10-Q 1 0001.txt FOR THE PERIOD ENDED SEPTEMBER 29, 2000 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 29, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-5989 ANIXTER INTERNATIONAL INC. (Exact name of registrant as specified in its charter) Delaware 94-1658138 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4711 Golf Road Skokie, Illinois 60076 (847) 677-2600 (Address and telephone number of principal executive offices) 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 X No At November 2, 2000, 37,550,510 shares of the registrant's Common Stock, $1.00 par value, were outstanding. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings * Item 2. Changes in Securities * Item 3. Defaults Upon Senior Securities * Item 4. Submission of Matters to a Vote of Security Holders * Item 5. Other Information * Item 6. Exhibits and Reports on Form 8-K 12 12 * No reportable information under this item. This report 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, which 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 could also 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. PART I. FINANCIAL INFORMATION Item 1. Financial Statements
ANIXTER INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In millions, except per share amounts) For the 13 Weeks Ended For the 39 Weeks Ended -------------------------------------- --------------------------------------- September 29, October 1, September 29, October 1, 2000 1999 2000 1999 ----------------- ---------------- ----------------- ----------------- Net sales $ 955.9 $ 710.4 $ 2,606.5 $ 1,964.0 Cost of goods sold 754.1 548.5 2,038.1 1,496.9 ----------------- ---------------- ----------------- ----------------- Gross profit 201.8 161.9 568.4 467.1 Operating Expenses 145.8 126.9 420.8 377.8 Amortization of goodwill 2.1 1.8 6.2 5.6 ----------------- ---------------- ----------------- ----------------- Operating income 53.9 33.2 141.4 83.7 Interest expense (12.5) (8.9) (33.9) (25.0) Foreign exchange and other, net (0.5) (0.1) 0.3 (0.2) ----------------- ---------------- ----------------- ----------------- Income before income taxes 40.9 24.2 107.8 58.5 Income tax expense 16.9 (14.1) 45.0 0.3 ----------------- ---------------- ----------------- ----------------- Income from continuing operations 24.0 38.3 62.8 58.2 Discontinued operations: Income (loss) from discontinued operations, net of tax - (0.6) - (1.1) Gain on disposal of discontinued operations, net of tax - 6.5 - 52.4 ----------------- ---------------- ----------------- ----------------- Net income $ 24.0 $ 44.2 $ 62.8 $ 109.5 ================= ================ ================= ================= Basic income per share: Continuing operations $ 0.65 $ 1.06 $ 1.73 $ 1.53 Discontinued operations - 0.17 - 1.35 ----------------- ---------------- ----------------- ----------------- Net income $ 0.65 $ 1.23 $ 1.73 $ 2.88 ================= ================ ================= ================= Diluted income per share: Continuing operations $ 0.59 $ 1.04 $ 1.63 $ 1.52 Discontinued operations - 0.16 - 1.33 ----------------- ---------------- ----------------- ----------------- Net income $ 0.59 $ 1.20 $ 1.63 $ 2.85 ================= ================ ================= =================
See accompanying notes to the condensed consolidated financial statements.
ANIXTER INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) September 29, December 31, ASSETS 2000 1999 --------------- --------------- (Unaudited) Current assets: Cash $ 18.4 $ 17.5 Accounts receivable (less allowances of $17.0 and $10.3 in 2000 and 1999, respectively) 725.5 537.5 Inventories 860.6 536.4 Deferred income taxes 20.0 18.2 Other current assets 11.7 11.5 --------------- --------------- Total current assets 1,636.2 1,121.1 Property and equipment, at cost 160.4 158.6 Accumulated depreciation (108.4) (105.5) --------------- --------------- Property and equipment, net 52.0 53.1 Goodwill (less accumulated amortization of $84.6 and $78.4 in 2000 and 1999, respectively) 233.2 229.1 Other assets 41.3 31.4 --------------- --------------- $ 1,962.7 $ 1,434.7 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 539.6 $ 340.4 Accrued expenses 135.3 131.2 Income taxes payable 15.4 6.0 --------------- --------------- Total current liabilities 690.3 477.6 Other liabilities 35.7 32.7 Long-term debt 513.6 468.0 Zero-coupon convertible notes 203.6 - --------------- --------------- Total liabilities 1,443.2 978.3 Stockholders' equity: Common stock 37.3 35.9 Accumulated other comprehensive income (54.6) (37.6) Retained earnings 536.8 458.1 --------------- --------------- 519.5 456.4 --------------- --------------- $ 1,962.7 $ 1,434.7 =============== ===============
See accompanying notes to the condensed consolidated financial statements.
