Anixter International Inc. Reports First Quarter Net Income of $1.23 Per Diluted Share, Including a European Restructuring Charge of $0.09 Per Share, on Sales of $1.52 Billion

GLENVIEW, Ill., April 26, 2011 /PRNewswire/ -- Anixter International Inc. (NYSE: AXE), a leading global distributor of communication and security products, electrical and electronic wire & cable, fasteners and other small parts, today reported results for the quarter ended April 1, 2011.

• Sales increased 19 percent from the prior year period to $1.52 billion.
• Operating income increased 46 percent year-on-year, inclusive of a current quarter European restructuring charge of $5.3 million.  Excluding this charge operating income increased 55 percent.
• Net income increased by $38.4 million year-on-year, inclusive of a current quarter after-tax European restructuring charge of $3.3 million and a prior year after-tax loss on early debt retirement of $18.9 million.  Excluding these two items, net income increased $22.8 million or 92 percent.

First Quarter Sales Trends  

Commenting on first quarter sales trends, Robert Eck, President and CEO, stated, "The stronger-than-expected pace of this recovery not only fueled higher sales growth than we anticipated, but it also was strong enough to overcome the historical patterns that typically produce relatively flat sequential sales from the fourth quarter to the first quarter. In addition to the better-than-expected year-on-year sales increase of 19 percent, we also experienced a nearly six percent sequential increase in sales, which included $29.5 million of sales from our December 2010 acquisition of Clark Security Products. Consistent with the trends we have experienced in the last few quarters, higher copper prices added approximately $25.2 million or approximately two percent of revenues in the first quarter compared to the prior year quarter. The continued strengthening of foreign currencies also accounted for an additional $20.0 million or approximately two percent of revenues."

"We are very pleased with the well-balanced sales performance across all reporting segments with North America, Europe and Emerging Markets all delivering excellent year-on-year sales increases ranging between 15 and 27 percent," continued Eck. "Sales growth by end market was also robust, with the biggest improvement coming from the Electrical Wire & Cable end market. In that end market, new project bookings continue to be strong while the benefit of the project activity booked over the past couple of quarters helped produce first quarter billings that were up 31 percent year-on-year. The OEM Supply end market increased by 21 percent during the first quarter while the Enterprise Cabling and Security end market grew by 12 percent, with approximately one-third of that growth coming from the Clark acquisition."

First Quarter Operating Results

"Strong momentum in year-on-year operating profit growth was driven by the fifth sequential quarter of sales growth coupled with a favorable mix and prudent gross margin management," commented Eck. "Specifically, first quarter operating margin reached its highest level since 2008.  Excluding the previously mentioned European restructuring charge, a 40 basis point improvement in gross margin combined with a strong 90 basis point improvement in operating expense leverage due to higher sales, driving operating margin to 5.8 percent, its highest level in ten quarters. An improvement in overall sales mix by end market largely drove the higher gross margin while the increased volume drove improved fixed cost leverage. As expected, incremental operating profit of 13 percent on the increased year-on-year sales, excluding the restructuring charge, is indicative of our disciplined balance between investing for growth while delivering productivity in our cost structure."

"First quarter operating expenses of $264.3 million, excluding the above-mentioned restructuring charge, represented 17.4 percent of sales compared to 18.3 percent in the prior year quarter," continued Eck. "Excluding the impact of the Clark acquisition, exchange rates and the restructuring item, year-on-year operating expenses increased by only $19.6 million or 8 percent, on a 13 percent organic increase in sales, demonstrating the leverage in our operating structure. Expense increases were primarily volume related."

Company-wide operating margin improved to 5.5 percent from 4.5 percent in the year ago quarter. However, excluding the restructuring charge the current quarter, operating margin improved by 130 basis points to 5.8 percent in the current quarter.  Sequentially, operating margin improved by 10 basis points, excluding the restructuring charge in the current quarter and the unfavorable arbitration award in the previous quarter. Both year-on-year and sequential improvements benefited from a stronger sales mix coupled with sales-driven operating leverage from the company's cost structure.

North America operating margin improved from 5.7 percent in the year ago quarter to 7.1 percent in the current quarter. This 140 basis point improvement was driven by a richer sales mix and operating expense leverage on higher sales volumes, with a 70 basis point improvement in gross margin and a 70 basis point improvement in operating expenses as a percent of sales. This resulted in a 14.4 percent incremental operating profit on the increased year-on-year sales. Sequentially, operating profit margin was flat, excluding the arbitration award in the previous quarter.

Europe operating profit was break-even for the quarter, including the restructuring charge, compared to a profit of $0.5 million in the year ago quarter. Excluding the restructuring charge to rationalize the European cost structure, operating profit in the current quarter was $5.3 million, which was its highest level in ten quarters. The operating margin in the current quarter, excluding this charge, was 1.8 percent compared to 0.2 percent in the year ago quarter. This improvement in operating margin was driven by the 40 basis point improvement in gross margin year-on-year combined with the 120 basis point improvement in operating expense as a percent of sales. Excluding the restructuring charge in the current quarter, operating profit margin improved by 180 basis points on a sequential basis.  

