| Debt
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NOTE 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
• | Return or rotation privileges with vendors; | |
• | Price protection from vendors; | |
• | Expected future usage; | |
• | Whether or not a customer is obligated by contract to purchase the inventory; | |
• | Current market pricing; | |
• | Historical consumption experience; and | |
• | Risk of obsolescence. |
December 31, 2010 | January 1, 2010 | |||||||||||||||
($ and shares in millions, except conversion prices) | Notes due 2013 | Notes due 2033 | Notes due 2013 | Notes due 2033 | ||||||||||||
Carrying amount of the equity component
|
$ | 53.3 | $ | (45.7 | ) | $ | 53.3 | $ | (25.3 | ) | ||||||
Principal amount of the liability component
|
$ | 300.0 | $ | 100.2 | $ | 300.0 | $ | 240.3 | ||||||||
Unamortized discount of liability
component(a)
|
$ | (35.8 | ) | $ | (51.7 | ) | $ | (50.9 | ) | $ | (127.6 | ) | ||||
Net carrying amount of liability component
|
$ | 264.2 | $ | 48.5 | $ | 249.1 | $ | 112.7 | ||||||||
Remaining amortization period of discount
(a)
|
26 months | 271 months | (c | ) | (c | ) | ||||||||||
Conversion price
|
$ | 59.78 | $ | 30.22 | (c | ) | (c | ) | ||||||||
Number of shares to be issued upon conversion
|
5.0 | 1.6 | (c | ) | (c | ) | ||||||||||
If-converted value exceeds principal
amount(b)
|
$ | — | $ | 47.4 | (c | ) | (c | ) |
(a) | The Notes due 2013 and Notes due 2033 were issued in February of 2007 and July of 2003, respectively. For convertible debt accounting purposes, the expected life of the Notes due 2013 and the Notes due 2033 have been determined to be six years and four years from the issuance date, respectively. As such, the Company is amortizing the unamortized discount through interest expense through February of 2013 for the Notes due 2013. As of the end of fiscal 2010, the remaining discount related to the Notes due 2033 represents the original discount and will be amortized through July of 2033 at the original rate of 3.25%. This is due to the Notes due 2033 being outstanding past the original four-year expected life used for accounting purposes at issuance. | |
(b) | If-converted value amounts are for disclosure purposes only. The Notes due 2013 are convertible when the closing price of the Company’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is more than $77.71. Based on the Company’s stock prices during the year, the Notes due 2013 have not been convertible during 2010. The Notes due 2033 are convertible when the sale price of the Company’s common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is more than 120% of the accreted conversion price per share of common stock on the last day of such preceding fiscal quarter. Based on the Company’s stock prices during the year as compared to the accreted conversion price at December 31, 2010, the Notes due 2033 are currently convertible. | |
(c) | Data not required for comparative purposes. |
Years Ended | ||||||||||||
December 31, |
January 1, |
January 2, |
||||||||||
2010 | 2010 | 2009 | ||||||||||
(In millions) | ||||||||||||
Other, net (loss) gain:
|
||||||||||||
Foreign exchange
|
$ | (2.3 | ) | $ | (23.3 | ) | $ | (18.0 | ) | |||
Cash surrender value of life insurance policies
|
3.0 | 3.4 | (6.5 | ) | ||||||||
Settlement of interest rate swaps
|
— | (2.1 | ) | — | ||||||||
Other
|
(2.1 | ) | 2.9 | (1.3 | ) | |||||||
$ | (1.4 | ) | $ | (19.1 | ) | $ | (25.8 | ) | ||||
|
NOTE 3. | ACCRUED EXPENSES |
December 31, |
January 1, |
|||||||
2010 | 2010 | |||||||
(In millions) | ||||||||
Salaries and fringe benefits
|
$ | 94.6 | $ | 67.5 | ||||
Other accrued expenses
|
124.3 | 88.4 | ||||||
Total accrued expenses
|
$ | 218.9 | $ | 155.9 | ||||
|
NOTE 4. | SEVERANCE |
|
NOTE 5. | DEBT |
December 31, |
January 1, |
|||||||
2010 | 2010 | |||||||
(In millions) | ||||||||
Long-term debt:
|
||||||||
Convertible senior notes due 2013
|
$ | 264.2 | $ | 249.1 | ||||
Senior notes due 2015
|
200.0 | 200.0 | ||||||
Revolving lines of credit and other
|
145.5 | 96.1 | ||||||
Convertible notes due 2033
|
48.5 | 112.7 | ||||||
Senior notes due 2014
|
30.6 | 163.5 | ||||||
Total long-term debt
|
688.8 | 821.4 | ||||||
Short-term debt
|
203.6 | 8.7 | ||||||
Total debt
|
$ | 892.4 | $ | 830.1 | ||||
• | The consolidated fixed charge coverage ratio (as defined in the revolving credit agreement) requires a minimum coverage of 2.25 times through September 30, 2010, 2.50 times from December 2010 through December 2011 and 3.00 times thereafter. As of December 31, 2010, the consolidated fixed charge coverage ratio was 3.70. | |