ANIXTER INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) 39 Weeks Ended ----------------------------------------- September 29, October 1, 2000 1999 ----------------- ----------------- Operating activities Net income $ 62.8 $ 109.5 Adjustments to reconcile income from continuing operations to net cash provided by continuing operating activities: Income from discontinued operations - (51.3) Depreciation and amortization 20.3 20.0 Deferred income taxes (2.0) (28.3) Changes in current assets and liabilities, net (307.8) (104.1) Other, net 0.6 0.8 ----------------- ----------------- Net cash used in continuing operating activities (226.1) (53.4) Investing activities Capital expenditures (13.2) (12.8) Acquisitions and divestitures (3.7) - Other - 0.9 ----------------- ----------------- Net cash used in continuing investing activities (16.9) (11.9) Financing activities Proceeds from long-term borrowings 1,155.9 728.5 Repayment of long-term borrowings (903.0) (714.9) Proceeds from issuance of common stock 30.8 7.0 Purchases of common stock for treasury (15.4) (85.6) Debt issuance costs (6.4) - Other, net (6.2) (5.5) ----------------- ----------------- Net cash provided by (used in) continuing financing activities 255.7 (70.5) Cash (used in) provided by discontinued operations (11.8) 131.0 ----------------- ----------------- Increase (decrease) in cash 0.9 (4.8) Cash at beginning of period 17.5 20.5 ----------------- ----------------- Cash at end of period $ 18.4 $ 15.7 ================= =================
See accompanying notes to the condensed consolidated financial statements. ANIXTER INTERNATIONAL INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies Basis of Consolidation and Presentation The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in Anixter International Inc.'s ("the Company") Annual Report on Form 10-K for the year ended December 31, 1999. The condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the condensed consolidated financial statements for the periods shown. The results of operations of any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. Certain amounts for the prior year have been reclassified to conform to the 2000 presentation. Accounts Receivable Securitization Program In the fourth quarter of 2000, the Company entered into a $275 million accounts receivable securitization program. The program is conducted through a special purpose corporation which is a wholly-owned unconsolidated subsidiary of the Company. The program is secured by accounts receivable originating in the United States and consists of a series of 364-day facilities. Initially, $257 million of the securitized accounts receivable will be removed from the balance sheet. The proceeds were used to reduce outstanding debt. A non-operating charge of approximately $9 million, primarily relating to the discount on the sale of the accounts receivable to the wholly- owned special purpose corporation will be recorded at inception of the program in the fourth quarter. The Company expects to substantially recover the charge during the course of the program. Recently Issued Accounting Pronouncements In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of SFAS No. 133." These statements outline the accounting treatment for all derivative activity. The Company is required to and will adopt these standards in the first quarter of fiscal 2001, but does not expect adoption to have a significant effect on its consolidated results of operations or financial position. On December 3, 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin ("SAB") No. 101. SAB No. 101 reflects the basic principles of revenue recognition. The Company is required to and will adopt SAB No. 101 in the fourth quarter of fiscal 2000. The adoption will not have a significant effect on the consolidated results of operations or financial position. ANIXTER INTERNATIONAL INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 2. Income per Share The following table sets forth the computation of basic and diluted income per common share from continuing operations (In thousands, except per share amounts):
13 weeks ended 39 weeks ended September 29, October 1, September 29, October 1, 2000 1999 2000 1999 Basic EPS: Income from continuing operations $ 24,055 $ 38,273 $ 62,848 $ 58,197 (numerator) Weighted-average common shares Outstanding (denominator) 36,975 36,026 36,321 37,978 Basic EPS $ .65 $ 1.06 $ 1.73 $ 1.53 Diluted EPS: Income from continuing operations $ 24,055 $ 38,273 $ 62,848 $ 58,197 Interest impact of assumed conversion of convertible notes 2,056 -- 2,101 -- Income from continuing operations plus assumed conversion (numerator) $ 26,111 $ 38,273 $ 64,949 $ 58,197 Weighted-average common shares outstanding 36,975 36,026 36,321 $ 37,978 Effect of dilutive securities: Stock options, warrants and convertible notes 7,519 887 3,450 425 Weighted-average common shares outstanding (denominator) 44,494 36,913 39,771 38,403 Diluted EPS $ .59 $ 1.04 $ 1.63 $ 1.52
