Anixter International Inc. Financial Statement Analysis
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Anixter International Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Anixter International Inc. (the Company) as of January 3,
2020 and December 28, 2018, the related consolidated statements of income, comprehensive income, stockholders' equity and
cash flows for each of the three years in the period ended January 3, 2020, and the related notes and financial statement
schedules listed in the Index at Item 15(a)(2) (collectively referred to as the "consolidated financial statements"). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
January 3, 2020 and December 28, 2018, and the results of its operations and its cash flows for each of the three years in the
period ended January 3, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of January 3, 2020, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 20, 2020 expressed an unqualified opinion thereon.
Adoption of New Accounting Standard
As discussed in Note 1 to the consolidated financial statements, the Company changed its method for accounting for leases as
of December 29, 2018 due to the adoption of the ASU 2016-02, Leases.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Description
of the Matter
Goodwill Impairment
At January 3, 2020, the Company's goodwill was $828.7 million. As discussed in Note 1 to the consolidated
financial statements, goodwill is tested for impairment annually at the beginning of the third quarter and when
events or changes in circumstances indicate the carrying value of reporting units might exceed their current
fair values. In connection with the annual assessment of goodwill at the beginning of the third quarter of 2019,
the Company performed a quantitative test for all reporting units and utilized a combination of the income and
market approaches.
Auditing management's annual goodwill impairment test was complex and highly judgmental due to the
significant estimation required to determine the fair value of the reporting units. In particular, the fair value
estimate was sensitive to changes in significant assumptions, such as the weighted average cost of capital, and
assumptions in the prospective financial information (including revenue growth rate, operating margin and
working capital), which are affected by expectations about future market or economic conditions.
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