• | The consolidated leverage ratio (as defined in the revolving credit agreement) limits the maximum leverage allowed to 3.25. As of December 31, 2010, the consolidated leverage ratio was 1.90. | |
• | Anixter Inc. is required to have, on a proforma basis, a minimum of $50 million of availability under the revolving credit agreement at any time it elects to distribute funds to the Company to prepay, purchase or redeem the Company’s indebtedness. | |
• | Anixter Inc. is permitted to distribute funds to the Company for payment of dividends and share repurchases up to a maximum amount of $150 million plus 50% of Anixter Inc.’s cumulative net income from July of 2009 through the maturity of the facility. In both 2010 and 2009, the Company repurchased 1.0 million shares for $41.2 million and $34.9 million, respectively. In 2010, the Company paid a special dividend of $111.0 million. As of December 31, 2010, Anixter Inc. has the ability to distribute $43.4 million of funds to the Company. | |
• | The ratings-based pricing grid is such that the all-in drawn cost of borrowings, based on Anixter Inc.’s current credit ratings of BB+/Ba1, is Libor plus 250 basis points on all borrowings. |
• | distribute, to all holders of the Company’s common stock, any rights entitling them to purchase, for a period expiring within 45 days of distribution, common stock, or securities convertible into common stock, at less than, or having a conversion price per share less than, the closing price of the Company’s common stock; or | |
• | distribute, to all holders of the Company’s common stock, assets, cash, debt securities or rights to purchase the Company’s securities, which distribution has a per share value exceeding 15% of the closing price of such common stock, |
• | stock dividends and distributions, share splits and share combinations, | |
• | the issuance of any rights to all holders of the Company’s common stock to purchase shares of such stock at an issuance price of less than the closing price of such stock, exercisable within 45 days of issuance, | |
• | the distribution of stock, debt or other assets, to all holders of the Company’s common stock, other than distributions covered above, and | |
• | issuer tender offers at a premium to the closing price of the Company’s common stock. |
• | for Notes due 2013 that are converted during the one month period prior to maturity date of the notes, the 20 consecutive trading days preceding and ending on the maturity date, subject to any extension due to a market disruption event, and | |
• | in all other instances, the 20 consecutive trading days beginning on the third trading day following the conversion date. |
• | July 7, 2011 at a price equal to $492.01 per Convertible Note due 2033; | |
• | July 7, 2013 at a price equal to $524.78 per Convertible Note due 2033; | |
• | July 7, 2018 at a price equal to $616.57 per Convertible Note due 2033; | |
• | July 7, 2023 at a price equal to $724.42 per Convertible Note due 2033; and | |
• | July 7, 2028 at a price equal to $851.13 per Convertible Note due 2033. |
• | stock dividends and distributions, | |
• | subdivisions, combinations and reclassifications of the Company’s common stock, |
• | the distribution to all holders of the Company’s common stock of certain rights to purchase stock, expiring within 60 days, at less than the current sale price, | |
• | the distribution to holders of the Company’s common stock of certain stock, the Company’s assets (including equity interests in subsidiaries), debt securities or certain rights to purchase the Company’s securities, and | |
• | certain cash dividends. |
|
NOTE 6. | COMMITMENTS AND CONTINGENCIES |
(In millions) | ||||
2011
|
$ | 60.3 | ||
2012
|
50.0 | |||
2013
|
38.3 | |||
2014
|
30.1 | |||
2015
|
23.2 | |||
2016 and thereafter
|
58.2 | |||
Total
|
$ | 260.1 | ||
|
NOTE 7. | INCOME TAXES |
Years Ended | ||||||||||||
December 31, |
January 1, |
January 2, |
||||||||||
2010 | 2010 | 2009 | ||||||||||
As adjusted (See Note 1.) | ||||||||||||
Current:
|
||||||||||||
Foreign
|
$ | 20.6 | $ | 18.6 | $ | 40.2 | ||||||
State
|
4.0 | 0.4 | 10.6 | |||||||||
Federal
|
24.6 | 29.1 | 74.8 | |||||||||
49.2 | 48.1 | 125.6 | ||||||||||
Deferred:
|
||||||||||||
Foreign
|
0.4 | (5.9 | ) | (3.2 | ) | |||||||
State
|
2.3 | 0.2 | (0.4 | ) | ||||||||
Federal
|
18.9 | 4.1 | (4.4 | ) | ||||||||
21.6 | (1.6 | ) | (8.0 | ) | ||||||||
Income tax expense
|
$ | 70.8 | $ | 46.5 | $ | 117.6 | ||||||
Years Ended | ||||||||||||
December 31, |
January 1, |
January 2, |
||||||||||
2010 | 2010 | 2009 | ||||||||||
As adjusted (See Note 1.) | ||||||||||||
Statutory tax expense
|
$ | 62.7 | $ | 6.0 | $ | 106.9 | ||||||
Increase (reduction) in taxes resulting from:
|
||||||||||||
Nondeductible goodwill impairment loss