Note 3. Comprehensive Income For the 13 and 39 weeks ended September 29, 2000, total comprehensive income amounted to $17.5 million and $45.8 million, respectively. For the 13 and 39 weeks ended October 1,1999, total comprehensive income was $44.8 million and $113.0 million, respectively. The difference between net income and comprehensive income is the change in cumulative translation adjustments. Note 4. Discontinued Operations 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 sale of the North American Integration business was completed on April 2, 1999, following the sale of the European Integration business in the fourth quarter of 1998. Total proceeds received were $215.8 million. This resulted in a one-time after-tax gain of $45.9 million, which is net of $11.0 million of costs associated primarily with the closing of selected Latin American and Asian Integration locations and severance costs associated with staff reductions necessitated by discontinuing the Integration segment. In the third quarter of 1999, the Company recorded an additional after-tax net curtailment gain of $2.5 million. The gain resulted from the net decrease in the Company's pension benefit obligation for employees affected by the sale of the North American Integration business. The Company also recognized a tax benefit of $8.4 million resulting from the reversal of certain tax liabilities associated with prior years' reported sales of discontinued assets. In addition, a $4.4 million net loss was recorded for the write-down of certain assets held for sale sold in the fourth quarter of 1999. Integration net sales were $12.5 million and $190.4 million for the 13 and 39 weeks ended October 1,1999, respectively. Interest expense was allocated to discontinued operations based on the percentage of total identifiable assets. Note 5. Acquisition and Divestiture of Businesses In the first quarter of 2000, the Company acquired 100% of the stock of allNET Technologies Pty Limited ("allNET") for $6.7 million. allNET is a structured cabling distributor located in Australia. In the third quarter of 2000, the Company sold the net assets of a wholly-owned subsidiary of Accu-Tech Corporation for $4.6 million. The effect of these transactions on the operating results of the Company was not significant. Note 6. Debt On June 28, 2000, the Company issued $792 million 7% zero-coupon convertible notes due 2020. The net proceeds from the issue were $193 million and was initially used to repay working capital borrowings under a floating rate bank line of credit which matures on September 6, 2001. The Company expects to reborrow such amounts under the line of credit from time to time for general corporate purposes. The discount associated with the issuance is being amortized through June 28, 2020 using the effective interest rate method. Issuance costs were $7 million and are being amortized through June 28, 2020 using the straight line method. On October 6, 2000, the Company entered into a new credit arrangement to replace the existing $550 million revolving credit agreement set to mature in 2001. The new agreement consists of a $500 million, senior unsecured, revolving credit line which includes a $390 million, five year agreement, plus a $110 million, 364 day agreement. Note 7. Summarized Financial Information of Anixter Inc. The Company has an approximate 99% ownership interest in Anixter Inc. at September 29, 2000, which is included in the consolidated financial statements of the Company. The following summarizes the financial information for Anixter Inc: ANIXTER INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) September 29, December 31, 2000 1999 Assets: (Unaudited) Current assets $ 1,630.4 $ 1,117.9 Property, net 52.0 53.1 Goodwill, net 233.3 229.1 Other assets 39.0 31.2 $ 1,954.7 $ 1,431.3 Liabilities and Stockholders' Equity: Current liabilities $ 677.6 $ 468.5 Other liabilities 30.9 27.8 Long-term debt 513.6 468.0 Subordinated notes payable to parent 240.1 19.1 Stockholders' equity 492.5 447.9 $ 1,954.7 $ 1,431.3
ANIXTER INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In millions) 13 weeks ended 39 weeks ended September 29, October 1, September 29, October 1, 2000 1999 2000 1999 Net sales $ 955.9 $ 710.4 $ 2,606.5 $ 1,938.9 Operating income $ 54.4 $ 33.5 $ 143.5 $ 85.2 Income before income taxes $ 40.8 $ 24.3 $ 109.3 $ 60.0 Income from continuing operations $ 23.0 $ 13.3 $ 61.6 $ 32.8 Income loss from discontinued operations, net of tax $ - $ (0.6) $ - $ (1.1) Gain on disposal of discontinued operations, net of tax $ - $ 2.6 $ - $ 48.5 Net income $ 23.0 $ 15.3 $ 61.6 $ 80.2
