GLENVIEW, Ill. — Anixter International Inc. (NYSE: AXE) on Tuesday reported sales of $1.67 billion for the quarter ended Oct. 3, a 7.0 percent increase compared to the year-ago quarter. Excluding the impact of the following items, organic sales increased by 5.5 percent and approximately 4 percent on a per day basis, year-over-year:.
Sequentially, sales increased by 5.1 percent on a reported basis and approximately 3.4 percent on a per day basis.
Anixter came in at No. 6 on Industrial Distribution's 2014 Big 50 list.
Operating income adjusted for Tri-Ed acquisition costs in the current quarter was $99.7 million, an increase of 7.9 percent from operating income of $92.4 million in the year-ago quarter. Further excluding the negative $0.7 million impact of the year-over-year drop in copper prices, the $0.4 million unfavorable foreign exchange impact, and $1.4 million of acquisition-related operating profits, adjusted operating income would have increased by 7.6 percent. Including the Tri-Ed acquisition transaction costs of $5.7 million, current quarter reported operating income was $94.0 million.
Adjusted operating margin of 6.0 percent compares to 5.9 percent in the year-ago quarter and 5.8 percent in the prior quarter. The increase in operating margin was driven by higher volume and disciplined expense management. Including the negative impact of expenses related to the Tri-Ed acquisition, reported operating margin was 5.6 percent.
Adjusted net income of $56.3 million increased 11.7 percent from $50.5 million in the year-ago quarter. Including the negative impact of $6.0 million ($5.0 million, net of tax) of transaction and financing costs related to the Tri-Ed acquisition, the tax benefit of $1.9 million related to closing prior tax years and a $0.7 million additional tax expense to forecast an effective tax rate of 34.9 percent for the full year, reported net income was $52.5 million versus $53.8 million in the prior year. Adjusted diluted earnings per share of $1.69 increased 11.2 percent from $1.52 in the year ago quarter. Including the negative impact of $0.12 for the aforementioned items, reported diluted earnings per share was $1.57 versus $1.62 in the prior year.
"We were pleased to deliver over 10 percent revenue growth in North America, reflecting 9 percent organic revenue growth, driven by growth in all segments and increased investments by our core customers on capital projects," commented Bob Eck, President and CEO. "In addition, the acquisition of Tri-Ed, a leading independent security company, will enable us to provide more complete solutions to our customers, adding intrusion, fire and life safety to our existing video surveillance and access control platform. With this acquisition, and the re-acceleration of our legacy security business, we enter the fourth quarter energized by strong growth trends across our North America businesses."
Enterprise Cabling and Security Solutions (“ECS”) sales of $884.4 million compares to $804.3 million in the prior year period. The 10.0 percent increase was driven by strong growth in our North America market, the impact from approximately 2.5 weeks of sales from the Tri-Ed acquisition and one additional billing day in the quarter. Excluding the $30.6 million favorable impact of Tri-Ed's results and the $3.4 million unfavorable impact from foreign exchange, ECS organic sales growth increased by 6.6 percent, which equates to approximately 5 percent on an adjusted per day basis. Sequentially, ECS sales increased 8.2 percent, reflecting improving trends in North America, the impact of the Tri-Ed acquisition, and the benefit of one additional billing day in the current quarter.
ECS security sales, which represent approximately 30 percent of total segment sales, increased by 21 percent in the quarter. Excluding the $30.6 million impact of Tri-Ed sales for the period and the negative foreign exchange impact of $1.8 million, organic security sales growth of 8 percent reflected the successful re-acceleration of this business to Anixter's targeted growth rates.
Electrical and Electronic Wire and Cable (“W&C”) sales of $553.6 million compares to $528.6 million in the prior year period. The 4.7 percent increase from the prior year period was driven by improving sales trends in North America and Emerging Markets. Excluding the $2.7 million unfavorable impact from foreign exchange and the $3.1 million unfavorable impact from lower average copper prices, W&C organic sales growth increased by 5.8 percent, which equates to 4.2 percent on an adjusted per day basis. Sequentially, W&C sales increased 5.3 percent, driven by strength in North America day-to-day business.
W&C operating income of $40.4 million compares to operating income of $41.5 million in the year-ago quarter. Operating margin of 7.3 percent compares to 6.9 percent in the prior quarter and 7.9 percent in the year-ago quarter.
OEM Supply - Fasteners sales of $228.6 million increased by 1.7 percent from the prior year quarter. Excluding the $2.0 million favorable impact from foreign exchange, Fasteners organic sales growth increased by 0.8 percent, which equates to a 0.8 percent decrease on an adjusted per day basis. Further excluding the $10.0 million impact resulting from the previously disclosed transition of an existing customer to dual source supply, organic sales growth would have been 5.5 percent. North America sales increased 7.2 percent on an organic basis. On a sequential basis, global sales decreased by 6.0 percent reflecting normal seasonality.
Fasteners operating income of $8.6 million compares to operating income of $8.4 million in the year-ago quarter. Operating margin of 3.8 percent compares to operating margin of 3.7 percent in the prior year quarter and 5.0 percent in the second quarter of 2014. The decline in margin versus the second quarter is a result of a higher expense ratio for the third quarter, which is typically the lowest volume quarter of each year.
Business Outlook
“With the solid momentum we experienced in the third quarter across our North American business, we believe we are positioned for organic sales growth per day to continue to accelerate in the fourth quarter of 2014. While global markets remain uneven, we believe we are well positioned in our European and Emerging Markets geographies. For the full year, we continue to expect our organic sales growth on a days adjusted basis to be at the low end of the mid-single digit growth range.” Eck concluded, “Looking ahead, we believe our strong global presence and strategic initiatives will enable us to consistently gain market share and exceed market growth. We will continue to invest in strategic growth, including security, emerging markets, industrial communication and control, in-building wireless and e-commerce."
