-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V6EuDOLbPazKg1pjuNE9o0q3+gZkhcdipWUA3V9LmZc4V049rAz/VGy/0eOxlKi3 4F1uSCJoc8rCFMpN/mgVOw== 0000052795-02-000002.txt : 20020415 0000052795-02-000002.hdr.sgml : 20020415 ACCESSION NUMBER: 0000052795-02-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011228 FILED AS OF DATE: 20020314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANIXTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000052795 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 941658138 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10212 FILM NUMBER: 02575394 BUSINESS ADDRESS: STREET 1: 4711 GOLF RD CITY: SKOKIE STATE: IL ZIP: 60076 BUSINESS PHONE: 8477152568 MAIL ADDRESS: STREET 1: 4711 GOLF RD CITY: SKOKIE STATE: IL ZIP: 60076 FORMER COMPANY: FORMER CONFORMED NAME: ITEL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SSI COMPUTER DATE OF NAME CHANGE: 19710316 FORMER COMPANY: FORMER CONFORMED NAME: SSI COMPUTER CORP DATE OF NAME CHANGE: 19690727 10-K 1 form10k2001.txt DECEMBER 28, 2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) -- OF THE SECURITES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 28, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 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 incorporation or organization) Identification No.) 4711 GOLF ROAD SKOKIE, ILLINOIS 60076 (847) 677-2600 (Address and telephone number of principal executive offices in its charter) SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED -------------------- -------------------- Common stock, $1 par value New York Stock Exchange Convertible notes due 2020 New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: NONE. 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 _ 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 X No _ The aggregate market value of the shares of Registrant's Common Stock, $1 par value, held by nonaffiliates of Registrant was approximately $1,068,981,002 as of March 8, 2002. At March 8, 2002, 36,988,962 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 2002 Annual Meeting of Stockholders of Anixter International Inc. are incorporated by reference into Part III. This document consists of 45 pages. Exhibit List begins on page 37. TABLE OF CONTENTS PART I Item 1. Business of the Company..............................................1 Item 2. Properties...........................................................2 Item 3. Legal Proceedings....................................................3 Item 4. Submission of Matters to a Vote of Security Holders..................3 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................................................4 Item 6. Selected Financial Data..............................................4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................5 Item 7A. Quantitative and Qualitative Disclosures about Market Risk..........13 Item 8. Consolidated Financial Statements and Supplementary Data............13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........................................34 PART III Item 10. Directors and Executive Officers of the Registrant...................35 Item 11. Executive Compensation...............................................36 Item 12. Security Ownership of Certain Beneficial Owners and Management.......36 Item 13. Certain Relationships and Related Transactions.......................36 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......36 PART I ITEM 1. BUSINESS OF THE COMPANY. (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 through Anixter Inc. and its subsidiaries (collectively "Anixter"). 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. As of January 2, 1998, the Company owned approximately 19% of ANTEC Corporation and its subsidiaries (collectively "ANTEC"), a broadband communications technology company, which was reduced from 31% in February 1997, by the issuance of additional stock by ANTEC in connection with a merger. In 1998, the Company sold its remaining 19% interest in ANTEC. In June 1998, the Company purchased 100% of the outstanding common stock of Pacer Electronics, Inc., a distributor of wire and cable products, along with value added services, to original equipment manufacturers in the electronics industry. In August 1997, the Company purchased approximately 93% of the outstanding common stock of Accu-Tech Corporation ("Accu-Tech"), a networking and wiring systems specialist distributing products for data, voice, video and electrical applications. Accu-Tech became a wholly owned subsidiary during the first quarter of 2002. (B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company operates in one business segment which is engaged in the distribution of communications and specialty wire and cable products. In 2001, 10.3% of total sales were to Lucent Technologies and its subsidiaries. No other customer accounts for 10% or more of sales in 2001, 2000 or 1999. For certain financial information concerning the Company's business segment, see Note 13 "Business Segment" of the Notes to the Consolidated Financial Statements of this report. (C) NARRATIVE DESCRIPTION OF BUSINESS In 1999, the Company completed the disposal of the Integration segment and, accordingly, the Integration segment is reflected as a discontinued operation in these financial statements. All narrative descriptions and year to year comparisons have been restated to exclude Integration. Anixter is a leading global distributor of data, voice and video network communications products used by corporations to support their operations. 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 also provides contractual supply chain management of installation and repair-related materials for customers who install and/or maintain communication equipment ("Integrated Supply"). Such contracts are generally for time periods in excess of one year and include interfacing of Anixter and customer information systems, the procurement, warehousing and delivery of goods by Anixter, and in certain cases, the maintenance of dedicated warehouse facilities. Anixter stocks and/or sells a full line of these products from a network of 87 locations in the United States, 16 in Canada, 10 in the United Kingdom, 24 in Continental Europe, 11 in Latin America, 4 in Australia and 9 in Asia. Anixter sells approximately 92,000 products to 85,000 active customers and works with approximately 1,000 active suppliers. Its customers include international, national, regional and local companies that are end users of these products and engage in manufacturing, telecommunications, internet service, finance, education, health care, transportation, utilities and government. Also, Anixter sells products to resellers such as contractors, installers, system integrators, value added resellers, architects, engineers and wholesale distributors. The average order size is approximately $1,700. The products distributed by Anixter include communications (voice, data and video) products used to connect personal computers, peripheral equipment, mainframe equipment and various networks to each other. The products include an assortment of transmission media (copper and fiber optic cable) connectivity products and support and supply products. In the enterprise network communications market, Anixter sells products that are incorporated in local area networks ("LANs"), the internetworking of LANs to form wide area networks and enterprise networks. In the service provider market, Anixter provides the installation-related materials that support central switching offices, web hosting sites and remote transmission sites. Anixter's products also include electrical wiring system products used for the transmission of electrical energy and control/monitoring of industrial processes. 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 communications cabling, connectivity, support and supply products and electrical wiring systems products. 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. Approximately 38% of Anixter's dollar volume purchases in 2001 were from its five largest suppliers. Anixter enhances its value proposition to both key suppliers and customers through its industry leading specifications and testing lab in suburban Chicago. In this Underwriter Laboratories-certified lab, Anixter works with key suppliers to develop product specifications and to test compliance. The Company uses the same lab to design and test various product configurations for customers in order to optimize their network performance. Anixter cost-effectively serves its customers' needs through its proprietary computer system, which connects substantially all 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 Web sites 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. 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. The Company competes with distributors and manufacturers that sell products directly or through existing distribution channels to end users or other resellers. In addition, future performance could be subject to economic downturns, possible rapid changes in applicable technologies or regulatory changes, which may substantially change the cost and/or accessibility of public network bandwidth. To guard against inventory obsolescence, the Company has negotiated various return and price protection agreements with its key suppliers. Although relationships with its suppliers are good, the loss of a major supplier could have a temporary adverse effect on the Company's business, but would not have a lasting impact since comparable products are available from alternate sources. MISCELLANEOUS At December 28, 2001, the Company and its subsidiaries employed approximately 4,900 people. Backlog orders are not material as a significant amount of orders are shipped within 24 to 48 hours of receipt. (D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES For information concerning foreign and domestic operations and export sales, see Note 10 "Income Taxes" and Note 13 "Business Segment" of this report. ITEM 2. PROPERTIES. Substantially all of the Company's facilities are leased. ITEM 3. LEGAL PROCEEDINGS. In the ordinary course of business, the Company and its subsidiaries became 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 which 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the fourth quarter of 2001, no matters were submitted to a vote of the security holders. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. 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 14 ("Selected Quarterly Financial Data (Unaudited)") of this report. As of March 8, 2002, the Registrant had 3,807 shareholders of record. ITEM 6. SELECTED FINANCIAL DATA.
(In millions, except per share amounts) FISCAL YEAR Results of operations: 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- Net sales $3,144.2 $3,514.4 $2,712.0 $2,390.1 $2,126.4 Operating income (a) 102.0 189.8 112.8 87.0 91.1 Interest expense and other, net (b) (43.8) (55.2) (34.6) (34.8) (28.5) Gain on ANTEC investment -- -- -- 24.3 2.2 Income from continuing operations (c) 33.6 78.7 69.7 44.7 37.4 Income from discontinued operations -- -- 54.5 20.9 7.9 Extraordinary loss on early extinguishment of debt (3.3) -- -- -- -- Net income 30.3 78.7 124.2 65.6 45.3 Basic income per share: Continuing operations $ 0.92 $ 2.15 $ 1.86 $ 1.00 $ 0.79 Net income 0.83 2.15 3.31 1.46 0.95 Diluted income per share: Continuing operations $ 0.89 $ 2.03 $ 1.83 $ 0.99 $ 0.78 Net income 0.80 2.03 3.26 1.45 0.95 Financial position at year-end: Total assets $1,198.8 $1,686.0 $1,434.7 $1,335.1 $1,333.6 Total debt $ 241.1 $ 451.9 $ 468.0 $ 543.6 $ 468.8 Stockholders' equity (d) $ 563.1 $ 554.9 $ 456.4 $ 411.5 $ 477.0 Diluted book value per share $ 14.90 $ 13.57 $ 11.99 $ 9.09 $ 9.98 Diluted shares 37.8 40.9 38.1 45.3 47.8 Year end outstanding shares 36.9 37.7 35.9 41.9 47.3
Notes: (a) In the third quarter of 2001, the Company incurred a one-time restructuring charge of $31.7 million associated with reducing its workforce, closing or consolidating certain facilities and exiting the Korean market. (b) In the fourth quarter of 2000, the Company incurred an $8.8 million charge relating to the discount on the initial sale of accounts receivable to an unconsolidated wholly owned special purpose corporation in connection with an accounts receivable securitization program. (c) 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. (d) Stockholders' equity reflects treasury stock purchases of $46.9 million, $15.4 million, $91.9 million, $101.8 million and $14.2 million in 2001, 2000, 1999, 1998 and 1997, respectively. In addition, stockholders' equity includes unrealized after-tax gains on marketable equity securities available-for-sale of $19.8 million at January 2, 1998. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 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 14 to 33 of this Report. FINANCIAL LIQUIDITY AND CAPITAL RESOURCES ASSET SALES AND OTHER DISPOSITIONS DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE: In 1999, the Company completed the disposal of the Integration segment and, accordingly, the Integration segment is reflected as a discontinued operation in these financial statements. The North America Integration business was sold in the first quarter of 1999 and the Asia Pacific Integration business was sold in the fourth quarter of 1999. Total proceeds received from the sale of the Integration business were $238.3 million, resulting in an after-tax gain of $50.6 million. Loss from discontinued operations was $2.5 million in 1999. See Note 3 "Discontinued Operations" in the Notes to the Consolidated Financial Statements for further information. The Company sold certain other assets for $25.1 million resulting in an after-tax loss of $2.0 million in 1999. FINANCINGS On June 28, 2000, the Company issued $792.0 million 7% zero-coupon convertible notes ("Convertible Notes") due 2020. 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 Company expects to reborrow these 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. Holders of the Convertible Notes 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 5.9 million shares. Additionally, holders may require the Company to purchase all or a portion of their Convertible Notes on June 28, 2005, at a price of $356.28 per Convertible Note, on June 28, 2010, at a price of $502.57 per Convertible Note and on June 28, 2015, at a price of $708.92 per Convertible Note. The Company may choose to pay the purchase price in cash or common stock or a combination of both. The Convertible Notes are structurally subordinated to the indebtedness of Anixter Inc. ("Anixter"). On October 6, 2000, the Company entered into two financing arrangements to support further business growth. The agreements consisted of a $500.0 million, senior unsecured, revolving credit agreement and a $275.0 million accounts receivable securitization program. The new revolving credit line included a $390.0 million, five-year agreement, plus a $110.0 million, 364-day agreement. On April 24, 2001, Anixter Inc. cancelled the $110.0 million, 364-day revolving credit line. Accordingly, the Company recorded an extraordinary loss on the early extinquishment of debt in 2001 of $0.3 million ($0.2 million, net of tax) to expense the financing fees associated with this portion of the revolving credit agreement. On October 6, 2001, the Company reduced the borrowing capacity on the accounts receivable securitization program from $275.0 million to $225.0 million. The accounts receivable securitization program is conducted through Anixter Receivables Corporation ("ARC"), which is a wholly owned unconsolidated subsidiary of the Company accounted for using the equity method. The program allows the Company to sell, on an ongoing basis without recourse, a majority of the accounts receivable originating in the United States to ARC and consists of a series of 364-day facilities. ARC may in turn sell an interest in these receivables to a financial institution and borrow up to $225.0 million. Prior to October 6, 2001, ARC could borrow up to $275.0 million. The securitization program began in October 2000, at which time $416.8 million of gross accounts receivable were sold and removed from the balance sheet. At December 28, 2001 and December 29, 2000, the outstanding balance of accounts receivable sold to ARC totaled $296.0 million and $388.3 million, respectively. In order to fund the purchase of the accounts receivable from Anixter, ARC has incurred long-term debt of $143.7 million and $236.3 million and has a subordinated note payable to Anixter of $111.4 million and $126.1 million at December 28, 2001 and December 29, 2000, respectively. The effective interest rate paid by ARC in 2001 and 2000 on the long-term debt was 5.0% and 7.1%, respectively. ARC long-term debt has not been guaranteed by Anixter or the Company and neither have an obligation, contingent or otherwise, to the holders of ARC long-term debt. Under this program ARC is required to maintain delinquency, loss-to-liquidation and dilution ratios that are normal for this type of arrangement. As of December 28, 2001, ARC was within 13% of the maximum allowed under the delinquency ratio. The Company does not believe it is necessary to amend the ratio at this time. A charge of $8.8 million, primarily relating to the discount on the initial sale of accounts receivable to ARC, was recorded at inception of the program in the fourth quarter 2000. The Company expects to substantially recover the charge during the course of the program. In other expenses, the Company recorded net charges of $8.7 million and $3.8 million in 2001 and 2000, respectively, primarily for the interest expense on the long-term debt incurred by ARC to fund the purchases of the accounts receivable from Anixter. 