|
— | 35.0 | — | |||||||||
State income taxes, net
|
4.1 | 2.6 | 6.9 | |||||||||
Foreign tax effects
|
2.1 | 8.2 | 2.3 | |||||||||
Reversal of Mexico’s valuation allowance
|
— | (4.5 | ) | — | ||||||||
Audit activity*
|
— | (1.0 | ) | (0.1 | ) | |||||||
Other, net
|
1.9 | 0.2 | 1.6 | |||||||||
Income tax expense
|
$ | 70.8 | $ | 46.5 | $ | 117.6 | ||||||
* | Benefits in 2009 are primarily associated with the settlement of the Wisconsin railroad income tax dispute. |
December 31, |
January 1, |
|||||||
2010 | 2010 | |||||||
Property, equipment, intangibles and other
|
$ | (21.6 | ) | $ | (20.8 | ) | ||
Accreted interest (Notes due 2033)
|
(6.0 | ) | (24.2 | ) | ||||
Gross deferred tax liabilities
|
(27.6 | ) | (45.0 | ) | ||||
Deferred compensation and other postretirement benefits
|
57.7 | 53.2 | ||||||
Inventory reserves
|
31.5 | 27.6 | ||||||
Foreign NOL carryforwards and other
|
21.8 | 24.6 | ||||||
Allowance for doubtful accounts
|
8.3 | 9.3 | ||||||
Other
|
10.8 | 15.9 | ||||||
Gross deferred tax assets
|
130.1 | 130.6 | ||||||
Deferred tax assets, net of deferred tax liabilities
|
102.5 | 85.6 | ||||||
Valuation allowance
|
(18.8 | ) | (18.7 | ) | ||||
Net deferred tax assets
|
$ | 83.7 | $ | 66.9 | ||||
Net current deferred tax assets
|
$ | 50.3 | $ | 47.5 | ||||
Net non-current deferred tax assets
|
33.4 | 19.4 | ||||||
Net deferred tax assets
|
$ | 83.7 | $ | 66.9 | ||||
(In millions) | ||||
Balance at January 2, 2009
|
$ | 5.8 | ||
Additions for tax positions of prior years
|
4.0 | |||
Reductions for tax positions of prior years
|
(5.2 | ) | ||
Balance at January 1, 2010
|
$ | 4.6 | ||
Additions for tax positions of prior years
|
1.9 | |||
Reductions for tax positions of prior years
|
(2.5 | ) | ||
Balance at December 31, 2010
|
$ | 4.0 | ||
|
NOTE 8. | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
|
NOTE 9. | FAIR VALUE MEASUREMENTS |
• | Nonconvertible fixed-rate debt consisting of the Company’s Notes due 2015 and Notes due 2014. | |
• | Convertible fixed-rate debt consisting of the Company’s Notes due 2013 and Notes due 2033. |
|
NOTE 10. | PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS |
Domestic Plans | ||||||||||||||||||||
December 31, |
January 1, |
Allocation Guidelines | ||||||||||||||||||
2010 | 2010 | Min | Target | Max | ||||||||||||||||
Large capitalization U.S. stocks
|
33.2 | % | 33.8 | % | 20 | % | 30 | % | 40 | % | ||||||||||
Small capitalization U.S. stocks
|
17.3 | 15.0 | 15 | 20 | 25 | |||||||||||||||
International stocks
|
16.6 | 17.8 | 15 | 20 | 25 | |||||||||||||||
Total equity securities
|
67.1 | 66.6 | 70 | |||||||||||||||||
Fixed income investments
|
30.3 | 30.7 | 25 | 30 | 35 | |||||||||||||||
Other investments
|
2.6 | 2.7 | — | — | — | |||||||||||||||
100.0 | % | 100.0 | % | 100 | % | |||||||||||||||
Foreign Plans | ||||||||||||
December 31, |
January 1, |
Allocation Guidelines | ||||||||||
2010 | 2010 | Target | ||||||||||
Equity securities
|
46.2 | % | 43.1 | % | 48 | % | ||||||
Fixed income investments
|
44.9 | 48.3 | 45 | |||||||||
Other investments
|
8.9 | 8.6 | 7 | |||||||||
100.0 | % | 100.0 | % | 100.0 | % | |||||||
• | Each asset class is actively managed by one investment manager; | |
• | Each asset class may be invested in a commingled fund, mutual fund, or separately managed account; | |
• | Each manager is expected to be “fully invested” with minimal cash holdings; | |
• | The use of options and futures is limited to covered hedges only; | |
• | Each equity asset manager has a minimum number of individual company stocks that need to be held and there are restrictions on the total market value that can be invested in any one industry and the percentage that any one company can be of the portfolio total. The domestic equity funds are limited as to the percentage that can be invested in international securities; | |
• | The international stock fund is limited to readily marketable securities; and | |
• | The fixed income fund has a duration that approximates the duration of the projected benefit obligations. |
• | Make sure that the obligations to the beneficiaries of the Plan can be met; | |
• | Maintain funds at a level to meet the minimum funding requirements; and | |
• | The investment managers are expected to provide a return, within certain tracking tolerances, close to that of the relevant market’s indices. |
Pension Benefits | ||||||||||||||||||||||||
Domestic | Foreign | Total | ||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Change in projected benefit obligation:
|
||||||||||||||||||||||||
Beginning balance
|
$ | 197.9 | $ | 187.3 | $ | 175.9 | $ | 123.4 | $ | 373.8 | $ | 310.7 | ||||||||||||
Service cost
|
