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Anixter International Inc. Reports Fourth Quarter 2012 Results

Enterprise Cabling and Security Solutions (“ECS”) sales of $800.0 million declined 1 percent from the prior year period, impacted by the continuation of the trends we experienced throughout 2012 with companies delaying commitments to data center investments. Partially offsetting the decline was a 12 percent increase in security sales, which accounted for approximately 28 percent of segment sales. Adjusted operating income was $44.3 million, excluding $12.3 million of pension-related and restructuring charges, compared to $48.7 million in the year ago quarter. Adjusted operating margin was 5.5 percent compared to 5.6 percent in the previous quarter and 6.0 percent in the year ago quarter. Persistent weakness in the European economy and a product mix shift as security becomes an increasing part of the overall sales mix were the primary drivers of the margin decline versus the previous periods.

Electrical and Electronic Wire and Cable (“W&C”) achieved record fourth quarter sales of $544.1 million, up 18 percent from the prior year period, reflecting the acquisition of Jorvex and the continued strength in our natural resource extraction and power generation businesses. The strength was geographically broad-based, including record fourth quarter sales in resource rich regions such as Canada, Latin America and the Middle East. Adjusted operating income was $43.7 million, excluding $8.5 million of pension-related and restructuring charges, compared to $39.4 million in the year ago quarter. Adjusted operating margin was 8.0 percent compared to 8.5 percent in the previous quarter and 8.6 percent in the year ago quarter. The change in margin was largely a result of a mix shift from OEM to Industrial products in North America, and an increase in lower margin project activity outside of the US.

OEM Supply (“OEM”) sales of $200.3 million declined by 12.4 percent from the prior year quarter driven by a year-over-year decline in heavy truck production levels in North America along with weaker manufacturing production levels in the European region. Adjusted operating loss was $2.7 million, excluding $25.9 million of impairment, pension-related and restructuring charges, compared to an operating profit of $3.5 million in the year ago quarter. Adjusted operating margin was negative 1.4 percent compared to 0.2 percent in the previous quarter and 1.5 percent in the year ago quarter.

Discussion of Impairment, Pension-related and Restructuring Charges

In connection with the previously announced change in reportable segments and in accordance with accounting guidance, the Company was required to reassign the carrying amount of goodwill to its new reporting units in the fourth quarter of 2012. This interim assessment of the recoverability of goodwill and the recoverability of the Company's long lived assets assigned to the reporting units concluded that the estimated fair value of the OEM Supply business was lower than the carrying value of the net assets. This result is primarily due to the poor global economic conditions that have disproportionately impacted this segment of our business, resulting in impairment charges of $21.3 million in the fourth quarter of 2012.

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