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, which bear interest at 8%, contain various restrictions with respect to secured borrowings and are unconditionally guaranteed by the Company. During 2001, Anixter repurchased $81.3 million of its 8% senior notes for $86.5 million. Accordingly, the Company recorded an extraordinary loss on the early extinquishment of debt of $5.2 million ($3.1 million, net of tax) in its consolidated statement of operations for the year ended December 28, 2001. These notes have a put provision that under certain circumstances is triggered by a rating downgrade. At December 28, 2001, the outstanding balance of the 8% notes was $18.6 million which was under the cross-default thresholds of Anixter and the Company's other existing indebtedness. Therefore, Anixter and the Company were not exposed to any potentially adverse effects from this provision. At December 28, 2001, $408.2 million was available under the bank revolving lines of credit at Anixter, of which $25.7 million was available to pay the Company for intercompany liabilities. The primary liquidity source for Anixter is the $390.0 million revolving credit agreement for which no borrowings were outstanding at December 28, 2001. This revolving credit agreement requires certain financial ratios to be maintained. The most restrictive financial ratios are the fixed charge coverage ratio and the leverage ratio. As of December 28, 2001, Anixter's operating results exceeded the minimum required under the fixed charge coverage ratio by 23%. If results for 2002 are significantly lower than planned, the restricted financial ratio provisions would be in default and the borrowings callable. In addition, due to cross-default provisions in all other Anixter and Company debt agreements, all outstanding debt would then become due and payable. While the Company does not expect to default under this agreement, if that were to occur, the Company believes it would be able to obtain a waiver or amendment from the lenders on reasonable terms. Due to the requirement of the leverage ratio, borrowings of only $298.0 million of the $408.2 million available under bank revolving lines of credit at Anixter would be permitted as of December 28, 2001. In 2002, the Company estimates that it will have positive cash flow from operating activities and after capital expenditures. The Company will continue to pursue opportunities to repurchase outstanding debt, with the volume and timing to depend on market conditions. As of March 13, 2002, Anixter has repurchased an additional $1.0 million of its 8% senior notes that mature in September, 2003 for $1.1 million and 54,100 of its Convertible Notes that mature in June 2020 for $15.5 million. The Company will reflect an extraordinary loss on the early extinguishment of debt of approximately $0.6 million ($0.4 million, net of tax) from these transactions in its consolidated statements of operations for the 13 weeks ended March 29, 2002. The Board of Directors of the Company had authorized the purchase of up to 2.8 million common shares (2.0 million was authorized in 2001 and 0.8 million carried over from prior year authorizations), with the volume and timing to depend on market conditions. In 2001, the Company repurchased 2,079,000 shares at an average cost of $22.57. Purchases were made on the open market and were financed from cash generated by operations. CASH FLOW YEAR ENDED DECEMBER 28, 2001: Consolidated net cash provided by continuing operating activities was $288.5 million in 2001 compared to $67.5 million in 2000. Cash provided by continuing operating activities increased primarily due to a reduction in working capital required to support the business. In 2001, accounts receivable decreased, providing cash of $128.5 million compared to $91.4 million in 2000. The outstanding balance of gross receivables sold to ARC at December 28, 2001, was $92.3 million less than at December 29, 2000. The cash generated by the decline was used by ARC to pay-down $92.6 million of ARC long-term debt. Inventory declined $357.1 million as the $120.0 million specifically identified at December 29, 2000 as inventory returnable to vendors was returned and the remaining decline was due to reduced purchases as lower levels of inventory were needed to support the reduced sales levels. In 2000, inventory increased $329.7 million, $120.0 million of which represented inventories returnable to vendors, to support the growth in the service provider and integrated supply markets and a significant competitive local exchange carrier contract. The increase in cash flow generated by the reduction in inventory was partially offset by the related decrease of $294.5 million in accounts payable and accrued expenses. In 2000, accounts payable and accrued expenses increased $181.8 million. In 2001, the Company incurred a $31.7 million restructuring charge, of which $6.6 million was non-cash. At December 28, 2001, $17.7 million remained to be paid. Consolidated net cash used in investing activities was $20.5 million in 2001 versus $26.3 million in 2000. Capital expenditures were $22.0 million in 2001 compared to $22.6 million in 2000. Capital expenditures in 2001 were primarily for the upgrades of warehouse facilities and the purchase of software and computer equipment. Capital expenditures are expected to be approximately $11.0 million in 2002. In the first quarter of 2000, the Company purchased allNet Technologies Pty. Limited 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 $3.0 million in cash and $1.6 million in notes receivable. Consolidated net cash used by financing activities was $255.8 million in 2001 in comparison to $24.4 million in 2000. In 2001, cash used in financing activities included a net repayment of long-term borrowings of $142.4 million, extinquishment of 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. In 2000, net repayment of long-term borrowings was $21.5 million, while treasury stock purchases were $15.4 million. In addition, in 2000 the Company received $34.9 million from the issuance of 2.2 million shares for the exercise of stock options and the employee stock purchase plan. Cash used for discontinued operations was $5.8 million in 2001 compared to $13.5 million in 2000. YEAR ENDED DECEMBER 29, 2000: Consolidated net cash provided by continuing operating activities was $67.5 million in 2000 compared to $6.9 million in 1999. Cash provided by continuing operating activities increased primarily due to net proceeds of $236.3 million received in connection with the receivable securitization program, partially offset by higher working capital requirements. Consolidated net cash used by investing activities was $26.3 million in 2000 versus $15.9 million in 1999. In the first quarter of 2000, the Company purchased allNet Technologies Pty. Limited 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 communications products distribution business for $3.0 million in cash and $1.6 million in notes receivable. In the fourth quarter of 1999, the Company acquired a small specialty wire and cable company in Europe for $2.6 million. Capital expenditures were $22.6 million in 2000 compared to $13.8 million in 1999. The increase primarily relates to the expansion of the Company's distribution centers. Consolidated net cash used by financing activities was $24.4 million in 2000 in comparison to $163.4 million in 1999. In 1999, the Company had treasury stock purchases of $91.9 million as compared to $15.4 million in 2000. In addition, in 2000 the Company received $34.9 million relating to the exercise of 2.2 million stock options compared to $7.4 million received in 1999. Net repayment of long-term borrowings was $21.5 and $73.0 million in 2000 and 1999, respectively. In 1999, proceeds from the sale of the Integration business was used to pay down long-term debt. Cash used for discontinued operations was $13.5 million in 2000 compared to $169.4 million provided in 1999. In 1999, proceeds of $238.3 million were received from the sale of the Integration business. INTEREST EXPENSE: Interest expense for continuing operations was $30.1 million, $43.3 million and $34.9 million for 2001, 2000 and 1999, respectively. During the second quarter of 2001, the Company incurred $1.7 million in interest expense related to the cancellation of certain interest rate hedge agreements for which there were no longer outstanding borrowings. The decrease in the interest expense in 2001 from 2000 was due to lower debt levels, a result of the accounts receivable securitization program implemented in the fourth quarter of 2000, lower working capital levels and a reduction in interest rates. During previous years, the Company had entered into interest rate agreements that effectively fix or cap, for a period of time, the interest rate on a portion of its floating-rate obligations. At December 28, 2001, the Company had only $0.5 million in variable borrowings outstanding under the bank revolving lines of credit, for which no interest rate hedge agreements were in place. Total outstanding debt at December 28, 2001, was $241.1 million for the Company and $143.7 million for ARC. The interest rate on substantially all of the Company's debt obligations (excluding ARC, which are variable rate obligations) at December 28, 2001, was fixed. The impact of interest rate swaps and caps for 2001 and 1999 was an increase to interest expense of $0.3 million and $1.3 million, respectively, and a decrease to interest expense of $0.7 million in 2000. INCOME TAXES Various foreign subsidiaries of the Company had aggregate cumulative net operating loss ("NOL") carryforwards for foreign income tax purposes of approximately $167.6 million at December 28, 2001, which are subject to various provisions of each respective country. Approximately $56.1 million of this amount expires between 2002 and 2011 and $111.5 million of the amount has an indefinite life. Of the $167.6 million NOL carryforwards of foreign subsidiaries, $89.4 million related to losses that have already provided a tax benefit in the U.S. due to rules permitting flow-through of such losses in certain circumstances. Without such losses included, the cumulative NOL carryforwards at December 28, 2001, were approximately $78.2 million, which are subject to various provisions of each respective country. Approximately $48.6 million of this amount expires between 2002 and 2011 and $29.6 million of the amount has an indefinite life. The deferred tax asset and valuation allowance has been adjusted to reflect only the carryforwards for which the Company has not taken a tax benefit in the U.S. During the third quarter of 1998, the Internal Revenue Service completed its examination for the years 1993 to 1995, which included an examination of net operating losses and credit carryforwards dating back to 1979. As a result of the lapsing, during the third quarter of 1999, of all relevant statutes of limitations on assessment relating to that 17-year period of time, the Company recorded a $24.3 million tax benefit in continuing operations in 1999 for the reversal of previously established tax reserves determined to be no longer necessary. LIQUIDITY CONSIDERATIONS AND OTHER 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. 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 ownership as well as other factors. In addition, the Company's future performance could be affected by economic downturns, possible rapid changes in applicable technologies or regulatory changes that substantially change the cost and/or availability of public networking bandwidth. YEAR ENDED DECEMBER 28, 2001: Net income was $30.3 million in 2001 compared with $78.7 million in 2000. Due to a combination of increased economic softness and continued deterioration of market conditions in the communications products industry, the Company incurred a one-time charge of $31.7 million ($19.0 million, net of tax) in the third quarter of 2001 associated with reducing its workforce, closing or consolidating certain facilities and exiting the Korean market. The Company anticipates that the restructuring will result in annualized expense reductions of approximately $48 million. In addition, the Company recorded an after-tax extraordinary loss of $3.3 million for the early extinguishment of $81.3 million of Anixter Inc.'s 8% senior notes and debt issuance costs associated with the cancellation of a $110.0 million 364-day revolving credit agreement due 2001. In 2000, the Company incurred an initial after-tax charge of $5.3 million for the receivables securitization program, which the Company expects to substantially recover during the course of the program. The Company's net sales for the year ended December 28, 2001, declined 10.5% to $3.1 billion from $3.5 billion in 2000. Net sales by major geographic market are presented in the following table: YEARS ENDED DECEMBER 28, DECEMBER 29, (In millions) 2001 2000 ------------ ------------ North America $2,433.5 $2,739.3 Europe 502.1 587.1 Asia Pacific and Latin America 208.6 188.0 ------------ ------------ $3,144.2 $3,514.4 ============ ============ North America sales declined 11.2% to $2.4 billion from $2.7 billion in 2000. With the exception of integrated supply, all customer markets in North America declined from 2000. Enterprise network communications product sales declined 10.6%, due to a worldwide reduction in technology-related spending. The electrical wire and cable market declined 4.3% resulting from the general economic softness. Due to the significant fall in spending in the telecom industry, sales in the service provider market were down 67.7%. The integrated supply market improved significantly, as sales increased 65.1% on new contracts added in late 2000. Europe sales decreased 14.5% when compared to 2000. Increased sales in the integrated supply market partially offset declines across all other customer markets as the general economic softness experienced in the United States is also being felt by the international markets. Excluding the effect in changes in exchange rates, Europe sales declined 10.9%. Asia Pacific and Latin America net sales increased 11.0% from the same period in 2000, reflecting strong growth in Latin America associated with expanded product lines. Excluding the effect of changes in exchange rates, Asia Pacific and Latin America net sales increased 13.8%. In 2001, operating income decreased 46.2% to $102.0 million from $189.8 million in 2000. Operating margins declined to 3.2% in 2001 from 5.4% in 2000. Excluding the one-time restructuring charge of $31.7 million previously discussed, operating profit declined 29.5% to $133.7 million, representing a 4.3% operating margin compared to 5.4% in 2000. Gross margins were flat at 23.4%. Operating income (loss) by major market is presented in the following table: YEARS ENDED DECEMBER 28, DECEMBER 29, (In millions) 2001 2000 ------------ ------------ North America * $ 89.7 $164.2 Europe * 21.2 24.6 Asia Pacific and Latin America * (8.9) 1.0 ------------ ------------ $102.0 $189.8 ============ ============ *THE YEAR ENDED DECEMBER 28, 2001, INCLUDES RESTRUCTURING COSTS FOR NORTH AMERICA, EUROPE AND ASIA PACIFIC AND LATIN AMERICA OF $23.1 MILLION, $2.3 MILLION AND $6.3 MILLION, RESPECTIVELY. North America operating income decreased 45.4% in 2001 compared to 2000. Excluding restructuring costs of $23.1 million and the non-recurring fulfillment sales impact on operating profit of $6.9 million during 2000, operating profit declined 28.3%. Operating margins decreased to 3.7% in 2001 from 6.0% in 2000. Excluding restructuring costs, operating margins were 4.6%, a decline of 1.4 percentage points when compared to 2000. Operating results were negatively affected, particularly in the second half of the year, as sales declined more rapidly than the Company was able to reduce operating expenses. This more than offset a slight improvement in gross margins from 23.7% in 2000 to 23.9% in 2001, resulting primarily from the change in sales mix caused by the decline in sales to the lower margin service provider market. Europe operating income decreased 13.6% when compared to 2000. Excluding restructuring costs of $2.3 million, operating profit decreased 4.2%, while operating margins improved by 0.5 percentage points to 4.7%. Excluding the effect of changes in exchange rates and the restructuring charge, Europe operating profit remained flat. Operating profit and margins benefited from a significant reduction in operating expenses, reflecting organizational changes and refocused market efforts that offset the 14.5% decline in sales. In addition, Europe's gross margins improved to 22.3% from 21.7% in 2000, reflecting reduced sales of lower margin networking products. Asia Pacific and Latin America recorded an operating loss of $8.9 million in 2001 compared to income of $1.0 million for 2000. Excluding restructuring costs of $6.3 million, the operating loss was $2.6 million and operating margin was 1.8 percentage points below 2000. Operating loss was negatively impacted by $6.3 million in inventory write-offs in Latin America recorded in 2001. Changes in exchange rates had a minimal effect on operating income. Consolidated interest expense and other expenses decreased to $43.8 million in 2001 from $55.2 million in 2000. Interest expense decreased $13.2 million to $30.1 million due to lower debt levels, resulting from the accounts receivable securitization program implemented in the fourth quarter of 2000, lower working capital levels and a reduction in interest rates. Other expenses of $13.7 million in 2001 primarily consisted of $8.7 million of costs associated with the receivable securitization program and $5.3 million of foreign exchange losses. The Company incurred a $2.3 million foreign exchange loss resulting from the devaluation of the Argentine peso in December of 2001. In 2000, other expenses of $11.9 million primarily represent costs associated with the receivable securitization program, of which $8.8 million relates to the initial discounting fee. The consolidated tax provision on continuing operations decreased to $24.6 million in 2001 from $55.9 million in 2000 due to lower pre-tax earnings, partially offset by a small increase in the income tax rate. The 2001 effective tax rate of 42.2% is based on pre-tax book income adjusted primarily for amortization of nondeductible goodwill and losses of foreign operations that are not currently deductible. The increase from 41.6% in 2000 is due to nondeductible goodwill being a higher percentage of the total, offset by a lower state tax rate. YEAR ENDED DECEMBER 29, 2000: Income from continuing operations was $78.7 million in 2000 compared with $69.7 million in 1999. The comparative results were favorably impacted by a 30% growth in sales and lower operating expenses as a percentage of sales. 2000 includes an initial after-tax charge of $5.3 million for the receivables securitization program, which the Company expects to substantially recover during the course of the program. 1999 results were favorably impacted by a $24.3 million one-time tax benefit. The Company's net sales for the year ended December 29, 2000, grew by 30% to $3.5 billion from $2.7 billion in 1999. Net sales by major geographic market are presented in the following table: YEARS ENDED DECEMBER 29, DECEMBER 31, (In millions) 2000 1999 ------------ ------------ North America $2,739.3 $2,047.3 Europe 587.1 523.0 Asia Pacific and Latin America 188.0 141.7 ------------ ------------ $3,514.4 $2,712.0 ============ ============ North American sales from continuing operations in 2000 experienced 34% growth to $2.7 billion from $2.0 billion in 1999. The improvement was the result of growth in all customer markets. The service provider market continued its rapid growth driven by the telecommunications industry. Enterprise network communications benefitted from the increase in technology-related spending, while the electrical wire and cable market grew along with the improving economy. Sales to the integrated supply market increased 30% as the Company entered into a couple of new significant contracts in 2000. In Europe, sales increased 12%, reflecting strong growth in the Company's core enterprise network communications products, combined with a growing amount of sales to the service provider market. Excluding the effect of changes in exchange rates, sales improved 22%. Asia Pacific and Latin America net sales were up 33% to $188.0 million in 2000 from $141.7 million in 1999. The increase is a result of improved economic conditions along with a stronger market share position. In 2000, operating income increased to $189.8 million from $112.8 million in 1999. Operating margins improved to 5.4% in 2000 from 4.2% in 1999. The improvement primarily relates to further leveraging of the expense structure, associated with rapid sales growth, 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. Operating expenses as a percent of sales decreased from 21% in 1999 to 18% in 2000. The lower gross margins in the service provider and integrated supply markets correspond with the higher operating productivity that is inherent in the nature of those businesses, including the effects of some very large volume and low gross profit fulfillment orders to service provider customers. 