ANIXTER INTERNATIONAL INC, 10-Q filed on 10/28/2014
Quarterly Report
Document and Entity Information
9 Months Ended
Oct. 3, 2014
Oct. 21, 2014
Entity Information [Line Items]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Oct. 03, 2014 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q3 
 
Trading Symbol
AXE 
 
Entity Registrant Name
ANIXTER INTERNATIONAL INC 
 
Entity Central Index Key
0000052795 
 
Current Fiscal Year End Date
--01-02 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
32,837,494 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 3, 2014
Sep. 27, 2013
Oct. 3, 2014
Sep. 27, 2013
Net sales
$ 1,666.6 
$ 1,557.6 
$ 4,776.4 
$ 4,628.0 
Cost of goods sold
1,288.0 
1,200.6 
3,681.3 
3,576.7 
Gross profit
378.6 
357.0 
1,095.1 
1,051.3 
Operating expenses
284.6 
264.6 
823.0 
792.1 
Operating income
94.0 
92.4 
272.1 
259.2 
Other expense:
 
 
 
 
Interest expense
(11.1)
(11.3)
(32.4)
(36.2)
Other, net
(2.5)
(1.6)
(15.4)
(7.3)
Income before income taxes
80.4 
79.5 
224.3 
215.7 
Income tax expense
27.9 
25.7 
70.6 
73.3 
Net income
52.5 
53.8 
153.7 
142.4 
Income per share:
 
 
 
 
Basic
$ 1.59 
$ 1.64 
$ 4.66 
$ 4.35 
Diluted
$ 1.57 
$ 1.62 
$ 4.61 
$ 4.29 
Basic weighted-average common shares outstanding
33.1 
32.8 
33.0 
32.8 
Effect of dilutive securities:
 
 
 
 
Stock options and units
0.3 
0.3 
0.3 
0.2 
Convertible notes due 2013
0.2 
Diluted weighted-average common shares outstanding
33.4 
33.1 
33.3 
33.2 
Foreign currency translation
(35.2)
11.2 
(26.6)
(9.4)
Changes in unrealized pension cost, net of tax
0.8 
(0.3)
1.1 
Change in fair market value of derivatives
(0.1)
(0.2)
(0.1)
Other comprehensive (loss) income
(35.3)
12.0 
(27.1)
(8.4)
Comprehensive income
$ 17.2 
$ 65.8 
$ 126.6 
$ 134.0 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Oct. 3, 2014
Jan. 3, 2014
Current assets:
 
 
Cash and cash equivalents
$ 88.1 
$ 57.3 
Accounts receivable (Includes $550.6 and $524.2 at October 3, 2014 and January 3, 2014, respectively, associated with securitization facility)
1,394.2 
1,182.8 
Inventories
1,113.4 
959.8 
Deferred income taxes
34.4 
32.8 
Other current assets
46.6 
43.0 
Total current assets
2,676.7 
2,275.7 
Property and equipment, at cost
341.9 
328.0 
Accumulated depreciation
(222.9)
(224.0)
Net property and equipment
119.0 
104.0 
Goodwill
618.4 
342.1 
Other assets
317.3 
139.0 
Total assets
3,731.4 
2,860.8 
Current liabilities:
 
 
Accounts payable
903.0 
691.9 
Accrued expenses
239.4 
210.5 
Total current liabilities
1,142.4 
902.4 
Long-term debt (Includes $75.0 and $145.0 at October 3, 2014 and January 3, 2014, respectively, associated with securitization facility)
1,241.9 
836.0 
Other liabilities
176.0 
95.0 
Total liabilities
2,560.3 
1,833.4 
Stockholders’ equity:
 
 
Common stock - $1.00 par value, 100,000,000 shares authorized, 33,106,759 and 32,853,702 shares issued and outstanding at October 3, 2014 and January 3, 2014, respectively
33.1 
32.9 
Capital surplus
233.1 
216.3 
Retained earnings
958.6 
804.8 
Accumulated other comprehensive (loss) income:
 
 
Foreign currency translation
(26.2)
0.4 
Unrecognized pension liability, net
(27.5)
(27.2)
Unrealized gain on derivatives, net
0.2 
Total accumulated other comprehensive loss
(53.7)
(26.6)
Total stockholders’ equity
1,171.1 
1,027.4 
Total liabilities and stockholders’ equity
$ 3,731.4 
$ 2,860.8 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Oct. 3, 2014
Jan. 3, 2014
Accounts receivable
$ 550.6 
$ 524.2 
Common stock, par value
$ 1.00 
$ 1.00 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
33,106,759 
32,853,702 
Common stock, shares outstanding
33,106,759 
32,853,702 
Long-term debt
1,241.9 
836.0 
Accounts receivable securitization facility [Member]
 
 
Long-term debt
$ 75.0 
$ 145.0 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
9 Months Ended
Oct. 3, 2014
Sep. 27, 2013
Operating activities:
 
 
Net income
$ 153.7 
$ 142.4 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation
17.4 
16.5 
Stock-based compensation
10.3 
10.1 
Amortization of intangible assets
6.3 
6.1 
Amortization of deferred financing costs
1.7 
2.0 
Accretion of debt discount
0.1 
2.6 
Excess income tax benefit from employee stock plans
(4.7)
(1.5)
Deferred income taxes
(2.8)
9.7 
Pension plan contributions
(14.6)
(10.0)
Pension Expense
3.4 
12.5 
Changes in current assets and liabilities, net
(98.7)
8.1 
Other, net
(3.5)
(1.1)
Net cash provided by operating activities
68.6 
197.4 
Investing activities:
 
 
Capital expenditures, net
(30.5)
(23.9)
Acquisition of business, net of cash acquired
(418.4)
Net cash used in investing activities
(448.9)
(23.9)
Financing activities:
 
 
Proceeds from borrowings
1,161.9 
1,464.8 
Repayment of borrowings
(1,322.6)
(1,328.3)
Proceeds from issuance of Notes dues 2021
400.0 
Proceeds from term loan
200.0 
Retirement of Notes due 2014
(32.3)
Proceeds from stock options exercised
5.9 
7.5 
Excess income tax benefit from employee stock plans
4.7 
1.5 
Deferred financing costs
(7.3)
Retirement of Notes due 2013
(300.0)
Payments for repurchase of warrants
(19.2)
Other
(1.7)
(1.5)
Net cash provided by (used in) financing activities
408.6 
(175.2)
Increase (decrease) in cash and cash equivalents
28.3 
(1.7)
Effect of exchange rate on cash balances
2.5 
(5.8)
Cash and cash equivalents at beginning of period
57.3 
89.4 
Cash and cash equivalents at end of period
$ 88.1 
$ 81.9 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: Anixter International Inc. and its subsidiaries (collectively referred to as “Anixter” or the “Company”) are sometimes referred to in this Quarterly Report on Form 10-Q as “we”, “our”, “us”, or “ourselves.” The condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals), which are, in the opinion of management, necessary for a fair presentation of the Condensed Consolidated Financial Statements for the periods shown. Certain prior period amounts have been reclassified to conform to the current year presentation. The results of operations of any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

Recently issued and adopted accounting pronouncements: In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, updating guidance to limit the scope of the balance sheet offsetting disclosures to derivatives, repurchase agreements and securities lending transactions to the extent they are offset in the financial statements or subject to an enforceable master netting arrangement or similar arrangement. The guidance was effective for us beginning in fiscal year 2014 and applicable disclosures are reflected herein.

