jp morgan high yield conference -...

32
JP Morgan High Yield Conference Kevin Burns, SVP – Investor Relations and Treasurer February 25, 2019

Upload: vongoc

Post on 05-May-2019

214 views

Category:

Documents


0 download

TRANSCRIPT

JP Morgan High Yield ConferenceKevin Burns, SVP – Investor Relations and Treasurer

February 25, 2019

Safe Harbor StatementThe 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 1995. Theseforward-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 togeneral 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 financialviability, risks associated with the sale of nonconforming products and services, political, economic or currency risks related to foreign operations, inventory obsolescence, copper pricefluctuations, customer viability, risks associated with accounts receivable, the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, informationsecurity 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 timingand 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 theacquisitions 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 inany forward looking statements. We do not undertake to update any forward looking statements. Please see our Securities and Exchange Commission (“SEC”) filings for more information.

Non-GAAP Financial MeasuresIn 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 presentationboth 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 exchangefluctuations, copper prices and the number of billing days, both management and investors are provided with meaningful supplemental sales information to understand and analyze ourunderlying 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 incometaxes 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 periodover 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 theadjusted 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 andother 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 thepercentage change in Adjusted EBITDA divided by the percentage change in net sales. We believe that adjusted operating income, EBITDA, Adjusted EBITDA, and Adjusted EBITDA leverageprovide 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 businesssegment 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 notreflect 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 morecomparable 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 theunderlying performance of our business. EBITDA provides us with an understanding of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDAfurther 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 alsoexcluded 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 variouspurposes 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 usefulto 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 varysubstantially 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 havelimitations 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 measuresas 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 CondensedConsolidated 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.

SAFE HARBOR STATEMENT ANDNON-GAAP FINANCIAL MEASURES

2

TABLE OF CONTENTS

3

Business Overview

Key Priorities

Financial Profile

Invest in Anixter

1234

BUSINESS OVERVIEW

ANIXTER AT A GLANCE

5

2018

Sales $8.4B

Adjusted EBITDA $411M

Adjusted EBITDA margin 4.9%

Debt/Adjusted EBITDA 3.0x

Debt/Total Cap 44.4%

Fitch BBB-

Moody’s Ba3

S&P BB

NYSE Ticker AXE

2018 Sales by Segment

2018 Sales by Geography

Key Metrics

($0.9)

6

OUR STRATEGIC ACTIONS ADDED $1.8 BILLION TO OUR SALES RUN RATE

2017

$6.9

$0.6

$0.1

$2.0

2018CSD

Inner RangeAtlas Gentech

$6.2

2015Net

impact

2014Tri-Ed

2015Fasteners

2015Power

Solutions

2013

$0.2

$7.7

2016

Proforma Sales Bridge 2013 - 2018$Billions

+$2.2

2015$7.6

($0.1)

$7.9

$0.3

$8.4

$0.4

$0.1

Acquisition Revenues

Organic Growth

Divestiture

22.5%23.9%

2014 2018

FINANCIAL PERFORMANCE 2014-2018

7

$5.5

$8.4

2014 2018

$361

$411

2014 2018

Note: As reported, non-GAAP results

AdjustedEBITDA

($M)

Sales($B)

AdjustedROTC

11%CAGR

3%CAGR

+140bps

LEADING POSITIONS IN ATTRACTIVE BUSINESSES

8

Network & SecuritySolutions

(NSS)

Electrical & ElectronicSolutions

(EES)

Utility PowerSolutions

(UPS)

LeadingMarket Positions Global #1 Global Top 3 North America #1

Total AddressableMarket (TAM) ~$55B ~$450B ~$31B

Expected MarketGrowth CAGR 3 - 4% 2 - 3% ~4%

Markets are HighlyFragmented ~7% Share <1% Share <4% Share

BROAD AND DIVERSE CUSTOMER ACCESS PROVIDES GROWTH OPPORTUNITIESAND MINIMIZES EXPOSURE AND RISK

9

ChannelsData ContractorsNetwork IntegratorsPro A/V Contractors

NSS

Customer VerticalsArchitects/ConsultantsData CentersEducation

Security DealersSecurity IntegratorsWireless IntegratorsService Providers

Financial ServicesHealthcareStadiumsState and Federal Gov.RetailTechnology

UPS

Customer VerticalsInvestor Owned UtilitiesPublic Power Utilities

ChannelsUtility Co-opsGeneration & Transmission CooperativesUtility Contractors

ChannelsElectrical ContractorsEPCsPanel BuildersHarness Assemblers

Customer VerticalsAlternative EnergyData CentersFood and BeverageIndustrial AutomationIndustrial ManufacturingLighting ManufacturingMarine/ShipbuildingMaterial HandlingMiningMunicipalitiesOil, Gas and PetrochemicalOriginal Equipment ManufacturersTransportationWater/Waste Treatment