1999 expenses include $3.0 million for headcount reductions and the write-down of inventory to net realizable value for the Latin American operations. Operating income (loss) by major market is presented in the following table: YEARS ENDED DECEMBER 29, DECEMBER 31, (In millions) 2000 1999 ------------ ------------ North America $164.2 $106.2 Europe 24.6 20.6 Asia Pacific and Latin America 1.0 (14.0) ------------ ------------ $189.8 $112.8 ============ ============ In North America, operating margins increased to 6.0% in 2000 from 5.2% 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 19%, reflecting the increase in sales, as operating margins remained flat. Excluding the effect of changes in exchange rates, Europe operating income increased 27%. Asia Pacific and Latin America recorded income of $1.0 million compared to a loss of $14.0 million in 1999. This resulted from the 33% improvement in sales and a reduced cost structure following the expense reduction efforts made over the last 2 years. Consolidated interest expense and other expenses increased to $55.2 million in 2000 from $34.6 million in 1999. Interest expense increased $8.4 million to $43.3 million due to higher interest rates and higher levels of working capital. Other expenses of $11.9 million in 2000 primarily represents costs associated with the receivable securitization program, of which $8.8 million relates to the initial discounting fee. The consolidated tax provision on continuing operations increased to $55.9 million in 2000 from $8.5 million in 1999 due to higher pre-tax earnings. 1999 includes a $24.3 million one-time tax benefit recorded to reverse previously established tax liabilities. The 2000 effective tax rate of 41.6% is based on pre-tax book income adjusted primarily for amortization of nondeductible goodwill and losses of foreign operations that are not currently deductible. IMPACT OF INFLATION: Inflation is currently not an important determinant of Anixter's results of operations due to the low rate of inflation and, in part, to rapid inventory turnover. CRITICAL ACCOUNTING POLICIES The Company believes that the following are critical areas which either require judgement by management or may be affected by changes in general market conditions outside the control of management. As a result, changes in estimates and general market conditions could cause actual results to differ materially from future expected results. ALLOWANCE FOR DOUBTFUL ACCOUNTS : Each quarter the Company segregates the doubtful receivable balances into the following major categories and determines the bad debt reserve as stated below: Customers that have refused to pay their balances are reserved based on the historical write-off percentages. Risk accounts are individually reviewed and the reserve is based on the probability of potential default. The outstanding balance for customers who have declared bankruptcy is reserved at 100%. If circumstances change (i.e., higher (lower) than expected defaults or an unexpected material change in a major customer's ability to meet its financial obligations to us), the Company's estimates of the recoverability of amounts due to the Company could be reduced (increased) by a material amount. INVENTORY OBSOLESCENCE: At December 28, 2001, the Company reported inventory of $495.7 million. Each quarter the Company reviews the excess inventory and makes an assessment of the realizable value. There are many factors that management considers in determining whether or not a reserve should be established. These factors include the following: a) return or rotation privileges with vendors, b) price protection from vendors, c) expected usage during the next twenty-four months, d) whether or not a customer is obligated by contract to purchase the inventory, e) current market pricing, and f) risk of obsolescence. If circumstances change (i.e., unexpected shift in market demand, pricing or customer defaults) there could be a material impact on the net realizable value of the inventory. DEFERRED TAX ASSETS: The Company applies a three-year cumulative taxable income test for foreign subsidiaries whose results are not included in the U.S. tax return in determining whether to recognize an income tax benefit for their respective foreign NOL carryforwards, with a resultant adjustment to the valuation allowance. Qualitative factors surrounding a particular subsidiary are also examined, and in certain circumstances (e.g., projections of further losses for that subsidiary in the short term), an income tax benefit may not be recorded (and therefore, the valuation allowance not adjusted) even when the three-year cumulative taxable income is positive for a given subsidiary. LIFE INSURANCE POLICIES: Anixter implemented a nonqualified deferred compensation plan on January 1, 1995. The plan permits selected employees to make pre-tax deferrals of salary and bonus. The plan provides for benefit payments upon retirement, death, disability or termination. Concurrent with the implementation of the deferred compensation plan, Anixter purchased variable, separate account life insurance policies on the lives of the participants. To fund additional liabilities, Anixter purchased fixed, general account "increasing whole life" insurance policies on the lives of certain participants in both the deferred compensation plan and the excess defined benefit plan. All of the above policies are owned by Anixter and Anixter pays level annual premiums on them. Policy proceeds are payable to Anixter upon the insured participant's death. The cash surrender values on those policies are updated quarterly. At December 28, 2001 and December 29, 2000, the cash surrender value of $19.1 million and $14.4 million, respectively, was recorded under this program and reflected in "Other Assets" on the consolidated balance sheets. The value of the investment was recorded at market value determined by the performance of the underlying investments in the market. The Company's investment in the cash surrender value program is liquid and redeemable in whole or part by "surrendering" the underlying life insurance policies. As the life insurance policies are recorded at market value, changes in the market value of the underlying securities can have a significant impact on the Company's results of operations. FOREIGN DENOMINATED ASSETS AND LIABILITIES: At December 28, 2001, the Company had a significant amount of assets and liabilities that are denominated in currencies other than the functional currency of the reporting entity. Such net assets at December 28, 2001, were approximately $20.0 million. The Company has purchased approximately $10.0 million of short-term foreign currency forward contracts to minimize the effect of fluctuating foreign currencies. If there was a 10 percent adverse change in exchange rates, the Company would record a foreign exchange loss of approximately $1.0 million. PENSION EXPENSE: The Company accounts for its defined benefit pension plans in accordance with SFAS No. 87, "Employers' Accounting for Pensions", which requires that amounts recognized in financial statements be determined on an actuarial basis. A substantial portion of the Company's pension benefit cost relates to its defined benefit plan in the United States. The Company has not made contributions to the U.S. pension plan since 1995. SFAS No. 87 and the policies used by the Company generally reduce the volatility of the net benefit cost from changes in pension liability discount rates and the performance of the pension plan's assets, as significant actuarial gains/losses are amortized over the service lives of the plan participants. A significant element in determining the Company's net periodic benefit cost in accordance with SFAS No. 87 is the expected return on plan assets. The Company has assumed that the weighted-average expected long-term rate of return on plan assets will be 8.53%. Over the long term, the company's pension plan assets have earned in excess of 8.53%; therefore, the company believes that its assumption of future returns of 8.53% is reasonable. This produces the expected return on plan assets that is included in the net periodic benefit cost. The difference between this expected return and the actual return on plan assets is deferred. The plan assets have earned a rate of return substantially less than 8.53% in the last two years. Should this trend continue, future benefit costs would likely increase. At the end of each year, the Company determines the discount rate to be used to discount the plan liabilities. The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks to rates of return on high quality, fixed-income investments that receive one of the two highest ratings given by a recognized ratings agency. At December 28, 2001, the Company determined this rate to be 6.81%. Changes in discount rates over the past three years have not materially affected the net periodic benefit cost. The net effect of changes in the discount rate, as well as the net effect of other changes in actuarial assumptions and experience, have been deferred as allowed by SFAS No. 87. At December 28, 2001, the Company's consolidated pension liability was $21.5 million, up from $17.7 million at the end of 2000. For the year ended December 28, 2001, the Company recognized consolidated pre-tax net periodic benefit cost of $5.8 million, down from $7.0 million in 2000. In 2000, the Company incurred a $3.2 million loss on settlement of a supplemental employee retirement plan. As a result of the decline in the fair value of the pension plan assets, along with a reduced discount rate, the Company estimates its 2002 net periodic benefit cost to increase by 25% to 50%. TAX CONTINGENCIES: The Company believes it has a reasonable basis in the tax law for all of the positions it takes on the various tax returns it files. However, in recognition of the fact that various taxing authorities may take opposing views on some issues, that the costs and hazards of litigation in maintaining the positions that the Company has taken on various returns might be significant and that the taxing authorities may prevail in their attempts to overturn such positions, the Company maintains tax reserves. The amounts of such reserves, the potential issues they are intended to cover and their adequacy to do so, are topics of frequent review internally and with outside tax professionals. Where necessary, adjustments are periodically made to such reserves to reflect the lapsing of statutes of limitations, closings of ongoing examinations or the commencement of new examinations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to the impact of interest rate changes and fluctuations in foreign currencies, as well as changes in the market value of its financial instruments. The Company periodically enters into derivatives in order to minimize these risks, but not for trading purposes. The Company's strategy is to negotiate terms for its derivatives and other financial instruments to be perfectly effective, such that the change in the value of the derivative perfectly offsets the impact of the underlying hedged item. Any resulting gains or losses from hedge ineffectiveness are reflected directly in income. See "Critical Accounting Policies" in Management's Discussion and Analysis of Financial Condition and Results of Operations, Note 1 "Interest rate agreements" and "Foreign currency forward contracts" and Note 8 "Debt" of the consolidated financial statements for further detail on interest agreements and debt obligations outstanding. In the past, the Company has entered into interest rate agreements that effectively fix or cap the LIBOR component of the interest rate on a portion of its floating rate obligations. At December 28, 2001, the Company had minimal variable debt outstanding and as a result, had no interest rate agreements outstanding. Approximately 100% and 91% of debt obligations at December 28, 2001 and December 29, 2000, respectively, was fixed or capped. The Company prepared sensitivity analyses of its derivatives and other financial instruments assuming a one percentage point adverse change in interest rates and a 10 percent adverse change in the foreign currency contracts outstanding, and holding all other variables constant, the hypothetical adverse changes would have increased interest expense by $0.8 million and $3.4 million and decreased the value of foreign currency forward contracts by $3.2 million and $3.1 million in 2001 and 2000, respectively. In 2001 and 2000, the fair market value of the outstanding fixed rate debt was $245.2 million and $280.6 million, respectively. If interest rates were to increase or decrease by 1%, the fair market value of the fixed rate debt would decrease or increase by 3.2% and 3.5% for 2001 and 2000, respectively. Changes in the market value of the Company's debt does not affect the reported results of operations unless the Company is retiring such obligations prior to their maturity. These analyses did not consider the effects of a changed level of economic activity that could exist in such an environment and certain other factors. Further, in the event of a change of this magnitude, management would likely take actions to further mitigate its exposure to possible changes. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analyses assume no changes in the Company's financial structure. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. PAGE Report of Independent Auditors 14 Consolidated Statements of Operations 15 Consolidated Balance Sheets 16 Consolidated Statements of Cash Flows 17 Consolidated Statements of Stockholders' Equity 18 Notes to the Consolidated Financial Statements 19 Selected Quarterly Financial Data (Unaudited) 33 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Anixter International Inc. We have audited the accompanying consolidated balance sheets of Anixter International Inc. as of December 28, 2001, and December 29, 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 28, 2001. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Anixter International Inc. at December 28, 2001 and December 29, 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 28, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Chicago, Illinois January 28, 2002 ANIXTER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts)
YEARS ENDED ---------------------------------------------- DECEMBER 28, DECEMBER 29, DECEMBER 31, 2001 2000 1999 ------------ ------------ ------------ NET SALES $ 3,144.2 $ 3,514.4 $ 2,712.0 Cost of operations: Cost of goods sold 2,407.3 2,692.5 2,042.7 Operating expenses 594.2 623.7 549.1 Amortization of goodwill 9.0 8.4 7.4 Restructuring costs 31.7 - - ------------ ------------ ------------ Total costs and expenses 3,042.2 3,324.6 2,599.2 ------------ ------------ ------------ OPERATING INCOME 102.0 189.8 112.8 Other (expenses) income: Interest expense (30.1) (43.3) (34.9) Other, net (13.7) (11.9) 0.3 ------------ ------------ ------------ Income from continuing operations before income taxes and extraordinary loss 58.2 134.6 78.2 Income tax expense 24.6 55.9 8.5 ------------ ------------ ------------ Income from continuing operations before extraordinary loss 33.6 78.7 69.7 Discontinued operations: Loss from discontinued operations, net of tax - - (2.5) Gain on disposal of discontinued, net of tax - - 57.0 ------------ ------------ ------------ Income before extraordinary loss 33.6 78.7 124.2 Extraordinary loss on early extinguishment of debt, net of tax (3.3) - - ------------ ------------ ------------ NET INCOME $ 30.3 $ 78.7 $ 124.2 ============ ============ ============ BASIC INCOME (LOSS) PER SHARE: Continuing operations $ 0.92 $ 2.15 $ 1.86 Discontinued operations - - 1.45 Extraordinary loss (0.09) - - ------------ ------------ ------------ Net income $ 0.83 $ 2.15 $ 3.31 ============ ============ ============ DILUTED INCOME (LOSS) PER SHARE: Continuing operations $ 0.89 $ 2.03 $ 1.83 Discontinued operations - - 1.43 Extraordinary loss (0.09) - - ------------ ------------ ------------ Net income $ 0.80 $ 2.03 $ 3.26 ============ ============ ============
See accompanying notes to the consolidated financial statements. ANIXTER INTERNATIONAL INC. CONSOLIDATED BALANCE SHEETS (In millions, except share amounts)
DECEMBER 28, DECEMBER 29, ASSETS 2001 2000 ------------ ------------ CURRENT ASSETS Cash $ 27.2 $ 20.8 Accounts receivable (less allowances of $20.9 and $14.8 in 2001 and 2000, respectively) 154.1 293.3 Note receivable - unconsolidated subsidiary 111.4 126.1 Inventories 495.7 738.4 Inventories returnable to vendor, net - 120.0 Deferred income taxes 32.0 25.5 Other current assets 8.6 10.3 ------------ ------------ Total current assets 829.0 1,334.4 Property and equipment, at cost 167.4 167.1 Accumulated depreciation (112.4) (110.6) ------------ ------------ Net property and equipment 55.0 56.5 Goodwill (less accumulated amortization of $95.4 and $86.8 in 2001 and 2000, respectively) 231.6 239.3 Other assets 83.2 55.8 ------------ ------------ $1,198.8 $1,686.0 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 251.0 $ 499.1 Accrued expenses 86.2 139.6 Accrued restructuring 11.1 - Income taxes payable 4.4 8.1 ------------ ------------ Total current liabilities 352.7 646.8 Long-term debt 241.1 451.9 Other liabilities 41.9 32.4 ------------ ------------ Total liabilities 635.7 1,131.1 STOCKHOLDERS' EQUITY Common stock - - $1.00 par value, 100,000,000 shares authorized, 36,917,313 and 37,654,885 shares issued and outstanding in 2001 and 2000, respectively 36.9 37.7 Capital surplus 32.5 46.9 Accumulated other comprehensive income (59.5) (52.6) Retained earnings 553.2 522.9 ------------ ------------ Total stockholders' equity 563.1 554.9 ------------ ------------ $1,198.8 $1,686.0 ============ ============
See accompanying notes to the consolidated financial statements. ANIXTER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
YEARS ENDED ---------------------------------------------- DECEMBER 28, DECEMBER 29, DECEMBER 31, 2001 2000 1999 ------------ ------------ ------------ Operating activities Net income $ 30.3 $ 78.7 $ 124.2 Adjustments to reconcile net income to net cash provided by continuing operating activities: Income from discontinued operations - - (54.5) Extraordinary loss 3.3 - - Depreciation and amortization 32.4 29.6 26.5 Accretion of zero-coupon convertible notes 14.7 7.0 - Non-cash restructuring costs 6.6 - - Income tax savings from employee stock plans 5.3 11.2 2.6 Deferred income taxes (12.5) (3.2) (28.6) Changes in assets and liabilities: Accounts receivable 128.5 91.4 (70.3) Inventory 357.1 (329.7) (115.4) Accounts payable and accruals (294.5) 181.8 127.9 Restructuring costs 17.7 - - Other, net (0.4) 0.7 (5.5) ------------ ----------- ------------ Net cash provided by continuing operating activities 288.5 67.5 6.9 INVESTING ACTIVITIES Capital expenditures (22.0) (22.6) (13.8) Acquisitions and divestiture - (3.7) (2.6) Proceeds from sale of fixed assets 1.5 - - Other, net - - 0.5 ------------ ----------- ------------ Net cash used in continuing investing activities (20.5) (26.3) (15.9) FINANCING ACTIVITIES Proceeds from long-term borrowings 795.2 1,557.0 897.2 Repayment of long-term borrowings (937.6) (1,578.5) (970.2) Repayment of notes payable (86.5) - - Proceeds from issuance of common stock 22.3 34.9 7.4 Purchases of common stock for treasury (46.9) (15.4) (91.9) Debt issuance costs - (8.3) - Other, net (2.3) (14.1) (5.9) ------------ ----------- ------------ Net cash used in continuing financing activities (255.8) (24.4) (163.4) ------------ ----------- ------------ INCREASE (DECREASE) IN CASH FROM CONTINUING OPERATIONS 12.2 16.8 (172.4) Cash (used in) provided by discontinued operations (5.8) (13.5) 169.4 Cash at beginning of year 20.8 17.5 20.5 ------------ ----------- ------------ Cash at end of year $ 27.2 $ 20.8 $ 17.5 ============ =========== ============
See accompanying notes to the consolidated financial statements.