Emerging Markets operating margin of 4.6 percent in the current quarter was flat year-on-year. Sequentially, operating margin declined from 6.4 percent to 4.6 percent. Consistent with prior years, this decline was primarily driven by the normal sales seasonality in this segment from the fourth quarter to the first quarter as well as continued investments in the Electrical Wire & Cable end market and the addition of new Emerging Markets locations.

Cash Flow and Leverage

"Due to the incremental working capital requirements to support 19 percent sales growth in the current quarter, net cash used in operations was $5.5 million," commented Dennis Letham, Executive Vice President-Finance. "In the prior year quarter, cash flow generated from operations was $74.7 million, but that was in the context of flat sales and continuing working capital reductions. Going forward, we expect to see lower year-on-year cash flow generation as we continue to fund the working capital requirements of a growing business."  

"During the most recent quarter we retired $21.2 million in accreted value of our 3.25% zero coupon convertible notes," said Letham. "We refinanced our revolving credit agreement in early April, increasing the size of the facility to $400 million with a new maturity date of April 2016. The financial leverage of 47.4 percent at the end of the current quarter is comfortably in our longstanding target range of 45 to 50 percent. Our strong balance sheet allows us the flexibility to further reduce the outstanding amount of the 3.25% zero coupon convertible notes utilizing available capacity in our bank revolving lines of credit while enabling us to pursue strategic acquisition opportunities when they arise."

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

• Quarter-end debt-to-total capital ratio of 47.4 percent compared to 46.9 percent at the end of 2010
• Invested cash of $65.4 million at the end of the current quarter, up from $46.0 million at the end of 2010
• First quarter weighted average cost of borrowed capital of 5.2 percent compared to 7.4 percent in the year ago quarter
• 61 percent of quarter-end borrowings have fixed interest rates, either by terms of the borrowing agreement or through hedging contracts
• $184.6 million of availability under bank revolving lines of credit at the end of the first quarter ($234.6 million after consideration of the recently completed refinancing of the revolving credit agreement)
• $200.0 million of outstanding borrowings under the $200.0 million account receivable securitization facility at quarter end

Business Outlook

Eck commented, "The strong first quarter sales results position us very well to continue to leverage the improving economy with our enhanced competitive position. The moderately improving economic fundamentals seen globally over the past few quarters provide both opportunities and challenges for the balance of 2011. Assuming there are no major shocks to the macro economy within the U.S. or international markets, we believe that we should continue to drive growth at both the top and bottom line, albeit at somewhat lower year-on-year growth rates as we begin to experience more difficult growth comparisons starting with the second quarter. Nevertheless, we believe that a combination of improving economic conditions and our own strategic growth initiatives positions us well to achieve both strong sales growth and operating leverage in the coming year."

"Overall, our strategic growth initiatives should continue to improve our market share positions across all end markets and geographic segments while maintaining or improving gross margin. Specifically, we expect our growth to be fueled by adding new products to our portfolio where appropriate; developing an end market presence in either Electrical Wire & Cable or OEM Supply in countries where our current presence is large but limited primarily to the Enterprise Cabling and Security Solutions end market; and selectively expanding our geographic presence in countries such as Brazil and China, where our current presence is largely confined to the capital or the principal business city. We are also excited about both the strong sales synergies and operating leverage opportunities that we are experiencing as we continue to integrate the Clark Security Products acquisition into our growing Enterprise Cabling and Security Solutions business, providing another business driver in the quarters ahead," Eck concluded.

First Quarter Earnings Report

Anixter will broadcast a conference call discussing these results at 9:30 am central time on Tuesday, April 26, 2011.  The call will be Webcast by CCBN and can be accessed at the investor relations portion of Anixter's Website at www.anixter.com.  The Webcast also will be available over CCBN's Investor Distribution Network to both institutional and individual investors.  Individual investors can listen to the call through CCBN's individual investor center at www.companyboardroom.com, or by visiting any of the investor sites in CCBN's Individual Investor Network (such as America Online's Personal Finance Channel and Fidelity.com).  Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (www.streetevents.com).  The Webcast will be archived on all of these sites for 30 days.

About Anixter

Anixter International is a leading global distributor of communication and security products, electrical and electronic wire & cable, fasteners and other small parts.  The company adds value to the distribution process by providing its customers access to 1) innovative inventory management programs, 2) more than 450,000 products and over $1.0 billion in inventory, 3) 226 warehouses with approximately 7.0 million square feet of space, and 4) locations in 266 cities in 51 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 news release 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 the company's 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, 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, potential impairment of goodwill 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 the company's Securities and Exchange Commission filings for more information.

Additional information about Anixter is available on the Internet at www.anixter.com

SOURCE Anixter International Inc.

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