Anixter International (AXE)
Q1 2010 Earnings Call
April 27, 2010 10:30 am ET
Robert Eck - Chief Executive Officer, President, Director, Chief Executive Officer of Anixter Inc. and President of Anixter Inc
Ted Dosch - Senior Vice President of Global Finance
Chris Kettmann - Senior Vice President
Dennis Letham - Chief Financial Officer and Executive Vice President of Finance
Matthew McCall - BB&T Capital Markets
Jeffrey Beach - Stifel, Nicolaus & Co., Inc.
Shawn Harrison - Longbow Research LLC
Kyle O'Meara - Robert W. Baird & Company, Inc.
Jeffrey Germanotta - William Blair & Company L.L.C.
Brent Rakers - Morgan Keegan & Company, Inc.
Hamzah Mazari - Crédit Suisse First Boston, Inc.
Nat Kellogg - Hudson Securities Inc.
Previous Statements by AXE
» Anixter International Inc. Q4 2009 Earnings Call Transcript
» Anixter International Inc. Q3 2009 Earnings Call Transcript
» Anixter International Inc. Q2 2009 Earnings Call Transcript
Good day, ladies and gentlemen. Welcome to Anixter International's First Quarter Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Chris Kettmann for opening remarks. Please go ahead, sir.
Thank you. Good morning, and thank you, all for joining us to discuss Anixter's First Quarter 2010 Results. By now, everyone should have received a copy of the press release which was sent out earlier this morning. If anyone still needs a copy, you can either go to Anixter's website or call Chris Kettmann at (312) 553-6716 and I can resend the information. On the line today from Anixter's management team are Bob Eck, President and CEO; Dennis Letham, Chief Financial Officer; and Ted Dosch, Senior VP of Finance. After management completes their opening remarks, we will open the line for a Q&A session.
Before we begin, I want to remind everyone that statements in this conference call, including words such as believe, expect, intend, anticipate, contemplate, estimate, plan, project, should, may, will or similar expressions are forward-looking statements. They are subject to a number of factors that could cause the Company's actual results to differ materially from what is indicated here. These factors include: General economic conditions, including the severity of current economic and financial market conditions, the level of customer demand, particularly for capital projects in the markets we serve, changes in supplier sales strategies or financial viability, political, economic or currency risks related to foreign operations, inventory obsolescence, copper price fluctuations, customer liability, risks associated with accounts receivable, the impact of regulation and regulatory investigated in legal proceedings and legal compliance risks, potential impairment of goodwill and risks associated with the integration of acquired companies. These uncertainties may cause our actual results to be materially different than those expressed in any forward-looking statements. We do not undertake to update any forward-looking statements. Please see the Company's SEC filings for more information.
At this point, I'll turn the call over to Dennis.
Thank you, Chris. For those of you who been with us on prior calls, or who I've talked to from time to time, either on the phone or in conferences, you could probably tell by the sound of my voice I'm fighting through some sinus conditions this morning. So I'm going to limit my comments to a few general remarks and then I'll turn this over to Ted for a more detailed review of the results for the quarter.
Let's start by reviewing some of the expectations we'd set out for this quarter during our last call. For those of you who were with us on the last few calls, you'll remember that we reported a series of quarters where our daily sales run rate was flat. We also said that it would take two or three quarters of solid GDP growth to generate the business needs or confidence within our customer base to drive renewed sales growth. In this context, we have stated that we felt it would be late in the first quarter or during the second quarter of 2010 before we began to see improved demand patterns developing. The daily sales of the first quarter started similarly to the past few quarters but as we got deeper into the quarter, there were noticeable improvements in the daily sales run rate for certain areas of our business. The positive trends then became more broad-based across the various end markets and geographies in which we operate. These improved trends have continued into the early weeks of the second quarter, leaving us pretty much where we expected to be at this stage in the recovery. As is always the case, our backlog equals approximately four weeks of sales and a high percentage of our orders continue to ship within 24 to 48 hours of receipt. So while the trends of the past few weeks have been positive, some uncertainty in the macroeconomic environment remains and there's no guarantee that these positive trends will continue. That said, assuming the economy continues to grow, our expectation would be for continued growth in our business as well.
Before Ted discusses the drivers of our operating performance, let me start by saying that this quarter's performance was in line with our internal expectations that we had communicated during the past several calls. The most significant event affecting that earnings was the loss incurred on the early retirement of debt which Ted will discuss in more detail later. Excluding that, the first quarter was a very straightforward quarter from an operating perspective. We feel very good about the business given the positive start to our year from a sales, earnings and cash flow perspective.
At this point, let me turn it over to Ted for a more detailed discussion of the first quarter results.
Thank you, Dennis. Consistent with our expectations, sales were up 5% sequentially but down almost 5% year-on-year on an organic basis. The sequential improvement is largely attributable to the fewer number of holidays in the first quarter when compared to the fourth quarter of 2009. The expected decline year-on-year was driven by three important factors. First, as mentioned in previous quarters, we believe that we needed to see six to nine months of GDP growth before our customer base would begin to see their respective businesses grow. Secondly, we exited a major lower margin customer contract in Q4 of last year. Lastly, our Electronic Wire & Cable business and our Aerospace business didn't hit their bottom until Q2 2009, making for a challenging year-over-year comparison in the current quarter.