Anixter International Inc. Reports Fourth Quarter 2017 Results

Diluted EPS of $0.01, including $35.6 million impact of tax
legislation

Adjusted diluted EPS of $1.41, up 8%

Fourth Quarter Highlights

• Record fourth quarter sales of $2.0 billion, up 6.3%, reflecting
  growth in all segments and geographies
• Strong organic growth of 4.2%, including 13% in Emerging Markets
  and 7% in EMEA

GLENVIEW, Ill.–(BUSINESS WIRE)–Anixter International Inc. (NYSE: AXE) today reported sales of $2.0
billion for the quarter ended December 29, 2017, a 6.3% increase versus
the prior year quarter. Organic sales increased 4.2%, excluding the
impact of the following items:

• $16.8 million favorable impact from the higher average price of copper
• $22.5 million favorable impact from the fluctuation in foreign
  currencies

All commentary in this release reflects fourth quarter 2017 results from
continuing operations, and all comparisons are versus the prior year
quarter, 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. Both the
current and prior year quarters had 62 billing days.

Net income of $0.4 million includes amortization and impairment of
intangible assets and acquisition and integration costs, which combined
had a $16.2 million pre-tax impact and an $11.8 million after-tax
impact. Additionally, net income includes $35.6 million of tax expense
related to the impact of recent U.S. tax legislation. Combined, these
items had a $47.4 million after-tax impact.

Prior year net income of $36.8 million included amortization of
intangible assets and acquisition and integration costs, which combined
had a $9.8 million pre-tax and $7.6 million after-tax impact. Excluding
the impacts of the above items, adjusted net income increased 7.8% to
$47.8 million.

Adjusted EBITDA increased 6.3% to $108.1 million, resulting in an
adjusted EBITDA margin of 5.4%, flat with the prior year quarter.

"Our sales growth was broad based, driven by strength in our EES and UPS
segments, and including a return to growth in our NSS segment against a
challenging prior year comparison," commented Bob Eck, Chief Executive
Officer. "For the full year, we delivered growth in all segments and
geographies, including double digit growth in our EMEA and Emerging
Markets regions, validating our belief that our specialized distribution
model continues to deliver value to our customers and suppliers on a
worldwide basis."

Income Statement Detail

Gross margin of 19.8% compares to 20.4%. The year-over-year decline in
margin was caused by customer and product mix, combined with the impact
of lower vendor rebates and competitive pressure. On a sequential
basis, gross margin increased by 10 basis points.

Operating expense of $318.0 million compares to $306.1 million.
Excluding operating expense items as detailed above, adjusted operating
expense of $301.8 million compares to $296.3 million, with the increase
driven by higher volume. The corresponding adjusted operating expense
ratio improved by 60 basis points to 15.0% of sales. On a sequential
basis, adjusted operating expense decreased by 1.6% and adjusted
operating expense ratio improved by 20 basis points.

Operating income of $80.4 million compares to $81.0 million. Excluding
operating expense items as detailed above, adjusted operating income
increased 6.6% to $96.6 million and the adjusted operating margin of
4.8% was flat. On a sequential basis, adjusted operating income
increased 6.5% and adjusted operating margin improved by 30 basis points.

Fourth quarter U.S. GAAP effective tax rate ("ETR") of 99.4% compares to
37.2%, the increase is primarily due to the impact of tax legislation
recognized in the fourth quarter 2017. Fourth quarter non-GAAP ETR of
38.5% compares to 35.1%. Full year 2017 non-GAAP effective tax rate of
37.8% compares to our full year 2016 non-GAAP effective tax rate of
37.0%, with the difference due primarily to country mix of earnings.

Segment Update

Network & Security Solutions ("NSS") sales of $1.1 billion
compares to $1.0 billion. Adjusted for the $11.6 million favorable
impact from foreign exchange, NSS organic sales were approximately flat.
NSS security sales of $421.1 million, which represents approximately 40%
of segment sales, increased 1.5%. Adjusted for the $5.3 million
favorable currency impact, organic security sales increased 0.2%.

NSS operating income of $68.4 million compares to $77.2 million.
Excluding $9.3 million of impairment of intangible assets and
amortization of intangible assets in the current year, and $3.5 million
of expense, primarily amortization of intangible assets, in the prior
year, NSS adjusted operating income of $77.7 million compares to $80.7
million. NSS adjusted EBITDA of $79.4 million, or 7.6% of sales,
compares to $81.9 million, or 7.9% of sales.

