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Anixter International Inc. Reports Fourth Quarter Net Income of $0.88 Per Diluted Share, Including a Loss of $0.35 Per Share for an Arbitration Award and a Gain of $0.04 Per Share for Early Retirement of Debt and a Tax Benefit, on Sales of $1.43 Billion

GLENVIEW, Ill. Feb. 1, 2011 December 31, 2010

  • $1.43 billion
  • Operating income increased by 31 percent year-on-year
  • Net income increased by 146 percent year-on-year
  • $29.7 million

Financial Highlights

(In millions, except per share amounts)

Three Months Ended

Year Ended

(n.m. — not meaningful)

Dec. 31,

Jan. 1,

Percent

Dec. 31,

Jan. 1,

Percent

2010

2010

Change

2010

2010

Change

Net Sales

$1,434.4

$1,217.6

18%

$5,472.1

$4,982.4

10%

Impairment Charge

$100.0

n.m.

Operating Income

$61.6

$46.9

31%

$266.2

$103.5

157%

Net Income/(Loss)

$31.5

$12.7

146%

$108.5

($29.3)

n.m.

Diluted Earnings/(Loss) Per Share

$0.88

$0.35

151%

$3.05

($0.83)

n.m.

Diluted Weighted Shares

35.5

36.3

-2%

35.5

35.1

1%

Fourth Quarter Highlights

  • Sales of $1.43 billion increased 18 percent compared to sales of $1.22 billion in the year ago quarter.  Major items affecting current quarter sales comparisons versus the prior year include:

– $19.0 million of favorable copper price effects

– $17.3 million of unfavorable effects from exiting a major customer contract in 2009

– $1.7 million of unfavorable foreign exchange effects

Exclusive of the effects of the above items, sales increased by 18 percent organically.

  • Fourth quarter operating income of $61.6 million improved by 31 percent compared to $46.9 million reported in the year ago quarter.  Major items affecting year-on-year operating profit comparisons included a fourth quarter 2010 expense of $20.0 million ($12.3 million after-tax) related to a previously disclosed arbitration award as well as a fourth quarter 2009 expense related to a $4.2 million ($2.6 million after-tax) exchange rate-driven lower of cost or market inventory adjustment in Venezuela. Excluding these two items from the respective quarter’s earnings, operating income improved from $51.1 million in 2009 to $81.6 million in 2010, an increase of 60 percent.
  • Operating margin in the current quarter was 4.3 percent as compared to 3.9 percent in the year ago quarter. Excluding the items outlined above, operating margin in the fourth quarter of 2010 was 5.7 percent versus 4.2 percent in the year ago quarter. The strong operating margin improvement was driven by both a higher gross margin and better operating leverage on higher sales.
  • In the current quarter, an after-tax gain of $0.3 million or $0.01 per diluted share on the early retirement of debt compares to an after-tax loss of $1.5 million or $0.04 per diluted share on the early retirement of debt in the prior year quarter.
  • Other expense in the current quarter was $1.8 million versus $15.9 million in the year ago quarter.  Fourth quarter 2009 included foreign exchange losses of $13.8 million associated with repatriation of cash from Venezuela and the remeasurement of Bolivar denominated assets at the parallel exchange rate. This resulted in a $6.3 million after-tax charge or $0.17 per diluted share.
  • Income tax expense in the current quarter includes a reversal of $1.3 million for prior year foreign taxes while the fourth quarter of 2009 includes a favorable net adjustment of $4.8 million primarily due to the reversal of a valuation allowance. These adjustments resulted in an increase of $0.03 and $0.13 per diluted share, respectively.
  • Net income of $31.5 million, or $0.88 per diluted share, increased by 146 percent as compared to $12.7 million, or $0.35 per share, reported in the year ago quarter.  The year-on-year comparisons were impacted by a number of items in each reporting period, as outlined above.  Excluding those items from both years, net income would have been $42.2 million, or $1.19 per diluted share as compared to $18.3 million, or $0.50 per diluted share in the year ago quarter, an increase of 131 percent.
  • Cash flow generated from operations was $29.7 million as compared to $47.0 million generated in the year ago quarter due to an increase in working capital to support higher sales.

