided with meaningful supplemental information to understand and analyze our
underlying trends and other aspects of our financial performance. The statements in this
presentation that use such words as “believe,” “expect,” “intend,” “anticipate,” “contemplate,”
“estimate,” “plan,” “project,” “should,” “may,”
“will,” or similar expressions are forward-looking statements. They are subject
to a number of factors that could cause our actual results to differ materially from what is
indicated here. These factors include general economic conditions, the level of customer
demand particularly for capital projects in the markets we serve, changes 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 fluctuation customer viability, risks associated with accounts
receivable, the impact of regulation and regulatory, investigative and legal proceedings and
legal compliance risks and risks associated with integration of acquired companies. 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 |
 3
2011 REVENUE: $6.1 Billion
Anixter Overview
•
Employ over 2,500 technical salespeople
•
Located in over 260 cities and 50 countries
•
Transact in 35 currencies
•
Speak over 30 languages
•
Serve over 100,000 customers
•
Carry over $1 billion and 450,000 SKUs
in inventory
•
Operate 225 warehouses with over 7 million
square feet
•
AXE is a leading global value-added industrial distributor of communications
and security products, electrical and electronic wire and cable, and
fasteners and other small components •
Founded
in
1957,
Anixter
employs
over
8,200
people
and
had
2011
revenues
of
$6.1
billion
•
AXE’s success is built on customizing solutions to optimize the supply chain
for our customers through our technical expertise and our global operational
consistency and distribution network Unmatched Global Distribution
Network ECS
33%
W&C
37%
W&C
10%
Europe
19%
Emerging
Markets
11%
OEM
9%
ECS
81%
ECS
53%
OEM
41%
North
America
70%
OEM
10%
W&C
26% |
 4
•
Sales increased in 2Q12 for the 10th consecutive quarter
–
Sales of $1.58 billion increased by 1% from 2Q11
–
Excluding
the
unfavorable
impact
from
copper
pricing
and
foreign
exchange,
organic sales increased by 4%
–
North America organic sales increased by 5%
•
Generated $124 million in cash flow from operations in 2Q12 versus
$18 million in 2Q11, primarily due to a reduction in working capital
•
Returned over $150 million to shareholders through special dividend of
$4.50 per share, paid May 31, 2012
•
Announced the acquisition of Jorvex, a Peruvian wire and cable
distributor, July 9, 2012
•
Announced 1 million share buyback, July 27, 2012
Recent Highlights |
 5
Core Operating Principles
Leverage global
Leverage global
footprint
footprint
Deliver a compelling
Deliver a compelling
value proposition
value proposition
Strengthen
Strengthen
customer loyalty
customer loyalty
Execute with
Execute with
excellence
excellence |
 6
Anixter's Competitive Advantage
One Anixter
One IT platform
One management team
Global reach
World-class
supply chain
Subject matter
experts
Superior
technical
knowledge |
 7
Earnings and Cash Flow Relationship to Sales Changes
Fiscal Year
(1)
Net
cash
provided
by
(used
in)
operating
activities
less
capital
expenditures.
