Anixter International Announces Better Than Expected Fourth Quarter Results Lead to Record Year for Continuing Operations - Company Financial Information

Cambridge Telcom Report, Feb 14, 2000

Anixter International Inc. (NYSE: AXE), the world's leading distributor of communication products, today announced better than anticipated quarterly sales and operating results, before a $1.8 million after-tax restructuring charge in Latin America, on continuing strong sales growth in North America.

* Fourth Quarter Highlights * Worldwide Sales were up 21 percent to $706 million * Operating Profits, excluding restructuring charges in each year, increased 93 percent

* Income from Continuing Operations, excluding restructuring charges in each year, rose 133 percent * Diluted Earnings per Share from Continuing Operations, excluding the restructuring charges in both years, were up 166 percent

Financial Highlights for Continuing Operations (Excludes gains from the sale of Antec shares in 1998, a tax gain in 1999, and restructuring charges in both years)

"We have completed one of the most challenging and successful years in Anixter's history. In the first quarter, we announced a major shift in strategy - to focus all of our efforts on distribution. This allowed us to address the soft market conditions and excess overhead structure, which existed at that time, with a high level of focus and control. As a result, we delivered exceptional revenue and earnings growth over the past three quarters and have provided a solid base for continued growth and improvement in 2000." Robert W. Grubbs President and CEO.

Limited Y2K Impact on Quarterly Sales In the quarter ended December 31, 1999, income from continuing operations was $13.3 million, or 36 cents per diluted share, on sales of $706.0 million. This compares with $5.7 million, or 13 cents per diluted share, in the year-ago period, on sales of $584.5 million. The 1999 and 1998 results exclude after-tax restructuring charges of $1.8 million for Latin America and $2.5 million primarily for Europe, respectively, which were used primarily to cover the costs of staff reductions and facility consolidations.

Operating earnings in the quarter (excluding the restructuring charges) were $32.1 million, or 93 percent higher than the year-ago quarter. Operating margins of 4.54 percent for the latest three months were in line with the 4.67 percent operating margins achieved on higher sales volumes in the traditionally stronger third quarter. In the latest quarter, the company experienced some revenue softness from project deferrals in its core data cabling products, as customers made final preparations for Y2K. This volume shortfall, however, was offset by continued strong growth in sales to service provider customers (companies that offer telecommunications services, including Internet Service Providers, cable companies and wireless communication providers) in North America.

Significant Improvements in 1999 Results For the year, income from continuing operations reached $47.2 million, or $1.24 per diluted share, on sales of $2.67 billion. This compared with $32.7 million, or 72 cents per diluted share, on sales of $2.35 billion. Income from continuing operations excludes after-tax restructuring charges mentioned earlier. The 1999 figure also excludes a gain of $24.3 million, or 64 cents per diluted share, recorded from the reversal of certain tax liabilities associated with completing Internal Revenue Service audits for a number of open years. In 1998, an after-tax gain of $14.6 million, or 32 cents per diluted share, from the sale of shares of Antec Corporation is excluded from income from continuing operations.

Without the previously mentioned restructuring costs, operating earnings for the year were $115.8 million, which represents a 27 percent improvement over 1998. Operating margins for the year were 4.34 percent as compared to 3.88 percent in the prior year. The progress made in the latest year closes approximately 40 percent of the gap between the 1998 results and the company's goal of reaching 5 percent operating margins in 2000.

Discontinued Operations During the fourth quarter, Anixter recorded income from discontinued operations of $3.2 million, or 9 cents per diluted share, from disposing its Asian Network Integration business and certain other assets held for sale.

For the year, the company recorded income from discontinued operations of $54.5 million, or $1.43 per diluted share, compared with $20.9 million, or 46 cents per diluted share, in the prior year. Income from discontinued operations came from two sources: earnings prior to the disposition and transaction gains from selling the Network Integration business, and disposing of certain other discontinued assets. In addition, a portion of the 1999 discontinued operations income came from the previously mentioned reversal of certain tax liabilities associated with prior-year sales of assets.

Stronger than Anticipated Fourth Quarter President and CEO Robert Grubbs said, "We approached the end of 1999 with a degree of caution, not knowing how our customers' final preparations for Y2K would affect our sales. Like most of the world, we got a positive surprise not only on the small number of Y2K problems, but also by the limited impact it had on sales late in the year. While we saw some definite deferral of projects in our core data cabling products, we were able to offset that with very strong growth in our North American service provider markets. We are extremely pleased with the results of our first year of focused efforts in the service provider market, where we recorded sales well in excess of $100 million, and run rates that are continuing to grow."