6.1 | 6.6 | 4.7 | 4.0 | 10.8 | 10.6 | ||||||||||||||||||
Interest cost
|
11.6 | 11.0 | 9.9 | 8.6 | 21.5 | 19.6 | ||||||||||||||||||
Plan participants contributions
|
— | — | 0.3 | 0.3 | 0.3 | 0.3 | ||||||||||||||||||
Actuarial (gain) loss
|
15.3 | (1.7 | ) | (6.1 | ) | 29.9 | 9.2 | 28.2 | ||||||||||||||||
Benefits paid
|
(6.1 | ) | (5.3 | ) | (5.6 | ) | (5.1 | ) | (11.7 | ) | (10.4 | ) | ||||||||||||
Foreign currency exchange rate changes
|
— | — | (4.5 | ) | 14.8 | (4.5 | ) | 14.8 | ||||||||||||||||
Other
|
0.6 | — | — | — | 0.6 | — | ||||||||||||||||||
Ending balance
|
$ | 225.4 | $ | 197.9 | $ | 174.6 | $ | 175.9 | $ | 400.0 | $ | 373.8 | ||||||||||||
Change in plan assets at fair value:
|
||||||||||||||||||||||||
Beginning balance
|
$ | 127.3 | $ | 114.6 | $ | 149.5 | $ | 115.3 | $ | 276.8 | $ | 229.9 | ||||||||||||
Actual return (loss) on plan assets
|
19.9 | 8.7 | 15.0 | 15.9 | 34.9 | 24.6 | ||||||||||||||||||
Company contributions
|
6.9 | 9.3 | 10.0 | 9.6 | 16.9 | 18.9 | ||||||||||||||||||
Plan participants contributions
|
— | — | 0.3 | 0.3 | 0.3 | 0.3 | ||||||||||||||||||
Benefits paid
|
(6.1 | ) | (5.3 | ) | (5.6 | ) | (5.1 | ) | (11.7 | ) | (10.4 | ) | ||||||||||||
Foreign currency exchange rate changes
|
— | — | (3.4 | ) | 13.5 | (3.4 | ) | 13.5 | ||||||||||||||||
Ending balance
|
$ | 148.0 | $ | 127.3 | $ | 165.8 | $ | 149.5 | $ | 313.8 | $ | 276.8 | ||||||||||||
Reconciliation of funded status:
|
||||||||||||||||||||||||
Projected benefit obligation
|
$ | (225.4 | ) | $ | (197.9 | ) | $ | (174.6 | ) | $ | (175.9 | ) | $ | (400.0 | ) | $ | (373.8 | ) | ||||||
Plan assets at fair value
|
148.0 | 127.3 | 165.8 | 149.5 | 313.8 | 276.8 | ||||||||||||||||||
Funded status
|
$ | (77.4 | ) | $ | (70.6 | ) | $ | (8.8 | ) | $ | (26.4 | ) | $ | (86.2 | ) | $ | (97.0 | ) | ||||||
Included in the 2010 and 2009 funded status is accrued benefit cost of approximately $13.0 million and $16.2 million, respectively, related to two non-qualified plans, which cannot be funded pursuant to tax regulations. | ||||||||||||||||||||||||
Noncurrent asset
|
$ | — | $ | — | $ | 2.0 | $ | 3.8 | $ | 2.0 | $ | 3.8 | ||||||||||||
Current liability
|
(0.6 | ) | (0.7 | ) | — | — | (0.6 | ) | (0.7 | ) | ||||||||||||||
Noncurrent liability
|
(76.8 | ) | (69.9 | ) | (10.8 | ) | (30.2 | ) | (87.6 | ) | (100.1 | ) | ||||||||||||
Funded status
|
$ | (77.4 | ) | $ | (70.6 | ) | $ | (8.8 | ) | $ | (26.4 | ) | $ | (86.2 | ) | $ | (97.0 | ) | ||||||
Weighted-average assumptions used for measurement of the projected benefit obligation: | ||||||||||||||||||||||||
Discount rate
|
5.53 | % | 5.99 | % | 5.43 | % | 5.77 | % | 5.49 | % | 5.88 | % | ||||||||||||
Salary growth rate
|
3.91 | % | 3.91 | % | 3.57 | % | 3.59 | % | 3.76 | % | 3.79 | % |
Pension Benefits | ||||||||||||||||||||||||||||||||||||||||
Domestic | Foreign | Total | ||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||
Components of net periodic cost:
|
||||||||||||||||||||||||||||||||||||||||
Service cost
|
$ | 6.1 | $ | 6.6 | $ | 5.8 | $ | 4.7 | $ | 4.0 | $ | 5.7 | $ | 10.8 | $ | 10.6 | $ | 11.5 | ||||||||||||||||||||||
Interest cost
|
11.6 | 11.0 | 10.3 | 9.9 | 8.6 | 10.0 | 21.5 | 19.6 | 20.3 | |||||||||||||||||||||||||||||||
Expected return on plan assets
|
(10.8 | ) | (9.9 | ) | (11.8 | ) | (8.9 | ) | (7.9 | ) | (11.0 | ) | (19.7 | ) | (17.8 | ) | (22.8 | ) | ||||||||||||||||||||||
Net amortization
|
3.5 | 3.7 | 0.5 | 0.6 | (0.1 | ) | 0.1 | 4.1 | 3.6 | 0.6 | ||||||||||||||||||||||||||||||
Curtailment loss
|
— | — | 0.9 | — | — | — | — | — | 0.9 | |||||||||||||||||||||||||||||||
Net periodic cost
|
$ | 10.4 | $ | 11.4 | $ | 5.7 | $ | 6.3 | $ | 4.6 | $ | 4.8 | $ | 16.7 | $ | 16.0 | $ | 10.5 | ||||||||||||||||||||||
Weighted-average assumption used to measure net periodic
cost:
|
||||||||||||||||||||||||||||||||||||||||
Discount rate
|
5.99 | % | 5.90 | % | 6.50 | % | 5.77 | % | 6.45 | % | 5.63 | % | 5.88 | % | 6.12 | % | 6.03 | % | ||||||||||||||||||||||
Expected return on plan assets
|
8.50 | % | 8.50 | % | 8.50 | % | 6.02 | % | 6.02 | % | 6.82 | % | 7.16 | % | 7.26 | % | 7.66 | % | ||||||||||||||||||||||
Salary growth rate
|
3.91 | % | 4.43 | % | 4.38 | % | 3.59 | % | 3.66 | % | 3.79 | % | 3.79 | % | 4.05 | % | 4.08 | % |
Pension Assets | ||||||||||||||||||||||||||||||||||||
Domestic | Foreign | Total | ||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | ||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||
Asset Categories:
|
||||||||||||||||||||||||||||||||||||
Cash and short-term investments
|
$ | 3.9 | $ | — | $ | 3.9 | $ | 1.6 | $ | — | $ | 1.6 | $ | 5.5 | $ | — | $ | 5.5 | ||||||||||||||||||
Equity securities:
|
||||||||||||||||||||||||||||||||||||
Domestic
|