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion and analysis of the historical results of operations and financial condition of Anixter International Inc. (the "Company") and factors affecting the Company's financial resources. This discussion should be read in conjunction with the consolidated financial statements, including the notes thereto, set forth herein under "Financial Statements" and the Company's Annual Report on Form 10-K for the year ended December 31, 1999. This discussion contains forward-looking statements, which are qualified by reference to, and should be read in conjunction with, the Company's discussion regarding forward-looking statements as set forth in this report. Financial Liquidity and Capital Resources Cash Flow Consolidated net cash used in continuing operating activities was $226.1 million for the 39 weeks ended September 29, 2000 compared to $53.4 million used for the same period in 1999. Cash used in operating activities increased due to the increase in working capital required to support the growth in the business. Specifically, inventory has increased $324.2 million from December 1999 primarily in order to support the rapid growth in the service provider and integrated supply business. Consolidated net cash used in investing activities was $16.9 million for the 39 weeks ended September 29, 2000 versus $11.9 million for the same period in 1999. In the first quarter of 2000, the Company purchased a small structured cabling company in Australia for $6.7 million. In the third quarter of 2000, the Company sold the net assets of a wholly-owned U.S. subsidiary of its structured cabling business for $4.6 million in cash and notes receivable. Consolidated net cash provided by financing activities was $255.7 million for the 39 weeks ended September 29, 2000 in comparison to $70.5 million used in the corresponding 1999 period. The change is primarily the result of a net increase in long-term borrowings of $252.9 million to fund the increase in working capital. In 1999, long-term borrowings increased by $13.6 million. Treasury stock purchases for the 39 weeks ended September 29, 2000 were $15.4 million compared to $85.6 million in the corresponding 1999 period. The Company received $30.8 million in 2000 from the exercise of 1,813,311 stock options. Cash used for discontinued operations was $11.8 million in the 39 weeks ended September 29, 2000 compared to $131.0 million provided in the corresponding 1999 period. The 39 weeks ended October 1,1999 includes the cash received from the sale of the North American Integration business. Financings On June 28, 2000, the Company issued $792 million 7% zero-coupon convertible notes due 2020. The net proceeds from the issue were $193 million and was initially used to repay working capital borrowings under a floating rate bank line of credit which matures on September 6, 2001. The Company expects to reborrow such amounts under the line of credit from time to time for general corporate purposes. The discount associated with the issuance is being amortized through June 28, 2020 using the effective interest rate method. Issuance costs were $7 million and are being amortized through June 28, 2020 using the straight line method.On October 6, 2000, the Company entered into two new credit arrangements to support further business growth. The new agreements consist of a $500 million, senior unsecured, revolving credit agreement, and a $275 million accounts receivable securitization program. The new revolving credit line includes a $390 million, five-year agreement, plus a $110 million, 364-day agreement. These facilities replaced the existing $550 million revolving credit agreement set to mature in 2001. The new accounts receivable securitization program is conducted through a special purpose corporation that is wholly owned by the Company. The program will be secured by accounts receivable originating in the United States and consists of a series of 364-day facilities. Initially, $257 million of the securitized accounts receivable were sold and removed from the balance sheet. The proceeds were used to reduce outstanding debt. A non-operating charge of approximately $9 million, primarily relating to the discount on the sale of the accounts receivable to the wholly owned special purpose corporation, will be recorded at inception of the program in the fourth quarter. The company expects to substantially recover the charge during the course of the program. At October 6, 2000, $407.3 million was available under the bank revolving lines of credit at Anixter Inc., of which $35.7 was available to pay the Company for intercompany liabilities. Consolidated interest expense was $33.9 million and $25.0 million for the 39 