Anixter Meets 2Q Expectations

GLENVIEW, Ill. (AP) — Anixter International Inc. (AXE) on Tuesday reported second-quarter earnings of $40.1 million.

On a per-share basis, the Glenview, Illinois-based company said it had profit of $1.18. Earnings, adjusted for amortization costs, came to $1.36 per share.

The results met Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was also for earnings of $1.36 per share.

The maker of security products, wires and fasteners posted revenue of $2 billion in the period, falling short of Street forecasts. Three analysts surveyed by Zacks expected $2.03 billion.

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

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

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

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

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

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

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

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

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

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

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

Anixter International shares have declined almost 3 percent since the beginning of the year. The stock has climbed 34 percent in the last 12 months.

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