Anixter International Inc. Financial Statement Analysis
Items Impacting Comparability of Results
ANIXTER INTERNATIONAL INC.
In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP")
above, this report includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission.
Specifically, net sales comparisons to the prior corresponding period, both worldwide and in relevant segments, are discussed in
this report both on a U.S. GAAP and non-GAAP basis. We believe that by providing non-GAAP organic growth, which adjusts
for the impact of acquisitions (when applicable), foreign exchange fluctuations, copper prices and the number of billing days,
both management and investors are provided with meaningful supplemental sales information to understand and analyze our
underlying trends and other aspects of our financial performance. We calculate the year-over-year organic sales growth impact
related to acquisitions by including their comparable period results prior to the acquisitions with our results, as we believe this
represents the most accurate representation of organic growth, considering the nature of the companies we acquired and the
synergistic revenues that have been or will be achieved. Historically, and from time to time, we may also exclude other items
from reported financial results (e.g., impairment charges, inventory adjustments, restructuring charges, tax items, currency
devaluations, pension settlements, etc.) in presenting adjusted operating expense, adjusted operating income, adjusted income
taxes and adjusted net income so that both management and financial statement users can use these non-GAAP financial
measures to better understand and evaluate our performance period over period and to analyze the underlying trends of our
business. We have also excluded amortization of intangible assets associated with purchase accounting from acquisitions from
the adjusted amounts for comparison of the non-GAAP financial measures period over period.
EBITDA is defined as net income from continuing operations before interest, income taxes, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and other non-operating expense and non-cash
stock-based compensation, excluding the other items from reported financial results, as defined above. We believe that adjusted
operating income, EBITDA and Adjusted EBITDA provide relevant and useful information, which is widely used by analysts,
investors and competitors in our industry as well as by our management in assessing both consolidated and business segment
performance. Adjusted operating income provides an understanding of the results from the primary operations of our business
by excluding the effects of certain items that do not reflect the ordinary earnings of our operations. We use adjusted operating
income to evaluate our period over period operating performance because we believe this provides a more comparable measure
of our continuing business excluding certain items that are not reflective of expected ongoing operations. This measure may be
useful to an investor in evaluating the underlying performance of our business. EBITDA provides us with an understanding of
earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA further excludes the effects
of foreign exchange and other non-cash stock-based compensation, and certain items that do not reflect the ordinary earnings of
our operations and that are also excluded for purposes of calculating adjusted net income, adjusted earnings per share and
adjusted operating income. EBITDA and Adjusted EBITDA are used by our management for various purposes including as
measures of performance of our operating entities and as a basis for strategic planning and forecasting. Adjusted EBITDA may
be useful to an investor because this measure is widely used to evaluate a company's operating performance without regard to
items excluded from the calculation of such measure, which can vary substantially from company to company depending on the
accounting methods, book value of assets, capital structure and the method by which the assets were acquired, among other
factors. They are not, however, intended as an alternative measure of operating results or cash flow from operations as
determined in accordance with U.S. GAAP.
Non-GAAP financial measures provide insight into selected financial information and should be evaluated in the context
in which they are presented. These non-GAAP financial measures have limitations as analytical tools, and should not be
considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP, and non-
GAAP financial measures as reported by us may not be comparable to similarly titled amounts reported by other companies.
The non-GAAP financial measures should be considered in conjunction with the Consolidated Financial Statements, including
the related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this
report. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.
Our operating results can be affected by changes in prices of commodities, primarily copper, which are components in
some of the electrical wire and cable products sold. Generally, as the costs of inventory purchases increase due to higher
commodity prices, our mark-up percentage to customers remains relatively constant, resulting in higher sales revenue and gross
profit. In addition, existing inventory purchased at previously lower prices and sold as prices increase may result in a higher
gross profit margin. Conversely, a decrease in commodity prices in a short period of time would have the opposite effect,
negatively affecting financial results. The degree to which spot market copper prices change affects product prices and the
amount of gross profit earned will be affected by end market demand and overall economic conditions. Importantly, however,
there is no exact measure of the impact of changes in copper prices, as there are thousands of transactions in any given year,
each of which has various factors involved in the individual pricing decisions. Therefore, all references to the effect of copper
prices are estimates.
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