weeks ended September 29, 2000 and October 1,1999, respectively. The increase is due to higher debt levels required to fund the increase in working capital along with higher interest rates. The Company has authorized the repurchase of up to 1.5 million shares in 2000, with the volume and timing to depend on market conditions. As of September 29, 2000, the Company has repurchased 768,776 shares at an average cost of $19.97. Purchases were made in the open market or through other transactions and were financed through available cash from the sale of the Integration businesses and other non-core assets. Other Liquidity Considerations Certain debt agreements entered into by the Company's subsidiaries contain various restrictions including restrictions on payments to the Company. Such restrictions have not had nor are expected to have an adverse impact on the Company's ability to meet its cash obligations. Capital Expenditures Consolidated capital expenditures were $13.2 million and $12.8 million for the 39 weeks ended September 29, 2000 and October 1, 1999, respectively. The Company expects to spend approximately $20 to $25 million in capital expenditures in 2000. Results of Operations The Company competes with distributors and manufacturers who sell products directly or through existing distribution channels to end users or other resellers. The Company's relationship with the manufacturers for which it distributes products could be affected by decisions made by these manufacturers as the result of changes in management or ownerships as well as other factors. In addition, the Company's future performance could be affected by economic downturns and possible rapid changes in applicable technologies. Quarter ended September 29, 2000: Income from continuing operations for the third quarter of 2000 was $24.0 million compared with $38.3 million for the third quarter of 1999. Excluding a $24.3 million one-time tax benefit recorded in the third quarter of 1999, income from continuing operations increased 72.0%. The Company's net sales during the third quarter of 2000 increased 34.6% to $955.9 million from $710.4 million in the same period in 1999. Net sales by major geographic market are presented in the following table: 13 weeks ended September 29, October 1, 2000 1999 (in millions) North America $ 746.2 $ 547.4 Europe 161.8 128.0 Asia Pacific and Latin America 47.9 35.0 $ 955.9 $ 710.4 When compared to the corresponding period in 1999, North America sales for the third quarter of 2000 grew 36.3% to $746.2 million. The improvement was a result of continued rapid growth in sales to the Service Provider market and a 28.3% increase in Integrated Supply sales, along with strong growth in sales to the core Enterprise Network Communications and Electrical Wire and Cable market. Based on third quarter results, sales to the Service Provider market are now at an annualized $600 million run rate. Europe sales increased 26.3% reflecting strong growth in our core structured cabling products, along with a growing amount of sales to the Service Provider market. Excluding the effect of changes in exchange rates, Europe sales improved 36.8%. Asia Pacific and Latin American net sales were up 37.2% from the third quarter of 1999, reflecting improvement in their respective economies. Excluding the effect of changes in exchange rates, Asia Pacific and Latin America sales increased 38.7%. Operating income increased to $53.9 million in 2000 from $33.2 million in the third quarter of 1999. Operating income by major geographic market is presented in the following table. 13 weeks ended September 29, October 1, 2000 1999 (in millions) North America $ 47.6 $ 31.1 Europe 5.7 4.6 Asia Pacific and Latin America 0.6 (2.5) $ 53.9 $ 33.2 North America operating income for the third quarter of 2000 increased 53.1%, from the corresponding period in 1999. Operating margins improved to 6.4% in the third quarter of 2000, from 5.7% in the same period in 1999. The improvement primarily relates to further leveraging of the expense structure which more than offset a decline in gross margins resulting from the mix in sales associated with the rapid growth of sales to the Service Provider and Integrated Supply markets. Europe operating income increased 22.9%, reflecting strong third quarter sales. Excluding the effect of changes in exchange rates, Europe operating profit increased 33.4%. Asia Pacific and Latin America operating income increased 3.1 million, from a loss of $2.5 million in the third quarter of 1999. This resulted from the 37.2% improvement in sales and a reduced cost structure following the changes made in staffing and operations over the last 2 years. Changes in exchange rates had a minimal effect on operating income. The consolidated tax provision on continuing operations increased to $16.9 million in 2000 from a $14.1 million tax benefit in the third quarter of 1999. As a result of the completion of the Internal Revenue Service review of previous open tax years, a $24.3 million one-time tax benefit was recorded in the third quarter of 1999 to reverse previously established tax liabilities. The 2000 effective tax rate of 41.3% is based on pre-tax book income adjusted primarily for amortization of nondeductible goodwill and losses of foreign operations which are not currently deductible. 