Distributors

Anixter Tops Q2 Earnings and Revenue Estimates

Anixter

GLENVIEW, Ill. — Anixter International Inc. today announced its results for the second quarter of 2019.

CEO Commentary

“Anixter continues to execute on our strategy of above-market top line growth, increased gross margin and operating margin and enhanced customer experience through our investments in digital innovation and technology. We delivered another strong quarter, with sales growth above our outlook range. This is the fifth consecutive quarter with organic sales growth at or above 5% and organic growth in each segment, and brings our year-to-date organic sales growth to 7%,” commented Bill Galvin, President and Chief Executive Officer.

Second Quarter Highlights

    • Record quarterly sales of $2.3 billion, up 5.8%, organic sales growth of 6.0%
    • Organic sales growth in all segments
    • Operating Profit up 48%

Financial Results

Three Months Ended

Six Months Ended

(In millions, except per share amounts)

June 28,
2019

June 29,
2018

Percent
Change

June 28,
2019

June 29,
2018

Percent
Change

Select Reported Measures

Net Sales

$

2,262.6

$

2,137.9

6

%

$

4,371.1

$

4,102.1

7

%

Operating Income

$

105.7

$

71.3

48

%

$

180.3

$

132.9

36

%

Net Income

$

63.5

$

34.8

83

%

$

102.6

$

66.9

53

%

Diluted Earnings Per Share

$

1.86

$

1.02

82

%

$

3.00

$

1.96

53

%

Diluted Weighted Shares

34.2

34.1

%

34.2

34.1

%

Select Non-GAAP Measures

Adjusted EBITDA

$

129.4

$

107.8

20

%

$

225.9

$

191.2

18

%

Adjusted Net Income

$

70.1

$

51.9

35

%

$

115.5

$

91.6

26

%

Adjusted Diluted Earnings Per Share

$

2.05

$

1.53

34

%

$

3.38

$

2.69

26

%

Segment Update

Network & Security Solutions (“NSS”) reported record second quarter sales of $1.2 billion, an increase of 9.4%, or 8.4% on an organic basis. NSS security sales of $525.0 million, which represents approximately 44% of segment sales, increased 14.3%. Adjusted EBITDA increased 23.1% to $93.6 million. Adjusted EBITDA margin of 7.8% compares to 6.9%.

Electrical & Electronic Solutions (“EES”) reported record second quarter sales of $607.0 million, an increase of 0.2%, or 2.3% on an organic basis. Adjusted EBITDA increased 3.6% to $41.8 million. Adjusted EBITDA margin of 6.9%, compares to 6.7%.

Utility Power Solutions (“UPS”) reported record second quarter sales of $455.7 million, an increase of 4.5%, or 5.0% on an organic basis. Adjusted EBITDA increased 18.4% to $27.4 million. Adjusted EBITDA margin of 6.0% compares to 5.3%.

Cash Flow and Credit Metrics

We used $63.2 million of cash flow from operations year-to-date, which compares to $69.3 million generated in the prior year period, driven primarily by an increase in working capital to support growth in the business. Working capital as a percentage of sales was 19.2%, which compares to 18.7% in the prior year quarter. We invested $13.5 million in capital expenditures year-to-date, reflecting investment in information technology and facilities, which compares to $24.5 million in the prior year period.

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

    • Debt-to-total capital ratio of 43.4%, compares to 44.4% at the end of 2018
    • Debt-to-adjusted EBITDA ratio of 2.9 times compares to 3.0 times at the end of 2018
    • Weighted average cost of borrowed capital of 5.3%, compares to 5.1% in the prior year quarter
    • $546.6 million available under secured accounts receivable, inventory facilities and revolving lines of credit

Outlook

Galvin commented, “We believe that the favorable sales trends that we realized in the first and second quarters 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 macro economic uncertainty in certain markets and flat or decelerating trends in certain key economic indicators.

Third Quarter Outlook

Our outlook for the third quarter sales growth is 2.0% – 4.0%, or organic growth of 2.5% – 4.5%. While this expected organic growth is below the Q2 organic growth rate of 6%, it is being compared to a strong Q3 2018 quarter, which had a 7.4% growth rate. The cumulative two year growth rate would be 10.9% at the mid point of the outlook range, which is higher than both of the previous two quarters.

Full Year Outlook

We are increasing the lower end of our full year 2019 sales outlook from 3.5% to 4%, while reaffirming the upper end of the range at 6%. After adjusting for copper and foreign exchange, the organic sales growth outlook is 4.5% – 6.5%.

Based on our outlook for 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.”

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