Anixter International Inc. Reports Second Quarter 2017 Results

Diluted EPS of $1.18 from continuing operations, up 90% versus $0.62
in 2Q16

Adjusted diluted EPS of $1.36 from continuing operations, up
3% versus $1.32 in 2Q16

Second Quarter Highlights

• Record second quarter sales of $2.0 billion, up 2.3% YOY,
  reflecting growth in all regions
• Organic sales increased 2.6%, driven by 15.8% growth in UPS segment
• Generated strong cash flow of $137.1 million YTD

GLENVIEW, Ill.–(BUSINESS WIRE)–Anixter International Inc. (NYSE: AXE) today reported sales of $2.0
billion for the quarter ended June 30, 2017, a 2.3% increase compared to
the prior year quarter. Organic sales increased 2.6% year-over-year,
excluding the impact of the following items:

• $13.8 million favorable impact from the higher average price of copper
• $18.2 million unfavorable impact from the fluctuation in foreign
  currencies

Both the current and prior year quarters had 64 billing days.

All commentary in this release reflects results from continuing
operations unless otherwise noted. Please refer to the tables at the end
of this release for the reconciliations from our reported results
prepared in accordance with U.S. GAAP to the non-GAAP measures.

Net income of $40.1 million includes amortization of intangible assets
expense of $9.0 million pre-tax and $6.1 million after-tax. Net income
of $20.8 million in the second quarter of 2016 included amortization of
intangible assets, as well as a UK pension settlement, Latin America bad
debt provision, a restructuring charge, and acquisition and integration
costs, which combined had a $33.7 million pre-tax and $23.4 million
after-tax impact.

Excluding the impact of the above items, second quarter 2017 adjusted
net income of $46.2 million increased 4.3% versus the prior year
adjusted net income of $44.2 million.

Diluted earnings per share of $1.18 compares to $0.62, and adjusted
diluted earnings per share of $1.36 compares to $1.32, both versus the
prior year quarter.

Adjusted EBITDA of $103.2 million, or 5.2% of sales, compares to prior
year adjusted EBITDA of $101.8 million, or 5.2% of sales and first
quarter 2017 adjusted EBITDA of $89.5 million, or 4.7% of sales.

Strong year-to-date cash flow from operations of $137.1 million was
driven by ongoing working capital improvements. Working capital was
18.5% of sales in the second quarter, a 70 basis point improvement from
the prior year quarter.

"Second quarter 2017 year-over-year organic sales growth of 2.6% was
driven by a strong 15.8% organic growth in our Utility Power Solutions
segment. Against a backdrop of slow economic growth and a gradually
improving global economy, end market recovery remains uneven, with
strength in our growth initiatives, such as global accounts and
security, offsetting more challenging industrial markets" commented CEO
Bob Eck. "In the current economic and competitive environment, our
specialized distribution model, differentiated by our global footprint,
supply chain capabilities and technical expertise, position us well for
sustainable growth while helping our customers reduce risk, cost and
complexity in their supply chains."

Income Statement Detail

Gross margin of 19.8% compares to 20.1% in the prior year quarter and
20.0% in the first quarter of 2017. The change in gross margin versus
prior year was primarily due to the growth coming from our lowest gross
margin segment. The significant operating leverage achieved in that
segment favorably contributes to consolidated operating margin.

Operating expense of $313.0 million, or 15.6% of sales, compares to
prior year operating expense of $336.7 million, or 17.2% of sales.
Excluding current quarter expense of $9.0 million and second quarter
2016 expense of $33.7 million, as detailed above, second quarter 2017
adjusted operating expense of $304.0 million increased 0.3% versus
second quarter 2016 adjusted operating expense of $303.0 million and
0.7% versus first quarter 2017 adjusted operating expense of $301.7
million. Current quarter adjusted operating expense of 15.2% of sales
improved from 15.5% of sales in the second quarter of 2016 and 15.9% in
the first quarter of 2017, driven by the combination of expense
reduction initiatives and leveraging growth in the business.

Operating income of $82.7 million, or 4.1% of sales, compares to $56.7
million, or 2.9% of sales, in the prior year quarter. Excluding
operating expense items outlined above, second quarter 2017 adjusted
operating income was $91.7 million compared to $90.4 million in the
second quarter of 2016. Adjusted operating margin of 4.6% is flat
compared to the prior year quarter.

