GLENVIEW, Ill. — Anixter International Inc. today announced its results for the first quarter of 2019.
“Sales growth was above our outlook range, driven by strong results in our NSS and UPS segments. In addition to strong sales growth, we were pleased to continue to deliver meaningful improvement in gross margin and operating margin, driven by margin initiatives implemented across the business,” commented Bill Galvin, President and Chief Executive Officer.
The following results are for the 13 weeks ended March 29, 2019, compared to the 13 weeks ended March 30, 2018. Unless otherwise noted, all comparisons are versus the prior year quarter. Both the current and prior year quarters had 64 billing days.
- Sales increased 7.3% to $2.1 billion. Current quarter sales include the favorable impact of the security acquisitions completed in the second quarter of 2018 and the unfavorable impacts of lower average copper prices and generally weaker foreign currencies. Adjusting for these impacts, organic sales increased 7.7%, as detailed in the table on page 9 of this release.
- Gross profit increased 8.9% to $418.9 million. Gross margin of 19.9% increased by 30 basis points year over year.
- Operating expense of $344.3 million compares to $323.2 million. Operating expense ratio of 16.3% compares to 16.5%.
- Operating income increased 21.1% to $74.6 million. Operating margin of 3.5% compares to 3.1%.
- Interest expense of $20.4 million compares to $18.2 million.
- Other, net income of $1.8 million compares to $2.3 million.
- The effective tax rate of 30.3% compares to 29.7%.
- Net income of $39.1 million compares to $32.1 million.
- Earnings per diluted share of $1.14 compares to $0.94.
- 2019 cash flow used from operations of $114.2 million compares to $71.2 million.
- 2019 capital expenditures of $5.9 million compares to $10.9 million.
- Working capital as a percentage of sales of 19.6% compares to 20.0%.
Ted Dosch, EVP and Chief Financial Officer, commented, “Our strong year over year gross margin performance helped drive the increase in adjusted EBITDA margin of 40 basis points over the first quarter of 2018, and operating leverage of 2.1 times. This improvement in gross margin will help fund our investment in innovation and business transformation, as we continue to invest in customer-facing technologies that will enhance our digital capabilities and enterprise efficiencies and drive long term EBITDA growth.”
Network & Security Solutions (“NSS”) reported record first quarter sales of $1.1 billion, an increase of 11.8%, or 10.7% on an organic basis. NSS security sales of $476.0 million, which represents approximately 43% of segment sales, increased 15.3%. Adjusted EBITDA increased 33.3% to $78.0 million. Adjusted EBITDA margin of 7.0% compares to 5.9%, driven by strong volume growth and gross margin improvement.
Electrical & Electronic Solutions (“EES”) reported first quarter sales of $566.0 million, a decrease of 0.4% and an increase of 2.3% organically. Adjusted EBITDA decreased 6.0% to $32.6 million. Adjusted EBITDA margin decreased by 30 basis points to 5.8%, as volume decrease offset the benefit of improved gross margins.
Utility Power Solutions (“UPS”) reported record first quarter sales of $430.0 million, an increase of 7.2%, or 7.9% on an organic basis. Adjusted EBITDA increased 8.6% to $22.7 million. Adjusted EBITDA margin increased 10 basis points to 5.3%, driven by volume growth and strong operating leverage.
Cash Flow and Credit Metrics
In the first quarter of 2019 we used $114.2 million of cash flow from operations, which compares to $71.2 million used in the first quarter of 2018, driven primarily by an increase in working capital to support growth in the business. Working capital as a percentage of sales was 19.6%, which compares to 20.0% in the prior year quarter. We invested $5.9 million in capital expenditures in the first quarter of 2019, which compares to $10.9 million in the first quarter of 2018, primarily reflecting investment in facilities and information technology.
Key capital structure and credit-related statistics for the quarter:
- Debt-to-total capital ratio of 45.8%, compares to 44.4% at the end of 2018
- Debt-to-adjusted EBITDA ratio of 3.2 times compares to 3.0 times at the end of 2018
- Weighted average cost of borrowed capital of 5.3%, compares to 5.3% in the prior year quarter
- $484.1 million available under secured accounts receivable, inventory facilities and revolving lines of credit
Galvin commented, “We are optimistic that favorable sales trends that we realized in the first quarter of 2019 will continue, based on our strong backlog and pipeline trends, and discussions with our customers and suppliers. We continue to see strong demand, tempered by macroeconomic uncertainty in certain markets. Based on current conditions, we have increased our 2019 organic sales growth to the 4% – 6.5% range, with second quarter 2019 organic sales growth in the 3% – 5% range. Based on our outlook for low-to-mid single digit sales growth and the related investment in working capital to support that growth, combined with our ongoing investment in innovation and business transformation, we reaffirm our previous estimate for full year cash flow from operations of $150 – $175 million and capital expenditures of $55 – $60 million, which will result in free cash flow of $95 – $115 million.”
|Three Months Ended|
|(In millions, except per share amounts)||March 29,
|Diluted Earnings Per Share||$||1.14||$||0.94||21||%|
|Diluted Weighted Shares||34.2||34.1||—||%|