(2)
Adjusted operating profit from continuing operations excludes special items
outlined in the Company’s Earnings Releases for the applicable
periods. See Appendix for details. Flexible/Scalable Business Model
|
  8
•
Consistent sales and profitability growth
•
Platform for sustainable growth
•
Effective working capital management
•
Significant free cash flow
•
Disciplined and strategic approach
to capital allocation
Focused on value creation for shareholders
Positioned to Create Value |
 9
GAAP
2Q12
2Q11
Change
Net Sales
$1,577.0
$1,565.3
0.7%
Operating Margin
5.7%
5.9%
(20) basis points
Net Income from
Continuing Operations
$44.0
$48.4
(8.9)%
Earnings Per Diluted Share
$1.28
$1.33
(3.8)%
Weighted Average Diluted
Shares Outstanding
34.3
36.3
(5.6)%
Operating Cash Flow
$123.9
$18.3
NM
NM –
Not meaningful information
Second
Quarter 2012 Financial Results
$ in Millions except EPS |
 10
2Q12 Forex
and Copper Impacts
$ in Millions
2Q12
GAAP
Sales
Foreign
Exchange
Impact
Copper
Impact
Adjusted
Sales
2Q11
GAAP
Sales
Organic
Sales
Growth
North America
$1,128.8
$9.3
$15.6
$1,153.7
$1,099.4
4.9%
Europe
$273.8
$17.3
$1.5
$292.6
$290.4
0.7%
Emerging
Markets
$174.4
$7.8
NA
$182.2
$175.5
3.8%
Total
$1,577.0
$34.4
$17.1
$1,628.5
$1,565.3
4.0% |
 11
GAAP
1H12
1H11
Change
Net Sales
$3,099.7
$3,036.1
2.1%
Operating Margin
5.7%
5.6%
10 basis points
Net Income from Continuing
Operations
$99.6
$89.3
11.6%
Earnings Per Diluted Share
$2.90
$2.47
17.4%
Weighted Average Diluted
Shares Outstanding
34.3
36.2
(5.2)%
Operating Cash Flow
$59.2
$12.8
NM
NM –
Not meaningful information
First
Half 2012 Financial Results
$ in Millions except EPS |
 12
1H12 Forex
and Copper Impacts
$ in Millions
1H12
GAAP
Sales
Foreign
Exchange
Impact
Copper
Impact
Adjusted
Sales
1H11
GAAP
Sales
Organic
Sales
Growth
North America
$2,197.9
$12.6
$28.7
$2,239.2
$2,128.1
5.2%
Europe
$561.4
$24.4
$3.0
$588.8
$576.0
2.2%
Emerging
Markets
$340.4
$9.6
NA
$350.0
$332.0
5.4%
Total
$3,099.7
$46.6
$31.7
$3,178.0
$3,036.1
4.7% |
 13
Operating Income by Segment
$ in Millions
Operating Income -
GAAP
2Q12
2Q11
Change
North America
$79.5
$79.2
0.3%
Europe
$0.8
$4.6
(82.8)%
Emerging Markets
$9.6
$8.2
18.6%
Total
$89.9
$92.0
(2.3)% |
 14
GAAP
2Q11
3Q11
4Q11
1Q12
2Q12
North America
7.2%
7.5%
7.0%
7.1%
7.0%
Europe
1.6%
2.0%
1.9%
1.3%
0.3%
Emerging
Markets
4.6%
5.7%
7.5%
4.5%
5.6%
Total
5.9%
6.3%
6.1%
5.7%
5.7%
YOY Basis Point
Change
90
100
40
40
(20)
Operating Income
$92.0 M
$101.7 M
$91.6 M
$86.7 M
$89.9 M
Operating Income
Dollar Growth
$25.5 M
$30.9 M
$13.1 M
$9.2 M
$(2.1) M
Operating Margin Progression |
 15
GAAP
2Q12
2Q11
Interest Expense
$(14.8) M
$(12.8) M
Other, Net
$(5.5) M
$(1.6) M
Effective Tax Rate
36.7%
37.6%
Weighted Average Basic
Shares Outstanding
33.5 M
34.8 M
Weighted Average Diluted
Shares Outstanding
34.3 M
36.3 M
Income Statement Details |
 16
2Q12
4Q11
% Change
Cash Impact
Cash/Short-term
Investments
$152.0 M
$106.1 M
43.3%
Accounts Receivable
$1,222.8 M
$1,151.0 M
6.2%
Inventories
$1,079.9 M
$1,070.7 M
0.9%
Accounts Payable
$748.9 M
$706.5 M
6.0%
+
Total Working Capital
$1,505.4 M
$1,376.0 M
9.4%
Working Capital Details |
 17
2Q11
3Q11
4Q11
1Q12
2Q12
Working Capital
($ in Millions)
$1,596.8
$1,420.2
$1,376.0
$1,487.0
$1,505.4
Working Capital
as a % of
Annualized Sales
25.5%
22.0%
22.9%
24.4%
23.9%
Working Capital Trends |
 18
•
Organic growth
–
Support existing markets
–
Expand into new markets
•
Deleveraging
–
Further strengthen balance sheet
and improve liquidity
–
Continue to enhance flexibility
•
Strategic acquisitions
–
Enhance geographic segment position
–
EPS accretive
•
Opportunistic return of value to shareholders
–
Share repurchases
–
Special dividends
Capital Allocation Priorities |
 19
2007
2008
2009
2010
2011
1H12
Share
Repurchases*
$241.8
$104.6
$34.9
$41.2
$107.5
-
Special Dividends
-
-
-
$113.7
-
$150.6
Total
$241.8
$104.6
$34.9
$154.9
$107.5
$150.6
Consistent Return of Capital
to Shareholders
$ in Millions
*Announced a 1 million share repurchase authorization on July 27, 2012.