EES

Customers

Technology is Blurring the LinesAcross Segments

OUR PRODUCTS ARE CRITICAL PARTS OF A CONNECTED, CONTROLLED AND POWEREDINFRASTRUCTURE

10

NSS UPS• Infrastructure• Video surveillance• Access control• Fire/intrusion• Data centers• Power• Wireless• Professional A/V

• Electrical/electronic wireand cable

• Gear, controls,transformers,power generation

• Industrial automationproducts

• Indoor/outdoor lighting• Support and supplies

• Generation,transmission anddistribution

• MRO supplies• Smart grid infrastructure• Outdoor lighting• Security

EES• Electrical/electronic wire

and cable• Gear, controls,

transformers,power generation

• Industrial automationproducts

• Indoor/outdoor lighting• Support and supplies

STRONG, DIVERSE AND GLOBAL SUPPLIERS AND CUSTOMERS

11

Suppliers Customers

PIVOT AND SHIFT INTO HIGHER GROWTH OPPORTUNITIES

12

NSS EES UPS

Emerging technologies

•5G

•IoT

Global and complex customers

Smart Building (Inner Range)

Security and Professional A/V

Wireless

Power

OEM

•Marine

•Oil and gas

•Transit

•Harness assemblers and panel shops

Industrial

•Global EPCs

•Datacenter

•Renewable Energy

•Industrial infrastructure

•Mining

Public power customers

Electrical grid upgrade

Smart meters

Storm-hardening efforts

Natural disasters

•Hurricane rebuild

•Wildfire rebuild

EMERGING TECHNOLOGIES ARE GROWTH DRIVERS FOR THE BUSINESS

13

DIFFERENTIATORS PROVIDE COMPETITIVE ADVANTAGE AND BARRIERS TO ENTRY

14

Global Capabilities withLocal Presence

Reducing Costs, Risks andComplexities through our

Services

TechnicalExpertise

World class demonstration facilitiesExpertise in emerging technologies

Application engineering and complianceMetering labs for power utilities

Infrastructure Solutions LabSM andSolutions Briefing Centers

Sourcing

Inventory Management

Product Enhancement and Packaging

Global Logistics

E-Commerce

•International Deployment Experts

•Local Teams

•Global Support

•Deployments Services

•Product Enhancement Services

UNMATCHED GLOBAL CAPABILITIES WITH LOCAL PRESENCE

15

3,600+Technical SalesSpecialists, Multi-LevelTechnical Support

130,000+Customers$1.0 Billion+Inventory

600,000+Products

~50 Countries35+ Currencies20+ Languages

316Warehousesand BranchesWorldwide

Anixter is a Services Companythat Does Exceptional Distribution

Our Vision

16

17

REDUCING RISKS AND COMPLEXITIES THROUGH OUR SERVICES

InstallationEnhancement

Services

ProjectDeployment

Services

SupplyChain

Programs

Enhancing products throughservices to reduce the total costof installation for our customers

Saving time, reducing costs,mitigating risk and increasing

efficiencies through services formultifaceted projects

Optimizing operationalefficiencies through an

integrated supply chain model

EXAMPLES OF OUR SERVICES THAT HELP LOWER COST, COMPLEXITY AND RISKIN OUR CUSTOMERS’ SUPPLY CHAINS

18

Source-proven, quality-controlled products

Manage manufacturerrelationships and contracts

Access competitive pricingand product standardization

Reduce non-contract buying

Inventory managementsoftware

Decrease write-offs fromscrap, overruns and

obsolescence

Reduce product shortages

Streamline warehouseinvestment

Provision inventory

IP addressing

Cable bundling

Cable labeling

Cutting to length

Kitting and custompackaging

Pre-assembly/sub-assembly

Last- mile delivery

Import / exportdocumentation

preparation

B2B integration (EDI, JIT,ERP)

E-procurement Punchoutcatalog

Anixter.com (B2B)

eAnixter.com (contract)

Electronic invoices andpayments

Automated order confirmationand shipment process

Sourcing InventoryManagement

ProductEnhancement and

Packaging

GlobalLogistics

E-commerce

SUPPORTING CUSTOMERS THROUGH UNIQUE AND UNPARALLELED TECHNICAL EXPERTISE

19

Anixter Infrastructure Solutions LabSM

• Located at our headquarters in Glenview, ILo Proof of concept testing and solutions buildingo Data infrastructure product testingo Independent testingo Physical security testingo Industrial Communications and Control module

• Certified by Underwriters Laboratories®

• 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)

BuildingTechnologies

Data Centerand EnterpriseNetworks

PhysicalSecurity

Gear, Lightingand Controls

Solutions BriefingCenters

• Woburn, MA• Indianapolis, IN• Atlanta, GA• Sao Paulo, Brazil• Bracknell, U.K.