74.7 | — | 74.7 | — | 35.8 | 35.8 | 74.7 | 35.8 | 110.5 | |||||||||||||||||||||||||||
International
|
— | 24.6 | 24.6 | — | 40.8 | 40.8 | — | 65.4 | 65.4 | |||||||||||||||||||||||||||
Fixed income securities:
|
||||||||||||||||||||||||||||||||||||
Domestic
|
30.4 | 4.3 | 34.7 | 0.1 | 57.2 | 57.3 | 30.5 | 61.5 | 92.0 | |||||||||||||||||||||||||||
Corporate bonds
|
— | 10.1 | 10.1 | — | 17.2 | 17.2 | — | 27.3 | 27.3 | |||||||||||||||||||||||||||
Insurance funds
|
— | — | — | — | 12.6 | 12.6 | — | 12.6 | 12.6 | |||||||||||||||||||||||||||
Other
|
— | — | — | 0.1 | 0.4 | 0.5 | 0.1 | 0.4 | 0.5 | |||||||||||||||||||||||||||
Total
|
$ | 109.0 | $ | 39.0 | $ | 148.0 | $ | 1.8 | $ | 164.0 | $ | 165.8 | $ | 110.8 | $ | 203.0 | $ | 313.8 | ||||||||||||||||||
Estimated Future Benefit |
||||||||||||
Payments | ||||||||||||
Domestic | Foreign | Total | ||||||||||
(In millions) | ||||||||||||
2011
|
$ | 6.3 | $ | 5.1 | $ | 11.4 | ||||||
2012
|
7.2 | 5.7 | 12.9 | |||||||||
2013
|
7.9 | 6.4 | 14.3 | |||||||||
2014
|
8.6 | 6.7 | 15.3 | |||||||||
2015
|
9.2 | 6.4 | 15.6 | |||||||||
2016-2020
|
58.2 | 39.1 | 97.3 | |||||||||
Total
|
$ | 97.4 | $ | 69.4 | $ | 166.8 | ||||||
|
NOTE 11. | STOCKHOLDERS’ EQUITY |
Weighted |
Weighted |
|||||||||||||||
Director |
Average |
Employee |
Average |
|||||||||||||
Stock |
Grant Date |
Stock |
Grant Date |
|||||||||||||
Units(1) | Value(2) | Units(1) | Value(2) | |||||||||||||
(Units in thousands) | ||||||||||||||||
Outstanding balance at December 28, 2007
|
150.4 | $ | 36.95 | 645.9 | $ | 45.83 | ||||||||||
Granted
|
45.1 | 50.68 | 173.8 | 65.24 | ||||||||||||
Converted
|
(1.6 | ) | 37.17 | (231.6 | ) | 37.81 | ||||||||||
Cancelled
|
— | — | (5.5 | ) | 52.15 | |||||||||||
Outstanding balance at January 2, 2009
|
193.9 | 40.14 | 582.6 | 54.74 | ||||||||||||
Granted
|
48.9 | 38.39 | 371.1 | 29.41 | ||||||||||||
Converted
|
(2.7 | ) | 46.91 | (177.4 | ) | 46.02 | ||||||||||
Cancelled
|
— | — | (17.2 | ) | 47.79 | |||||||||||
Outstanding balance at January 1, 2010
|
240.1 | 39.71 | 759.1 | 44.55 | ||||||||||||
Granted
|
26.8 | 47.32 | 268.7 | 42.72 | ||||||||||||
Converted
|
(37.2 | ) | 38.14 | (197.4 | ) | 51.09 | ||||||||||
Cancelled
|
— | — | (6.7 | ) | 45.32 | |||||||||||
Outstanding balance at December 31, 2010
|
229.7 | $ | 40.85 | 823.7 | $ | 42.38 | ||||||||||
(1) | Generally, stock units are included in the Company’s common stock outstanding on the date of vesting as the conditions for conversion have been met. However, director and employee units are considered convertible units if vested and the individual has elected to defer for conversion until a pre-arranged time selected by each individual. All of the director stock units outstanding are convertible. Approximately 6,000 of employee units outstanding were convertible at the end of 2010. | |
(2) | Director and employee stock units are granted at no cost to the participants. |
Risk-Free |
||||||||||
Expected Stock |
Interest |
Expected |
Average |
|||||||
Price Volatility | Rate | Dividend Yield | Expected Life | |||||||
2010 Grants:
|
||||||||||
4 year vesting
|
36.2% | 2.7% | 0 | % | 6.13 years | |||||
2009 Grants:
|
||||||||||
4 year vesting
|
35.4% | 2.7% | 0 | % | 7 years | |||||
2008 Grants:
|
||||||||||
4 year vesting (2 grants)
|
27.8% and 28.0% | 3.0% and 3.6% | 0 | % | 7 years | |||||
5 year vesting
|
27.8% | 3.0% | 0 | % | 7 years |
Weighted- |
||||||||
Average |
||||||||
Employee |
Exercise |
|||||||
Options | Price | |||||||
Balance at December 28, 2007
|
2,048.3 | $ | 26.19 | |||||
Granted
|
230.9 | 65.10 | ||||||
Exercised
|
(549.4 | ) | 18.66 | |||||
Cancelled
|
— | — | ||||||
Balance at January 2, 2009
|
1,729.8 | 33.78 | ||||||
Granted
|
97.2 | 29.41 | ||||||
Exercised
|
(264.8 | ) | 18.21 | |||||
Cancelled
|
— | — | ||||||
Balance at January 1, 2010
|
1,562.2 | 36.15 | ||||||
Adjusted(a)
|
87.2 | 37.87 | ||||||
Granted
|
96.5 | 42.71 | ||||||
Exercised
|
(510.9 | ) | 21.25 | |||||
Cancelled
|
(0.1 | ) | 22.39 | |||||
Balance at December 31, 2010
|
1,234.9 | $ | 40.27 | |||||
Options exercisable at year-end:
|
||||||||
2008
|
1,168.3 | $ | 20.86 | |||||
2009
|
956.8 | $ | 20.43 | |||||
2010(a)
|
661.2 | $ | 26.12 |
(a) | In accordance with the provisions of the stock option plan, the exercise price and number of options outstanding and exercisable were adjusted to reflect the special dividend in 2010. |
Weighted-Average |
||||||||
Non-vested |
Grant Date |
|||||||
Shares | Fair Value | |||||||
(Shares in thousands) | ||||||||
Non-vested shares at January 1, 2010
|
1,349.8 | $ | 48.73 | |||||
Adjusted(a)
|
50.8 | 50.00 | ||||||
Granted
|
365.2 | 42.72 | ||||||
Vested
|
(367.7 | ) | 53.18 | |||||
Cancelled
|
(6.8 | ) | 45.03 | |||||