|
 20
FY11
Long Term Goal
Organic Sales Growth*
10.4%
8-10%
5-Year
Average
FY11
Long Term Goal
Operating Leverage
10.9%
11.0%
Mid-
to high-single digits
Working Capital as a %
of Sales
24.6%
22.4%
21-22%
Debt-to-Capital Ratio
46.7%
44.7%
45-50%
* Organic Sales Growth excludes acquisition impact, copper impact, and changes in
foreign currency. Long-Term Financial Goals |
 21
Outlook for the Second Half of 2012
Tailwinds
•
Security business
•
Emerging markets
•
Additional parts with OEM Supply customers
•
Electrical wire and cable projects
•
Low interest rates
Potential Headwinds
•
Copper pricing
•
Foreign exchange
•
European economic volatility
•
Global uncertainty
Organic sales growth:
4-5%
Operating profit leverage:
Mid-
to high-single digits
2H12 Performance Outlook |
 22
Appendix
Appendix I
Adjusted Gross Profit and Operating Profit
Appendix II
Acronyms and Definitions
Appendix III
Non –
GAAP Earnings Per Share
Appendix IV
Non –
GAAP Trailing Twelve Months Results
Appendix V
Other Supporting Schedules |
 23
Appendix I –
Adjusted Gross Profit
and Operating Profit
(1) All periods restated for 2011 divestiture of Aerospace. Adjustments to
operating profit are further described in the Company’s earnings releases and
SEC filings for the applicable periods.
FY'01
FY'02
FY'03
FY'04
FY'05
FY'06
FY'07
FY'08
FY'09
FY'10
1H '11
FY'11
1H '12
Sales
5,661.5
$
5,891.0
$
4,779.6
$
5,274.5
$
3,036.1
$
6,146.9
$
3,099.7
$
Gross profit
1,344.4
$
1,353.9
$
1,077.1
$
1,207.6
$
696.7
$
1,407.4
$
707.1
$
Inventory adjustment
-
2.0
4.2
-
-
-
-
Gross profit, adjusted
1,344.4
$
1,355.9
$
1,081.3
$
1,207.6
$
696.7
$
1,407.4
$
707.1
$
Gross profit margin, adjusted
23.7%
23.0%
22.6%
22.9%
22.9%
22.9%
22.8%
Gross profit margin, reported
23.7%
23.0%
22.5%
22.9%
22.9%
22.9%
22.8%
Operating profit
102.0
$
87.2
$
88.1
$
127.7
$
175.4
$
317.3
$
402.7
$
341.5
$
84.8
$
267.2
$
169.5
$
362.8
$
176.6
$
Restructuring
31.7
-
-
5.2
-
-
-
8.1
5.7
-
5.3
5.3
-
Europe goodwill impairment
-
-
-
1.8
-
-
-
-
100.0
-
-
-
-
Receivable losses from customer
bankruptcies
-
-
-
-
-
-
-
24.1
-
-
-
-
-
Inventory adjustment
-
-
-
(10.2)
-
-
-
2.0
4.2
-
-
-
-
Stock-based compensation modification
-
-
-
-
-
-
-
4.2
-
-
-
-
-
Sales tax related settlement
-
-
-
-
-
(2.2)
-
-
-
-
-
-
-
Amortization of Goodwill
9.0
-
-
-
-
-
-
-
-
-
-
-
-
Total adjustments
40.7
-
-
(3.2)
-
(2.2)
-
38.4
109.9
-
5.3
5.3
-
Operating profit, adjusted
142.7
$
87.2
$
88.1
$
124.5
$
175.4
$
315.1
$
402.7
$
379.9
$
194.7
$
267.2
$
174.8
$
368.1
$
176.6
$
Adjusted operating profit margin
7.1%
6.4%
4.1%
5.1%
5.8%
6.0%
5.7%
Operating profit leverage (1)
14.6%
11.6%
2.7%