While our derivatives are all subject to master netting arrangements, we present our assets and liabilities related to derivative instruments on a gross basis within the Condensed Consolidated Balance Sheets. The gross amount of our derivative assets and liabilities are immaterial.

Recently issued accounting pronouncements not yet adopted: In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The update’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The update also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The update provides for two transition methods to the new guidance: a retrospective approach and a modified retrospective approach. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is not permitted. We are currently in the process of evaluating the transition methods and the impact of adoption of this ASU on our financial statements.
We do not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on our consolidated financial statements or disclosures.
Other, net: The following represents the components of “Other, net” as reflected in the Condensed Consolidated Statements of Comprehensive Income (in millions):
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
Other, net:
 
 
 
 
 
 
 
 
    Foreign exchange
 
$
(2.4
)
 
$
(2.5
)
 
$
(14.4
)
 
$
(7.2
)
    Cash surrender value of life insurance policies
 
(0.3
)
 
0.5

 
0.5

 
(0.2
)
    Other
 
0.2

 
0.4

 
(1.5
)
 
0.1

Total other, net
 
$
(2.5
)
 
$
(1.6
)
 
$
(15.4
)
 
$
(7.3
)

In the first quarter of 2014, the Venezuelan government changed its policy regarding the bolivar, which we believe will now require us to use the Complementary System for the Administration of Foreign Currency (“SICAD”) rate of 49.0 bolivars to one U.S. Dollar (“USD”) to repatriate cash from Venezuela. In the first quarter of 2014, the Argentina peso was also devalued from 6.5 pesos to one USD to approximately 8.0 pesos to one USD after the central bank scaled back its intervention in a bid to preserve USD cash reserves. As a result of these devaluations, we recorded foreign exchange losses in these two countries of $8.0 million in the first quarter of 2014.
Several of our subsidiaries conduct business in a currency other than the legal entity’s functional currency. Transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. The increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that is included in “Other, net” in the Condensed Consolidated Statements of Comprehensive Income.
We purchase foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated accounts on our reported income. The foreign currency forward contracts are not designated as hedges for accounting purposes. Our strategy is to negotiate terms for our derivatives and other financial instruments to be highly effective, such that the change in the value of the derivative perfectly offsets the impact of the underlying hedged item (e.g., various foreign currency-denominated accounts). Our counterparties to foreign currency forward contracts have investment-grade credit ratings. We expect the creditworthiness of our counterparties to remain intact through the term of the transactions. We regularly monitor the creditworthiness of our counterparties to ensure no issues exist which could affect the value of the derivatives.
We do not hedge 100% of our foreign currency-denominated accounts. In addition, the results of hedging can vary significantly based on various factors, such as the timing of executing the foreign currency forward contracts versus the movement of the currencies as well as the fluctuations in the account balances throughout each reporting period. The fair value of the foreign currency forward contracts is based on the difference between the contract rate and the current exchange rate. The fair value of the foreign currency forward contracts is measured using observable market information. These inputs would be considered Level 2 in the fair value hierarchy. At October 3, 2014 and January 3, 2014, foreign currency forward contracts were revalued at then-current foreign exchange rates with the changes in valuation reflected directly in “Other, net” in the Condensed Consolidated Statements of Comprehensive Income offsetting the transaction gain/loss recorded on the foreign currency-denominated accounts. At October 3, 2014 and January 3, 2014, the gross notional amount of foreign currency forward contracts outstanding was approximately $194.0 million and $217.4 million, respectively. All of our foreign currency forward contracts are subject to master netting arrangements with our counterparties. As a result, at October 3, 2014 and January 3, 2014, the net notional amount of the foreign currency forward contracts outstanding was approximately $125.7 million and $152.0 million, respectively.
The combined effect of changes in both the equity and bond markets resulted in changes in the cash surrender value of our owned life insurance policies associated with our sponsored deferred compensation program.
Accumulated other comprehensive income (loss): We accumulated unrealized gains and losses in “Accumulated other comprehensive income (loss)” (“AOCI”) which are also reported in "Other comprehensive income" on the Condensed Consolidated Statement of Comprehensive Income. These include unrealized gains and losses related to our defined benefit obligations, certain immaterial derivative transactions that have been designated as cash flow hedges and foreign currency translation. See Note 5. "Pension Plans" for pension related amounts reclassified into net income.

Our investments in several subsidiaries are recorded in currencies other than the USD. As these foreign currency denominated investments are translated at the end of each period during consolidation using period-end exchange rates, fluctuations of exchange rates between the foreign currency and the USD increase or decrease the value of those investments. These fluctuations and the results of operations for foreign subsidiaries, where the functional currency is not the USD, are translated into USD using the average exchange rates during the periods reported, while the assets and liabilities are translated using period-end exchange rates. The assets and liabilities-related translation adjustments are recorded as a separate component of AOCI, “Foreign currency translation." In addition, as our subsidiaries maintain investments denominated in currencies other than local currencies, exchange rate fluctuations will occur. Borrowings are raised in certain foreign currencies to minimize the exchange rate translation adjustment risk.
BUSINESS COMBINATION BUSINESS COMBINATION
Business Combination Disclosure [Text Block]
NOTE 2. BUSINESS COMBINATION
On September 17, 2014, we acquired 100% of the outstanding capital stock of Tri-Northern Acquisition Holdings, Inc. (“Tri-Ed”) from Tri-NVS Holdings, LLC for $418.4 million (net of cash acquired of $11.6 million and an estimated favorable net assets adjustment of $1.3 million). The acquisition was financed using borrowings under the 5-year senior unsecured revolving credit agreement, the accounts receivable credit facility, available cash and the $200.0 million term loan, as more fully described in Note 4. "Debt". A portion of the proceeds from a subsequent issuance of $400.0 million principal amount of senior notes were used to repay certain incurred borrowings to finance the Tri-Ed acquisition. Tri-Ed is a leading independent distributor of security and low-voltage technology products.
The acquisition of Tri-Ed presents a strategic opportunity for us and our security business, consistent with our vision to create a leading global security platform and to accelerate profitable revenue growth. Through expanding our offering into highly complementary product lines, we believe our customers will benefit from a broader set of products and solutions in the areas of video, access control, fire/life safety, and intrusion detection. In addition, this transaction provides access to the residential construction end market at an attractive point in the recovery cycle as well as to a community of security integrators and dealers we do not currently service.
The following table sets forth the preliminary purchase price allocation, as of October 3, 2014, for Tri-Ed (in millions). The purchase price allocation is preliminary and awaiting finalization of the valuation of the acquired intangible assets and related tax liabilities, which is expected to be completed in the next twelve months.
Cash
 
 
$
11.6

Current assets, net
 
 
197.4

Property, plant and equipment
 
 
2.7

Goodwill
 
 
275.6

Intangible assets
 
 
166.8

Non-current assets
 
 

Current liabilities
 
 
(144.0
)
Non-current liabilities
 
 
(81.4
)
Total purchase price
 
 
$
428.7


All Tri-Ed goodwill, other assets and liabilities were recorded in the Enterprise Cabling and Security Solutions (“ECS”) reportable segment. The goodwill resulting from the acquisition largely consists of our expected future product sales and synergies from combining Tri-Ed’s products with our existing product offerings. Goodwill is not deductible for tax purposes. The following table sets forth the components of preliminary identifiable intangible assets acquired and their estimated useful lives as of the date of the acquisition (in millions):
 
Average useful life (in years)
 
Fair value
Customer relationships
11-18
 
$
120.6

Exclusive supplier agreement
21
 
23.2

Trade names
Indefinite
 
10.6

Tri-Ed trade names
4
 
9.2

Non-compete agreements
4-5
 
3.2

Total intangible assets
 
 
$
166.8



We incurred approximately $6.0 million in acquisition transaction costs during the nine months ended October 3, 2014. We expect additional acquisition transaction costs of $1.3 million will be incurred during the fourth quarter of 2014 and fiscal year 2015.