Interest expense of $17.9 million compares to $19.8 million in the prior
year quarter, as we decreased debt with the strong cash flow we continue
to generate. Foreign exchange and other expense of $1.0 million compares
to $0.8 million in the prior year quarter.

Our second quarter 2017 U.S. GAAP effective tax rate ("ETR") was 37.2%
versus 42.4% in the second quarter of 2016 and our second quarter 2017
non-GAAP ETR was 36.6% versus 36.7% in the prior year quarter. Our
year-to-date 2017 non-GAAP effective tax rate of 36.9% differs from our
first quarter effective tax rate of 37.2% primarily due to country mix
of earnings.

Segment Update

Network & Security Solutions ("NSS") sales of $1,029.4
million compares to $1,044.7 million in the prior year period. Adjusted
for the $7.4 million unfavorable impact from foreign exchange, NSS
organic sales decreased 0.8%, reflecting fewer large projects in the
current quarter versus the prior year quarter. On a sequential basis,
sales increased by 4.5%.

Second quarter NSS security sales of $423.1 million, which represents
approximately 41% of segment sales, increased 2.1% from the prior year
quarter. Adjusted for the $2.6 million negative currency impact, organic
security sales growth was 2.7%.

NSS operating income of $64.9 million is flat compared to the second
quarter of 2016 and compares to $61.8 million in the first quarter of
2017. NSS adjusted EBITDA of $69.8 million compares to $75.7 million in
the second quarter of 2016 and $66.6 million in the first quarter of
2017. The corresponding adjusted EBITDA margin of 6.8% compares to 7.2%
in the second quarter of 2016 and is flat with the first quarter of 2017.

Electrical & Electronic Solutions (“EES”) sales of $561.5
million compares to $555.1 million in the prior year period, an increase
of 1.1%. Adjusted for the $9.0 million unfavorable impact from foreign
exchange and the $13.6 million favorable impact from higher average
copper prices, EES organic sales increased 0.3%, driven by growth with
OEM customers and synergistic growth from cross-selling low voltage
products to legacy Anixter customers.

EES operating income of $29.6 million compares to $23.9 million in the
prior year quarter and $27.9 million in the first quarter of 2017. EES
adjusted EBITDA of $32.8 million compares to $32.3 million in the prior
year period and $30.4 million in the first quarter of 2017. The
corresponding adjusted EBITDA margin of 5.8% in the current quarter is
flat compared to both the prior year period and the first quarter of
2017.

Utility Power Solutions (“UPS”) sales of $410.5 million compares
to $355.9 million in the prior year period, an increase of 15.3%.
Adjusted for the $1.8 million unfavorable impact from foreign exchange
and the $0.2 million favorable impact from higher average copper prices,
UPS organic sales increased 15.8%.

UPS operating income of $21.3 million compares to $12.0 million in the
prior year quarter and $16.2 million in the first quarter of 2017. UPS
adjusted EBITDA of $25.9 million increased 34.1% from $19.3 million in
the prior year quarter, and increased 23.9% from $20.9 million in the
first quarter of 2017. The corresponding adjusted EBITDA margin of 6.3%
in the current quarter increased 90 basis points versus 5.4% in the
prior year quarter and 80 basis points versus 5.5% in the first quarter
of 2017. The performance of both adjusted EBITDA and adjusted EBITDA
margin versus prior periods was driven by strong operating profit
leverage.

"Our overall sales performance was consistent with our expectations at
the beginning of the quarter, as we delivered sales growth at the high
end of our projected 1.5 – 3% outlook range. Our NSS segment experienced
a decline in sales as we faced challenging comparisons from large
projects in the prior year quarter; however, momentum in the business
remains strong, evidenced by the 4.5% increase in sales on a sequential
basis. Finally, modest growth in our EES segment reflects solid growth
trends with OEM customers, partially offset by the persistent
challenging industrial end markets," commented Bill Galvin, who was
named President and Chief Operating Officer on July 1, 2017.