Non-vested shares at December 31, 2010
|
1,391.3 | $ | 44.40 | |||||
(a) | In accordance with the provisions of the stock option plan, the exercise price and number of options outstanding and exercisable were adjusted to reflect the special dividend in 2010. |
|
NOTE 12. | GOODWILL IMPAIRMENT |
|
NOTE 13. | BUSINESS SEGMENTS |
North |
Emerging |
|||||||||||||||
America | Europe | Markets | Total | |||||||||||||
2010
|
||||||||||||||||
Net sales
|
$ | 3,889.4 | $ | 1,023.9 | $ | 558.8 | $ | 5,472.1 | ||||||||
Operating income
|
235.4 | (2.1 | ) | 32.9 | 266.2 | |||||||||||
Depreciation
|
14.7 | 5.6 | 2.2 | 22.5 | ||||||||||||
Amortization of intangibles
|
5.0 | 6.2 | 0.1 | 11.3 | ||||||||||||
Tangible long-lived assets
|
97.2 | 24.7 | 5.5 | 127.4 | ||||||||||||
Total assets
|
2,045.9 | 586.7 | 300.7 | 2,933.3 | ||||||||||||
Capital expenditures
|
16.6 | 1.9 | 1.1 | 19.6 | ||||||||||||
2009
|
||||||||||||||||
Net sales
|
$ | 3,589.1 | $ | 907.2 | $ | 486.1 | $ | 4,982.4 | ||||||||
Operating income
|
193.6 | (119.2 | ) | 29.1 | 103.5 | |||||||||||
Depreciation
|
15.0 | 7.0 | 2.1 | 24.1 | ||||||||||||
Amortization of intangibles
|
6.3 | 6.6 | 0.1 | 13.0 | ||||||||||||
Tangible long-lived assets
|
93.9 | 32.7 | 5.5 | 132.1 | ||||||||||||
Total assets
|
1,869.7 | 545.5 | 256.5 | 2,671.7 | ||||||||||||
Capital expenditures
|
17.0 | 2.9 | 2.0 | 21.9 | ||||||||||||
2008
|
||||||||||||||||
Net sales
|
$ | 4,278.8 | $ | 1,309.4 | $ | 548.4 | $ | 6,136.6 | ||||||||
Operating income
|
315.0 | 35.9 | 41.0 | 391.9 | ||||||||||||
Depreciation
|
15.6 | 7.3 | 2.0 | 24.9 | ||||||||||||
Amortization of intangibles
|
3.6 | 6.1 | — | 9.7 | ||||||||||||
Tangible long-lived assets
|
87.7 | 33.0 | 5.5 | 126.2 | ||||||||||||
Total assets
|
2,030.3 | 755.7 | 276.4 | 3,062.4 | ||||||||||||
Capital expenditures
|
20.5 | 8.7 | 3.2 | 32.4 |
North |
Emerging |
|||||||||||||||
America | Europe | Markets | Total | |||||||||||||
Balance January 2, 2009
|
$ | 345.2 | $ | 105.0 | $ | 8.4 | $ | 458.6 | ||||||||
Acquisition
related(a)
|
(12.7 | ) | 2.8 | 0.2 | (9.7 | ) | ||||||||||
Foreign currency translation
|
2.2 | 4.5 | 2.1 | 8.8 | ||||||||||||
Subtotal
|
$ | 334.7 | $ | 112.3 | $ | 10.7 | $ | 457.7 | ||||||||
Goodwill
impairment(b)
|
— | (100.0 | ) | — | (100.0 | ) | ||||||||||
Balance January 1, 2010
|
$ | 334.7 | $ | 12.3 | $ | 10.7 | $ | 357.7 | ||||||||
Acquisition
related(c)
|
15.3 | — | — | 15.3 | ||||||||||||
Foreign currency translation
|
0.8 | (0.7 | ) | 1.2 | 1.3 | |||||||||||
Balance December 31, 2010
|
$ | 350.8 | $ | 11.6 | $ | 11.9 | $ | 374.3 | ||||||||
(a) | Relates primarily to adjustments to goodwill as a result of the finalization of purchase price allocations for prior acquisitions. |
(b) | Europe’s goodwill balance includes $100.0 million of accumulated impairment losses at January 1, 2010 and December 31, 2010. See Note 12. “Goodwill Impairment” for further information. | |
(c) | In 2010, the Company paid for $36.4 million, net of cash acquired, for Clark which resulted in the recognition of goodwill of $15.3 million based on the preliminary valuation. The purchase price, as well as the allocation thereof, will be finalized in 2011. |
|
NOTE 14. | SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC. |
December 31, |
January 1, |
|||||||
2010 | 2010 | |||||||
Assets:
|
||||||||
Current assets
|
$ | 2,284.3 | $ | 2,047.5 | ||||
Property, equipment and capital leases, net
|
99.8 | 103.8 | ||||||
Goodwill
|
374.3 | 357.7 | ||||||
Other assets
|
191.3 | 172.8 | ||||||
$ | 2,949.7 | $ | 2,681.8 | |||||
Liabilities and Stockholder’s Equity:
|
||||||||
Current liabilities
|
$ | 1,067.4 | $ | 666.7 | ||||
Subordinated notes payable to parent
|
8.5 | 3.5 | ||||||
Long-term debt
|
394.4 | 478.8 | ||||||
Other liabilities
|
160.6 | 156.2 | ||||||
Stockholder’s equity
|
1,318.8 | 1,376.6 | ||||||
$ | 2,949.7 | $ | 2,681.8 | |||||
Years Ended | ||||||||||||
December 31, |
January 1, |
January 2, |
||||||||||
2010 | 2010 | 2009 | ||||||||||
Net sales
|
$ | 5,472.1 | $ | 4,982.4 | $ | 6,136.6 | ||||||
Operating income
|
$ | 272.0 | $ | 109.2 | $ | 396.9 | ||||||
Income before income taxes
|
$ | 203.3 | $ | 39.9 | $ | 329.1 | ||||||
Net income (loss)
|
$ | 123.2 | $ | (15.4 | ) | $ | 196.9 |
|
NOTE 15. | SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) |
First |
Second |
Third |
Fourth |
|||||||||||||
Quarter(1) | Quarter(2) | Quarter(3) | Quarter(4) | |||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Year ended December 31, 2010
|
||||||||||||||||
Net sales
|
$ | 1,272.6 | $ | 1,367.2 | $ | 1,397.9 | $ | 1,434.4 | ||||||||
Cost of goods sold
|
982.9 | 1,054.2 | 1,073.2 | 1,100.6 | ||||||||||||
Operating income
|
