Anixter International Inc. Financial Statement Analysis
ANIXTER INTERNATIONAL INC.
EES Operating income was $139.5 million, or 5.9% of sales, in 2019, compared to $132.3 million, or 5.6% of sales, in
2018 and $114.3 million, or 5.1% of sales, in 2017. The increase in operating income in 2019 was driven by gross margin
improvement and expense leverage. The increase in operating income in 2018 compared to 2017 was driven by the favorable
impacts of higher copper prices combined with sales growth and gross margin improvement. EES adjusted operating income of
$145.4 million in 2019 compares to adjusted operating income of $141.4 million in 2018 and $122.2 million in 2017, resulting
in adjusted operating margin of 6.2%, 6.0% and 5.5% in 2019, 2018 and 2017, respectively.
UPS Operating income was $83.5 million, or 4.6% of sales in 2019, compared to $75.4 million, or 4.4%, in 2018 and
$73.1 million, or 4.6% of sales, in 2017. The increase in operating income in 2019 was driven by sales growth and gross margin
improvement. The increase in operating income in 2018 compared to 2017 was driven by sales growth and expense discipline.
UPS adjusted operating income of $96.6 million in 2019 compares to adjusted operating income of $89.4 million in 2018 and
$86.5 million in 2017, resulting in adjusted operating margin of 5.4%, 5.2% and 5.4% in 2019, 2018 and 2017, respectively.
Interest Expense
Interest expense was $77.1 million, $76.3 million and $74.7 million in 2019, 2018 and 2017, respectively. Our weighted-
average cost of borrowings was 5.5% in 2019 and 5.3% in 2018 and 2017, respectively.
Other, Net
Other, net income of $3.0 million in 2019 compares to expense of $10.2 million and $0.6 million in 2018 and 2017,
respectively. The components of other, net are further described below.
Due to fluctuations in the U.S. dollar ("USD") against certain foreign currencies, primarily in Europe, Canada and Latin
America, we recorded foreign exchange losses of $2.2 million, $8.2 million and $3.4 million in 2019, 2018 and 2017,
respectively.
The combined effect of changes in both the equity and bond markets resulted in changes in the cash surrender value of
our company owned life insurance policies associated with our sponsored deferred compensation program. We recorded a gain
on the cash surrender value of life insurance policies of $4.4 million in 2019, a loss of $1.3 million in 2018 and a gain of $2.4
million in 2017.
We recognized net periodic pension benefit of $2.4 million, $5.1 million and $0.2 million in 2019, 2018 and 2017
respectively.
In the fourth quarter of 2018, we retired our 5.625% Senior notes due 2019 and recognized a loss on extinguishment of
debt of $4.6 million.
Income Taxes
The income tax provision for 2019 was $30.5 million compared to $66.9 million in 2018 and $128.6 million in 2017. Our
effective tax rate was 10.4%, 30.0% and 54.1% in 2019, 2018 and 2017, respectively. Our effective tax rate for 2019 included a
$45.9 million tax benefit related to the reversal of deferred income tax valuation allowances, partially offset by $0.8 million of
tax expense related to prior year tax positions. Our effective tax rate for 2018 included $2.1 million of tax benefit related to the
impact of tax legislation and a $1.4 million tax benefit related to the reversal of deferred income tax valuation allowances,
partially offset by $0.7 million of tax expense related to domestic permanent tax differences and $0.1 million of tax expense
related to prior year tax positions. Our effective tax rate for 2017 included $35.6 million of tax expense related to the impact of
tax legislation and $1.3 million of tax expense related to prior year tax positions. Excluding the impact of these items as well as
the other items impacting the comparability of results discussed above, the adjusted effective tax rate in 2019 was 24.8%
compared to 29.2% in 2018 and 37.8% in 2017. The decrease in our adjusted effective tax rate in 2019 was due to a change in
the country mix of earnings and associated tax benefits from our continued movement to a U.S.-center-led business model, with
the major impact coming from a lower U.S. tax rate on foreign derived income and the ability to utilize foreign tax credits,
previously fully reserved. The decrease in our adjusted effective tax rate in 2018 compared to 2017 was primarily due to a
favorable tax impact from the December 22, 2017 Tax Cuts and Jobs Act (the "Act"). Under the Act, the statutory U.S. federal
tax rate was reduced from 35% to 21% effective January 1, 2018. The benefit from this rate reduction was partially offset by
other newly enacted tax provisions.
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