Anixter International Inc. (AXE) filed Quarterly Report for the period ended 2009-10-02.
Anixter International Inc. is a leading global distributor of communication products used in building enterprise and service provider data voice and video networks. In addition Anixter is a leading distributor of specialty wire and cable products to original equipment manufacturers and to industrial companies for maintenance and repair operations. Anixter International Inc. has a market cap of $1.52 billion; its shares were traded at around $43.05 with a P/E ratio of 15.8 and P/S ratio of 0.2. Anixter International Inc. had an annual average earning growth of 13% over the past 10 years. GuruFocus rated Anixter International Inc. the business predictability rank of 2-star.
Highlight of Business Operations:
In August of 2008, the Company acquired the assets and operations of QSN Industries, Inc. (“QSN”) and all of the outstanding shares of Quality Screw de Mexico SA (“QSM”). QSN is based near Chicago, Illinois and QSM is based in Aguascalientes, Mexico. In the fiscal month of September 2008, the Company acquired all of the outstanding shares of Sofrasar SA (“Sofrasar”) and partnership interests and shares in Camille Gergen GmbH & Co, KG and Camille Gergen Verwaltungs GmbH (collectively “Gergen”) from the Gergen family and management of the entities. Sofrasar is headquartered in Sarreguemines, France and Gergen is based in Dillingen, Germany. In October of 2008, the Company acquired all the assets and operations of World Class Wire & Cable Inc. (“World Class”), a Waukesha, Wisconsin based distributor of electrical wire and cable. The Company paid approximately $180.6 million in cash and assumed approximately $17.4 million in debt for the five companies. As a result of these acquisitions, sales were favorably affected in the 13 and 39 weeks ended October 2, 2009 by $23.4 million and $109.8 million, respectively, while operating income was negatively affected by $0.5 million and $2.4 million, respectively.
Liquidity continues to be an area of intense focus throughout the investment community and the Company believes it has a strong liquidity position, sufficient to meet its liquidity requirements for the ensuing twelve months. During the 39 weeks ended October 2, 2009, the Company generated $393.6 million of cash flow from operations which, along with $180.4 million of net proceeds from the issuance of $200 million principal amount of 10% Senior Notes due 2014 (“Notes due 2014”), was used to fund capital expenditures of $17.8 million, reduce borrowings by $227.2 million and repurchase 1.0 million shares of common stock for $34.9 million. As of October 2, 2009, the Company’s debt-to-total capital ratio was 46.2%, within our target range of 45% to 50%. Certain debt agreements entered into by the Company’s operating subsidiaries contain various restrictions, including restrictions on payments to the Company. These restrictions have not had, nor are expected to have, an adverse impact on the Company’s ability to meet its cash obligations. During the third quarter of 2009, the Company’s primary operating subsidiary, Anixter Inc., amended its revolving credit agreement and renewed its accounts receivable securitization program.
Net cash used for financing activities was $273.5 million in the 39 weeks ended October 2, 2009 compared to net cash provided by financing activities of $66.2 million in the corresponding period in 2008. In the 39 weeks ended October 2, 2009 the Company received net proceeds of $180.4 million from the issuance of the Notes due 2014 (net of deferred financing costs of $4.8 million associated with the offering). Using the proceeds from the note offering together with $393.6 million of cash generated from operations during the first nine months of 2009, the Company reduced borrowings by $227.2 million (primarily short term borrowings) and repurchased 1.0 million shares of common stock for $34.9 million. In the corresponding period in the prior year, the Company increased borrowings, primarily bank revolving lines of credit and borrowings under the accounts receivable securitization facility by $152.1 million and repurchased approximately 1.7 million shares of common stock for $104.6 million. The 39 weeks ended September 26, 2008 include $10.2 million of cash from the excess income tax benefit associated with employee stock plans. Proceeds from the issuance of common stock relating to the exercise of stock options were $1.2 million in the 39 weeks ended October 2, 2009 compared to $9.7 million in the corresponding period in 2008.
Net Sales: The Company’s net sales during the third quarter of 2009 decreased $316.6 million, or 19.9%, to $1,273.0 million from $1,589.6 million in the same period in 2008. Unfavorable effects of foreign exchange rates and lower copper prices accounted for $42.6 million and $42.0 million of the decrease, respectively, while acquisitions contributed $23.4 million to sales. Excluding these items, the Company’s net sales decreased $255.4 million, or approximately 16.1%, in the third quarter of 2009 as compared to the corresponding period in the prior year. All geographic segments, as well as all end markets (enterprise cabling, electrical wire and cable and OEM supply) reported year-on-year sales declines.
Net Sales: When compared to the third quarter of 2008, North America net sales in the third quarter of 2009 decreased 17.0% to $928.5 million in the third quarter of 2009 from $1,118.4 million. Excluding the incremental sales of $13.4 million as a result of the acquisitions of QSN and World Class, the unfavorable effects of foreign exchange rate changes of $10.4 million and unfavorable effects of copper prices of $39.2 million, North America net sales were $964.7 million in the 13 weeks ended October 2, 2009, which represents a decrease of $153.7 million, or approximately 13.8%, over the 13 weeks ended September 26, 2008. The decrease in sales is primarily the result of lower project volume in both the enterprise cabling and wire and cable end markets due to constrained capital conditions in the current recessionary environment. Also contributing to the negative sales comparisons were lower OEM supply sales primarily due to lower sales to aerospace customers.
Net Sales: When compared to the third quarter of 2008, Europe net sales decreased 33.0% to $219.8 million in the third quarter of 2009, including $24.0 million due to unfavorable foreign exchange rate changes and $2.8 million due to copper prices. Acquisitions added $9.5 million to sales in the third quarter of 2009 compared to the corresponding period in the prior year. Excluding acquisitions, copper prices and the unfavorable effects of foreign exchange rate changes, Europe net sales were $237.1 million in the third quarter of 2009, which represents a decrease of $91.0 million, or approximately 27.8%, over the third quarter of 2008. The decrease in sales is primarily the result of lower project volume in both the enterprise cabling and wire and cable end markets due to constrained capital conditions in the current recessionary environment. Also contributing to the negative sales comparisons were lower industrial production volumes which resulted in lower OEM supply sales as compared to the corresponding period in the prior year.
AXE is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, David Dreman of Dreman Value Management, Kenneth Fisher of Fisher Asset Management, LLC, David Einhorn of Greenlight Capital Inc.
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