Gross profit pull through (1)
57.4%
50.5%
16.3%
Adjustment to gross profit
Adjustments to operating profit |
 24
Acronyms
Appendix II –
Acronyms and Definitions
•
ECS
–
Enterprise Cabling and Security Solutions
•
W&C
–
Electrical and Electronic Wire and Cable
•
OEM
–
Original Equipment Manufacturer
•
EPS
–
Diluted earnings per share, continuing operations
•
EBITDA
–
Earnings before interest, taxes, depreciation, and amortization
•
TTM
–
Trailing twelve months
•
Cap ex
–
Capital expenditures
•
Forex
–
Foreign exchange
•
Q
-
Quarter
•
1H
–
First half
•
2H
–
Second half
•
FY
–
Fiscal year
•
YOY
–
Year-over-year
•
FCF
–
Free Cash Flow
•
SKU
–
Stock keeping unit
•
AXE
–
Anixter International Inc.
•
GAAP
–
Generally Accepted Accounting Principles
•
Total operating margin
is defined as operating income as a percentage of total sales
•
Operating
profit
leverage
is
defined
as
the
change
in
operating
profit
over
the
change
in
sales
•
Gross profit margin
is defined as gross profit as a percentage of total sales
•
Cash flow
is defined as net cash provided by (used in) operating activities less capital
expenditures •
Cash flow from operations
is defined as total cash provided from operating activities
•
Working
capital
is
defined
as
total
current
assets
less
total
current
liabilities
•
Free cash flow
is defined as adjusted EBITDA less capital expenditures, cash paid for taxes, cash
paid for interest plus the
change in working capital
Definitions |
 25
2009
In
the
six
months
ended
July
3,
2009,
the
Company
reported
a
net
loss
from
continuing
operations
of
$72.9
million
(a
loss
of
$2.06
per
diluted share). During this period, the Company recorded an impairment charge of
$100.0 million ($2.85 per diluted share), severance charge
of
$5.7
million
($3.9
million
net
of
tax,
or
$0.11
per
diluted
share)
and
losses
due
to
the
cancellation
of
interest
rate
swaps
of
$2.1
million
($1.5
million
net
of
tax,
or
$0.04
per
diluted
share).
These
items
decreased
net
income
from
continuing
operations
for
the
six months ended July 3, 2009 by a combined $105.4 million ($2.90 per diluted
share). For
the
full
year
2009,
the
Company
reported
a
net
loss
from
continuing
operations
of
$44.1
million
(a
loss
of
$1.17
per
diluted
share).
In addition to the items above, during the remainder of 2009, the Company recorded
foreign exchange related losses in Venezuela of $18.0 million ($9.0 million
net of tax, or $0.24 per diluted share) and a loss on the early retirement of debt of $1.1 million ($0.07 net of
tax,
or
$0.02
per
diluted
share),
which
were
partially
offset
by
the
tax
benefits
of
$4.8
million
($0.13
per
diluted
share).