The following unaudited pro forma information shows our results of operations as if the acquisition of Tri-Ed had been completed as of the beginning of fiscal 2013. Adjustments have been made for the pro forma effects of interest expense and deferred financing costs related to the financing of the business combination, depreciation and amortization of tangible and intangible assets recognized as part of the business combination, related income taxes and various other costs which would not have been incurred had we and Tri-Ed operated as a combined entity (i.e., management fees paid by Tri-Ed to its former owners and professional fees related to the transaction).
 
 
Three Months Ended
 
Nine Months Ended
(In millions, except per share amounts)
 
October 3, 2014
 
September 27, 2013
 
October 3, 2014
 
September 27, 2013
Net sales
 
$
1,759.5

 
$
1,700.0

 
$
5,196.1

 
$
5,050.9

Net income
 
$
57.8

 
$
55.0

 
$
160.5

 
$
144.8

Income per share:
 
 
 
 
 
 
 
 
Basic
 
$
1.75

 
$
1.67

 
$
4.86

 
$
4.42

Diluted
 
$
1.73

 
$
1.66

 
$
4.82

 
$
4.36



Since the date of acquisition, the Tri-Ed results are reflected in our Condensed Consolidated Financial Statements. For the three and nine months ended October 3, 2014, Tri-Ed added approximately $30.6 million of revenue and $1.3 million in net income, respectively, to our consolidated results.
As of October 3, 2014 and January 3, 2014, our intangible asset balances, including the intangible assets associated with Tri-Ed, are as follows (in millions):
 
 
 
 
October 3, 2014
 
January 3, 2014
 
 
Average useful life (in years)
 
Gross carrying amount
 
Accumulated amortization
 
Gross carrying amount
 
Accumulated amortization
Customer relationships
 
6-20
 
$
214.2

 
$
(47.7
)
 
$
93.8

 
$
(42.4
)
Exclusive supplier agreement
 
21
 
23.2

 

 

 

Trade names
 
3-10
 
15.8

 
(4.1
)
 
6.6

 
(3.5
)
Trade names
 
Indefinite
 
10.6

 

 

 

Non-compete agreements
 
4-5
 
5.2

 
(2.1
)
 
2.0

 
(2.0
)
Intellectual property
 
10
 
1.6

 
(0.9
)
 
1.7

 
(0.9
)
Total
 
 
 
$
270.6

 
$
(54.8
)
 
$
104.1

 
$
(48.8
)

Intangible amortization expense is expected to average $20.3 million per year for the next five years; $13.9 million of that amount relates to intangible assets recorded for the Tri-Ed acquisition. Our definite lived intangible assets are amortized over a straight line basis as it approximates the customer attrition patterns and best estimates the use pattern of the assets.

INCOME TAXES
INCOME TAXES
INCOME TAXES
The income tax provision for the third quarter of 2014 was $27.9 million compared to $25.7 million in the corresponding period of last year. Our effective tax rate for the third quarter of 2014 was 34.8% compared to 32.4% in the prior year period. The third quarter of 2014 includes a net benefit of $1.9 million primarily related to closing prior tax years partially offset by a tax cost of $1.1 million related to certain acquisition transaction costs that are capitalized for tax purposes. The third quarter of 2013 includes net benefits of $4.7 million primarily related to closing prior tax years. This net benefit includes related interest income of $0.7 million which is included in “Other, net” ($0.5 million, net of tax).
The income tax provision for the nine months ended October 3, 2014 was $70.6 million compared to $73.3 million in the corresponding period of last year. Our effective tax rate for the nine months ended October 3, 2014 was 31.5% as compared to 34.0% in the prior year period. During the nine months ended October 3, 2014, we recorded a net tax benefit of $6.9 million primarily related to the reversal of deferred income tax valuation allowances in Europe and a net benefit of $1.9 million primarily related to closing prior tax years partially offset by a tax cost of $1.1 million related to certain acquisition transaction costs that are capitalized for tax purposes. During the nine months ended September 27, 2013, we recorded net benefits of $4.7 million primarily related to closing prior tax years. This benefit includes related interest income of $0.7 million which is included in “Other, net” ($0.5 million, net of tax). As a result of the items mentioned above and changes in tax rates related to country mix of income, our effective tax rate was different from the statutory rate.
DEBT
DEBT
DEBT
Debt is summarized below (in millions):
 
October 3,
2014
 
January 3,
2014
Long-term debt:
 
Senior notes due 2021
$
400.0

 
$

Senior notes due 2019
350.0

 
350.0

Senior notes due 2015
200.0

 
200.0

Term loan
200.0

 

Accounts receivable securitization facility
75.0

 
145.0

Revolving lines of credit
13.0

 
101.5

Senior notes due 2014

 
32.1

Other
3.9

 
7.4

Total long-term debt
$
1,241.9

 
$
836.0


At October 3, 2014, our total carrying value and estimated fair value of debt outstanding was $1,241.9 million and $1,264.8 million, respectively. This compares to a carrying value and estimated fair value at January 3, 2014 of $836.0 million and $867.9 million, respectively. The estimated fair value of our debt instruments is measured using observable market information which would be considered Level 2 inputs as described in the fair value accounting guidance on fair value measurements. Our weighted-average cost of borrowings was 4.7% and 5.1% for the three months ended October 3, 2014 and September 27, 2013, respectively, and 4.7% and 5.3% for the nine months ended October 3, 2014 and September 27, 2013, respectively.
New Financing
On August 27, 2014, our primary operating subsidiary, Anixter Inc., completed a second amendment and incremental facility agreement to its 5-year senior unsecured revolving credit agreement. Anixter Inc. received a $200.0 million term loan, utilizing the incremental facility available under the 5-year senior unsecured revolving credit agreement. Proceeds from the term loan were used to fund a portion of the acquisition of Tri-Ed. Issuance costs of approximately $0.9 million are being amortized through maturity using the straight-line method. See Note 2. "Business Combination" for acquisition details.
The following key changes have been made as part of the second amendment to the 5-year senior unsecured revolving credit agreement:

The consolidated leverage ratio maximum leverage increased from 3.25 to 3.50.
The leverage ratio maintenance test with respect to the Senior notes due 2015 increased from 2.75 to 3.00.
The incremental facility was reset to $200 million after giving effect to the term loan.
On September 23, 2014, our primary operating subsidiary, Anixter Inc., completed the issuance of $400.0 million principal amount of Senior notes due 2021 (“Notes due 2021”). The Notes due 2021 pay interest semi-annually at a rate of 5.125% per annum and will mature on October 1, 2021. In addition, Anixter Inc. may at any time redeem some or all of the Notes due 2021 at a price equal to 100% of the principal amount plus a “make whole” premium. If Anixter Inc. and/or we experience certain kinds of changes of control, it must offer to repurchase all of the Notes due 2021 outstanding at 101% of the aggregate principal amount repurchased, plus accrued and unpaid interest. Net proceeds from this offering were approximately $393 million after deducting fees and expenses. The proceeds were used by Anixter Inc. to repay amounts outstanding under the accounts receivable credit facility, to repay certain additional borrowings under the 5-year senior unsecured revolving credit agreement that had been incurred for the specific purpose of funding the Tri-Ed acquisition, to provide additional liquidity for maturing indebtedness and for general corporate purposes. Issuance costs of approximately $7.0 million are being amortized through maturity using the straight-line method. We fully and unconditionally guarantee the Notes due 2021, which are unsecured obligations of Anixter Inc.