Fourth Quarter Sales Trends

Robert Eck $19 million

North America Europe

Fourth Quarter Operating Results

"Strong year-on-year operating profit growth continued the upward momentum we have experienced this year. Fourth quarter operating margin was the highest since 2008.  Excluding the items discussed above, a 60 basis point improvement in gross margin combined with a strong 90 basis point improvement in operating expense leverage due to higher sales, drove operating margin, exclusive of the arbitration award, to its highest level in eight quarters at 5.7 percent. An improvement in sales mix, both by geographic segment and by end market, largely drove the gross margin improvement while the higher volume resulted in improved fixed cost leverage. The incremental operating profit margin of 14.0 percent on the increased year-on-year sales reflects the success of the continued cost management discipline while supporting a growing revenue base."

$252.2 million $28.0 million

Company-wide

North America

Europe $6.0 million

Emerging Markets

Cash Flow and Leverage

$29.7 million $47.0 million Dennis Letham $195.2 million $440.9 million

$30.2 million $67.0 million $133.7 million

$3.25 $111.0 million $36.4 million

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

  • Year-end debt-to-total capital ratio of 46.9 percent compared to 44.8 percent at the end of 2009
  • $46.0 million $72.5 million
  • Fourth quarter weighted average cost of borrowed capital of 5.6 percent compared to 7.8 percent in the year ago quarter
  • 67 percent of quarter-end borrowings have fixed interest rates, either by terms of the borrowing agreement or through hedging contracts
  • $259.8 million
  • $200.0 million $200.0 million

Business Outlook

Eck commented, "The strong fourth quarter sales results leave us with increased confidence that the improving economic fundamentals of the past few quarters can be sustained into 2011.  We recognize that on a macro basis sustained growth is still at risk from factors such as sovereign debt issues outside the U.S. and significant pressures to reduce budget deficits at all levels of government within the U.S.  At the same time, we will begin to experience more difficult growth comparisons as the year unfolds due to the strong growth we achieved in 2010.  Nevertheless, we believe that a combination of improved economic conditions and our own strategic growth initiatives positions us well to achieve strong sales growth and improved operating leverage in the coming year."

Brazil China Morocco

Fourth Quarter Earnings Report

Tuesday, February 1, 2011 9:30 am central time www.anixter.com www.companyboardroom.com America Online www.streetevents.com

About Anixter

$1.0 billion Chicago

Safe Harbor Statement

The statements in this news release that use such words as "believe," "expect," "intend," "anticipate," "contemplate," "estimate," "plan," "project," "should," "may," "will,"  or similar expressions are forward-looking statements.  They are subject to a number of factors that could cause the company’s actual results to differ materially from what is indicated here.  These factors include general economic conditions, including the severity of current economic and financial market conditions, the level of customer demand particularly for capital projects in the markets we serve,  changes in supplier sales strategies or financial viability, political, economic or currency risks related to foreign operations, inventory obsolescence, copper price fluctuations, customer viability, risks associated with accounts receivable, the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, potential impairment of goodwill and risks associated with integration of acquired companies.  These uncertainties may cause our actual results to be materially different than those expressed in any forward looking statements.  We do not undertake to update any forward looking statements.  Please see the company’s Securities and Exchange Commission filings for more information.

Additional information about Anixter is available on the Internet at

www.anixter.com

ANIXTER INTERNATIONAL INC.

Condensed Consolidated Statements of Operations

Three Months Ended

Twelve Months Ended

December 31,

January 1,

December 31,

January 1,

(In millions, except per share amounts)

2010

2010

2010

2010

Net sales

$            1,434.4

$     1,217.6

$            5,472.1

$     4,982.4

Cost of goods sold

1,100.6

945.0

4,210.9

3,851.8

Gross profit

333.8

272.6

1,261.2

1,130.6

Goodwill impairment

100.0

Operating expenses

272.2

225.7

995.0

927.1

Operating income  

61.6

46.9

266.2

103.5

Interest expense

(12.3)

(16.9)

(53.6)

(66.1)

Net gain (loss) on retirement of debt

0.5

(2.3)

(31.9)

(1.1)

Other, net

(1.8)

(15.9)

(1.4)

(19.1)

Income before income taxes

48.0

11.8

179.3

17.2

Income tax expense

16.5

(0.9)

70.8

46.5

Net income (loss)

$                 31.5

$          12.7

$               108.5

$         (29.3)

Net income (loss) per share:

    Basic

$                 0.92

$          0.37

$                 3.18

$         (0.83)

    Diluted

$                 0.88

$          0.35

$                 3.05

$         (0.83)

Average shares outstanding:

    Basic

34.2

34.6

34.1

35.1

    Diluted

35.5

36.3

35.5

35.1

Geographic Segments

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