Combined,
all
of these items decreased 2009 net income from continuing operations by $110.2
million ($3.06 per diluted share). After adjusting for these items, net income
from continuing operations would have been $32.5 million and $66.1 million in
the 6 and 12 months of fiscal 2009, respectively ($0.84 and $1.89 per diluted share,
respectively). 2010
In the six months ended July 2, 2010, the Company reported net income from
continuing operations of $34.8 million ($0.98 per diluted share).
During
this
period,
the
Company
recorded
a
pre-tax
loss
on
the
early
retirement
of
debt
of
$29.7
million
($18.4
million
net
of
tax,
or
$0.51
per
diluted
share)
and
a
foreign
exchange
gain
in
Venezuela
of
$2.1
million
($0.8
million
net
of
tax,
or
$0.02
per
diluted
share). These items decreased 2010 net income from continuing operations by
a combined $17.6 million ($0.49 per diluted share). For the full year 2010,
the Company reported net income from continuing operations of $109.5 million ($3.08 per diluted share). In
addition to the items above, during the remainder of 2010, the Company recorded
additional pre-tax losses on the early retirement of debt of $2.2
million ($1.4 million net of tax, or $0.04 per diluted share) and recorded a reversal of prior years foreign taxes of $1.3
million
($0.03
per
diluted
share).
Combined,
all
of
these
items
decreased
2010
net
income
from
continuing
operations
by
$17.7
million
($0.50 per diluted share).
After adjusting for these items, net income from continuing operations would have
been $52.4 million and $127.2 million in the 6 and 12 months of fiscal 2010,
respectively ($1.47 and $3.58 per diluted share, respectively). Appendix III
– Non-GAAP
Earnings Per Share |
 26
2011
In the 6 and 12 months ended 2011, the Company reported net income from continuing
operations of $89.3 million and $200.7 million, respectively
($2.47
and
$5.71
per
diluted
share,
respectively).
In
the
first
half
of
2011,
the
Company
recorded
a
European
restructuring charge of $5.3 million ($3.3 million net of tax, or $0.09 per
diluted share). In addition to the restructuring charge, the Company
recorded a tax valuation allowance adjustment of $10.8 million ($0.31 per diluted share) during the second half of the year.
Combined, all of these items increased 2011 net income from continuing operations
by a combined $7.5 million ($0.22 per diluted share).
After adjusting for these items, net income from continuing operations would have
been $92.6 million and $193.2 million in the 6 and 12 months of fiscal 2011,
respectively ($2.56 and $5.49 per diluted share, respectively). 2012
In the first half of 2012, the Company reported net income from continuing
operations of $99.6 million ($2.90 per diluted share). During this period,
the Company recorded a charge for the interest and penalties associated with prior year income tax liabilities of $1.7
million ($1.1 million net of tax, or $0.03 per diluted share), an income tax
benefit of $9.7 million ($0.28 per diluted share) primarily related
to
the
reversal
of
deferred
income
tax
valuation
allowances
in
certain
foreign
jurisdictions
and
incremental
interest
of
$3.2
million ($2.1 million net of tax, or $0.06 per diluted share) associated with a
bond offering completed in 2012. These items increased net income
from continuing operations by a net amount of $6.5 million ($0.19 per diluted share).
After adjusting for these items, net income from continuing operations would have
been $93.1 million ($2.71 per diluted share).
Appendix III –
Non-GAAP
Earnings Per Share (cont.) |
 27
In the trailing twelve months ending June 29, 2012, the Company recorded a charge
for the interest and penalties associated with 2011
income
tax
liabilities
of
$1.7
million
($1.1
million
net
of
tax,
or
$0.03
per
diluted
share),
income
tax
benefits
of
$20.5
million
($0.59
per
diluted
share)
primarily
related
to
the
reversal
of
deferred
income
tax
valuation
allowances
in
certain
foreign
jurisdictions
and
incremental interest of $3.2 million ($2.1 million net of tax, or $0.06 per
diluted share) associated with a bond offering completed in 2012.
