Investor Presentation November Products. Technology. Services. Delivered Globally.

Transcription

1 Investor Presentation November 2018 Products. Technology. Services. Delivered Globally.

2 Safe Harbor Statement and Non-GAAP Financial Measures Safe Harbor Statement The statements in this release other than historical facts are forward-looking statements made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of These forward-looking statements are subject to a number of factors that could cause our actual results to differ materially from what is indicated here. These factors include but are not limited to general economic conditions, the level of customer demand particularly for capital projects in the markets we serve, changes in supplier relationships or in supplier sales strategies or financial viability, risks associated with the sale of nonconforming products and services, political, economic or currency risks related to foreign operations, inventory obsolescence, copper price fluctuations, customer viability, risks associated with accounts receivable, the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, information security risks, risks associated with substantial debt and restrictions contained in financial and operating covenants in our debt agreements, the impact and the uncertainty concerning the timing and terms of the withdrawal by the United Kingdom from the European Union, and risks associated with integration of acquired companies, including, but not limited to, the risk that the acquisitions may not provide us with the synergies or other benefits that were anticipated. These uncertainties may cause our actual results to be materially different than those expressed in any forward looking statements. Wedo not undertake to update any forward looking statements. Please see our Securities and Exchange Commission ( SEC ) filings for more information. Non-GAAP Financial Measures In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ( GAAP ) above, this presentation includes certain financial measures computed using non- GAAP components as defined by the SEC. Specifically, net sales comparisons to the prior corresponding period, both worldwide and in relevant segments, are discussed in this presentation 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. 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. Adjusted EBITDA leverage is defined as the percentage change in Adjusted EBITDA divided by the percentage change in net sales. We believe that adjusted operating income, EBITDA, Adjusted EBITDA, and Adjusted EBITDA leverage 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 and Adjusted EBITDA leverage 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 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 Condensed Consolidated Financial Statements, including the related notes, and Management s Discussion and Analysis of Financial Condition and Results of Operations included in this presentation. Management does not use these non-gaap financial measures for any purpose other than the reasons stated above. 2

3 Strategic Priorities Our Focus on the Customer Will Drive Improved Results Enabling Value Creation Customer Access Strategy Commitment to Technology and Innovation Services Profitability Capital Allocation Enable customers to access all solutions and expertise through existing selling organization Enable customers to connect with Anixter through channels they choose Specialists in highly technical solutions and new innovative technologies Provide customers with state of the art electronic business platforms to provide an enhanced customer experience Provide broad and global service capabilities that reduce risk and complexity for our customers Provide service solutions from simple project services to complex long term program solutions Accelerate sales growth Increase gross margin Improve expense structure Deliver strong EBITDA and consistent long term performance Invest in strategies and initiatives to drive organic growth Invest in acquisitions that provide a strategic benefit and meet our financial and risk criteria Return value to shareholders 3

4 Anixter at a Glance UPS 20% Key Metrics 2017 Sales by Segment EES 28% NSS 52% LTM 3Q18 Sales $8.3B Adjusted EBITDA $411M Adjusted EBITDA margin 5.0% Countries ~ Sales by Geography EMEA 8% Emerging Markets 10% Cities >300 SKUs >600k Inventory >$1.0B Warehouses/Branches >300 North America 82% 4

5 Platform Strengths 1. Leading positions in attractive businesses 2. Diverse solutions across segments 3. Balanced sector approach minimizes exposure and risk 4. Strong, diverse and global suppliers and customers 5. Differentiators provide competitive advantage and barriers to entry 6. Financial strength and capital efficiency 5

6 Leading Positions in Attractive Businesses $ Billions Network & Security Solutions Electrical & Electronic Solutions Utility Power Solutions Leading Position Global #1 Global Top 3 North America #1 Large ~$55B TAM ~$450B TAM ~$31B TAM Growing 3-4% CAGR 2-3% CAGR ~4% CAGR Fragmented ~7% Share <1% Share <4% Share Diverse and Global END USERS Commercial, Data Center, Defense, Education, Electronics, Financial Services, Government, Healthcare, Industrial, Marine, Mining, Oil and Gas, Retail, Semi-conductor, Technology, Transportation, Utility CHANNELS Contractors, Integrators, EPCs 6

7 Diverse Solutions Across Segments Power and Cooling Electrical/Electronic Wire and Cable Professional A/V Data Center NSS: Security ~40% EES: C&I 65-70% Lighting EES: OEM 30-35% Switchgear Wireless NSS: DC and NI ~60% UPS: IOU ~60% UPS: PP ~40% Transformers Security Electrical Wire and Cable MRO Pole line Hardware 7

8 Balanced Sector Approach Minimizes Exposure and Risk NSS: 52% of 2017 Sales EES: 28% of 2017 Sales Channels Data Contractors Network Integrators Pro A/V Contractors Security Dealers Security Integrators Wireless Integrators Customer Verticals Architects/Consultants Data Centers Education Financial Services Healthcare Stadiums State and Federal Governments Retail Technology NSS: Security ~40% NSS: DC and NI ~60% EES: C&I 65-70% UPS: PP ~40% EES: OEM 30-35% 30-35% UPS: IOU ~60% Channels Electrical Contractors EPCs Panel Builders and Harness Assemblers Customer Verticals Alternative Energy Data Centers Industrial Automation Industrial Manufacturing Oil, Gas and Petrochemical Marine/Shipbuilding Mining Municipalities Original Equipment Manufacturers Transportation Water/Waste Treatment UPS: 20% of 2017 Sales Customer Verticals Investor Owned Utilities Public Power Utilities Channels Utility Co-ops Generation & Transmission Cooperatives Municipalities Utility Contractors 8