Electrical & Electronic Solutions (“EES”) sales of $581.6
million compares to $507.0 million. Adjusted for the $8.8 million
favorable impact from foreign exchange and the $16.4 million favorable
impact from higher average copper prices, EES organic sales increased
9.8%. The strong growth was driven by a recovery in North America
industrial project activity, ongoing growth with OEM customers and
synergistic growth from sales of low voltage products to legacy Anixter
customers.

EES operating income increased 33.5% to $30.0 million. Excluding $2.0
million and $2.2 million of amortization of intangible assets, from
current and prior year, respectively, EES adjusted operating income
increased 30.7% to $32.0 million. EES adjusted EBITDA increased 29.0% to
$33.0 million, with a corresponding improvement in adjusted EBITDA
margin of 60 basis points. Strong adjusted EBITDA leverage of 2.0x was
driven by increased volume combined with operating expense leverage.

Utility Power Solutions (“UPS”) sales of $381.3 million compares
to $347.5 million. Adjusted for the $2.1 million favorable impact from
foreign exchange and the $0.4 million favorable impact from higher
average copper prices, UPS organic sales increased 9.0%.

UPS operating income increased 8.6% to $15.8 million. Excluding $3.4
million and $3.1 million of expense, primarily amortization of
intangible assets, from current and prior year, respectively, UPS
adjusted operating income increased 8.3% to $19.2 million. UPS adjusted
EBITDA increased 6.8% to $20.5 million, or 5.4% of sales, compared to
$19.2 million, or 5.5% of sales.

Cash Flow and Leverage

Full year cash flow from operations of $183.8 million compares to $279.1
million in 2016. The decrease is primarily due to higher working capital
investment to support growth in the business. Our ongoing focus on our
working capital efficiency drove a 40 basis point improvement to 18.4%
of sales from the prior year quarter. Finally, we invested $41.1 million
in capital expenditures in 2017, which compares to $32.6 million in
2016, reflecting higher capital investment in facilities and information
technology.

"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." commented Ted Dosch,
Executive Vice President – Finance and CFO. "Turning to our capital
structure, the strong free cash flow we continue to generate, 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 and we continue to expect to reduce our debt-to-adjusted
EBITDA below 3.0 times by early 2018."

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

• Debt-to-total capital ratio improved to 46.1% from 51.6% at the end of
  2016
• Debt-to-adjusted EBITDA ratio improved to 3.1 times from 3.5 times at
  the end of 2016
• Weighted average cost of borrowed capital of 5.6% compares to 5.1% at
  the end of 2016
• $667.1 million available under revolving lines of credit and secured
  accounts receivable and inventory facilities

Business Outlook

"Full year 2017 organic sales growth on a per day basis of 3.5% was near
the high end of our initial 2017 range and included growth in all
segments and all geographies. We were especially pleased to deliver
double digit organic sales growth in our UPS segment and in our EMEA and
Emerging Markets geographies," commented Bill Galvin, President and
Chief Operating Officer. "Looking ahead, we are optimistic regarding our
business based on multiple indicators. We experienced strong momentum in
the fourth quarter, including a recovery in large capital project
activity in our EES business, an improving backlog, and strong pipeline
activity. The external environment remains favorable in all of our major
geographies, reflected by broad favorable economic growth indicators
across global markets. Additionally, we see the recent tax reform
legislation as a potential catalyst for our customers to increase
capital expenditures."

We estimate the following impacts as a result of the recently passed Tax
Cuts and Jobs Act:

• $35.6 million expense recorded in the fourth quarter 2017 related to
  the impact of tax legislation which includes the following;
  • $50.0 million unfavorable transition tax on deferred foreign
    income, to be paid over 8 years; and
  • $14.4 million favorable rate change impact of net deferred tax
    liability
• A 2018 effective tax rate in the 28.5% – 29.5% range.

For the full year 2018, we estimate organic sales growth of 2.0 – 5.0%,
cash flow from operations of $180 – $200 million and capital
expenditures of $60 – $70 million. For the first quarter of 2018, we
estimate organic sales growth in the 2.0 – 3.0% range.

Financial Results from Continuing Operations

Conference 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 “Fourth Quarter 2017 Highlights and
Operating Results” 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) over
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 U.S. GAAP.

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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