These items increased net income from continuing operations by a net amount of $17.3 million ($0.50 per diluted share).
In the trailing twelve months ending July 1, 2011, the $5.3 million restructuring
charge decreased operating income by $5.3 and net income from continuing
operations by $3.3 million, or $0.09 per diluted share. The Company also repurchased a portion of its debt
which
resulted
in
the
recognition
of
a
pre-tax
loss
of
$2.2
million
($1.4
million,
net
of
tax,
or
$0.04
per
diluted
share)
and
recorded
a
tax
benefit of $1.3 million for the reversal of prior year foreign taxes ($0.03 per
diluted share). After adjusting for these items, net income from continuing
operations over the trailing twelve months ending June 29, 2012 would have
been $193.7 million, or $5.64 per diluted share, which compares to adjusted net income from continuing operations of $167.4
million, or $4.67 per diluted share, in the corresponding prior year period (an
increase of 21% per diluted share). Appendix IV –
Non-GAAP Trailing
Twelve Months Results |
  28
Appendix V -
2011 Segment and End Market
Sales Growth (Actual and Organic)
Twelve Months
Twelve Months
Ended
Ended
Twelve Months
(In millions)
December 2011
Acquisition
Foreign Exchange
Copper
December 2011
Ended
Actual
Organic
(as reported)
Impact
Impact
Impact
(as adjusted)
December 2010
Growth
Growth
North America
Enterprise Cabling and Security
2,301.6
$
(120.1)
$
(11.4)
$
-
$
2,170.1
$
2,060.7
$
11.7%
5.3%
Wire & Cable
1,579.6
-
(21.9)
(93.4)
1,464.3
1,288.6
22.6%
13.6%
OEM Supply
421.3
-
(0.2)
-
421.1
351.9
19.7%
19.7%
Total North America
4,302.5
$
(120.1)
$
(33.5)
$
(93.4)
$
4,055.5
$
3,701.2
$
16.2%
9.6%
Europe
Enterprise Cabling and Security
380.8
$
-
$
(18.6)
$
-
$
362.2
$
367.0
$
3.7%
-1.4%
Wire & Cable
299.7
-
(10.3)
(10.9)
278.5
275.6
8.8%
1.1%
OEM Supply
469.5
-
(19.1)
-
450.4
365.8
28.3%
23.1%
Total Europe
1,150.0
$
-
$
(48.0)
$
(10.9)
$
1,091.1
$
1,008.4
$
14.0%
8.2%
Emerging Markets
Enterprise Cabling and Security
563.5
$
-
$
(14.3)
$
-
$
549.2
$
484.9
$
16.2%
13.2%
Wire & Cable
70.2
-
(0.5)
-
69.7
38.3
83.1%
81.8%
OEM Supply
60.7
(1.1)
-
59.6
41.7
45.8%
43.2%
Total Emerging Markets
694.4
$
-
$
(15.9)
$
-
$
678.5
$
564.9
$
22.9%
20.1%
Anixter International
Enterprise Cabling and Security
3,245.9
$
(120.1)
$
(44.3)
$
-
$
3,081.5
$
2,912.6
$
11.4%
5.8%
Wire & Cable
1,949.5
-
(32.7)
(104.3)
1,812.5
1,602.5
21.7%
13.1%
OEM Supply
951.5
-
(20.4)
-
931.1
759.4
25.3%
22.6%
Total Anixter International
6,146.9
$
(120.1)
$
(97.4)
$
(104.3)
$
5,825.1
$
5,274.5
$
16.5%
10.4%
Adjustments for:
YTD 2011 Sales Growth |