Retirement of Debt
At the end of the third quarter of 2014, the Senior notes due 2015 have a maturity date within the next fiscal year but are classified as long-term as we have the intent and ability to finance the debt under existing long-term financing agreements.
In the first quarter of 2014, we retired our Senior notes due 2014 upon maturity for $32.3 million. Available borrowings under existing long-term financing agreements were used to settle the maturity value.
In the first quarter of 2013, our Senior notes due 2013 matured and, pursuant to the terms of the indenture, we settled our conversion obligations up to the $300 million principal amount of the notes in cash. At the time of issuance of the notes, we entered into a bond hedge that reimbursed us for any above par value amounts due to holders of the notes at maturity. Available borrowings under long-term financing agreements were used to retire the Senior notes due 2013.
At issuance of the Senior notes due 2013, we also sold to the counterparty a warrant to purchase shares of our common stock at a current exercise price of $72.81, which could not be exercised prior to the maturity of the notes. Although the bond hedge matured with the notes on February 15, 2013, the warrant “exercise period” began on May 16, 2013 and expired daily over 40 full trading days ending July 15, 2013. Any excess amount above the warrant exercise price of $72.81 was settled in cash at our option. Because our stock price exceeded the exercise price during the exercise period, 5.4 million warrants were exercised, and on July 18, 2013, we paid $19.2 million in cash to settle all warrants exercised through July 15, 2013. The cash payment was recorded as a reduction to stockholders' equity.
Under our accounts receivable securitization program, we sell, on an ongoing basis without recourse, a portion of our accounts receivables originating in the United States to Anixter Receivables Corporation (“ARC”), which is considered a wholly-owned, bankruptcy-remote variable interest entity (“VIE”). We have the authority to direct the activities of the VIE and, as a result, we have concluded that we maintain control of the VIE, are the primary beneficiary (as defined by accounting guidance) and, therefore, consolidate the account balances of ARC. As of October 3, 2014 and January 3, 2014, $550.6 million and $524.2 million of our receivables were sold to ARC, respectively. ARC in turn assigns a collateral interest in these receivables to a financial institution for proceeds up to $300 million. The assets of ARC are not available to us until all obligations of ARC are satisfied in the event of bankruptcy or insolvency proceedings.

On May 30, 2014, Anixter Inc., amended the Receivables Purchase Agreement governing the accounts receivable securitization program. The following key changes have been made to the program:

The liquidity termination date of the program will be May 2017 (formerly May 2015).
The commitments are split 50%/50% (formerly 57-1/3% from J.P. Morgan and 42-2/3% from SunTrust).
The purchasers have the option to delay funding by 35 days.
Chariot replaced J.P. Morgan as a Financial Institution and a committed purchaser; J.P. Morgan will continue to have a liquidity agreement in place with Chariot.
One month LIBOR has been replaced by three month LIBOR.
The renewed program carries an all-in drawn funding cost of LIBOR plus 80 basis points (previously LIBOR plus 95 basis points).
Unused capacity fees decreased from 47.5 to 57.5 basis points to 40 to 50 basis points depending on utilization.

In addition, on August 27, 2014, Anixter Inc. amended the Receivables Purchase Agreement governing the accounts receivable securitization program to increase the leverage ratio from 3.25 to 3.50.

All other material terms and conditions remain unchanged.
PENSION PLANS
PENSION PLANS
PENSION PLANS
We have various defined benefit and defined contribution pension plans. Our defined benefit pension plans are the plans in the United States, which consist of the Anixter Inc. Pension Plan, the Executive Benefit Plan and the Supplemental Executive Retirement Plan (“SERP”) (together the “Domestic Plans”) and various defined benefit pension plans covering employees of foreign subsidiaries in Canada and Europe (together the “Foreign Plans”). The majority of our defined benefit 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 both the Domestic Plans and the Foreign Plans. Our policy is to fund all Domestic Plans as required by the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Service (“IRS”) and all Foreign Plans as required by applicable foreign laws. The Executive Benefit Plan and SERP are the only two plans that are unfunded. Assets in the various plans consist primarily of equity securities and fixed income investments.
In the fourth quarter of 2012, we took two actions related to the Anixter Inc. Pension Plan in the United States that reduced expenses and funding requirements. We offered a one-time lump sum payment option to terminated vested participants and we made changes to our existing U.S. defined benefit plan, as of December 31, 2013, that froze benefits provided to employees hired on or before June 1, 2004. As part of the transition to the new pension plan, we provided a one-time transition credit equal to five percent of pay for employees at least 50 years old as of December 31, 2013 and whose combined age and years of service equals 70 or more. The amount of the transition credit for employees eligible was credited in the first quarter of 2014 to the employee’s individual 401(k) account or deferred compensation account. Accordingly, in the fourth quarter of 2013, we recorded a $2.5 million defined contribution charge related to this funding.
Components of net periodic pension cost are as follows (in millions):
 
Three Months Ended
 
Domestic (a)
 
Foreign
 
Total
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
Service cost
$
1.2

 
$
2.2

 
$
1.4

 
$
1.6

 
$
2.6

 
$
3.8

Interest cost
2.8

 
2.3

 
2.7

 
2.3

 
5.5

 
4.6

Expected return on plan assets
(3.5
)
 
(2.9
)
 
(3.1
)
 
(2.6
)
 
(6.6
)
 
(5.5
)
Net amortization (b)
(0.6
)
 
0.7

 
0.3

 
0.4

 
(0.3
)
 
1.1

Net periodic (benefit) cost
$
(0.1
)
 
$
2.3

 
$
1.3

 
$
1.7

 
$
1.2

 
$
4.0


 
Nine Months Ended
 
Domestic (a)
 
Foreign
 
Total
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
Service cost
$
3.6

 
$
6.4

 
$
4.4

 
$
5.0

 
$
8.0

 
$
11.4

Interest cost
8.1

 
7.1

 
8.1

 
7.0

 
16.2

 
14.1

Expected return on plan assets
(10.4
)
 
(8.8
)
 
(9.5
)
 
(7.8
)
 
(19.9
)
 
(16.6
)
Net amortization (b)
(1.7
)
 
2.3

 
0.9

 
1.2

 
(0.8
)
 
3.5

Net periodic (benefit) cost
$
(0.4
)
 
$
7.0

 
$
3.9

 
$
5.4

 
$
3.5

 
$
12.4


(a) Domestic service costs are lower in the three and nine months ended October 3, 2014 as compared to the corresponding periods in the prior year as a result of the aforementioned actions we took in the fourth quarter of 2012.
(b) Reclassified into operating expenses from AOCI.
SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
We guarantee, fully and unconditionally, substantially all of the debt of our subsidiaries, which include Anixter Inc., our primary operating subsidiary. We have no independent assets or operations and all subsidiaries other than consolidated Anixter Inc. are minor. The following summarizes the financial information for Anixter Inc.:
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
October 3,
2014
 
January 3,
2014
(In millions)

 
 
Assets:
 
 
 