ANIXTER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In millions) ACCUMULATED OTHER COMPREHENSIVE INCOME -------------------------- UNREALIZED GAIN ON CUMULATIVE FOREIGN COMMON CAPITAL RETAINED TRANSLATION EXCHANGE COMPREHENSIVE STOCK SURPLUS EARNINGS ADJUSTMENTS CONTRACTS INCOME ---------- ---------- ---------- ------------- ----------- ------------- Balance at January 1, 1999 $ 41.8 $ - $ 409.4 $ (39.7) $ - Net income - - 124.2 - - $124.2 Other comprehensive income: Foreign currency translation adjustments - - - 2.1 - 2.1 ------------- Comprehensive income $126.3 Issuance of common stock and ============= related tax benefits 0.6 9.9 - - - Purchase and retirement of treasury stock (6.5) (9.9) (75.5) - - ---------- ---------- ---------- ------------- ----------- Balance at December 31, 1999 35.9 - 458.1 (37.6) - Net income - - 78.7 - - $ 78.7 Other comprehensive income: Foreign currency translation adjustments - - - (15.0) - (15.0) ------------- Comprehensive income $ 63.7 Issuance of common stock and ============= related tax benefits 2.5 47.7 - - - Purchase and retirement of treasury stock (0.7) (0.8) (13.9) - - ---------- ---------- ---------- ------------- ----------- Balance at December 29, 2000 37.7 46.9 522.9 (52.6) - Net income - - 30.3 - - $ 30.3 Other comprehensive income: Foreign currency translation adjustments - - - (12.0) - (12.0) Cumulative effect of change in accounting principle, net of tax of $1.8 - - - - 2.7 2.7 Change in fair market value of foreign exchange contracts, net of tax of $1.6 - - - - 2.4 2.4 ------------- Comprehensive income $ 23.4 Issuance of common stock and ============= related tax benefits 1.3 30.4 - - - Purchase and retirement of treasury stock (2.1) (44.8) - - - ---------- ---------- ---------- ------------- ----------- Balance at December 28, 2001 $ 36.9 $ 32.5 $ 553.2 $ (64.6) $ 5.1 ========== ========== ========== ============= ===========
See accompanying notes to the consolidated financial statements. ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION: Anixter International Inc., 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 through Anixter Inc. and its subsidiaries (collectively "Anixter"). BASIS OF PRESENTATION: The consolidated financial statements include the accounts of Anixter International Inc. and its majority-owned subsidiaries, excluding Anixter Receivables Corporation (collectively "the Company"), after elimination of intercompany transactions. The Company's fiscal year ends on the Friday nearest December 31 and included 52 weeks in 2001, 2000 and 1999. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain amounts for prior years have been reclassified to conform to the current year presentation. FOREIGN CURRENCY TRANSLATION: The results of operations for foreign subsidiaries where the functional currency is not the U.S. dollar are translated into U.S. dollars using the average exchange rates during the year, while the assets and liabilities are translated using period-end exchange rates. The related translation adjustments are recorded in a separate component of Stockholders' equity, "Accumulated other comprehensive income." Gains and losses from foreign currency transactions are included in income. The Company recognized $5.3 million, $0.9 million and $2.8 million in net foreign exchange losses in 2001, 2000 and 1999, respectively. ACCOUNTS RECEIVABLE PROGRAM: On October 6, 2000, the Company entered into an accounts receivable securitization program. The program is conducted through Anixter Receivables Corporation ("ARC"), which is a wholly owned unconsolidated subsidiary of the Company, on terms equivalent to those in an arms-length transaction. The investment is accounted for using the equity method. At December 28, 2001 and December 29, 2000, Anixter's investment in ARC was $34.2 million and $17.1 million, respectively. The program allows the Company to sell, on an ongoing basis without recourse, a majority of the accounts receivable originating in the United States to ARC and consists of a series of 364-day facilities. ARC may in turn sell an interest in these receivables to a financial institution and borrow up to $225.0 million. Prior to October 6, 2001, ARC could borrow up to $275.0 million. The Company agreed to continue servicing the sold receivables for the financial institution at market rates that approximate cost; accordingly, no servicing asset or liability has been recorded. At December 28, 2001 and December 29, 2000, the outstanding balance of accounts receivable sold to ARC totaled $296.0 million and $388.3 million, respectively. Accordingly, these accounts receivable were removed from the balance sheet. In order to fund the purchases of the accounts receivable from Anixter, ARC has incurred long-term debt of $143.7 million and $236.3 million and has a subordinated note payable to Anixter of $111.4 million and $126.1 million at December 28, 2001 and December 29, 2000, respectively. Net charges associated with the accounts receivable securitization program of $8.7 million and $3.8 million were recorded as other expenses in the 2001 and 2000 consolidated statements of operations, respectively. These costs primarily relate to the interest expense on the long-term debt incurred by ARC. Additionally, charges of $8.8 million relating to the discount on the initial sale of accounts receivable to ARC were recorded as other expenses in the 2000 consolidated statement of operations. The Company expects to substantially recover the charges on the initial sale during the course of the program. NOTE RECEIVABLE: At December 28, 2001 and December 29, 2000, the Company's note receivable of $111.4 million and $126.1 million, respectively, represents the amount due to Anixter from ARC primarily for the sale of accounts receivable and is subordinated to ARC's repayment of ARC long-term debt. INVENTORIES: Inventories, consisting primarily of finished goods, are stated at the lower of cost or market. Cost is determined using the average-cost method. In fiscal year 2000, inventories returnable to vendor represent those inventories that have been paid for by the Company. The inventory was returned for cash in the first quarter of 2001. PROPERTY AND EQUIPMENT: Capital expenditures are primarily for equipment, leasehold improvements and computer software. Equipment and computer software are recorded at cost and depreciated by applying the straight-line method over their estimated useful lives, and range from 3 to 10 years. Leasehold improvements are depreciated over the term of the related lease. Upon sale or retirement, the cost and related depreciation are removed from the respective accounts, and any gain or loss is included in income. Maintenance and repair costs are expensed as incurred. Depreciation expense charged to operations was $18.7 million, $17.1 million and $18.5 million in 2001, 2000 and 1999, respectively. GOODWILL: Goodwill primarily relates to the excess of cost over the fair value of the net tangible assets of businesses acquired. The ongoing value and remaining useful life of unamortized goodwill are subject to periodic evaluation and the Company currently expects the carrying amount to be fully recoverable. Should events and circumstances indicate that goodwill might be impaired, an undiscounted cash flow methodology would be used to determine whether an impairment loss would be recognized. Goodwill is amortized on a straight-line basis over periods ranging from 20 to 40 years. INTEREST RATE AGREEMENTS: The Company utilized interest rate agreements that effectively fix or cap, for a period of time, the London Interbank Offered Rate ("LIBOR") component of an interest rate on a portion of its floating rate obligations. There were no interest rate agreements outstanding at December 28, 2001 because the Company had minimal floating rate obligations outstanding. At December 29, 2000, as a result of these interest rate agreements, the interest rate on approximately 91% of debt obligations was fixed or capped. In June 2001, the Company cancelled two hedge agreements and one interest rate collar agreement for which there were no longer outstanding borrowings and incurred $1.7 million in interest expense related to the cancellation. At December 29, 2000, the Company had two interest rate swap agreements outstanding with a notional amount of $25.0 million each. These swap agreements obligated the Company to pay a fixed rate of approximately 6.1% through January 2003 and July 2002. At December 29, 2000, the Company also had one interest rate collar agreement with a notional amount of $50.0 million which entitled the Company to receive from the bank the amount by which the LIBOR component of the floating rate interest payments exceed 6.5%. In addition, the Company was required to pay the bank the difference between 6.3% and the floating rate when it was below 5.3%. This interest rate collar was cancelled in June 2001. The fair value, which is the estimated amount at the current interest rate that the Company would receive or pay to enter into similar interest rate agreements at December 29, 2000, would have been to pay $0.5 million. The impact of these interest rate agreements was to increase interest expense by $0.3 million in 2001, decrease interest expense by $0.7 million in 2000 and increase interest expense by $1.3 million in 1999. The Company does not enter into interest rate transactions for speculative purposes. FOREIGN CURRENCY FORWARD CONTRACTS: The Company also purchased foreign currency forward contracts, accounted for as cash flow hedges, to minimize the effect of fluctuating foreign currencies on its reported income. The impact of these foreign currency forward contracts on the income statement was insignificant in 2001, 2000 and 1999. The forward contracts were revalued at current foreign exchange rates, with the changes in valuation reflected directly in income. At December 28, 2001 and December 29, 2000, the face amount of foreign currency forward contracts outstanding was approximately $74.0 million and $73.9 million, respectively. At December 28, 2001, the amount by which the fair value exceeded the face amount of foreign exchange contracts was $8.5 million and was included in other assets on the consolidated balance sheet. REVENUE RECOGNITION: Sales and related cost of sales are recognized upon transfer of title which occurs upon shipment of products. ADVERTISING AND SALES PROMOTION: Advertising and sales promotion costs are expensed as incurred. Advertising and promotion costs were $10.9 million, $11.3 million and $11.1 million in 2001, 2000 and 1999, respectively. SHIPPING AND HANDLING FEES AND COSTS: The Company incurred shipping and handling fees and costs totaling $76.5 million, $90.6 million and $70.1 million for the years ended 2001, 2000 and 1999, respectively. These costs are included in operating expenses in the consolidated statements of operations. STOCK BASED COMPENSATION: In accordance with the Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees", compensation cost of stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the option exercise price and is charged to operations over the vesting period. Income tax benefits totaling $5.3 million, $11.2 million and $2.6 million in 2001, 2000 and 1999, respectively, attributable to stock options exercised were credited to capital surplus. INCOME TAXES: Using the liability method, provisions for income taxes include deferred taxes resulting from temporary differences in determining income for financial and tax purposes. Such temporary differences result primarily from differences in the carrying value of assets and liabilities. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations". SFAS No. 141 supercedes prior guidance and requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method, thereby eliminating the use of the pooling of interest method. The Company adopted this statement as required on July 1, 2001 and will account for all future business combinations under the provisions of this statement. In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible Assets", effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill will no longer be amortized, but will be subject to annual impairment tests in accordance with the statements. Amortization of goodwill was $9.0 million, $8.4 million and $7.4 million in 2001, 2000 and 1999, respectively. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. During 2002, the Company will perform the first of the required impairment tests of goodwill as of December 29, 2001 and does not anticipate that the effect of these tests will have a material impact on the Company's results of operations or financial position. In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long Lived Assets". Consistent with prior guidance, SFAS No. 144 continues to require a three-step approach for recognizing and measuring the impairment of assets to be held and used. Assets to be sold must be stated at the lower of the asset's carrying amount or fair value and depreciation is no longer recognized. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144 is not expected to have a material effect on the Company's results of operations or financial position. NOTE 2. INCOME (LOSS) PER SHARE The following table sets forth the computation of basic and diluted income (loss) per share:
(In millions, except per share data) YEARS ENDED ---------------------------------------------------- DECEMBER 28, DECEMBER 29, DECEMBER 31, 2001 2000 1999 ------------ ------------ ------------ BASIC INCOME (LOSS) PER SHARE: Income before extraordinary loss $ 33.6 $ 78.7 $ 69.7 Extraordinary loss (3.3) - - ------------ ------------ ------------ Net income (numerator) $ 30.3 $ 78.7 $ 69.7 ============ ============ ============ Weighted-average common shares outstanding (denominator) 36.5 36.6 37.5 Income per share before extraordinary loss $ 0.92 $ 2.15 $ 1.86 Extraordinary loss per share (0.09) - - Net income per share $ 0.83 $ 2.15 $ 1.86 DILUTED INCOME (LOSS) PER SHARE: Income before extraordinary loss $ 33.6 $ 78.7 $ 69.7 Interest impact of assumed conversion of convertible notes - 4.3 - ------------ ------------ ------------ Adjusted income before extraordinary loss (numerator) 33.6 83.0 69.7 Extraordinary loss (3.3) - - ------------ ------------ ------------ Net income $ 30.3 $ 83.0 $ 69.7 ============ ============ ============ Weighted-average common shares outstanding 36.5 36.6 37.5 Effect of dilutive securities: Stock options, warrants and convertible notes 1.3 4.3 0.6 ------------ ------------ ------------ Weighted-average common shares outstanding (denominator) 37.8 40.9 38.1 ============ ============ ============ Income per share before extraordinary loss $ 0.89 $ 2.03 $ 1.83 Extraordinary loss per share (0.09) - - Net income per share $ 0.80 $ 2.03 $ 1.83
In 2001, the Company excluded 5.9 million of common stock equivalents, primarily relating to the Convertible Notes from its calculation of diluted income (loss) per share because the effect would have been antidilutive. Because the Convertible Notes were antidilutive, the related $9.0 million of net interest expense was not excluded from the determination of income in the calculation of diluted income (loss) per share. Potentially dilutive securities that were excluded from the calculation of diluted income per share were insignificant in 2000 and1999. NOTE 3. DISCONTINUED OPERATIONS In 1999, the Company completed the disposal of the Integration segment and, accordingly, the Integration segment is reflected as a discontinued operation in these financial statements. The North America Integration business was sold in the first quarter of 1999 and the Asia Pacific Integration business was sold in the fourth quarter of 1999. Interest expense has been allocated to discontinued operations based on the percentage of total identifiable assets. The Company recorded an after-tax gain from the sale of discontinued assets of $57.0 million in 1999. The $57.0 million gain included a tax benefit of $8.4 million resulting from the reversal of certain tax reserves associated with prior years' reported sales of discontinued assets. Total proceeds received from the sale of the Integration business were $238.3 million. There was no significant activity in 2001 or 2000. Net sales and income from discontinued operations for the year ended December 31, 1999, were as follows: (In millions) Net sales $196.3 Costs and expenses (199.5) ------- Operating loss (3.2) Gain on sale of assets 81.1 Net interest expense and other (1.0) Income tax expense (22.4) ------- Income from discontinued operations $ 54.5 ======= NOTE 4. ACQUISITION AND DIVESTITURE OF BUSINESSES In January 2000, the Company acquired 100% of the stock of allNET Technologies Pty. Limited ("allNET") for $6.7 million. allNET is a communications products distributor located in Australia. This acquisition was accounted for using the purchase method of accounting. In September 2000, the Company sold the net assets of a wholly owned subsidiary of Accu-Tech Corporation for $3.0 million in cash and $1.6 million in notes receivable. The effect of these transactions on the operating results of the Company was not significant. NOTE 5. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC. At December 28, 2001 and December 29, 2000, the Company had an ownership interest of 99.9% and 99.7%, respectively, in Anixter Inc., which is included in the consolidated financial statements of the Company. The following summarizes the financial information of Anixter Inc. and reflects the Integration segment of the Company as a discontinued operation: ANIXTER INC. CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 28, DECEMBER 29, (In millions) 2001 2000 ------------ ------------ Assets: Current assets $ 827.1 $ 1,331.0 Property, net 55.0 56.5 Goodwill 231.6 239.3 Other assets 83.1 53.8 ------------ ------------ $ 1,196.8 $ 1,680.6 ============ ============ Liabilities and Stockholders' Equity: Current liabilities $ 352.9 $ 645.1 Other liabilities 41.5 28.6 Long-term debt 19.3 244.9 Subordinated notes payable to parent 244.8 250.5 Stockholders' equity 538.3 511.5 ------------ ------------ $ 1,196.8 $ 1,680.6 ============ ============
ANIXTER INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED -------------------------------------------------- DECEMBER 28, DECEMBER 29, DECEMBER 31, (In millions) 2001 2000 1999 ------------ ------------ ------------ Net sales $3,144.2 $3,514.4 $2,686.9 Operating income $ 103.5 $ 191.6 $ 114.6 Income from continuing operations before income taxes and extraordinary loss $ 58.7 $ 135.1 $ 79.9 Income from continuing operations before extraordinary loss $ 34.2 $ 76.3 $ 43.6 Extraordinary loss $ 3.3 - Net income $ 30.9 $ 75.7 $ 91.7