57.0 | 70.1 | 77.5 | 61.6 | ||||||||||||
Income before income taxes
|
9.8 | 57.7 | 63.8 | 48.0 | ||||||||||||
Net income
|
$ | 5.9 | $ | 34.6 | $ | 36.5 | $ | 31.5 | ||||||||
Net income per basic share
|
$ | 0.17 | $ | 1.02 | $ | 1.07 | $ | 0.92 | ||||||||
Net income per diluted share
|
$ | 0.16 | $ | 0.98 | $ | 1.03 | $ | 0.88 | ||||||||
Stock price range:
|
||||||||||||||||
High
|
$ | 48.85 | $ | 54.16 | $ | 54.99 | $ | 61.17 | ||||||||
Low
|
$ | 38.42 | $ | 41.31 | $ | 41.27 | $ | 52.10 | ||||||||
Close
|
$ | 47.16 | $ | 41.90 | $ | 54.28 | $ | 59.73 |
(1) | During the first quarter of 2010, the Company repurchased a portion of its Notes due 2014 which resulted in the recognition of a pre-tax loss of $30.5 million ($18.9 million, net of tax). | |
(2) | Net income in the second quarter includes a foreign exchange gain of $2.1 million ($0.8 million, net of tax) due to the remeasurement of Venezuela’s bolivar-denominated balance sheet at the new government rate. During the second quarter of 2010, the Company repurchased a portion of its Notes due 2033 which resulted in the recognition of a pre-tax gain of $0.8 million ($0.5 million, net of tax). | |
(3) | During third quarter of 2010, the Company repurchased a portion of its Notes due 2014 and 2033 which resulted in the recognition of a pre-tax loss of $2.7 million ($1.7 million, net of tax). | |
(4) | During the fourth quarter of 2010, the Company recorded a charge of $20.0 million to operating expense ($12.3 million, net of tax) related to an unfavorable arbitration award. Also during the fourth quarter of 2010, the Company repurchased a portion of its Notes due 2033 which resulted in the recognition of a pre-tax gain of $0.5 million ($0.3 million, net of tax). Also during the fourth quarter of 2010, the Company recorded a tax benefit of $1.3 million for the reversal of prior year foreign taxes. |
First |
Second |
Third |
Fourth |
|||||||||||||
Quarter(1) | Quarter(2) | Quarter(3) | Quarter(4) | |||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Year ended January 1, 2010
|
||||||||||||||||
Net sales
|
$ | 1,271.2 | $ | 1,220.6 | $ | 1,273.0 | $ | 1,217.6 | ||||||||
Cost of goods sold
|
977.9 | 944.1 | 984.8 | 945.0 | ||||||||||||
Operating income (loss)
|
56.9 | (58.7 | ) | 58.4 | 46.9 | |||||||||||
Income (loss) before income taxes
|
43.0 | (79.3 | ) | 41.7 | 11.8 | |||||||||||
Net income (loss)
|
$ | 25.7 | $ | (89.8 | ) | $ | 22.1 | $ | 12.7 | |||||||
Net income (loss) per basic share
|
$ | 0.72 | $ | (2.53 | ) | $ | 0.63 | $ | 0.37 | |||||||
Net income (loss) per diluted share
|
$ | 0.72 | $ | (2.53 | ) | $ | 0.61 | $ | 0.35 | |||||||
Stock price range:
|
||||||||||||||||
High
|
$ | 36.46 | $ | 43.80 | $ | 41.50 | $ | 48.55 | ||||||||
Low
|
$ | 24.46 | $ | 31.06 | $ | 31.57 | $ | 38.49 | ||||||||
Close
|
$ | 32.95 | $ | 38.59 | $ | 38.50 | $ | 47.10 |
(1) | Second quarter of 2009 operating loss of $58.7 million was negatively affected by a $100.0 million non-cash impairment charge related to the write-off of goodwill associated with the Company’s European reporting unit. In the second quarter of 2009, the Company undertook expense reduction actions that resulted in a reduction to operation income of $5.7 million ($3.9 million, net of tax) related to severance costs primarily related to staffing reductions needed to re-align the Company’s business in response to current market conditions. In connection with the cancellation of interest rate hedging contracts resulting from the repayment of the related borrowings in the second quarter, the Company recorded a pre-tax loss of $2.1 million ($1.5 million, net of tax). | |
(2) | During the third quarter of 2009, the Company repurchased a portion of its Notes due 2033 which resulted in the recognition of a pre-tax gain of $1.2 million ($0.7 million, net of tax). | |
(3) | Fourth quarter of 2009 operating income of $46.9 million was negatively affected by $4.2 million ($2.6 million, net of tax) in an exchange rate-driven inventory lower of cost or market adjustment in Venezuela. During the fourth quarter of 2009, the Company also recorded a pre-tax loss of $13.8 million ($6.3 million, net of tax) due to foreign exchange losses related to the repatriation of cash from Venezuela and the revaluation of the Venezuelan balance sheet at the parallel exchange rate. As a result of the early retirement of debt in the fourth quarter of 2009, the Company recorded a net pre-tax loss of $2.3 million ($1.4 million, net of tax). Partially offsetting these losses recorded in the fourth quarter of 2009, were net tax benefits of $4.8 million associated with the reversal of a valuation allowance. |
|
NOTE 16. | SUBSEQUENT EVENTS |
|