9 Strong, Diverse and Global Suppliers and Customers Suppliers Customers 9

10 Differentiators Provide Competitive Advantage and Barriers to Entry Global Capabilities with Local Presence Customized and Scalable Supply Chain Solutions Technical Expertise International Deployment Experts Local Teams Global Support Deployments Services Product Enhancement Services Save time, reduce costs, increase efficiency and mitigate risk Sourcing Inventory Management Product Enhancement and Packaging Global Logistics E-Commerce World class demonstration facilities Expertise in emerging technologies Application engineering and compliance Metering labs for power utilities Infrastructure Solutions Lab SM and Solutions Briefing Centers Anixter University TM online courses 10

11 Global Capabilities with Local Presence 3,600+ Technical Sales Specialists, Multi-Level Technical Support Approximately 310 ~50 Countries 35+ Currencies 20+ Languages Warehouses and Branches Worldwide 135,000+ Customers $1.0 Billion+ Inventory 600,000+ Products 11

12 Customized and Scalable Supply Chain Solutions Reduce time spent on the order cycle Provide proven, quality-controlled products Manage manufacturer relationships and contracts Access competitive pricing and product standardization Reduce non-contract buying Improve working capital Increase speed to market Decrease write-offs from scrap, overruns and obsolescence Reduce product shortages Streamline warehouse investment Provision inventory Eliminate nonproductive labor Increase speed to market Reduce variable costs Reduce packaging waste Streamline freight costs Improve on-time delivery Reduce lead times Optimize international transaction costs Decrease transaction processing time and cost Improve consistency and adherence to specification Increase operational efficiencies 12

13 World-Class Demonstration Facilities and Expertise in Emerging Technologies Anixter Infrastructure Solutions Lab SM Certified by Underwriters Laboratories Located at our headquarters in Glenview, IL Proof of concept testing and solutions building Data infrastructure product testing Independent testing Physical security testing Industrial Communications and Control module Equipped to provide virtual tours around the globe Leadership Roles in Industry Associations Telecommunications Industry Association (TIA) International Organization for Standardization (ISO) Institute of Electrical and Electronics Engineers (IEEE) Open Network Video Interface Forum (ONVIF) Building Industry Consulting Services International (BICSI) Security Industry Association (SIA) Control System Integrators Association (CSIA) National Electrical Manufacturers Association (NEMA) National Association of Electrical Distributors (NAED) Edison Electric Institute (EEI) National Rural Electric Cooperative (NRECA) Technical Certifications ASIS CPP (Certified Protection Professional) More than 90 Registered BICSI RCDDs PSPs (Physical Security Professional Certification) CCNAs (Cisco Certified Network Associate) QSSP Solutions Briefing Centers Woburn, MA Indianapolis, IN Atlanta, GA Sao Paulo, Brazil Bracknell, U.K. Data Center and Enterprise Networks Physical Security Building Technologies Gear, Lighting and Controls 13

14 Counter-Cyclical Free Cash Flow Provides Financial Flexibility ($ in millions) $ % $ % 6.2% $ % $71 $0 (10.0%) ($150) YTD 3Q18 Free Cash Flow Sales Growth (25.0%) Free cash flow: Defined as net cash provided by operating activities less capital expenditures. Free cash flow is not restated for acquisitions and divestitures Generate Strong Free Cash Flow Throughout the Economic Cycle 14

15 Approaching Strategic Leverage Targets Target range: x *2015 includes 12 months of Power Solutions earnings on a pro forma basis Target range: 45-50% 15

16 Conservative Financial Policy with a Prudent Approach to Capital Allocation Strong free cash flow allows Anixter to maintain a conservative leverage profile and ample liquidity throughout the business cycle Capital allocation priorities are organic growth, M&A and opportunistic return to shareholders Periods of acquisitions are immediately followed up by periods of debt reduction ($ in millions) 100% CapEx Share Repurchases Total Dividends Acquisitions Debt Reduction Operating Cash Flow $36 $55 80% $180 $82 $152 60% $272 $111 $151 $418 $823 $267 $133 $150 40% 20% 0% $108 $166 $105 $41 $59 $35 $5 $41 $42 $32 $22 $20 $26 $34 $32 $40 $27 $ LTM 3Q18 16

17 Acquired Security Businesses Australia and New Zealand in 2Q18 Transaction Summary for Combined Businesses Acquired Companies: Central Security Distributors ("CSD"), Atlas Gentech and Inner Range Purchase price Twelve-month revenues Twelve-month adjusted EBITDA Consideration $149.9 million $114 million $20 million 100% cash Financing Accretion Strategic Rationale Available cash and borrowing capacity $ $0.22 in the first full year of operation, exclusive of transaction and integration costs Enhances our competitive position, bringing new, innovative products and solutions to Anixter that we believe will be valued by both new and existing customers Acquired businesses gross and operating margins are higher than Anixter's Acquisition rate of return is above Anixter's risk-adjusted average cost of capital 17

18 Compelling Customer and Investor Value Propositions Customer value proposition Customer access strategy Commitment to technology and innovation Reducing risks and complexities through our services Investor value proposition Leading positions in attractive businesses Competitive advantages and differentiated business model Financial strength and capital efficiency Focused on driving improved results Committed to delivering shareholder value 18