NOTE 6. RESTRUCTURING COSTS Due to increased economic softness and deteriorating market conditions in the communications products market, the Company announced a one-time restructuring charge of $31.7 million during the third quarter of 2001. The components of the charge are identified below. STAFF REDUCTIONS - The Company planned to reduce approximately 700 employees across all business functions and geographic areas and communicated these intentions to the employees in the third quarter of 2001. The reductions started during that time and as of December 28, 2001, approximately 600 employees have been terminated. In 2001, the Company recorded a restructuring charge of $9.8 million primarily relating to severance and fringe benefits of the approximately 700 employees to be terminated. FACILITY RESTRUCTURING - The Company recorded a restructuring charge of $13.9 million to cover primarily the future lease payments on the excess facilities located in North America. Included in this amount was management's assumption that certain facilities could be sublet for a total of $7.2 million and the write-off of related leasehold improvements and equipment of $2.0 million. KOREA - The Company decided to leave the Korean market and, as a result, recorded a restructuring charge of $6.2 million. The major components of this charge included accounts receivable bad debts of $3.1 million and legal fees, settlements and other shutdown costs totaling $3.1 million. OTHER ITEMS - The Company expensed purchased software that it decided not to implement and provided for legal fees associated with the restructuring. The total charge for these items was $1.8 million. The following table summarizes the restructuring costs: TOTAL NON-CASH CASH ACCRUED COSTS CHARGES PAYMENTS COSTS ----- -------- -------- ------- Staff Reductions $ 9.8 $ - $ 5.5 $ 4.3 Facility Restructuring 13.9 2.0 0.9 11.0 Korea 6.2 3.7 0.9 1.6 Other 1.8 0.9 0.1 0.8 ----- -------- -------- ------ Total $31.7 $ 6.6 $ 7.4 $17.7 ===== ======== ======== ====== Amounts related to the net lease expense due to the consolidation of facilities will be paid over the respective lease terms through the year 2008. The Company expects to complete a majority of the implementation of the restructuring initiative by the second quarter of 2002. NOTE 7. ACCRUED EXPENSES Accrued expenses consisted of the following: DECEMBER 28, DECEMBER 29, (In millions) 2001 2000 ------------ ------------ Salaries and fringe benefits $ 37.5 $ 60.0 Taxes 4.8 21.0 Discontinued operations 11.9 17.6 Freight 4.1 7.2 Other 27.9 33.8 ------------ ------------ $ 86.2 $139.6 ============ ============ NOTE 8. DEBT Debt is summarized below: DECEMBER 28, DECEMBER 29, (In millions) 2001 2000 ------------ ------------ 7% Zero-coupon convertible notes $ 221.8 $ 207.0 8% Senior notes 18.6 100.0 Bank revolving lines of credit 0.5 142.2 Other 0.2 2.7 ------------ ------------ Total debt $ 241.1 $ 451.9 ============ ============ On June 28, 2000, the Company issued $792 million of 7% zero-coupon convertible notes ("Convertible Notes") due 2020. The net proceeds from the issue were $193.4 million and were initially used to repay working capital borrowings under a floating rate bank line of credit. 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 $6.5 million and are being amortized through June 28, 2020 using the straight-line method. Holders of the Convertible Notes 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 5.9 million shares. Additionally, holders may require the Company to purchase all or a portion of their Convertible Notes on June 28, 2005, at a price of $356.28 per Convertible Note, on June 28, 2010, at a price of $502.57 per Convertible Note and on June 28, 2015, at a price of $708.92 per Convertible Note. The Company may choose to pay the purchase price in cash or common stock or a combination of both. On October 6, 2000, Anixter entered into a new financing arrangement to replace the existing $550.0 million revolving credit agreement set to mature in 2001. The new agreement consisted of a $500.0 million, senior unsecured, revolving credit line which includes a $390.0 million agreement, due 2005, plus a $110.0 million, 364-day agreement which was cancelled in the second quarter of 2001. Anixter has various other revolving bank lines of credit worldwide that provide for up to $18.7 million of additional borrowings, none of which are domestic. These international lines of credit reduce or mature at various dates in 2002 through 2004. Floating and fixed interest rate options, based on the prime or LIBOR rate, are available under these facilities. At December 28, 2001, $0.5 million was borrowed and $408.2 million was available under the bank revolving lines of credit at Anixter, of which $25.7 million was available to pay the Company for intercompany liabilities. The weighted average interest rate on debt, excluding the fixed rate notes, at December 28, 2001 and December 29, 2000, was 5.0% and 8.0%, respectively. Facility fees of 0.25% payable on the 5 year agreement and 0.23% payable on the 364-day agreement totaled $1.1 million in 2001 and were included in interest expense in the consolidated statement of operations. Facility fees for 2000 were insignificant. In September 1996, Anixter filed a shelf registration statement with the Securities and Exchange Commission to offer from time to time up to $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, which bear interest at 8%, contain various restrictions with respect to secured borrowings and are unconditionally guaranteed by the Company. The Company repurchased $81.3 million of its 8% senior notes for $86.5 million during the year ended December 28, 2001. Additionally, in 2001, the Company expensed $0.3 million of debt issuance costs associated with the cancellation of the $110.0 million revolving credit agreement. Accordingly, the Company recorded an extraordinary loss on the early extinguishment of debt of $5.5 million ($3.3 million, net of tax), in its consolidated statements of operations for the year ended December 28, 2001. Certain debt agreements entered into by the Company's subsidiaries contain various restrictions including restrictions on payments to the Company. The Company has guaranteed substantially all of the debt of its subsidiaries. Restricted net assets of subsidiaries were approximately $410.1 million and $404.5 million at December 28, 2001 and December 29, 2000, respectively. Aggregate annual maturities of debt at December 28, 2001, were as follows: 2002-$0.7 million; 2003-$18.6 million; 2004-none; 2005-none; 2006-none; and $221.8 million thereafter. The amount due in 2002 was classified as long-term due to the Company's ability and intent to refinance through its long-term facilities. Interest paid in 2001, 2000 and 1999, was $18.2 million, $39.1 million and $34.5 million, respectively. The estimated fair value of the Company's debt at December 28, 2001 and December 29, 2000, was $245.9 million and $425.0 million respectively, based on public quotations and current market rates. NOTE 9. LEASE COMMITMENTS AND CONTINGENCIES Substantially all of the Company's office and warehouse facilities and equipment are leased under operating leases. A certain number of these leases are long-term operating leases and expire at various dates through 2018. Minimum lease commitments under operating leases at December 28, 2001 are as follows: 2002 - $46.0 million; 2003 - $35.0 million; 2004 - $26.7 million; 2005 - $17.7 million; 2006 - $12.1 million; beyond 2006 - $34.9 million. Total rental expense was $57.8 million, $52.3 million and $58.3 million in 2001, 2000 and 1999, respectively. 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 which 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. NOTE 10. INCOME TAXES The Company and its U.S. subsidiaries file their federal income tax return on a consolidated basis. As of December 28, 2001, the Company had no net operating loss ("NOL") or investment tax credit carryforwards for U.S. federal income tax purposes. During the third quarter of 1998, the Internal Revenue Service completed its examination for the years 1993 to 1995, which included an examination of net operating losses and credit carryovers dating back to 1979. As a result of the lapsing, during the third quarter of 1999, of all relevant statutes of limitations on assessments relating to that 17-year period of time, the Company recorded a $24.3 million tax benefit in continuing operations for the reversal of previously established tax reserves which were determined to be no longer necessary. At December 28, 2001, various foreign subsidiaries of the Company had aggregate cumulative NOL carryforwards for foreign income tax purposes of approximately $167.6 million, which are subject to various provisions of each respective country. Approximately $56.1 million of this amount expires between 2002 and 2011 and $111.5 million of the amount has an indefinite life. Of the $167.6 million NOL carryforwards of foreign subsidiaries mentioned above, $89.4 million relates to losses that have already provided a tax benefit in the U.S. due to rules permitting flow-through of such losses in certain circumstances. Without such losses included, the cumulative NOL carryforwards at December 28, 2001, are approximately $78.2 million, which are subject to various provisions of each respective country. Approximately $48.6 million of this amount expires between 2002 and 2011 and $29.6 million of the amount has an indefinite life. The deferred tax asset and valuation allowance, shown below relating to foreign NOL carryforwards, have been adjusted to reflect only the carryforwards for which the Company has not taken a tax benefit in the U.S. Domestic income from continuing operations before income taxes was $55.5 million, $110.1 million and $76.0 million for 2001, 2000 and 1999, respectively. Foreign income from continuing operations before income taxes was $2.7 million, $24.5 million and $2.2 million for 2001, 2000 and 1999, respectively. Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $83.7 million at December 28, 2001. Those earnings are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided. Upon distribution of those earnings in the form of dividends or otherwise, the Company may be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. According to the Company's computations as of December 28, 2001, unrecognized foreign tax credit carryforwards would be available to fully offset the U.S. regular corporate income tax liability that would arise upon such a distribution. Additionally, with respect to the countries that have undistributed earnings as of December 28, 2001, according to the foreign laws and treaties in place at that time, withholding taxes of approximately $1.0 million would be payable upon the remittance of all earnings at December 28, 2001. The Company paid income taxes in 2001, 2000 and 1999 of $33.7 million, $46.8 million and $64.9 million, respectively. Significant components of the Company's deferred tax assets and (liabilities) were as follows: DECEMBER 28, DECEMBER 29, (In millions) 2001 2000 ------------ ------------ Gross deferred tax liabilities $ (17.4) $ (15.8) Foreign NOL carryforwards 29.6 29.8 Deferred compensation 14.7 11.8 Inventory reserves 17.2 11.1 Allowance for doubtful accounts 3.0 5.8 Other 10.5 6.8 ------------ ------------ Gross deferred tax assets 75.0 65.3 Valuation allowance (24.5) (25.5) ------------ ------------ Net deferred tax asset $ 33.1 $ 24.0 ============ ============ Net current deferred tax assets $ 32.0 $ 25.5 Net non-current deferred tax assets (liabilities) 1.1 (1.5) ------------ ------------ $ 33.1 $ 24.0 ============ ============ Income tax expense (benefit) was comprised of:
YEARS ENDED --------------------------------------------------- DECEMBER 28, DECEMBER 29, DECEMBER 31, (In millions) 2001 2000 1999 ------------ ------------ ------------ Current--Foreign $ 10.1 $ 11.8 $ 7.6 State 3.3 8.1 4.5 Federal 25.1 36.7 25.0 ------------ ------------ ------------ 38.5 56.6 37.1 Deferred--Foreign (0.7) (0.7) (1.5) State (2.3) (2.4) (1.1) Federal (10.9) 2.4 (26.0) ------------ ------------ ------------ (13.9) (0.7) (28.6) ------------ ------------ ------------ $ 24.6 $ 55.9 $ 8.5 ============ ============ ============
Reconciliations of income tax expense to the statutory corporate federal tax rate of 35% were as follows:
YEARS ENDED -------------------------------------------------- DECEMBER 28, DECEMBER 29, DECEMBER 31, (In millions) 2001 2000 1999 ------------ ------------ ------------ Statutory tax expense $ 20.4 $ 47.1 $ 27.4 Increase (reduction) in taxes resulting from: Amortization of goodwill 2.6 2.5 2.2 Losses on foreign operations 0.9 2.3 2.5 State income taxes 0.5 3.7 2.3 Adjustment to prior year tax accounts - - (24.3) Other, net 0.2 0.3 (1.6) ------------ ------------ ------------ $ 24.6 $ 55.9 $ 8.5 ============ ============ ============
NOTE 11. PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS The Company's various pension plans are non-contributory and cover substantially all full-time domestic employees and certain employees in other countries. Retirement benefits are provided based on compensation as defined in the plans. The Company's policy is to fund these plans as required by Employee Retirement Income Security Act and the Internal Revenue Service. Plan assets consisted primarily of equity securities and mutual fund investments. In 2000, the Company incurred a $3.2 million loss on settlement of a supplemental employee retirement plan. In 1999, the Company completed the disposal of the Integration segment that resulted in a curtailment gain of $4.4 million and, accordingly, was classified as a gain on disposal of discontinued operations.
PENSION BENEFITS ------------------------------- 2001 2000 -------- -------- (IN MILLIONS) CHANGE IN PROJECTED BENEFIT OBLIGATION: Beginning balance $ 107.4 $ 104.2 Service cost 7.0 6.2 Interest cost 7.6 6.9 Amendments .7 - Actuarial loss (gain) 3.2 (0.2) Settlement/Curtailment loss - 3.4 Benefits paid (3.4) (11.0) Foreign currency exchange rate changes (1.3) (2.1) -------- -------- Ending balance $ 121.2 $ 107.4 ======== ======== CHANGE IN PLAN ASSETS AT FAIR VALUE: Beginning balance $ 99.8 $ 97.8 Actual return on plan assets (2.7) 4.8 Company contributions 2.7 2.7 Benefits paid (3.4) (3.8) Foreign currency exchange rate changes (1.1) (1.7) -------- -------- Ending balance $ 95.3 $ 99.8 ======== ======== RECONCILIATION OF FUNDED STATUS: Projected benefit obligation $(121.2) $(107.4) Plan assets at fair value 95.3 99.8 -------- -------- Funded status (25.9) (7.6) Unrecognized net actuarial loss (gain) 2.2 (11.7) Unrecognized prior service cost 2.4 2.0 Unrecognized transition obligation (0.2) (0.4) -------- -------- Accrued benefit cost $ (21.5) $ (17.7) ======== ======== WEIGHTED AVERAGE ASSUMPTIONS: Discount rate 6.81% 7.25% Expected return on plan assets 8.53% 8.63% Salary growth rate 4.96% 5.42%
PENSION COSTS ---------------------------------- 2001 2000 1999 ------ ------ ------ (IN MILLIONS) COMPONENTS OF NET PERIODIC COST: Service cost $ 7.0 $ 6.2 $ 8.4 Interest cost 7.6 6.9 7.2 Expected return on plan assets (8.4) (8.4) ( 7.9) Net amortization (0.4) (0.7) ( 0.2) ------ ------ ------ Periodic benefit cost prior to settlement/curtailment 5.8 4.0 7.5 Settlement/Curtailment loss (gain) - 3.0 (4.4) ------ ------ ------ Net periodic benefit cost $ 5.8 $ 7.0 $ 3.1 ====== ====== ======
The Company has four plans in 2001 and three plans in 2000 where the accumulated benefit obligation is in excess of the fair value of plan assets. The accumulated benefit obligation was $4.2 million and $4.0 million and the fair value of the plans' assets was $0.2 million and $0.1 million in 2001 and 2000, respectively. The Company had two plans in 2000 where the fair value of assets were in excess of the projected benefit obligation. The fair value of the plans' assets was $8.6 million and had projected benefit obligations of $7.1 million. The Company has several savings plans. The Company's contributions to these plans are based upon various levels of employee participation. The total cost of these plans was $1.6 million in 2001, $1.5 million in 2000 and $1.5 million in 1999. The Company's liability for post-retirement benefits other than pensions is not material. NOTE 12. PREFERRED STOCK AND COMMON STOCK PREFERRED STOCK-- The Company has the authority to issue 15 million shares of preferred stock, par value $1.00 per share, none of which was outstanding at the end of 2001 or 2000. STOCK OPTIONS AND STOCK GRANTS-- At December 28, 2001, the Company had stock incentive plans that authorize 2.6 million shares for additional stock option awards or stock grants. Options granted under these plans have been granted with exercise prices at or higher than the fair market value of the common stock on the date of grant. One-fourth of the employee options granted become exercisable each year after the year of grant. The director options fully vest in one year. All options expire ten years after the date of grant. Under its Enhanced Management Incentive Plan, in 2001 the Company issued 31,340 shares of restricted stock and granted 161,039 executive stock units. During 2000, the first year restricted stock was granted, the Company issued 281,173 shares of restricted stock. Restricted stock and executive stock units fully vest after four years from the date of grant. Compensation expense associated with the restricted stock grants and executive stock units was $3.6 million and $1.7 million in 2001 and 2000, respectively. The following table summarizes the 2001, 2000 and 1999 activity under the employee and director option plans:
WEIGHTED WEIGHTED AVERAGE AVERAGE EMPLOYEE EXERCISE DIRECTOR EXERCISE OPTIONS PRICE OPTIONS PRICE --------- -------- -------- -------- (Options in thousands) Balance at January 1, 1999 4,683.2 $16.48 390.0 $14.35 Granted 1,115.5 12.70 -- -- Exercised (452.0) 13.35 (30.0) 11.63 Canceled (163.1) 16.96 -- -- --------- -------- -------- -------- Balance at December 31, 1999 5,183.6 15.92 360.0 14.57 Granted 1,127.5 20.59 -- -- Exercised (2,003.0) 16.14 (100.0) 11.30 Canceled (147.1) 16.91 -- -- --------- -------- -------- -------- Balance at December 29, 2000 4,161.0 17.06 260.0 15.83 Granted 1,190.0 25.24 -- -- Exercised (1,128.1) 16.91 (40.0) 17.24 Canceled (138.3) 20.17 -- -- --------- -------- -------- -------- Balance at December 28, 2001 4,084.6 $19.37 220.0 $15.57 ========= ======== ======== ======== Options Exercisable at year-end 1999 2,679.3 $16.49 360.0 $14.57 2000 2,031.3 $16.75 260.0 $15.83 2001 1,649.0 $16.72 220.0 $15.57
