Anixter International Inc. Financial Statement Analysis
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Intangible assets: As of January 3, 2020 and December 28, 2018, the Company's intangible asset balances are as follows:
(In millions)
Customer relationships
Exclusive supplier agreement
Trade names
Trade names
Non-compete agreements
Intellectual property
January 3, 2020
Average useful life
(in years)
Gross carrying
amount
December 28, 2018
Accumulated Gross carrying
amortization
amount
Accumulated
amortization
6-20
21
503.6
22.3
$ (176.4) $
500.1
$ (143.7)
(5.6)
22.1
(4.5)
3-10
22.6
(13.5)
21.8
(12.6)
Indefinite
4.9
4.9
1-5
9.2
(7.9)
9.2
(6.5)
8
2.5
(0.5)
2.3
(0.2)
$
565.1 $
(203.9) $
560.4 $
(167.5)
Total
Anixter continually evaluates whether events or circumstances have occurred that would indicate the remaining estimated
useful lives of intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. Trade
names that have been identified to have indefinite lives are not being amortized based on the expectation that the trade name
products will generate future cash flows for the foreseeable future. In 2017, the Company recorded an impairment charge of
$5.7 million related to certain indefinite-lived trade names in its NSS reporting unit. This impairment charge is included in
"Operating expenses" in the Consolidated Statement of Income. The impairment charge was recorded as Anixter no longer
plans to use certain trade names on certain products. All remaining indefinite-lived trade names are expected to be used on
existing products for the foreseeable future.
For definite-lived intangible assets, the Company uses an estimate of the related undiscounted cash flows over the
remaining life of the asset in measuring whether the asset is recoverable. The Company's definite-lived intangible assets are
primarily related to customer relationships. In order to measure an impairment loss of customer relationships, Anixter estimates
the fair value by using an excess earnings model, a form of the income approach. The analysis requires making various
judgments, including assumptions about future cash flows based on projected growth rates of revenue and expense, rates of
customer attrition and working capital needs. The assumptions about future cash flows and growth rates are based on
management's forecast of the asset group. The key inputs utilized in determining the fair value of customer relationships
include significant unobservable inputs, or Level 3 inputs, as described in the accounting fair value hierarchy. Inputs included
discount rates derived from an estimated weighted-average cost of capital, which reflected the overall level of inherent risk of
the asset group and the rate of return a market participant would expect to earn, as well as customer attrition rates.
Intangible amortization expense is expected to average $33.6 million per year for the next five years. The Company's
definite lived intangible assets are amortized over a straight line basis as it approximates the customer attrition patterns and best
estimates the use pattern of the assets.
Other, net: The following represents the components of "Other, net" as reflected in the Consolidated Statements of
Income:
(In millions)
Other, net:
Foreign exchange loss
Cash surrender value of life insurance policies
Net periodic pension benefit
Loss on extinguishment of debt
Other
January 3,
2020
Years Ended
December 28,
2018
December 29,
2017
(2.2)
(8.2) $
4.4
(1.3)
(3.4)
2.4
2.4
5.1
0.2
(4.6)
(1.6)
(1.2)
0.2
$
3.0 $
(10.2) $
(0.6)
Total other, net
Certain subsidiaries of Anixter conduct business in a currency other than the legal entity's functional currency.
Transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received
or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated
increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. The increase
or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that is included in "Other,
net" in the Consolidated Statements of Income.
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