Current assets
$
2,676.0

 
$
2,275.1

Property, equipment and capital leases, net
129.7

 
115.6

Goodwill
618.4

 
342.1

Other assets
317.4

 
139.1

 
$
3,741.5

 
$
2,871.9

Liabilities and Stockholder’s Equity:
 
 
 
Current liabilities
$
1,142.0

 
$
898.9

Subordinated notes payable to parent
1.0

 
1.0

Long-term debt
1,256.3

 
851.3

Other liabilities
173.4

 
93.0

Stockholder’s equity
1,168.8

 
1,027.7

 
$
3,741.5

 
$
2,871.9


ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
Three Months Ended
 
Nine Months Ended
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
(In millions)
 
 
 
 
 
 
 
Net sales
$
1,666.6

 
$
1,557.6

 
$
4,776.4

 
$
4,628.0

Operating income
$
95.5

 
$
93.9

 
$
276.4

 
$
263.3

Income before income taxes
$
81.6

 
$
80.8

 
$
227.7

 
$
221.6

Net income
$
53.2

 
$
50.3

 
$
155.9

 
$
140.5

Comprehensive income
$
17.9

 
$
62.3

 
$
128.8

 
$
132.1

STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY
At the end of the third quarter of 2014, there were approximately 1.9 million shares reserved for issuance under various incentive plans. Under these plans, we pay non-employee directors annual retainer fees and, at their election, meeting fees in the form of stock units. Employee and director stock units are included in common stock outstanding on the date of vesting, and stock options are included in common stock outstanding upon exercise by the participant. The fair value of employee stock options and units is amortized over the respective vesting period representing the requisite service period, generally three to four years for stock units and four years for stock options. Director stock units are expensed in the period in which they are granted, as these vest immediately.
During the nine months ended October 3, 2014, we granted 126,815 stock units to employees, respectively, with a weighted-average grant-date fair value of $13.6 million. During the three and nine months ended October 3, 2014, we granted directors 5,391 and 14,890 stock units, respectively, with a weighted-average grant-date fair value of $0.4 million and $1.4 million, respectively. We exclude antidilutive stock options and units from the calculation of weighted-average shares for diluted earnings per share. For the third quarter of 2014 and 2013, the antidilutive stock options and units were immaterial.
LEGAL CONTINGENCIES
LEGAL CONTINGENCIES
LEGAL CONTINGENCIES
From time to time, we are party to legal proceedings and matters that arise in the ordinary course of business. As of October 3, 2014, we do not believe there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, our financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters.
BUSINESS SEGMENTS
BUSINESS SEGMENTS
BUSINESS SEGMENTS
We are a leading distributor of enterprise cabling and security solutions, electrical and electronic wire and cable products, and OEM Supply fasteners and other small parts (“C” Class inventory components). We have identified Enterprise Cabling and Security Solutions (“ECS”), Electrical and Electronic Wire and Cable (“W&C”) and OEM Supply - Fasteners (“Fasteners”) as reportable segments. We incur corporate expenses to obtain and coordinate financing, tax, information technology, legal and other related services, certain of which are rebilled to subsidiaries. These corporate expenses are allocated to the segments based primarily on projected sales and estimated use of time. Also, we have various corporate assets which are not allocated to the segments. Segment assets may not include jointly used assets or unallocated assets, but segment results include depreciation expense or other allocations related to those assets as such allocation is made for internal reporting. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis. Intercompany transactions are not significant.
Segment Financial Information
Segment information for the three and nine months ended October 3, 2014 and September 27, 2013 are as follows (in millions):

Third Quarter of 2014
ECS
 
W&C
 
Fasteners
 
Total
Net sales
$
884.4

 
$
553.6

 
$
228.6

 
$
1,666.6

Operating income
$
45.0

 
$
40.4

 
$
8.6

 
$
94.0

Third Quarter of 2013
ECS
 
W&C
 
Fasteners
 
Total
Net sales
$
804.3

 
$
528.6

 
$
224.7

 
$
1,557.6

Operating income
$
42.5

 
$
41.5

 
$
8.4

 
$
92.4

Nine Months of 2014
ECS
 
W&C
 
Fasteners
 
Total
Net sales
$
2,461.9

 
$
1,593.3

 
$
721.2

 
$
4,776.4

Operating income
$
125.1

 
$
113.4

 
$
33.6

 
$
272.1

Nine Months of 2013
ECS
 
W&C
 
Fasteners
 
Total
Net sales
$
2,363.2

 
$
1,577.0

 
$
687.8

 
$
4,628.0

Operating income
$
119.3

 
$
120.9

 
$
19.0

 
$
259.2


Goodwill Assigned to Segments
The following table presents the changes in goodwill allocated to our reportable segments during the nine months ended October 3, 2014 (in millions):
 
Reportable Segments
 
ECS (a)
 
W&C (b)
 
Fasteners
 
Total
Balance at January 3, 2014
$
162.5

 
$
179.6

 
$

 
$
342.1

Acquisition related
275.6

 
1.4

 

 
277.0

Foreign currency translation
1.0

 
(1.7
)
 

 
(0.7
)
Balance at October 3, 2014
$
439.1

 
$
179.3

 
$

 
$
618.4


(a)
In the third quarter of 2014, we recorded goodwill related to the preliminary purchase price allocation for the acquisition of Tri-Ed. See Note 2. "Business Combination".
(b)
In the first quarter of 2014, we recorded an immaterial reclassification between goodwill and deferred tax liability related to the purchase price allocation for the acquisition of Jorvex, S.A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Basis of presentation: Anixter International Inc. and its subsidiaries (collectively referred to as “Anixter” or the “Company”) are sometimes referred to in this Quarterly Report on Form 10-Q as “we”, “our”, “us”, or “ourselves.” The condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals), which are, in the opinion of management, necessary for a fair presentation of the Condensed Consolidated Financial Statements for the periods shown. Certain prior period amounts have been reclassified to conform to the current year presentation. The results of operations of any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.
Recently issued and adopted accounting pronouncements: In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, updating guidance to limit the scope of the balance sheet offsetting disclosures to derivatives, repurchase agreements and securities lending transactions to the extent they are offset in the financial statements or subject to an enforceable master netting arrangement or similar arrangement. The guidance was effective for us beginning in fiscal year 2014 and applicable disclosures are reflected herein.

While our derivatives are all subject to master netting arrangements, we present our assets and liabilities related to derivative instruments on a gross basis within the Condensed Consolidated Balance Sheets. The gross amount of our derivative assets and liabilities are immaterial.