The following table summarizes information relating to options outstanding and exercisable at December 28, 2001, using various ranges of exercise prices:
EMPLOYEE OPTIONS (options in thousands) OPTIONS OUTSTANDING OPTIONS EXERCISABLE ----------------------------------------- ------------------------- WEIGHTED WEIGHTED WEIGHTED RANGE OF AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE REMAINING EXERCISE PRICES OUTSTANDING PRICE YEARS EXERCISABLE PRICE -------- ----------- -------- --------- ----------- --------- $9.11 100.0 $ 9.11 1.0 100.0 $ 9.11 $12.69-$15.75 984.7 $13.65 7.1 576.9 $14.32 $17.44-$21.13 1,837.4 $19.26 7.4 967.5 $18.89 $25.20-$32.00 1,162.5 $25.28 10.0 4.6 $28.18
DIRECTOR OPTIONS (options in thousands) WEIGHTED WEIGHTED RANGE OF AVERAGE AVERAGE EXERCISE OUTSTANDING & EXERCISE REMAINING PRICES EXERCISABLE PRICE YEARS -------- ------------- -------- --------- $8.38-$8.46 60.0 $ 8.42 1.0 $15.00-$20.69 160.0 $ 18.26 3.3 In addition, the Company has an Employee Stock Purchase Plan ("ESPP") covering most employees. Participants can request that up to 10% of their base compensation be applied toward the purchase of common stock under the Company's ESPP. The purchase price is the lower of 85% of the fair market value of the common stock at the beginning of the ESPP year, July 1, 2001, or at the end of the ESPP year, June 30, 2002. Under the ESPP, the Company sold 110,128 shares, 114,100 shares and 123,700 shares to employees in 2001, 2000 and 1999, respectively. STOCK OPTION PLANS OF ANIXTER-- In 1995 and prior years, Anixter granted to key employees options to purchase the common stock of Anixter. Substantially all options were granted with exercise prices at the fair market value of the common stock on the date of grant. These options vest over four years and terminate seven to ten years from the date of grant. At December 28, 2001, the Company owned 99.97% of the approximately 32.2 million shares of outstanding Anixter common stock. The following table summarizes the 2001, 2000 and 1999 option activity: WEIGHTED AVERAGE EXERCISE OPTIONS PRICE ------- --------- (Options in thousands) Balance at January 1, 1999 982.3 $11.57 Exercised (586.6) 11.21 Canceled (26.2) 12.28 ------- Balance at December 31, 1999 369.5 12.08 Exercised (323.7) 11.92 Canceled (0.5) 14.50 ------- Balance at December 29, 2000 45.3 13.23 Exercised (27.3) 12.40 Canceled - - ------- Balance at December 28, 2001 18.0 $14.50 ======= Options exercisable at year-end 1999 369.5 $12.08 2000 45.3 $13.23 2001 18.0 $14.50 The exercise price for options outstanding as of December 28, 2001, was $14.50 per share and all options expired in January 2002. UNITS-- The Company adopted a Director Stock Unit Plan ("DSUP") to pay its non-employee directors annual retainer fees in the form of stock units. These stock units convert to common stock of the Company at the pre-arranged time selected by each director. Stock units were granted to eight directors in 2001 and nine directors in 2000, having an aggregate value at grant date of $480,000 and $540,000, respectively. The following table summarizes the 2001, 2000 and 1999 activity under the DSUP: DSUP STOCK UNITS (In thousands) ----------- Balance at January 1, 1999 81.6 Granted 29.7 Converted (3.5) ----------- Balance at December 31, 1999 107.8 Granted 20.4 Converted (31.2) ----------- Balance at December 29, 2000 97.0 Granted 18.4 Converted (31.8) Canceled (0.6) ----------- Balance at December 28, 2001 83.0 =========== ACCOUNTING FOR STOCK BASED COMPENSATION-- The Company applied the disclosure-only provisions of SFAS No. 123 "Accounting for Stock Based Compensation". Accordingly, no compensation expense has been recognized in the income statement for the stock option plans. Had compensation costs for the plans been determined based on the fair value at the grant date for awards beginning in 1995 and amortized over the respective vesting period, the Company's income from continuing operations would have been reduced to the pro forma amounts indicated below: (In millions, except per share data) 2001 2000 1999 ---- ---- ---- Basic income from continuing operations --as reported $33.6 $78.7 $69.7 --pro forma $26.5 $72.7 $64.0 Diluted income from continuing operations plus assumed conversion --as reported $33.6 $83.0 $69.7 --pro forma $26.5 $77.0 $64.0 Basic income per share from continuing operations --as reported $0.92 $2.15 $1.86 --pro forma $0.72 $1.99 $1.71 Diluted income per share from continuing operations --as reported $0.89 $2.03 $1.83 --pro forma $0.71 $1.90 -- Pro forma diluted income per share has not been presented for 1999, as the conversion of stock options and warrants would have had an anti-dilutive effect. The weighted average fair value for the Company's stock options (which was $14.92 per share in 2001, $11.74 per share in 2000 and $5.50 per share in 1999) was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions for 2001, 2000 and 1999, respectively: expected stock price volatility of 52%, 45%, and 39%; expected dividend yield of zero each year; risk-free interest rate of 5.2%, 6.5% and 5.6%; and, an expected 7 year life for 2001 and 2000 and a 5 year life for 1999. The Black-Scholes option pricing model was developed for estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company's stock options. NOTE 13. BUSINESS SEGMENT The Company operates in one business segment that is engaged in the distribution of communications and specialty wire and cable products from top suppliers to contractors and installers and to end users, including manufacturers, natural resources companies, utilities and original equipment manufacturers. The Company obtains and coordinates financing, legal and other related services, certain of which are rebilled to subsidiaries. The following table is a geographic breakdown of the Company's operations. In 2001, the Company reported sales to a single customer that represented 10.3% of total net sales. No other customer accounts for 10% or more of sales in 2001, 2000 or 1999. Export sales were insignificant. (In millions) WORLDWIDE OPERATIONS --------------------------------------- 2001 2000 1999 --------- --------- --------- Net sales United States $2,179.5 $2,453.9 $1,833.4 Europe 502.1 587.1 523.0 Canada 254.0 285.4 213.9 Asia Pacific and Latin America 208.6 188.0 141.7 --------- --------- --------- $3,144.2 $3,514.4 $2,712.0 ========= ========= ========= Operating income United States $ 79.4 $ 144.6 $ 93.3 Europe 21.2 24.6 20.6 Canada 10.3 19.6 12.9 Asia Pacific and Latin America (8.9) 1.0 (14.0) --------- --------- --------- 102.0 $ 189.8 $ 112.8 ========= ========= ========= Tangible long-lived assets United States $ 119.2 $ 89.8 $ 66.8 Europe 4.7 5.2 7.1 Canada 2.7 3.7 3.9 Asia Pacific and Latin America 3.3 4.2 5.0 --------- --------- --------- $ 129.9 $ 102.9 $ 82.8 ========= ========= ========= NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the unaudited interim results of operations and the price range of the common stock composite for each quarter in the years ended December 28, 2001 and December 29, 2000. The Company has never paid cash dividends on its common stock.
FIRST SECOND THIRD FOURTH (In millions, except per share amounts) QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- YEAR ENDED DECEMBER 28, 2001 Net sales $880.3 $839.8 $761.5 $662.6 Cost of sales (668.3) (639.3) (590.8) (508.9) Operating income (loss) 49.7 43.2 (10.0) 19.1 Income (loss) before income taxes and extraordinary loss 35.6 30.9 (19.7) 11.4 Income (loss) before extraordinary loss 20.9 18.7 (11.7) 5.7 Extraordinary loss on early extinguishment of debt, net of tax - (0.8) (0.2) (2.3) Net income (loss) 20.9 17.9 (11.9) 3.4 Basic income (loss) per share: Income (loss) before extraordinary loss 0.57 0.52 (0.32) 0.16 Extraordinary loss - (0.02) (0.01) (0.06) Net income (loss) 0.57 0.50 (0.33) 0.10 Diluted income (loss) per share: Income (loss) before extraordinary loss 0.53 0.49 (0.32) 0.15 Extraordinary loss - (0.02) (0.01) (0.06) Net income (loss) 0.53 0.47 (0.33) 0.09 Composite stock price range: High 29.25 31.80 31.69 30.86 Low 18.81 23.30 23.15 23.85 Close 24.10 30.70 24.78 28.82 YEAR ENDED DECEMBER 29, 2000 Net sales $758.8 $920.9 $971.8 $862.9 Cost of sales (571.8) (712.2) (754.1) (654.4) Operating income 37.5 50.0 53.9 48.4 Income before income taxes 27.7 39.2 40.9 26.8 Income from continuing operations 16.1 22.7 24.0 15.9 Net income 16.1 22.7 24.0 15.9 Basic income per share: Continuing 0.45 0.62 0.65 0.42 Net income 0.45 0.62 0.65 0.42 Diluted income per share: Continuing 0.44 0.60 0.59 0.41 Net income 0.44 0.60 0.59 0.41 Composite stock price range: High 29.94 34.00 37.00 29.19 Low 18.69 26.50 27.06 17.75 Close 27.88 26.52 29.13 21.63
In the third quarter of 2001, the Company recorded a $31.7 million ($19.0 million after-tax) one-time restructuring charge for severance and costs associated with closing and consolidating certain facilities. As a result, basic and diluted income per share were reduced by $0.52 and $0.50, respectively. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT. See Registrant's Proxy Statement for the 2002 Annual Meeting of Stockholders--"Election of Directors." EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists the name, age as of March 8, 2002, position, offices and certain other information with respect to the executive officers of the Company. The term of office of each executive officer will expire upon the appointment of his successor by the Board of Directors.
John A. Dul, 41 General Counsel of the Company since May 1998; Assistant Secretary of the Company since May 1995; General Counsel and Secretary of Anixter since January 1996. Terrance A. Faber, 50 Vice-President Controller of the Company since October 2000; Chief Financial Officer of International Survey Research from January 2000 to October 2000; Corporate Controller of BT Office Products International from August 1997 to January 2000; Corporate Controller of The Bradford Exchange from October 1994 to August 1997. Robert W. Grubbs Jr., 45 President and Chief Executive Officer of the Company since February 1998; President and Chief Executive Officer of Anixter since July 1994. James E. Knox, 64 Senior Vice-President--Law and Secretary of the Company since 1986. Dennis J. Letham, 50 Chief Financial Officer, Senior Vice-President--Finance of the Company since January 1995; Chief Financial Officer, Executive Vice President of Anixter since July 1993. Philip F. Meno, 43 Vice-President--Taxes of the Company since May 1993. Rodney A. Shoemaker, 44 Vice-President--Treasurer of the Company and Anixter since July 1999; Assistant Treasurer of the Company and Anixter from October 1994 to July 1999. Samuel Zell, 60 Chairman of the Board of Directors of the Company since January 1985.
ITEM 11. EXECUTIVE COMPENSATION. See Registrant's Proxy Statement for the 2002 Annual Meeting of Stockholders--"Executive Compensation," "Compensation of Directors," "Employment Contracts and Termination of Employment and Changes in Control Arrangements," and "Compensation Committee Interlocks and Insider Participation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. See Registrant's Proxy Statement for the 2002 Annual Meeting of Stockholders--"Security Ownership of Management" and "Security Ownership of Principal Stockholders." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. See Registrant's Proxy Statement for the 2002 Annual Meeting of Stockholders--"Certain Relationships and Related Transactions." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Exhibits. The exhibits listed below in Items 14(a)1, 2 and 3 are filed as part of this annual report. Each management contract or compensatory plan required to be filed as an exhibit is identified by an asterisk (*). (b) Reports on Form 8-K. None. (A) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (1) FINANCIAL STATEMENTS. The following Consolidated Financial Statements of Anixter International Inc. and Report of Independent Auditors are filed as part of this report. PAGE Report of Independent Auditors 14 Consolidated Statements of Operations for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 15 Consolidated Balance Sheets at December 28, 2001 and December 29, 2000 16 Consolidated Statements of Cash Flows for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 17 Consolidated Statements of Stockholders' Equity for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 18 Notes to the Consolidated Financial Statements 19 (2) FINANCIAL STATEMENT SCHEDULES. The following financial statement schedules of Anixter International Inc. are filed as part of this report and should be read in conjunction with the Consolidated Financial Statements of Anixter International Inc.: Page I. Condensed financial information of Registrant 40 II. Valuation and qualifying accounts and reserves 44 All other schedules are omitted because they are not required or are not applicable, or the required information is shown in the Consolidated Financial Statements or notes thereto. (3) EXHIBIT LIST. Each management contract or compensation plan required to be filed as an exhibit is identified by an asterisk (*). EXHIBIT NO. DESCRIPTION OF EXHIBIT (3) ARTICLES OF INCORPORATION AND BY-LAWS. 3.1 Restated Certificate of Incorporation of Anixter International Inc., filed with Secretary of the State of Delaware on September 29, 1987 and Certificate of Amendment thereof, filed with the Secretary of Delaware on August 31, 1995 (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 3.1). 3.2 By-laws of Anixter International Inc. as amended through November 9, 1995 (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 3.2). (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES. 4.1 Indenture dated September 17, 1996, between Anixter Inc., Anixter International Inc. and the Bank of New York, as Trustee, providing for 8% Senior Notes due 2003. (Incorporated by reference from Amendment No. 1 to Anixter Inc.'s Registration Statement on Form S-3, Registration Number 333-09185, filed August 27, 1996, Exhibit 4.1). 4.2 Indenture dated as of June 28, 2000, by and between Anixter International Inc. and Bank of New York, as Trustee offering 7% zero-coupon convertible notes due 2020. (Incorporated by reference from Anixter International Inc.'s Registration Statement on Form S-3, Registration Number 333-42788, filed August 1, 2000, Exhibit 4.1). 4.3 (a) Five-Year, $390 million, Revolving Credit Agreement, dated October 6, 2000, among Anixter Inc., Bank of America, N.A., as Agent, and other banks named therein. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 4.3). (b)Amendment No. 1 to Anixter Five-Year, $390.0 million, Revolving Credit Agreement, dated October 6, 2000. 4.4 Receivables Sale Agreement, dated October 6, 2000, between Anixter Inc. and Anixter Receivables Corporation. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 4.5). 4.5 Receivables Purchase Agreement, dated October 6, 2000, among Anixter Receivables Corporation, as Seller, Anixter Inc., as Servicer, Bank One, NA, as Agent, and the other financial institutions named therein. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 4.6). (10) MATERIAL CONTRACTS. 10.1 (a) Asset Purchase Agreement, dated February 22, 1999 (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K dated April 2, 1999). (b) First Amendment to Asset Purchase Agreement, dated March 29, 1999 (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K dated April 2, 1999). 10.2* Company's 1983 Stock Incentive Plan as amended and restated July 16, 1992. (Incorporated by reference from Itel Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.3). 10.3* Anixter International Inc. 1998 Stock Incentive Plan (Incorporated by reference from Anixter International Inc. Registration Statement on Form S-8, file number 333-56935. Exhibit 4a). 10.4* Company's Key Executive Equity Plan, as amended and restated July 16, 1992. (Incorporated by reference from Itel Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.8). 10.5* Company's Director Stock Option Plan. (Incorporated by reference from Itel Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Exhibit 10.24). 10.6* Form of Stock Option Agreement. (Incorporated by reference from Itel Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.24). 10.7* Form of Indemnity Agreement with all directors and officers (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.24). 10.8* Anixter International Inc. 1996 Stock Incentive Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.26). 10.9* Form of Stock Option Grant (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.27). 10.10* Anixter Excess Benefit Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.28). 10.11* Forms of Anixter Stock Option, Stockholder Agreement and Stock Option Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.29). 10.12* (a) Anixter Deferred Compensation Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.30). (b) Anixter 1999 Restated Deferred Compensation Plan. (c) Amendment No. 1 to Anixter 1999 Restated Deferred Compensation Plan. (d) Amendment No. 2 to Anixter 1999 Restated Deferred Compensation Plan. 10.13* Financial Advisory Agreement, dated August 4, 1999 (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1999, Exhibit 10.21). 10.14* Employment Agreement with Robert W. Grubbs, dated July 22, 1999 (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1999, Exhibit 10.22). 10.15* Employment Agreement with Dennis J. Letham, dated July 22, 1999 (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1999, Exhibit 10.23). 10.16* Anixter International Inc. Management Incentive Plan (Incorporated by reference from Anixter International Inc. Quarterly Report on form 10Q for the quarterly period ended June 30, 2000, Exhibit 10.20). 10.17* Amendment to Employee Agreements with Robert W. Grubbs and Dennis J. Letham, dated February 14, 2001 (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 10.23). 10.18* Anixter International Inc. 2001 Stock Incentive Plan. (21) Subsidiaries OF THE REGISTRANT. PAGE 21.1 List of Subsidiaries of the Registrant. 46 (23) Consents OF EXPERTS AND COUNSEL. 23.1 Consent of Ernst & Young LLP 48 (24) Power OF ATTORNEY. 24.1 Power of Attorney executed by Lord James Blyth, Robert L. Crandall, Robert W. Grubbs, F. Philip Handy, Melvyn N. Klein, John R. Petty, Stuart M. Sloan, Thomas C. Theobald, Matthew Zell and Samuel Zell 49 Copies of other instruments defining the rights of holders of long-term debt of the Company and its subsidiaries not filed pursuant to Item 601(b)(4)(iii) of Regulation S-K and omitted copies of attachments to plans and material contracts will be furnished to the Securities and Exchange Commission upon request.