Cash Flow and Leverage

We generated $137.1 million in cash flow from operations year-to-date
through the second quarter of 2017, which compares to $149.6 million in
the comparable year-ago period. The decrease is primarily due to higher
working capital investment to support growth in the business. We
continue to estimate full year 2017 cash flow from operations in the
range of $200 – $220 million. In the second quarter of 2017 we invested
$20.8 million in capital expenditures, which compares to $16.4 million
in the prior year period. For the full year we expect to invest $45 –
$50 million in capital expenditures.

"In addition to our focus on our strategic initiatives, including
delivering on our synergy goals, we continue to improve our cost
structure and working capital efficiency. Our ongoing focus on
excellence in execution has resulted in continued strong cash flow from
operations, enabling us to further reduce our debt. " commented Ted
Dosch, Executive Vice President – Finance and CFO. "Looking at our
capital structure, the strong free cash flow we are generating from our
repositioned platform, combined with working capital initiatives,
enabled us to return our debt-to-capital ratio to our target range of
45-to-50% in the first quarter of 2017, ahead of our second half of 2017
target. We remain on track to return our debt-to-adjusted EBITDA ratio
to our target range of 2.5-to-3.0 times by the end of the year."

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

• Debt-to-total capital ratio improved to 48.8% from 51.6% at the end of
  2016
• Weighted average cost of borrowed capital of 5.1% compares to 4.7% in
  the prior year quarter
• $610.8 million available under revolving lines of credit and secured
  accounts receivable and inventory facilities

Business Outlook

"Year-to-date, organic sales growth of 3.3% reflects solid execution of
our growth initiatives and flat to modest share gain across our markets,
against the backdrop of a slowly improving economic environment. As we
enter the second half of the year, our focus remains on our growth
initiatives which include synergistic sales and global accounts. Based
on our backlog and pipeline activity, and supported by our customers'
optimism and the macro-economic indicators we track, we remain
optimistic that end markets will improve in the second half of 2017,"
commented Bob Eck. "Reflecting our current sales and backlog trends, we
expect third quarter 2017 organic sales growth in the 2.0 – 4.0% range.
For the full year 2017 we have increased the midpoint of our outlook
range by 50 basis points, and now expect full year organic sales growth
in the 3.0 – 5.0% range."

Financial Results from Continuing Operations

Second Quarter Earnings Call Details

We will host a conference call to discuss these results beginning at
9:30 a.m. Central Time today. The call will be available as a live audio
webcast and can be accessed at the Investor Relations portion of our
website at anixter.com/investor.
Dial-in numbers for the call are as follows:

A replay of the call will be available at anixter.com/investor for 15
days following the call. Prior to the beginning of the call a
supplemental presentation titled “Second Quarter 2017 Highlights and
Operating Review” will be available on the Investor Relations section of
our website.

About Anixter

Anixter International is a leading global distributor of Network &
Security Solutions, Electrical & Electronic Solutions and Utility Power
Solutions. We help build, connect, protect, and power valuable assets
and critical infrastructures. From enterprise networks to industrial MRO
supply to video surveillance applications to electric power
distribution, we offer full-line solutions, and intelligence, that
create reliable, resilient systems that sustain businesses and
communities. Through our unmatched global distribution network along
with our supply chain and technical expertise, we help lower the cost,
risk and complexity of our customers’ supply chains.

Anixter adds value to the distribution process by providing our
customers access to 1) innovative supply chain solutions, 2) nearly
600,000 products and over $1.0 billion in inventory, 3) over 300
warehouses/branch locations with approximately 9.0 million square feet
of space and 4) locations in over 300 cities in approximately 50
countries. Founded in 1957 and headquartered near Chicago, Anixter
trades on the New York Stock Exchange under the symbol AXE.

Safe Harbor Statement

The statements in this release other than historical facts are
forward-looking statements made in reliance upon the safe harbor of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to a number of factors that could cause our
actual results to differ materially from what is indicated here. These
factors include but are not limited to general economic conditions, the
level of customer demand particularly for capital projects in the
markets we serve, changes in supplier relationships or in supplier sales
strategies or financial viability, risks associated with the sale of
nonconforming products and services, 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, information security
risks, risks associated with substantial debt and restrictions contained
in financial and operating covenants in our debt agreements, the impact
and the uncertainty concerning the timing and terms of the withdrawal by
the United Kingdom from the European Union, and risks associated with
integration of acquired companies, including, but not limited to, the
risk that the acquisitions may not provide us with the synergies or
other benefits that were anticipated. 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 our Securities and Exchange Commission
(“SEC”) filings for more information.

Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. Generally
Accepted Accounting Principles (“U.S. GAAP”) above, this release
includes certain financial measures computed using non-GAAP components
as defined by the SEC. Specifically, net sales comparisons to the prior
corresponding period, both worldwide and in relevant segments, are
discussed in this release both on an U.S. GAAP and non-GAAP basis. We
believe that by providing non-GAAP organic growth, which adjusts for the
impact of acquisitions (when applicable), foreign exchange fluctuations,
copper prices and the number of billing days, both management and
investors are provided with meaningful supplemental sales information to
understand and analyze our underlying trends and other aspects of our
financial performance. Historically and from time to time, we may also
exclude other items from reported financial results (e.g., impairment
charges, inventory adjustments, restructuring charges, tax items,
currency devaluations, pension settlements, etc.) in presenting adjusted
operating expense, adjusted operating income, adjusted income taxes and
adjusted net income so that both management and financial statement
users can use these non-GAAP financial measures to better understand and
evaluate our performance period over period and to analyze the
underlying trends of our business. As a result of the recent
acquisitions we have also excluded amortization of intangible assets
associated with purchase accounting from acquisitions from the adjusted
amounts for comparison of the non-GAAP financial measures period over
period.

EBITDA is defined as net income from continuing operations before
interest, income taxes, depreciation and amortization. Adjusted EBITDA
is defined as EBITDA before foreign exchange and other non-operating
expense and non-cash stock-based compensation, excluding the other items
from reported financial results, as defined above. Adjusted EBITDA
leverage is defined as the percentage change in Adjusted EBITDA divided
by the percentage change in net sales. We believe that adjusted
operating income, EBITDA, Adjusted EBITDA and Adjusted EBITDA leverage
provide relevant and useful information, which is widely used by
analysts, investors and competitors in our industry as well as by our
management in assessing both consolidated and business segment
performance. Adjusted operating income provides an understanding of the
results from the primary operations of our business by excluding the
effects of certain items that do not reflect the ordinary earnings of
our operations. We use adjusted operating income to evaluate our
period-over-period operating performance because we believe this
provides a more comparable measure of our continuing business excluding
certain items that are not reflective of expected ongoing operations.
This measure may be useful to an investor in evaluating the underlying
performance of our business. EBITDA provides us with an understanding of
earnings before the impact of investing and financing charges and income
taxes. Adjusted EBITDA further excludes the effects of foreign exchange
and other non-cash stock-based compensation, and certain items that do
not reflect the ordinary earnings of our operations and that are also
excluded for purposes of calculating adjusted net income, adjusted
earnings per share and adjusted operating income. EBITDA and Adjusted
EBITDA are used by our management for various purposes including as
measures of performance of our operating segments and as a basis for
strategic planning and forecasting. Adjusted EBITDA and Adjusted EBITDA
leverage may be useful to an investor because this measure is widely
used to evaluate a company’s operating performance without regard to
items excluded from the calculation of such measure, which can vary
substantially from company to company depending on the accounting
methods, book value of assets, capital structure and the method by which
the assets were acquired, among other factors. They are not, however,
intended as an alternative measure of operating results or cash flow
from operations as determined in accordance with generally accepted
accounting principles.

Non-GAAP financial measures provide insight into selected financial
information and should be evaluated in the context in which they are
presented. These non-GAAP financial measures have limitations as
analytical tools, and should not be considered in isolation from, or as
a substitute for, financial information presented in compliance with
U.S. GAAP, and non-GAAP financial measures as reported by us may not be
comparable to similarly titled amounts reported by other companies. The
non-GAAP financial measures should be considered in conjunction with the
Condensed Consolidated Financial Statements, including the related
notes, and Management’s Discussion and Analysis of Financial Condition
and Results of Operations included in this release. Management does not
use these non-GAAP financial measures for any purpose other than the
reasons stated above.

Additional information about Anixter is available at anixter.com

Contacts

Anixter International Inc.
INVESTOR CONTACTS
Ted
Dosch
EVP – Finance & Chief Financial Officer
(224)
521-4281
or
Lisa M. Gregory, CFA
VP
– Investor Relations
(224) 521-8895

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