Recently issued accounting pronouncements not yet adopted: In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The update’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The update also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The update provides for two transition methods to the new guidance: a retrospective approach and a modified retrospective approach. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is not permitted. We are currently in the process of evaluating the transition methods and the impact of adoption of this ASU on our financial statements.
We do not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on our consolidated financial statements or disclosures.
Other, net: The following represents the components of “Other, net” as reflected in the Condensed Consolidated Statements of Comprehensive Income (in millions):
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
Other, net:
 
 
 
 
 
 
 
 
    Foreign exchange
 
$
(2.4
)
 
$
(2.5
)
 
$
(14.4
)
 
$
(7.2
)
    Cash surrender value of life insurance policies
 
(0.3
)
 
0.5

 
0.5

 
(0.2
)
    Other
 
0.2

 
0.4

 
(1.5
)
 
0.1

Total other, net
 
$
(2.5
)
 
$
(1.6
)
 
$
(15.4
)
 
$
(7.3
)

In the first quarter of 2014, the Venezuelan government changed its policy regarding the bolivar, which we believe will now require us to use the Complementary System for the Administration of Foreign Currency (“SICAD”) rate of 49.0 bolivars to one U.S. Dollar (“USD”) to repatriate cash from Venezuela. In the first quarter of 2014, the Argentina peso was also devalued from 6.5 pesos to one USD to approximately 8.0 pesos to one USD after the central bank scaled back its intervention in a bid to preserve USD cash reserves. As a result of these devaluations, we recorded foreign exchange losses in these two countries of $8.0 million in the first quarter of 2014.
Several of our subsidiaries conduct business in a currency other than the legal entity’s functional currency. Transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. The increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that is included in “Other, net” in the Condensed Consolidated Statements of Comprehensive Income.
We purchase foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated accounts on our reported income. The foreign currency forward contracts are not designated as hedges for accounting purposes. Our strategy is to negotiate terms for our derivatives and other financial instruments to be highly effective, such that the change in the value of the derivative perfectly offsets the impact of the underlying hedged item (e.g., various foreign currency-denominated accounts). Our counterparties to foreign currency forward contracts have investment-grade credit ratings. We expect the creditworthiness of our counterparties to remain intact through the term of the transactions. We regularly monitor the creditworthiness of our counterparties to ensure no issues exist which could affect the value of the derivatives.
We do not hedge 100% of our foreign currency-denominated accounts. In addition, the results of hedging can vary significantly based on various factors, such as the timing of executing the foreign currency forward contracts versus the movement of the currencies as well as the fluctuations in the account balances throughout each reporting period. The fair value of the foreign currency forward contracts is based on the difference between the contract rate and the current exchange rate. The fair value of the foreign currency forward contracts is measured using observable market information. These inputs would be considered Level 2 in the fair value hierarchy. At October 3, 2014 and January 3, 2014, foreign currency forward contracts were revalued at then-current foreign exchange rates with the changes in valuation reflected directly in “Other, net” in the Condensed Consolidated Statements of Comprehensive Income offsetting the transaction gain/loss recorded on the foreign currency-denominated accounts. At October 3, 2014 and January 3, 2014, the gross notional amount of foreign currency forward contracts outstanding was approximately $194.0 million and $217.4 million, respectively. All of our foreign currency forward contracts are subject to master netting arrangements with our counterparties. As a result, at October 3, 2014 and January 3, 2014, the net notional amount of the foreign currency forward contracts outstanding was approximately $125.7 million and $152.0 million, respectively.
The combined effect of changes in both the equity and bond markets resulted in changes in the cash surrender value of our owned life insurance policies associated with our sponsored deferred compensation program.
Accumulated other comprehensive income (loss): We accumulated unrealized gains and losses in “Accumulated other comprehensive income (loss)” (“AOCI”) which are also reported in "Other comprehensive income" on the Condensed Consolidated Statement of Comprehensive Income. These include unrealized gains and losses related to our defined benefit obligations, certain immaterial derivative transactions that have been designated as cash flow hedges and foreign currency translation. See Note 5. "Pension Plans" for pension related amounts reclassified into net income.

Our investments in several subsidiaries are recorded in currencies other than the USD. As these foreign currency denominated investments are translated at the end of each period during consolidation using period-end exchange rates, fluctuations of exchange rates between the foreign currency and the USD increase or decrease the value of those investments. These fluctuations and the results of operations for foreign subsidiaries, where the functional currency is not the USD, are translated into USD using the average exchange rates during the periods reported, while the assets and liabilities are translated using period-end exchange rates. The assets and liabilities-related translation adjustments are recorded as a separate component of AOCI, “Foreign currency translation." In addition, as our subsidiaries maintain investments denominated in currencies other than local currencies, exchange rate fluctuations will occur. Borrowings are raised in certain foreign currencies to minimize the exchange rate translation adjustment risk.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
Schedule of Other Nonoperating Income, by Component
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
Other, net:
 
 
 
 
 
 
 
 
    Foreign exchange
 
$
(2.4
)
 
$
(2.5
)
 
$
(14.4
)
 
$
(7.2
)
    Cash surrender value of life insurance policies
 
(0.3
)
 
0.5

 
0.5

 
(0.2
)
    Other
 
0.2

 
0.4

 
(1.5
)
 
0.1

Total other, net
 
$
(2.5
)
 
$
(1.6
)
 
$
(15.4
)
 
$
(7.3
)
BUSINESS COMBINATION BUSINESS COMBINATION (Tables)
Cash
 
 
$
11.6

Current assets, net
 
 
197.4

Property, plant and equipment
 
 
2.7

Goodwill
 
 
275.6

Intangible assets
 
 
166.8

Non-current assets
 
 

Current liabilities
 
 
(144.0
)
Non-current liabilities
 
 
(81.4
)
Total purchase price
 
 
$
428.7

The following table sets forth the components of preliminary identifiable intangible assets acquired and their estimated useful lives as of the date of the acquisition (in millions):
 
Average useful life (in years)
 
Fair value
Customer relationships
11-18
 
$
120.6

Exclusive supplier agreement
21
 
23.2

Trade names
Indefinite
 
10.6

Tri-Ed trade names
4
 
9.2

Non-compete agreements
4-5
 
3.2

Total intangible assets
 
 
$
166.8

The following unaudited pro forma information shows our results of operations as if the acquisition of Tri-Ed had been completed as of the beginning of fiscal 2013. Adjustments have been made for the pro forma effects of interest expense and deferred financing costs related to the financing of the business combination, depreciation and amortization of tangible and intangible assets recognized as part of the business combination, related income taxes and various other costs which would not have been incurred had we and Tri-Ed operated as a combined entity (i.e., management fees paid by Tri-Ed to its former owners and professional fees related to the transaction).
 
 
Three Months Ended
 
Nine Months Ended
(In millions, except per share amounts)
 
October 3, 2014
 
September 27, 2013
 
October 3, 2014
 
September 27, 2013
Net sales
 
$
1,759.5

 
$
1,700.0

 
$
5,196.1

 
$
5,050.9

Net income
 
$
57.8

 
$
55.0

 
$
160.5

 
$
144.8

Income per share:
 
 
 
 
 
 
 
 
Basic
 
$
1.75

 
$
1.67

 
$
4.86

 
$
4.42

Diluted
 
$
1.73

 
$
1.66

 
$
4.82

 
$
4.36

As of October 3, 2014 and January 3, 2014, our intangible asset balances, including the intangible assets associated with Tri-Ed, are as follows (in millions):
 
 
 
 
October 3, 2014
 
January 3, 2014
 
 
Average useful life (in years)
 
Gross carrying amount
 
Accumulated amortization
 
Gross carrying amount
 
Accumulated amortization
Customer relationships
 
6-20
 
$
214.2

 
$
(47.7
)
 
$
93.8

 
$
(42.4
)
Exclusive supplier agreement
 
21
 
23.2

 

 

 

Trade names
 
3-10
 
15.8

 
(4.1
)
 
6.6

 
(3.5
)
Trade names
 
Indefinite
 
10.6

 

 

 

Non-compete agreements
 
4-5
 
5.2

 
(2.1
)
 
2.0

 
(2.0
)
Intellectual property
 
10
 
1.6

 
(0.9
)
 
1.7

 
(0.9
)
Total
 
 
 
$
270.6

 
$
(54.8
)
 
$
104.1

 
$
(48.8
)
DEBT (Tables)
Debt
Debt is summarized below (in millions):
 