ANIXTER INTERNATIONAL INC. SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT ANIXTER INTERNATIONAL INC. (PARENT COMPANY) STATEMENTS OF OPERATIONS (IN MILLIONS) YEARS ENDED -------------------------------------------------- DECEMBER 28, DECEMBER 29, DECEMBER 31, 2001 2000 1999 ------------ ------------ ------------ Operating loss $(1.5) $(4.1) $ (2.5) Other income (expenses): Interest income, including intercompany 5.3 6.6 3.1 Other -- (0.6) -- ------------ ------------ ------------ Income from operations before income taxes and equity in earnings of subsidiaries 3.8 1.9 0.6 Income tax (expense) benefit (1.8) 1.9 27.4 Equity in earnings of subsidiaries 28.3 74.9 96.2 ------------ ------------ ------------ Net income $30.3 $78.7 $124.2 ============ ============ ============
ANIXTER INTERNATIONAL INC. SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT ANIXTER INTERNATIONAL INC. (PARENT COMPANY) BALANCE SHEETS (IN MILLIONS) ASSETS DECEMBER 28, DECEMBER 29, 2001 2000 ------------ ------------- Current assets: Cash $ 0.8 $ 0.4 Accounts receivable 2.8 2.5 Amounts currently due from affiliates, net 2.7 3.4 Other assets 0.2 0.1 ------------ ------------- Total current assets 6.5 6.4 Investment in and advances to subsidiaries 788.6 765.1 Other assets 6.8 7.0 ------------ ------------- $ 801.9 $ 778.5 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses, due currently $ 2.2 $ 2.8 Long-term debt 221.8 207.0 Income taxes, net, primarily deferred 14.8 13.8 ------------ ------------- Total liabilities 238.8 223.6 Stockholders' equity: Common stock 36.9 37.7 Capital surplus 32.5 46.9 Accumulated other comprehensive income (59.5) (52.6) Retained earnings 553.2 522.9 ------------ ------------- Total stockholders' equity 563.1 554.9 ------------ ------------- $ 801.9 $ 778.5 ============ =============
ANIXTER INTERNATIONAL INC. SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT ANIXTER INTERNATIONAL INC. (PARENT COMPANY) STATEMENTS OF CASH FLOWS (IN MILLIONS) YEARS ENDED ------------------------------------------------ DECEMBER 28, DECEMBER 29, DECEMBER 31, 2001 2000 1999 ------------ ------------ ------------ Operating activities: Net income $ 30.3 $ 78.7 $ 124.2 Adjustments to reconcile net income to net cash provided by operating activities: Income tax expense (benefit) 1.8 (1.9) (27.4) Equity in earnings of subsidiaries (28.3) (74.9) (96.2) Accretion of zero-coupon convertible notes 14.7 7.0 -- Income tax savings from employee stock plans 5.3 11.2 2.6 Intercompany transactions 0.7 2.9 (1.7) Change in other operating items 6.3 (4.7) 63.9 ------------ ------------ ------------ Net cash provided by operating activities 30.8 18.3 65.4 Investing activities: Proceeds from sale of businesses -- -- 28.3 ------------ ------------ ------------ Net cash provided by investing activities -- -- 28.3 Financing activities: Proceeds from long-term debt -- 200.0 -- Loans to subsidiaries, net (5.8) (231.4) (12.1) Purchase of treasury stock (46.9) (15.4) (91.9) Proceeds from issuance of common stock 22.3 34.9 7.4 Debt issuance costs -- (6.4) -- ------------ ------------ ------------ Net cash used in financing activities (30.4) (18.3) (96.6) ------------ ------------ ------------ Cash provided (used) 0.4 -- (2.9) Cash at beginning of year 0.4 0.4 3.3 ------------ ------------ ------------ Cash at end of year $ 0.8 $ 0.4 $ 0.4 ============ ============ ============
ANIXTER INTERNATIONAL INC. SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT ANIXTER INTERNATIONAL INC. (PARENT COMPANY) NOTE TO CONDENSED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION In the parent company financial statements, the Company's investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The Company's share of net income of its unconsolidated subsidiaries is included in consolidated income using the equity method. The parent company financial statements should be read in conjunction with the Company's consolidated financial statements.
ANIXTER INTERNATIONAL INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES YEARS ENDED DECEMBER 28, 2001, DECEMBER 29, 2000 AND DECEMBER 31, 1999 (IN MILLIONS) ADDITIONS --------- BALANCE AT CHARGED CHARGED BALANCE AT BEGINNING OF TO TO OTHER END OF DESCRIPTION THE PERIOD INCOME ACCOUNTS DEDUCTIONS THE PERIOD ----------- ---------- ------ -------- ---------- ---------- Year ended December 28, 2001: Allowance for doubtful accounts $14.8 $ 11.5 $ 0.1 $ (5.5) $20.9 Allowance for deferred tax asset $25.5 $( 1.0) -- -- $24.5 Year ended December 29, 2000: Allowance for doubtful accounts $10.3 $ 8.1 $ (0.4) $ (3.2) $14.8 Allowance for deferred tax asset $26.3 $(0.8) -- -- $25.5 Year ended December 31, 1999: Allowance for doubtful accounts $ 11.0 $ 5.7 $ (0.9) $(5.5) $10.3 Allowance for deferred tax asset $ 24.0 $ 2.3 -- -- $26.3
SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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, IN THE CITY OF SKOKIE, STATE OF ILLINOIS, ON THE 13TH DAY OF MARCH, 2002. ANIXTER INTERNATIONAL INC. DENNIS J. LETHAM ------------------------------- Dennis J. Letham SENIOR VICE PRESIDENT - FINANCE PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. ROBERT W. GRUBBS Chief Executive Officer - ---------------------- and President March 13, 2002 Robert W. Grubbs (Principal Executive Officer) DENNIS J. LETHAM Senior Vice President--Finance March 13, 2002 - ---------------------- (Chief Financial Officer) Dennis J. Letham TERRANCE A. FABER Vice President--Controller March 13, 2002 - ---------------------- (Chief Accounting Officer) Terrance A. Faber LORD JAMES BLYTH* Director March 13, 2002 - ---------------------- Lord James Blyth ROBERT L. CRANDELL* Director March 13, 2002 - ---------------------- Robert L. Crandall ROBERT W. GRUBBS Director March 13, 2002 - ---------------------- Robert W. Grubbs F. PHILIP HANDY* Director March 13, 2002 - ---------------------- F. Philip Handy MELVYN N. KLEIN* Director March 13, 2002 - ---------------------- Melvyn N. Klein JOHN R. PETTY* Director March 13, 2002 - ---------------------- John R. Petty STUART M. SLOAN* Director March 13, 2002 - ---------------------- Stuart M. Sloan THOMAS C. THEOBALD* Director March 13, 2002 - ---------------------- Thomas C. Theobald Director March 13, 2002 - ---------------------- Mary Agnes Wilderotter MATTHEW ZELL* Director March 13, 2002 - ---------------------- Matthew Zell SAMUEL ZELL* Director March 13, 2002 - ---------------------- Samuel Zell *By DENNIS J. LETHAM ---------------------------------------- Dennis J. Letham (ATTORNEY IN FACT) Dennis J. Letham, as attorney in fact for each person indicated.
EXHIBIT 21.1 ANIXTER INTERNATIONAL SCHEDULE 21 LIST OF SUBSIDIARIES JURISDICTION COMPANY NAME OF INCORPORATION Anixter Inc. Delaware Accu-Tech Corporation Georgia Wallace Electronics, Inc. Georgia Anixter Australia Pty. Ltd. Australia allNET Technologies Pty. Ltd. Australia Anixter Cables y Manufacturas, S.A. de C.V. Mexico Anixter Chile S.A. Chile Anixter Colombia S.A. Colombia Anixter Costa Rica S.A. Costa Rica Anixter del Peru, S.A.C. Peru Anixter de Mexico, S.A. de C.V. Mexico Anixter do Brazil Ltda. Brazil Anixter Financial Inc. Delaware Anixter Communications (Malaysia) Sdn Bhd Malaysia Anixter Singapore Pte Ltd. Singapore Anixter Hong Kong Limited Hong Kong Anixter Trading (Shanghai) Company Limited China Anixter Thailand Inc. Delaware Anixter Holdings, Inc. Delaware Anixter Argentina S.A. Argentina Anixter AEH Holdings Inc. Delaware Anixter Europe Holdings B.V. Netherlands Anixter Austria GmbH Austria Anixter (CIS) L.L.C. (Russia) Russia Anixter Danmark A/S Denmark Anixter Deutschland GmbH Germany Anixter Eurofin B.V. Netherlands Anixter Canada Inc. Canada WireXpress Ltd. Canada Anixter Eurinvest B.V. Netherlands Anixter Belgium B.V.B.A. Belgium Anixter Espana S.L. Spain Anixter France SARL France Anixter International B.V.B.A. Belguim Anixter Italia S.r.l. Italy Anixter International Ltd. United Kingdom Anixter Power & Construction Ltd. United Kingdom Anixter U.K. Ltd. United Kingdom Anixter Logistics, Europe B.V.B.A. Belgium Anixter Nederland B.V. Netherlands Anixter Switzerland Sarl Switzerland Anixter Hungary Ltd. Hungary Anixter Iletsim Sistemleri Pazarlama ve Ticaret A.S. Turkey Anixter Network Systems Greece L.L.C. Greece Anixter Norge A.N.S. Norway Anixter Poland Sp.z.o.o. Poland Anixter Portugal S.A. Portugal Anixter Sverige AB Sweden B.E.L. Corporation Delaware Anixter Information Systems Corporation Illinois Anixter (Barbados), Inc. Barbados Anixter Korea Limited Korea Anixter Philippines Inc. Delaware Anixter Puerto Rico, Inc. Delaware Anixter-Real Estate Inc. Illinois Anixter Receivables Corporation Delaware Anixter Venezuela Inc. Delaware GL Holding of Delaware, Inc. Delaware Itel Corporation California Itel Container Ventures Inc. Delaware ICV GP Inc. Delaware ICV LP Inc. Delaware Itel Rail Holdings Corporation Delaware Fox River Valley Railroad Corporation Wisconsin Green Bay & Western Railroad Company Wisconsin Michigan & Western Railroad Company Michigan Signal Capital Corporation Delaware Richdale, Ltd. Delaware Signal Capital Projects, Inc. Delaware Signal Capital Norwalk Inc. Delaware Railcar Services Corporation Delaware
EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 2-93173) pertaining to the Anixter International Inc. 1983 Stock Incentive Plan, the Registration Statement (Form S-8 No. 33-13486) pertaining to the Anixter International Inc. Key Executive Equity Plan, the Registration Statement (Form S-8 No. 33-21656) pertaining to the Anixter International Inc. 1988 Employee Stock Purchase Plan, the Registration Statement (Form S-8 No. 33-38364) pertaining to the Anixter International Inc. 1989 Employee Stock Incentive Plan, the Registration Statement (Form S-8 No. 33-60676) pertaining to the Anixter International Inc. 1993 Director of Stock Option Plan, the Registration Statement (Form S-8 No. 33-05907) pertaining to the Anixter International Inc. 1996 Stock Incentive Plan, the Registration Statement (Form S-8 No. 333-56815) pertaining to the Anixter International Inc. 1998 Mid-level Stock Option Plan, the Registration Statement (Form S-8 No. 333-56935) pertaining to the Anixter International Inc. 1998 Stock Incentive Plan and the Registration Statement (Form S-3 No. 333-42788) pertaining to the Anixter International Inc. zero-coupon convertible notes due 2020 of our report dated January 28, 2002, with respect to the consolidated financial statements and schedules of Anixter International Inc. included in this Annual Report (Form 10-K) for the year ended December 28, 2001. ERNST & YOUNG LLP Chicago, Illinois March 13, 2002 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Anixter International Inc., a Delaware corporation (the "Corporation"), which is about to file an annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, on Form 10-K hereby constitutes and appoints Dennis J. Letham, John A. Dul and Terrance A. Faber, and each of them, his or her true and lawful attorney-in-fact and agents, with full power and all capacities, to sign the Corporation's Form 10-K and any or all amendments thereto, and any other documents in connection therewith, to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as she or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned and hereunto set her or his hand and seal as of the 21st day of February 2002. /s/ Lord James Blyth /s/ John R. Petty /s/ Robert L. Crandall /s/ Stuart M. Sloan /s/ Robert W. Grubbs /s/ Thomas C. Theobald /s/ F. Philip Handy /s/ Matthew Zell /s/ Melvyn N. Klein /s/ Samuel Zell EX-4 3 creditagrmtamend.txt ANIXTER 5 YEAR CREDIT AGREEMENT EXHIBIT 4.3 (b) FIRST AMENDMENT THIS FIRST AMENDMENT dated as of March 8, 2002 (this "Amendment") amends the Five-Year Revolving Credit Agreement dated as of October 6, 2000 among Anixter Inc. ("Anixter"), various subsidiaries of Anixter (the "Borrowing Subsidiaries"), various financial institutions (the "Lenders") and Bank of America, N.A., as administrative agent (the "Administrative Agent"). Terms defined in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein. WHEREAS, Anixter, the Borrowing Subsidiaries, the Lenders and the Administrative Agent have entered into the Credit Agreement; and WHEREAS, the parties hereto desire to amend the Credit Agreement in certain respects as more fully set forth herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1.Amendments. Subject to the satisfaction of the conditions precedent set forth in Section 3, the Credit Agreement shall be amended as follows. 1.1 ______ Amendment to Definition of "Consolidated Fixed Charge Expense". The definition of "Consolidated Fixed Charge Expense" is amended by deleting the phrase "cash interest expense (including the interest component of capital leases, the interest component of Synthetic Lease Obligations, facility fees, and fees for standby letters of credit, but excluding the interest accretion relating to the Subordinated LYONs Note)" therein and substituting therefor "net interest expense of the Consolidated Group (including the interest component of capital leases, the interest component of Synthetic Lease Obligations, facility fees, and fees for standby letters of credit, but excluding the interest accretion relating to the Subordinated LYONs Note and excluding amortization of deferred financing fees)". 1.2 ______ Amendment to Definition of "Restricted Payment". The definition of "Restricted Payment" is amended by (a) deleting the word "and" at the end of clause (v) and (b) inserting "and" and the following new clause (vii) in the appropriate numerical position prior to the proviso: "and (vii) any payment, redemption or purchase made by Anixter in respect of the Subordinated LYONs Note or the zero coupon senior Liquid Yield Option Notes due 2020 issued by AXE". 1.3 Amendment to Section 7.18. Section 7.18 is amended in its entirety to read as follows: "7.18 ____ Minimum Consolidated Fixed Charge Coverage Ratio. No Borrower shall permit the Consolidated Fixed Charge Coverage Ratio calculated at the end of each Fiscal Quarter for the period of the immediately preceding four Fiscal Quarters to be less than (a) 2.00 to 1 for any period ending prior to September 30, 2002, (b) 2.25 to 1 for any period ending on or after September 30, 2002 but prior to December 31, 2002, (c) 2.50 to 1 for any period ending on or after December 31, 2002 but prior to June 30, 2003 and (d) 3.0 to 1 for any period ending on or after June 30, 2003." SECTION 2. ________ Warranties. Each Borrower represents and warrants to the Administrative Agent and the Lenders that, after giving effect to the effectiveness hereof, (a) each warranty set forth in Article V of the Credit Agreement is true and correct in all material respects, except to the extent that such warranty specifically refers to an earlier date, and (b) no Default or Event of Default exists. SECTION 3. ________ Effectiveness. The amendments set forth in Section 1 above shall become effective when the Administrative Agent shall have received counterparts of this Amendment executed by Anixter, the Borrowing Subsidiaries and the Required Lenders. SECTION 4. Miscellaneous. 4.1 ______ Continuing Effectiveness, etc. As herein amended, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. After the effectiveness of this Amendment, all references in the Credit Agreement and the other Loan Documents to "Credit Agreement" or similar terms shall refer to the Credit Agreement as amended hereby. 4.2 ______ Counterparts. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original but all such counterparts shall together constitute one and the same Amendment. 4.3 Governing Law. This Amendment shall be a contract made under and governed by the laws of the State of Illinois. 4.4 ______ Successors and Assigns. This Amendment shall be binding upon Anixter, the Borrowing Subsidiaries, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of Anixter, the Borrowing Subsidiaries, the Lenders and the Administrative Agent and the respective successors and assigns of the Lenders and the Administrative Agent. 