KEY PRIORITIES

KEY PRIORITIES FOR ANIXTER

21

Our Focuson the

Customer

Customer AccessStrategy

• Enable customers to access all solutions and expertise throughexisting selling organization

• Enable customers to connect with Anixter through channelsthey choose

Commitment toTechnology and

Innovation

• Specialists in highly technical solutions and new innovativetechnologies

• Innovation and business transformation will provide customerswith state-of-the-art electronic business platform, supportgrowth in the business and create operating efficiencies

Services• Installation enhancement services• Project deployment services• Supply chain programs

Will DriveImprovedResults

Profitability

• Above-market sales growth• Increase gross margin• Deliver operating expense leverage• Strong Adjusted EBITDA and consistent long-term performance

EnablingValue

Creation

Capital AllocationPriorities

• Organic growth• M&A with strategic benefit that meets financial and risk criteria• Opportunistic return to shareholders

FINANCIAL PROFILE

THREE LEVERS TO TRANSFORM PROFITABILITY

23

Above-market Growth

Leverage customer access strategy

Pivot and shift to growth markets

Increase global and complex servicesrevenue streams

Gross MarginImprovement

Relentless focus and training

Price optimization tools

Maximize vendor rebates

Operating ExpenseLeverage

Leverage fixed cost base

Tools/technology to drive salesproductivity

Warehouse network optimization

Gross Margin Improvement Funds Innovation and BusinessTransformation while Enabling Operating Expense Leverage

Free cash flow: Defined as net cash provided by operating activities less capital expenditures. Free cash flow is not restated for acquisitions and divestitures

COUNTER-CYCLICAL FREE CASH FLOW PROVIDES FINANCIAL FLEXIBILITY

24

($ in millions)

Generate Strong Free Cash FlowThroughout the Economic Cycle

STRATEGIC LEVERAGE TARGETS

25

Target range:2.5x - 3.0x

Target range:45% - 50%

CONSERVATIVE FINANCIAL POLICY WITH A PRUDENT APPROACH TO CAPITALALLOCATION

26

• Strong free cash flow allows Anixter to maintain a conservative leverage profile and ample liquidity throughoutthe business cycle

• Periods of acquisitions are immediately followed up by periods of debt reduction

$32 $22 $20 $26 $34 $32 $40 $27 $33$41 $42

$105

$35$41

$108

$59

$111 $151

$166

$180

$36 $55

$418 $823

$5

$150$272

$82 $152

$267 $133

$1

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

CapEx Share Repurchases Total Dividends Acquisitions Debt Reduction Operating Cash Flow

Capital Allocation Priorities are Organic Growth, M&A andOpportunistic Return to Shareholders

DEBT MATURITY PROFILEDECEMBER 28, 2018

27

$260.0

$321.9

$133.2

$35.8

$250.0$400.0

$107.6

$350.0

$0

$250

$500

$750

$1,000

2019 2020 2021 2022 2023 2024 2025

5.50% Senior Notes due 2023 Undrawn Other Facilities 5.125% Senior Notes due 20216.000% Senior Notes due 2025 Undrawn CAD Revolver Undrawn Inventory RevolverUndrawn A/R Revolver $600MM A/R Revolver

*Current borrowing base on A/R Revolver is $600.0 million**Undrawn facilities are shown net of Letters of Credit that are backed by the respective revolvers and facilities***Borrowings do not include $6.1 Million of CALA debt which is backed by Letters of Credit.

2019 FINANCIAL GOALS

28

2019 Financial Goals

Above-market Sales Growth 150 – 250 bps outperformance3% – 6% organic growth (based on current environment)

Increase Gross Margin 20 – 40 bps improvement

Improve Profitability 1.25x - 1.50x Adjusted EBITDA leverage~5.0% Adjusted EBITDA margin

Generate Strong Cash Flowand Maintain Financial Flexibility

Working capital ~ 18% of salesDebt-to-adjusted EBITDA 2.5x - 3.0x

Debt-to-capital 45% - 50%

2019 Segment Adjusted EBITDA Goals

NSS Adjusted EBITDA 7.0% - 7.5%

EES Adjusted EBITDA 6.5% - 7.0%

UPS Adjusted EBITDA 5.5% - 6.0%

LONG TERM FINANCIAL GOALS

29

Long Term Financial Outlook

Organic Sales Growth 3% - 5%

Adjusted EBITDA Margin >6.0%

Adjusted EBITDA Leverage ~1.5X

Working Capital as a % of Sales <18%

Debt / Adjusted EBITDA 2.5x - 3.0x

Debt-to-total Capital 45% - 50%

INVEST IN ANIXTER

INVEST IN ANIXTER

31

1. Positioned for sustainable growth• Leading positions in large, growing, fragmented businesses

• Diverse solutions across converging businesses

• Balanced sector approach provides growth opportunities while minimizing exposure and risk2. Differentiators provide competitive advantage and barriers to entry

• Global capabilities with local presence• Technical expertise• Customized and scalable supply chain solutions

3. Culture of ethics and integrity• The Blue Book guides our philosophy, culture and business style

4. Financial strength and capital efficiency• Strong free cash flow generation through the economic cycle

5. Innovation and Business Transformation• To drive strong financial performance and shareholder value creation

THANK YOU