October 3,
2014
 
January 3,
2014
Long-term debt:
 
Senior notes due 2021
$
400.0

 
$

Senior notes due 2019
350.0

 
350.0

Senior notes due 2015
200.0

 
200.0

Term loan
200.0

 

Accounts receivable securitization facility
75.0

 
145.0

Revolving lines of credit
13.0

 
101.5

Senior notes due 2014

 
32.1

Other
3.9

 
7.4

Total long-term debt
$
1,241.9

 
$
836.0

PENSION PLANS (Tables)
Components of Net Periodic Cost
Components of net periodic pension cost are as follows (in millions):
 
Three Months Ended
 
Domestic (a)
 
Foreign
 
Total
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
Service cost
$
1.2

 
$
2.2

 
$
1.4

 
$
1.6

 
$
2.6

 
$
3.8

Interest cost
2.8

 
2.3

 
2.7

 
2.3

 
5.5

 
4.6

Expected return on plan assets
(3.5
)
 
(2.9
)
 
(3.1
)
 
(2.6
)
 
(6.6
)
 
(5.5
)
Net amortization (b)
(0.6
)
 
0.7

 
0.3

 
0.4

 
(0.3
)
 
1.1

Net periodic (benefit) cost
$
(0.1
)
 
$
2.3

 
$
1.3

 
$
1.7

 
$
1.2

 
$
4.0


 
Nine Months Ended
 
Domestic (a)
 
Foreign
 
Total
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
Service cost
$
3.6

 
$
6.4

 
$
4.4

 
$
5.0

 
$
8.0

 
$
11.4

Interest cost
8.1

 
7.1

 
8.1

 
7.0

 
16.2

 
14.1

Expected return on plan assets
(10.4
)
 
(8.8
)
 
(9.5
)
 
(7.8
)
 
(19.9
)
 
(16.6
)
Net amortization (b)
(1.7
)
 
2.3

 
0.9

 
1.2

 
(0.8
)
 
3.5

Net periodic (benefit) cost
$
(0.4
)
 
$
7.0

 
$
3.9

 
$
5.4

 
$
3.5

 
$
12.4


(a) Domestic service costs are lower in the three and nine months ended October 3, 2014 as compared to the corresponding periods in the prior year as a result of the aforementioned actions we took in the fourth quarter of 2012.
(b) Reclassified into operating expenses from AOCI.
SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC. (Tables)
ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
October 3,
2014
 
January 3,
2014
(In millions)

 
 
Assets:
 
 
 
Current assets
$
2,676.0

 
$
2,275.1

Property, equipment and capital leases, net
129.7

 
115.6

Goodwill
618.4

 
342.1

Other assets
317.4

 
139.1

 
$
3,741.5

 
$
2,871.9

Liabilities and Stockholder’s Equity:
 
 
 
Current liabilities
$
1,142.0

 
$
898.9

Subordinated notes payable to parent
1.0

 
1.0

Long-term debt
1,256.3

 
851.3

Other liabilities
173.4

 
93.0

Stockholder’s equity
1,168.8

 
1,027.7

 
$
3,741.5

 
$
2,871.9

ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
Three Months Ended
 
Nine Months Ended
 
October 3,
2014
 
September 27,
2013
 
October 3,
2014
 
September 27,
2013
(In millions)
 
 
 
 
 
 
 
Net sales
$
1,666.6

 
$
1,557.6

 
$
4,776.4

 
$
4,628.0

Operating income
$
95.5

 
$
93.9

 
$
276.4

 
$
263.3

Income before income taxes
$
81.6

 
$
80.8

 
$
227.7

 
$
221.6

Net income
$
53.2

 
$
50.3

 
$
155.9

 
$
140.5

Comprehensive income
$
17.9

 
$
62.3

 
$
128.8

 
$
132.1

BUSINESS SEGMENTS (Tables)
Segment information for the three and nine months ended October 3, 2014 and September 27, 2013 are as follows (in millions):

Third Quarter of 2014
ECS
 
W&C
 
Fasteners
 
Total
Net sales
$
884.4

 
$
553.6

 
$
228.6

 
$
1,666.6

Operating income
$
45.0

 
$
40.4

 
$
8.6

 
$
94.0

Third Quarter of 2013
ECS
 
W&C
 
Fasteners
 
Total
Net sales
$
804.3

 
$
528.6

 
$
224.7

 
$
1,557.6

Operating income
$
42.5

 
$
41.5

 
$
8.4

 
$
92.4

Nine Months of 2014
ECS
 
W&C
 
Fasteners
 
Total
Net sales
$
2,461.9

 
$
1,593.3

 
$
721.2

 
$
4,776.4

Operating income
$
125.1

 
$
113.4

 
$
33.6

 
$
272.1

Nine Months of 2013
ECS
 
W&C
 
Fasteners
 
Total
Net sales
$
2,363.2

 
$
1,577.0

 
$
687.8

 
$
4,628.0

Operating income
$
119.3

 
$
120.9

 
$
19.0

 
$
259.2


The following table presents the changes in goodwill allocated to our reportable segments during the nine months ended October 3, 2014 (in millions):
 
Reportable Segments
 
ECS (a)
 
W&C (b)
 
Fasteners
 
Total
Balance at January 3, 2014
$
162.5

 
$
179.6

 
$

 
$
342.1

Acquisition related
275.6

 
1.4

 

 
277.0

Foreign currency translation
1.0

 
(1.7
)
 

 
(0.7
)
Balance at October 3, 2014
$
439.1

 
$
179.3

 
$

 
$
618.4


(a)
In the third quarter of 2014, we recorded goodwill related to the preliminary purchase price allocation for the acquisition of Tri-Ed. See Note 2. "Business Combination".
(b)
In the first quarter of 2014, we recorded an immaterial reclassification between goodwill and deferred tax liability related to the purchase price allocation for the acquisition of Jorvex, S.A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of Components of Other Net Reflected in Consolidated Statements of Comprehensive Income (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 3, 2014
Sep. 27, 2013
Oct. 3, 2014
Sep. 27, 2013
Summary of Components of Other Net Reflected in Consolidated Statements of Comprehensive Income [Abstract]
 
 
 
 
Foreign exchange
$ (2.4)
$ (2.5)
$ (14.4)
$ (7.2)
Cash Surrender Value of Life Insurance Policies
(0.3)
0.5 
0.5 
(0.2)
Other
0.2 
0.4 
(1.5)
0.1 
Other, net
$ (2.5)
$ (1.6)
$ (15.4)
$ (7.3)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Apr. 4, 2014
Oct. 3, 2014
Oct. 3, 2014
gross [Member]
Jan. 3, 2014
gross [Member]
Oct. 3, 2014
Net [Member]
Jan. 3, 2014
Net [Member]
Apr. 4, 2014
Venezuela bolivar [Member]
Apr. 4, 2014
Argentina Peso [Member]
Jan. 3, 2014
Argentina Peso [Member]
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
 
 
Foreign currency exchange rate
 
 
 
 
 
 
49.0 
8.0 
6.5 
Foreign exchange losses due to devaluation
$ 8.0 
 
 
 
 
 
 
 
 
Rate of foreign currency denominated accounts not hedged
 
100.00% 
 
 
 
 
 
 
 
Derivative, Notional Amount
 
 
$ 194.0 
$ 217.4 
$ 125.7 
$ 152.0 
 
 
 
BUSINESS COMBINATION BUSINESS COMBINATION - Business Combination (Detail) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Oct. 3, 2014
Business Acquisition [Line Items]
 