1125896 00662759 S-22 Delivered as of the day and year first above written. ANIXTER INC., as Borrower By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ ANIXTER INTERNATIONAL N.V./S.A., as a Borrowing Subsidiary By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ ANIXTER U.K. LTD., as a Borrowing Subsidiary By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ BANK OF AMERICA, N.A., as Administrative Agent By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ BANK OF AMERICA, N.A., as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ BANK ONE, NA, as Syndication Agent and Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ THE BANK OF NOVA SCOTIA, as Documentation Agent and Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ SUNTRUST BANK, as Managing Agent and as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ CREDIT LYONNAIS CHICAGO BRANCH, as Managing Agent and as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ INTESABCI, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ BANCA NAZIONALE DEL LAVORO S.P.A. - NEW YORK BRANCH, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC., as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ THE BANK OF NEW YORK, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ THE DAI-ICHI KANGYO BANK, LTD., as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ U.S. BANK NATIONAL ASSOCIATION, (fka FIRSTAR BANK, N.A.), as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ THE FUJI BANK, LIMITED, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ NATIONAL CITY BANK, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ NATIONAL WESTMINSTER BANK, PLC NEW YORK AND/OR NASSAU BRANCHES, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ THE NORTHERN TRUST COMPANY, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ PNC BANK, N.A., as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ SUMITOMO MITSUI BANKING CORPORATION, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ U.S. BANK NATIONAL ASSOCIATION, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ WACHOVIA BANK, N.A., as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ COMERICA BANK, as a Lender By: _______________________________________________________ Name: _____________________________________________________ Title:______________________________________________________ EX-10 4 defcompamend1.txt ANIXTER DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.12 (c) ANIXTER INC. DEFERRED COMPENSATION PLAN 1999 RESTATEMENT AMENDMENT NO. 1 This Amendment No. 1 to the Plan is effective as of January 1, 2000, except as otherwise stated herein, and is executed as of the date shown below. Capitalized words used herein without definition shall have the meaning ascribed to them in the Plan. WHEREAS, the Company wishes to credit additional earnings if certain quarterly performance goals are met, to provide for the early distribution of small account balances to terminated Participants, to modify the definition of Change in Control, to make special provisions for Participants who have been rehired by a Participating Employer after being terminated as a result of the sale of a division of the Company, to correct typographical errors and make other clarifying changes; and WHEREAS, pursuant to Section 10.1 of the Plan, the Board has the authority to amend the Plan; and WHEREAS, the Board has approved this amendment. NOW, THEREFORE, the Plan is amended as follows: FIRST: Section 2.6(a)(ii) is modified in its entirety, as follows: (ii) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act) other than Samuel Zell controls more than the greater of twenty-five percent (25%) of the Parent Company's Voting Securities or the amount of the Parent Company's Voting Securities controlled by Mr. Zell; SECOND: The following new Section 2.22 is added to the Plan, the former Section 2.22 is renumbered as Section 2.23, and the following sections in Article II are renumbered accordingly: 2.22 Performance-Based Enhancement "Performance-Based Enhancement" means up to two (2) percentage points per year in additional Earnings if the Company attains certain quarterly performance goals, which goals and the amount of additional Earnings to be credited for the achievement thereof, shall be established by the Board from time to time and credited at the end of each calendar quarter. A Participant must be employed by Employer for at least one-half of the quarter to be eligible to receive a Performance-Based Enhancement for that quarter. THIRD: Section 2.27 is modified in its entirety as follows: 2.27 Valuation Date "Valuation Date" means the last day of the month in which Retirement, Disability, termination or death occurs. FOURTH: Section 4.4 is modified in its entirety as follows: 4.4 Determination of Accounts Each Account shall be adjusted as of each Determination Date and shall consist of: (a) The balance of the Account as of the immediately preceding Determination Date; (b) Any Compensation deferred and credited to the Account since the immediately preceding Determination Date; (c) Any Performance-Based Enhancement not previously credited; and (d) Earnings credited since the immediately preceding Determination Date. The total of (a), (b), (c), and (d) shall be reduced by any distributions from the Account since the immediately preceding Determination Date. FIFTH: Section 5.1(b) is modified by adding the following: If no election is made, the benefit shall be paid in a lump sum. SIXTH: Section 5.3(b) is modified by adding the following: If no election is made, the benefit shall be paid in a lump sum. SEVENTH: Section 5.3(f) is deleted. EIGHTH: Section 5.4 is modified in its entirety as follows: 5.4 Termination Benefit (a) ____ BENEFIT AMOUNT. If a Participant terminates employment (voluntarily or involuntarily) with all Participating Employers for any reason, other than Retirement, Disability, death, or due to a Change in Control, the Participating Employer shall pay to the Participant benefits equal to the balance in the Participant's Account. (b) FORM OF BENEFIT. The termination benefit payable under this Section 5.4 shall be paid in a lump sum. (c) ____ COMMENCEMENT. The amount of the lump sum shall be based on the value of the Participant's Account on the Valuation Date. A Participant must be employed for at least one-half (1/2) of the month in which termination occurs to receive the one hundred forty percent (140%) multiplier enhancement to the Earnings Rate for that month. The date on which payment is made shall be the settlement date. Earnings shall accrue from the Valuation Date to the settlement date at the Earnings Rate without the one hundred forty percent (140%) multiplier. The settlement date shall be the first business day in January of the calendar year two (2) years following the year of termination. If the Participating Employer has not held the amounts deferred for a period of at least five (5) years as of the settlement date, however, the settlement date shall be the first business day in January following the date the amounts deferred were held by the Participating Employer for five (5) years. Notwithstanding the above, as of October 1, 2001, the Committee may, in its sole discretion, direct that payment of any benefit be made as soon as is administratively feasible and in the form of a lump-sum payment to the Participant if the lump-sum amount of the Account balance at termination is five thousand dollars ($5,000) or less. (d) SALE OF DIVISION. (i) ____ Notwithstanding the above, if the Company sells one (1) or more of its divisions to a buyer that does not elect to continue the Plan for that division's Participants, such Participants shall, prior to the date the sale closes, irrevocably elect in writing to commence payment in accordance with either subsection (c) above or this subsection (d). (ii) Participants electing to be paid under this subsection (d) shall further elect to receive their benefit payments upon their attainment of age fifty-five (55) in one (1) of the following forms: (A) A lump-sum payment; (B) Monthly installments, the number of such installments not to exceed one hundred twenty (120); or (C) A combination of (A) and (B) above. (iii) The first day of the month following the Participant's attainment of age fifty-five (55) shall be the settlement date. The amount of the benefit shall be based on the value of the Participant's Account on the Valuation Date. Any lump sum and first installment payment elected shall be paid on the settlement date. Earnings shall accrue from the Valuation Date to the settlement date at the Earnings Rate, substituting a multiplier of one hundred twenty percent (120%) for one hundred forty percent (140%). Earnings (calculated with the one hundred twenty percent (120%) multiplier) on any remaining Account balance after the settlement date shall continue to accrue and be included in all payments made under this subsection (d). All payments shall be made as of the first day of the month. (iv) If payment is by installments, the amount of the installments shall be redetermined each January 1 based upon the remaining Account balance, the remaining number of installments and an Earnings Rate (calculated with the one hundred twenty percent (120%) multiplier) equal to the rate in effect for the preceding quarter. (v) ____ Notwithstanding (ii) above, a Participant may elect to file a change of payment designation which shall supersede the prior form of payment designation for any one (1) or more Deferral Periods. If the Participant's most recent change of payment designation has not been filed two (2) calendar years prior to the Participant's attainment of age fifty-five (55), the prior election shall be used to determine the form of payment (e.g., if a Participant attains age fifty-five (55) in 2010, the last day to file a change of payment designation would be December 31, 2008). (vi) In the event that a Participant who is terminated in connection with the sale of a division is rehired by a Participating Employer, any balance in the Participant's Account will, effective as of the rehire date, be credited with Earnings at the Earnings Rate then in effect and with the Performance-Based Enhancement, if applicable. NINTH: Appendix A is amended in its entirety to read as follows: appendix a--calculation of earnings using average daily balance ------------------------------------------------------------------------------- ADB FACTOR* = [DAYS IN MONTH - DAY OF MONTH + 1] ---------------------------------- Days in Month (Round to 10 Decimal Places) ------------------------------------------------------------------------------- EARNINGS FACTOR = (Earnings Rate + Performance - Based Enhancement) / 12 (Round to 10 Decimal Places) ------------------------------------------------------------------------------- EARNINGS = Earnings Factor x [Account Balance at Beginning of Month + Transaction 1 x ADB Factor 1 + Transaction 2 x ADB Factor 2 + Transaction 3 x ADB Factor 3] (Round to 2 Decimal Places) ------------------------------------------------------------------------------- ACCOUNT BALANCE = Account Balance at Beginning of Month + Deferrals During MONTH AT END OF Month + Earnings - Distributions =============================================================================== NOTE --------------------------- *Separate ADB Factor for each transaction. The term "transaction" includes Participant and Employer deferrals, benefit payments, withdrawals, and any other type of distribution. APPENDIX A--CALCULATION OF EARNINGS USING AVERAGE DAILY BALANCE EXAMPLE ASSUMPTIONS --------------------------------------------------------------------------- MARCH 31 ACCOUNT BALANCE $10,000 --------------------------------------------------------------------------- APRIL 14 DEFERRAL $1,000 --------------------------------------------------------------------------- APRIL EARNINGS RATE 10.98% --------------------------------------------------------------------------- --------------------------------------------------------------------------- PERFORMANCE-BASED ENHANCEMENT (PBE) 2 Percentage Points =========================================================================== Step 1. ____ Calculate Earnings for April on the most recent Account balance. A.Calculate the monthly Earnings factor ((Earnings Rate + PBE) / 12) (.1098 + .02) / 12 = .010817 B. Calculate the monthly Earnings (balance x factor) 10,000 x .010817 = 108.17 Step 2. Calculate Earnings during April on any deferrals. A. Calculate the average daily balance (ADB) for the deferral [deferral x (DAYS IN THE MONTH - DEFERRAL DATE + 1)] ------------------------------------- Days in the month 1,000 x (30 - 14 + 1) = 566.67 ----------- 30 B. Calculate the Earnings on the deferral (ADB x Earnings factor) 566.67 x .010817 = 6.13 Step 3. Calculate the Account balance as of April 30 (prior balance + deferrals + Earnings) 10,000 + 1,000 + 108.17 + 6.13 = 11,114.30 TENTH: Except as amended herein, all remaining terms and provisions of the Plan shall remain in full force and effect. anixter Inc. By: ------------------------------------------------------ Its Dated: ------------------------------------------------------ EX-10 5 defcompamend2.txt ANIXTER DEFERRED COMPENSATION PLAN 2 EXHIBIT 10.12 (d) ANIXTER INC. DEFERRED COMPENSATION PLAN 1999 RESTATEMENT AMENDMENT NO. 2 This Amendment No. 2 to the Plan is effective as of December 18, 2001, except as otherwise stated herein, and is executed as of the date shown below. Capitalized words used herein without definition shall have the meaning ascribed to them in the Plan. WHEREAS, the Company wishes to permit terminated Participants to elect the date of distribution of their Account balance; and WHEREAS, pursuant to Section 10.1 of the Plan, the Board has the authority to amend the Plan; and WHEREAS, the Board has approved this amendment. NOW, THEREFORE, the Plan is amended as follows: FIRST: Section 5.2 is modified by adding the following thereto: (d) ____ CHANGE IN COMMENCEMENT DATE. Notwithstanding subparagraph (c) above, a Participant may elect to defer receipt of his benefits under this Section 5.2 by specifying an alternate settlement date on a form approved by the Committee. A Participant may further elect to change the alternate settlement date, and such election shall supersede the Participant's most recent prior election provided it is received at least two (2) calendar years prior to the date any amounts are to be distributed. The settlement date may be the first day of any month, but in no event shall the settlement date be later than the first business day of the month following the Participant's attainment of age fifty-five (55). SECOND: Section 5.3(c) is modified by adding the following new paragraph thereto: Notwithstanding the above, a Participant may elect to defer receipt of his benefits under this Section 5.3 by specifying an alternate settlement date on a form approved by the Committee. A Participant may further elect to change the alternate settlement date, and such election shall supersede the Participant's most recent prior election provided it is received at least two (2) calendar years prior to the date any amounts are to be distributed. The settlement date may be the first day of any month, but in no event shall the settlement date be later than the first business day of the month following the Participant's attainment of age fifty-five (55). However, a Participant who elects an alternate settlement date shall forfeit any Earnings attributable to the one hundred twenty percent (120%) multiplier from the Valuation Date to the settlement date. THIRD: Section 5.4 is modified in its entirety as follows: 5.4 Termination Benefit (a) ____ BENEFIT AMOUNT. If a Participant terminates employment (voluntarily or involuntarily) with all Participating Employers for any reason, other than Retirement, Disability, death, or due to a Change in Control, the Participating Employer shall pay to the Participant benefits equal to the balance in the Participant's Account. (b) FORM OF BENEFIT. The termination benefit payable under this Section 5.4 shall be paid in a lump sum. (c) ____ COMMENCEMENT. The amount of the lump sum shall be based on the value of the Participant's Account on the Valuation Date. A Participant must be employed for at least one-half (1/2) of the month in which termination occurs to receive the one hundred forty percent (140%) multiplier enhancement to the Earnings Rate for that month. The date on which payment is made shall be the settlement date. Earnings shall accrue from the Valuation Date to the settlement date at the Earnings Rate without the one hundred forty percent (140%) multiplier. Unless the Participant elects otherwise, the settlement date shall be the first business day in January of the calendar year two (2) years following the year of termination. If the Participating Employer has not held the amounts deferred for a period of at least five (5) years as of the settlement date, the settlement date shall be the first business day in January following the date the amounts deferred were held by the Participating Employer for five (5) years. A Participant may elect to defer receipt of his benefits under this Section 5.4 by specifying an alternate settlement date on a form approved by the Committee. A Participant may further elect to change the alternate settlement date, and such election shall supersede the Participant's most recent prior election provided it is received at least two (2) calendar years prior to the date any amounts are to be distributed. The settlement date may be the first day of any month, but in no event shall the settlement date be later than the first business day of the month following the Participant's attainment of age fifty-five (55). (d) SALE OF DIVISION. (i) ____ Notwithstanding the above, if the Company sells one (1) or more of its divisions to a buyer that does not elect to continue the Plan for that division's Participants, such Participants shall, prior to the date the sale closes, elect in writing to commence payment in accordance with either subsection (c) above or this subsection (d). (ii) Participants electing to be paid under this subsection (d) shall further elect to receive their benefit payments upon their attainment of age fifty-five (55) in one (1) of the following forms: (A) A lump-sum payment; (B) Monthly installments, the number of such installments not to exceed one hundred twenty (120); or (C) A combination of (A) and (B) above. (iii) The settlement date shall be the first day of the month following the Participant's attainment of age fifty-five (55). The amount of the benefit shall be based on the value of the Participant's Account on the Valuation Date. Any lump sum and first installment payment elected shall be paid on the settlement date. Earnings shall accrue from the Valuation Date to the settlement date at the Earnings Rate, substituting a multiplier of one hundred twenty percent (120%) for one hundred forty percent (140%). Earnings (calculated with the one hundred twenty percent (120%) multiplier) on any remaining Account balance after the settlement date shall continue to accrue and be included in all payments made under this subsection (d). All payments shall be made as of the first day of the month. (iv) If payment is by installments, the amount of the installments shall be redetermined each January 1 based upon the remaining Account balance, the remaining number of installments, and an Earnings Rate (calculated with the one hundred twenty percent (120%) multiplier) equal to the rate in effect for the preceding quarter. (v) ____ Notwithstanding (ii) above, a Participant may elect to file a change of payment designation which shall supersede the prior form of payment designation for any one (1) or more Deferral Periods. If the Participant's most recent change of payment designation has not been filed two (2) calendar years prior to the date any amounts are to be distributed, the most recent prior election shall be used to determine the form of payment. (vi) A Participant may elect to accelerate the distribution of benefits under this subsection (d) by specifying an alternate settlement date on a form approved by the Committee. Such election shall supercede the Participant's most recent prior election provided it is received at least two (2) calendar years prior to the date any amounts are to be distributed. A Participant who elects an alternate settlement date shall forfeit any Earnings attributable to the one hundred twenty percent (120%) multiplier from the Valuation Date to the settlement date. (vii) In the event that a Participant who is terminated in connection with the sale of a division is rehired by a Participating Employer, any balance in the Participant's Account will, effective as of the rehire date, be credited with Earnings at the Earnings Rate then in effect and with the Performance-Based Enhancement, if applicable. FOURTH: A new Section 5.8 is added to the Plan as follows: 5.8 Accounts of $5,000 or Less As of October 1, 2001, the Committee may, in its sole discretion, direct that payment of any benefit be made as soon as is administratively feasible and in the form of a lump-sum payment to the Participant if the lump-sum amount of the Account balance on the Valuation Date is five thousand dollars ($5,000) or less. FIFTH: Except as amended herein, all remaining terms and provisions of the Plan shall remain in full force and effect. anixter Inc. By: ------------------------------------- Its Dated: ------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----