Years Ended | ||||||||||||
December 31, |
January 1, |
January 2, |
||||||||||
2010 | 2010 | 2009 | ||||||||||
(In millions) | ||||||||||||
Operating loss
|
$ | (4.6 | ) | $ | (4.2 | ) | $ | (3.8 | ) | |||
Other (expense) income:
|
||||||||||||
Interest expense, including intercompany
|
(17.3 | ) | (18.4 | ) | (14.9 | ) | ||||||
Other
|
1.7 | 4.2 | — | |||||||||
Loss before income taxes and equity in earnings of
subsidiaries
|
(20.2 | ) | (18.4 | ) | (18.7 | ) | ||||||
Income tax benefit
|
7.7 | 6.7 | 12.5 | |||||||||
Loss before equity in earnings of subsidiaries
|
(12.5 | ) | (11.7 | ) | (6.2 | ) | ||||||
Equity in earnings (loss) of subsidiaries
|
121.0 | (17.6 | ) | 194.1 | ||||||||
Net income (loss)
|
$ | 108.5 | $ | (29.3 | ) | $ | 187.9 | |||||
December 31, |
January 1, |
|||||||
2010 | 2010 | |||||||
(In millions) | ||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 0.4 | $ | 0.6 | ||||
Other assets
|
0.5 | 3.5 | ||||||
Total current assets
|
0.9 | 4.1 | ||||||
Investment in and advances to subsidiaries
|
1,328.9 | 1,381.0 | ||||||
Other assets
|
1.9 | 2.7 | ||||||
$ | 1,331.7 | $ | 1,387.8 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities:
|
||||||||
Accounts payable and accrued expenses, due currently
|
$ | 2.3 | $ | 1.3 | ||||
Amounts currently due to affiliates, net
|
4.1 | 0.7 | ||||||
Long-term debt
|
312.7 | 361.7 | ||||||
Other non-current liabilities
|
1.8 | — | ||||||
Total liabilities
|
320.9 | 363.7 | ||||||
Stockholders’ equity:
|
||||||||
Common stock
|
34.3 | 34.7 | ||||||
Capital surplus
|
230.1 | 225.1 | ||||||
Accumulated other comprehensive loss
|
(27.8 | ) | (55.3 | ) | ||||
Retained earnings
|
774.2 | 819.6 | ||||||
Total stockholders’ equity
|
1,010.8 | 1,024.1 | ||||||
$ | 1,331.7 | $ | 1,387.8 | |||||
Years Ended | ||||||||||||
December 31, |
January 1, |
January 2, |
||||||||||
2010 | 2010 | 2009 | ||||||||||
(In millions) | ||||||||||||
Operating activities:
|
||||||||||||
Net income (loss)
|
$ | 108.5 | $ | (29.3 | ) | $ | 187.9 | |||||
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
||||||||||||
Dividend from subsidiary
|
271.8 | 125.7 | — | |||||||||
Equity in earnings of subsidiaries
|
(121.0 | ) | 17.6 | (194.1 | ) | |||||||
Net gain on retirement of debt
|
(1.4 | ) | (3.6 | ) | — | |||||||
Accretion of debt discount
|
18.0 | 19.3 | 18.4 | |||||||||
Stock-based compensation
|
1.8 | 1.9 | 1.8 | |||||||||
Amortization of deferred financing costs
|
0.9 | 0.8 | 0.9 | |||||||||
Intercompany transactions
|
(0.9 | ) | (12.4 | ) | (0.4 | ) | ||||||
Income tax benefit
|
(7.7 | ) | (6.7 | ) | (12.5 | ) | ||||||
Changes in current assets and liabilities, net
|
(2.1 | ) | (0.3 | ) | (4.8 | ) | ||||||
Net cash provided by (used in) operating activities
|
267.9 | 113.0 | (2.8 | ) | ||||||||
Investing activities
|
— | — | — | |||||||||
Financing activities:
|
||||||||||||
Purchase of common stock for treasury
|
(41.2 | ) | (34.9 | ) | (104.6 | ) | ||||||
Payment of cash dividend
|
(111.0 | ) | (0.3 | ) | (0.7 | ) | ||||||
Retirement of Notes due 2033 — debt component
|
(65.6 | ) | (56.5 | ) | — | |||||||
Retirement of Notes due 2033 — equity component
|
(54.0 | ) | (34.3 | ) | — | |||||||
Loans (to) from subsidiaries, net
|
(5.0 | ) | 11.0 | 98.0 | ||||||||
Proceeds from issuance of common stock
|
8.7 | 2.5 | 10.1 | |||||||||
Net cash (used in) provided by financing activities
|
(268.1 | ) | (112.5 | ) | 2.8 | |||||||
(Decrease) increase in cash and cash equivalents
|
(0.2 | ) | 0.5 | — | ||||||||
Cash and cash equivalents at beginning of year
|
0.6 | 0.1 | 0.1 | |||||||||
Cash and cash equivalents at end of year
|
$ | 0.4 | $ | 0.6 | $ | 0.1 | ||||||
Note A — | Basis of Presentation |
|
Balance at |
Charged |
Balance at |
||||||||||||||||||
beginning of |
Charged |
to other |
end of |
|||||||||||||||||
Description | the period | to income | accounts | Deductions | the period | |||||||||||||||
(In millions) | ||||||||||||||||||||
Year ended December 31, 2010:
|
||||||||||||||||||||
Allowance for doubtful accounts
|
$ | 25.7 | $ | 12.3 | $ | (0.4 | ) | $ | (13.5 | ) | $ | 24.1 | ||||||||
Allowance for deferred tax asset
|
$ | 18.7 | $ | 1.7 | $ | (1.6 | ) | $ | — | $ | 18.8 | |||||||||
Year ended January 1, 2010:
|
||||||||||||||||||||
Allowance for doubtful accounts
|
$ | 29.4 | $ | 12.4 | $ | 0.6 | $ | (16.7 | ) | $ | 25.7 | |||||||||
Allowance for deferred tax asset
|
$ | 13.8 | $ | (6.6 | ) | $ | 11.5 | $ | — | $ | 18.7 | |||||||||
Year ended January 2, 2009:
|
||||||||||||||||||||
Allowance for doubtful accounts
|
$ | 25.6 | $ | 37.0 | $ | 1.8 | $ | (35.0 | ) | $ | 29.4 | |||||||||
Allowance for deferred tax asset
|
$ | 15.4 | $ | 0.3 | $ | (1.9 | ) | $ | — | $ | 13.8 |