Cash
$ 11.6 
Current assets, net
197.4 
Property, plant, and equipment
2.7 
Goodwill
275.6 
Finite and indefinite lived intangible assets acquired
166.8 
Non-current assets
Current liabilities
(144.0)
Non-current liabilities
(81.4)
Total purchase price
$ 428.7 
BUSINESS COMBINATION BUSINESS COMBINATION, Intangible assets acquired (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Oct. 3, 2014
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Indefinite-lived Intangible Assets Acquired
$ 10.6 
Finite and indefinite lived intangible assets acquired
166.8 
Customer Relationships [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life
18 years 0 months 
Tri-Ed trade name [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life
4 years 
Noncompete Agreements [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life
5 years 
Contractual Rights [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life
21 years 
Customer Relationships [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life
11 years 0 months 
Noncompete Agreements [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life
4 years 
Customer Relationships [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Finite-lived Intangible Assets Acquired
120.6 
Contractual Rights [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Finite-lived Intangible Assets Acquired
23.2 
Tri-Ed trade name [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Finite-lived Intangible Assets Acquired
9.2 
Noncompete Agreements [Member]
 
ScheduleOfAcquiredFiniteAndIndefiniteLivedIntangibleAssetsByMajorClass [Line Items]
 
Finite-lived Intangible Assets Acquired
$ 3.2 
BUSINESS COMBINATION BUSINESS AQUISITION, PRO FORMA (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 3, 2014
Sep. 27, 2013
Oct. 3, 2014
Sep. 27, 2013
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
 
 
 
 
Net sales
$ 1,759.5 
$ 1,700.0 
$ 5,196.1 
$ 5,050.9 
Net income
$ 57.8 
$ 55.0 
$ 160.5 
$ 144.8 
Basic
$ 1.75 
$ 1.67 
$ 4.86 
$ 4.42 
Diluted
$ 1.73 
$ 1.66 
$ 4.82 
$ 4.36 
BUSINESS COMBINATION BUSINESS COMBINATION, Consolidated Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Oct. 3, 2014
Jan. 3, 2014
Oct. 3, 2014
Intellectual Property [Member]
Jan. 3, 2014
Intellectual Property [Member]
Oct. 3, 2014
Noncompete Agreements [Member]
Jan. 3, 2014
Noncompete Agreements [Member]
Oct. 3, 2014
Trade Names [Member]
Jan. 3, 2014
Trade Names [Member]
Oct. 3, 2014
Contractual Rights [Member]
Jan. 3, 2014
Contractual Rights [Member]
Oct. 3, 2014
Customer Relationships [Member]
Jan. 3, 2014
Customer Relationships [Member]
Oct. 3, 2014
Customer Relationships [Member]
Oct. 3, 2014
Contractual Rights [Member]
Oct. 3, 2014
Trade Names [Member]
Oct. 3, 2014
Noncompete Agreements [Member]
Oct. 3, 2014
Intellectual Property [Member]
Oct. 3, 2014
Customer Relationships [Member]
Oct. 3, 2014
Trade Names [Member]
Oct. 3, 2014
Noncompete Agreements [Member]
Oct. 3, 2014
Customer Relationships [Member]
Jan. 3, 2014
Customer Relationships [Member]
Oct. 3, 2014
Contractual Rights [Member]
Jan. 3, 2014
Contractual Rights [Member]
Oct. 3, 2014
Trade Names [Member]
Jan. 3, 2014
Trade Names [Member]
Oct. 3, 2014
Noncompete Agreements [Member]
Jan. 3, 2014
Noncompete Agreements [Member]
Oct. 3, 2014
Intellectual Property [Member]
Jan. 3, 2014
Intellectual Property [Member]
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible Assets, Gross (Excluding Goodwill)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 214.2 
$ 93.8 
$ 23.2 
$ 0 
$ 15.8 
$ 6.6 
$ 5.2 
$ 2.0 
$ 1.6 
$ 1.7 
Indefinite-Lived Intangible Assets (Excluding Goodwill)
10.6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets, gross
270.6 
104.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Finite-Lived Intangible Assets, Accumulated Amortization
$ (54.8)
$ (48.8)
$ (0.9)
$ (0.9)
$ (2.1)
$ (2.0)
$ (4.1)
$ (3.5)
$ 0 
$ 0 
$ (47.7)
$ (42.4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Finite-Lived Intangible Asset, Useful Life
 
 
 
 
 
 
 
 
 
 
 
 
20 years 0 months 
21 years 0 months 
10 years 0 months 
5 years 0 months 
10 years 0 months 
6 years 0 months 
3 years 0 months 
4 years 0 months 
 
 
 
 
 
 
 
 
 
 
BUSINESS COMBINATION Business Combination - Additional information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 3, 2014
Oct. 3, 2014
Sep. 27, 2013
Jan. 3, 2014
Business Acquisition [Line Items]
 
 
 
 
Business Acquisition, Percentage of Voting Interests Acquired
100.00% 
100.00% 
 
 
Payments to Acquire Businesses, Net of Cash Acquired
 
$ 418.4 
$ 0 
 
Cash
11.6 
11.6 
 
 
Favorable net asset adjustment
 
1.3 
 
 
Long-term debt
1,241.9 
1,241.9 
 
836.0 
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual
30.6 
 
 
 
Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual
1.3 
 
 
 
Consolidated [Member]
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Average amortization of intangible assets
 
20.3 
 
 
Business acquisition [Member]
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Average amortization of intangible assets
 
13.9 
 
 
Incurred to date [Member]
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Business Acquisition, Transaction Costs
6.0 
6.0 
 
 
To be incurred [Member]
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Business Acquisition, Transaction Costs
1.3 
1.3 
 
 
Long-term Debt [Member]
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Long-term debt
200.0 
200.0 
 
Senior notes due 2021 [Member]
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Long-term debt
$ 400.0 
$ 400.0 
 
$ 0 
INCOME TAXES - Additional information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 3, 2014
Sep. 27, 2013
Oct. 3, 2014
Sep. 27, 2013
Income Tax Disclosure [Abstract]
 
 
 
 
Income tax provision
$ 27.9 
$ 25.7 
$ 70.6 
$ 73.3 
Effective income tax rate
34.80% 
32.40% 
31.50% 
34.00% 
Income Loss From Continuing Operations Net Benefit Related To Closing Prior Tax Years
1.9 
4.7 
1.9 
4.7 
Income Loss From Continuing Operations Tax Cost Related To Acquisition Transaction Costs Capitalized For Tax Purposes
1.1 
 
1.1 
 
Interest Income Related To Finalizing Prior Year Tax Returns
 
0.7 
 
0.7 
Interest Income Related To Finalizing Prior Year Tax Returns, Net Of Tax
 
0.5 
 
0.5 
Income Loss From Continuing Operations Tax Benefit Related To Reversal Of Valuation Allowance
 
 
$ 6.9 
 
DEBT- Debt (Detail) (USD $)
In Millions, unless otherwise specified
Oct. 3, 2014
Jan. 3, 2014
Debt Instrument [Line Items]
 
 
Long-term debt
$ 1,241.9 
$ 836.0 
Senior notes due 2021 [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
400.0 
Senior notes due 2019 [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
350.0 
350.0 
Senior notes due 2015 [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
200.0 
200.0 
Long-term Debt [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
200.0 
Accounts receivable securitization facility [Member]
 
 
Debt Instrument [Line Items]