39 weeks ended September 29, 2000: Income from continuing operations for the 39 weeks ended September 29, 2000 was $62.8 million compared to $58.2 million for the 39 weeks ended October 1, 1999. Excluding a $24.3 million one-time tax benefit recorded in the third quarter of 1999, income from continuing operations increased 85.3%. The Company's net sales during the 39 weeks ended September 29, 2000 increased 32.7% to $2,606.5 million from $1,964.0 million in the same period in 1999. Net sales by major geographic market are presented in the following table: 39 weeks ended September 29, October 1, 2000 1999 (in millions) North America $ 2,038.9 $ 1,473.0 Europe 435.8 389.7 Asia Pacific and Latin America 131.8 101.3 $ 2,606.5 $ 1,964.0 When compared to the corresponding period in 1999, North America sales for the 39 weeks ended September 29, 2000 grew 38.4% to $2,038.9 million. The improvement was a result of rapid growth in sales to the Service Provider and Integrated Supply markets, along with strong growth in sales to the core Enterprise Network Communications and Electrical Wire and Cable market. Sales to the Service Provider market continued their rapid growth and are now at an annualized $600 million run rate. Improvement in sales to the Enterprise Network Communications market reflects a rebound from the soft year-end 1999 sales related to the Year 2000 compliance efforts, while improvement in sales to the Electrical Wire and Cable market reflects higher copper prices and higher volume associated with the sales to the public network market. Europe sales increased 11.8% due to strong second and third quarter sales in our core structured cabling products along with an increasing amount of sales to the Service Provider market. Excluding the effect of changes in exchange rates, Europe sales improved 20.6%. Asia Pacific and Latin American net sales were up 30.2% from the same period in 1999, reflecting improvement in their respective economies. Operating income for the first three quarters of 2000 increased 68.9% or $57.7 million from $83.7 million in the first three quarters of 1999. Operating income by major geographic market is presented in the following table: 39 weeks ended September 29, October 1, 2000 1999 (in millions) North America $ 124.2 $ 77.9 Europe 17.1 14.8 Asia Pacific and Latin America 0.1 (9.0) $ 141.4 $ 83.7 North America operating income increased 59.4%. Operating margins improved to 6.1% in the first three quarters of 2000, from 5.3% in the same period in 1999. The improvement primarily relates to a reduction, as a percentage of sales, in retained overhead costs associated with the North American Integration business, the absence of costs associated with the Year 2000 compliance efforts incurred in 1999 and further leveraging of the expense structure resulting from the significant increase in sales. Europe operating income increased 15.3%, reflecting the increase in sales. Excluding the effect of changes in exchange rates, Europe operating profit increased 19.9%. Asia Pacific and Latin America operating income increased 101.4%, recording income of $.1 million in the first three quarters of 2000 compared to a loss of $9.0 million for the same period in 1999. This resulted from the 30.2% improvement in sales and a reduced cost structure following the corrections made over the last 2 years. The consolidated tax provision on continuing operations increased to $45.0 million in 2000 from $.3 million in the first three quarters of 1999 due to higher pre-tax earnings. The first three quarters of 1999 includes a $24.3 million one-time tax benefit recorded to reverse previously established tax liabilities. The 2000 effective tax rate of 41.7% is based on pre-tax book income adjusted primarily for amortization of nondeductible goodwill and losses of foreign operations which are not currently deductible. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial data schedule (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANIXTER INTERNATIONAL INC. Date: November 3, 2000 By: /s/ Robert W. Grubbs Robert W. Grubbs President and Chief Executive Officer Date: November 3, 2000 By: /s/ Dennis J. Letham Dennis J. Letham Senior Vice President - Finance and Chief Financial Officer