SEC Info - Anixter International Inc

(In millions, except per share amounts)

Net sales

i 8,845.6

i 8,400.2

i 7,927.4

Cost of goods sold

i 7,069.8

i 6,742.2

i 6,356.4

Gross profit

i 1,775.8

i 1,658.0

i 1,571.0

Operating expenses

i 1,408.3

i 1,348.3

i 1,258.1

Operating income

i 367.5

i 309.7

i 312.9

Other expense:

Interest expense

( i 77.1)

( i 76.3)

( i 74.7)

Other, net

i 3.0

( i 10.2)

( i 0.6)

Income before income taxes

i 293.4

i 223.2

i 237.6

Income tax expense

i 30.5

i 66.9

i 128.6

Net income

i 262.9

i 156.3

i 109.0

Income per share:

Basic

i 7.71

i 4.62

i 3.24

Diluted

i 7.67

i 4.58

i 3.21

Basic weighted-average common shares outstanding

i 34.1

i 33.8

i 33.6

Effect of dilutive securities:

Stock options and units

i 0.2

i 0.3

i 0.4

Diluted weighted-average common shares outstanding

i 34.3

i 34.1

i 34.0

See accompanying notes to the Consolidated Financial Statements.

ANIXTER INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended

(In millions)

Net income

i 262.9

i 156.3

i 109.0

Other comprehensive income (loss):

Foreign currency translation

i 23.1

( i 45.4)

i 30.7

Changes in unrealized pension cost, net of tax

( i 13.3)

( i 13.7)

i 9.9

Other comprehensive income (loss)

i 9.8

( i 59.1)

i 40.6

Comprehensive income

i 272.7

i 97.2

i 149.6

See accompanying notes to the Consolidated Financial Statements.

ANIXTER INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts)

ASSETS

Current assets:

Cash and cash equivalents

i 79.6

i 81.0

Accounts receivable, net

i 1,540.3

i 1,600.0

Inventories

i 1,354.7

i 1,440.4

Other current assets

i 63.3

i 50.6

Total current assets

i 3,037.9

i 3,172.0

Property and equipment, at cost

i 432.3

i 398.4

Accumulated depreciation

( i 257.4)

( i 235.1)

Property and equipment, net

i 174.9

i 163.3

Operating leases

i 273.3

i —

Goodwill

i 828.7

i 832.0

Intangible assets, net

i 361.2

i 392.9

Other assets

i 132.9

i 92.9

Total assets

i 4,808.9

i 4,653.1

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

i 1,100.3

i 1,320.0

Accrued expenses

i 330.3

i 309.0

Current operating lease obligations

i 62.9

i —

Total current liabilities

i 1,493.5

i 1,629.0

Long-term debt

i 1,059.7

i 1,252.7

Operating lease obligations

i 219.1

i —

Other liabilities

i 175.7

i 201.0

Total liabilities

i 2,948.0

i 3,082.7

Stockholders’ equity:

Common stock - $1.00 par value, 100,000,000 shares authorized, 34,214,795 and 33,862,704 shares issued and outstanding at January 3, 2020 and December 28, 2018, respectively

i 34.2

i 33.9

Capital surplus

i 310.2

i 292.7

Retained earnings

i 1,783.8

i 1,513.2

Accumulated other comprehensive loss:

Foreign currency translation

( i 145.5)

( i 168.6)

Unrecognized pension liability, net

( i 121.8)

( i 100.8)

Total accumulated other comprehensive loss

( i 267.3)

( i 269.4)

Total stockholders’ equity

i 1,860.9

i 1,570.4

Total liabilities and stockholders’ equity

i 4,808.9

i 4,653.1

See accompanying notes to the Consolidated Financial Statements.

ANIXTER INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended

(In millions)

Operating activities:

Net income

i 262.9

i 156.3

i 109.0

Adjustments to reconcile net income to net cash provided by operating activities:

Loss on extinguishment of debt

i —

i 4.6

i —

Depreciation

i 37.2

i 31.7

i 28.2

Amortization of intangible assets

i 35.0

i 37.3

i 36.1

Stock-based compensation

i 20.0

i 18.9

i 18.1

Deferred income taxes

( i 41.4)

( i 1.6)

i 13.6

Pension plan contributions

( i 6.3)

( i 7.4)

( i 27.4)

Pension plan expenses

i 6.4

i 4.3

i 10.5

Impact of tax legislation

i —

( i 2.1)

i 35.6

Impairment of intangible assets

i —

i 5.7

Changes in current assets and liabilities, net

Accounts receivable

i 66.6

( i 170.6)

( i 54.2)

Inventories

i 91.4

( i 204.7)

( i 39.8)

Accounts payable

( i 224.2)

i 245.3

i 58.5

Other current assets and liabilities, net

( i 7.1)

i 28.0

( i 10.0)

Other, net

( i 12.6)

( i 2.3)

( i 0.1)

Net cash provided by operating activities

i 227.9

i 137.7

i 183.8

Investing activities:

Acquisitions of businesses, net of cash acquired

i —

( i 150.1)

i —

Capital expenditures, net

( i 40.0)

( i 42.4)

( i 41.1)

Other

i 2.9

i 9.1

i —

Net cash used in investing activities

( i 37.1)

( i 183.4)

( i 41.1)

Financing activities:

Proceeds from borrowings

i 4,226.5

i 3,192.4

i 1,843.3

Repayments of borrowings

( i 4,425.0)

( i 3,082.4)

( i 1,884.0)

Retirement of Notes due 2019

i —

( i 353.9)

i —

Proceeds from issuance of Notes due 2025

i —

i 246.9

i —

Repayments of Canadian term loan

i —

( i 100.2)

Deferred financing costs

i —

( i 2.9)

i —

Proceeds from stock options exercised

i 4.7

i 1.5

i 5.0

Other, net

( i 2.1)

i —

( i 0.2)

Net cash (used in) provided by financing activities

( i 195.9)

i 1.6

( i 136.1)

(Decrease) increase in cash and cash equivalents

( i 5.1)

( i 44.1)

i 6.6

Effect of exchange rate changes on cash balances

i 3.7

i 9.1

( i 5.7)

Cash and cash equivalents at beginning of period

i 81.0

i 116.0

i 115.1

Cash and cash equivalents at end of period

i 79.6

i 81.0

i 116.0

Cash paid for interest

i 74.3

i 73.9

i 70.6

Cash paid for taxes

i 87.1

i 88.4

i 76.4

See accompanying notes to the Consolidated Financial Statements.

ANIXTER INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock

Capital

Surplus

Retained

Earnings

Accumulated Other

Comprehensive Loss

Amount

Total

(In millions)

Balance at December 30, 2016

i 33.4

i 261.8

i 1,247.9

( i 250.9)

i 1,292.2

Net income

—

i 109.0

—

i 109.0

Other comprehensive income:

Foreign currency translation

—

i 30.7

Changes in unrealized pension cost, net of tax benefit of $ i 10.4

—

i 9.9

Stock-based compensation

—

i 18.1

—

i 18.1

Issuance of common stock and related taxes

i 0.3

( i 1.2)

—

( i 0.9)

Balance at December 29, 2017

i 33.7

i 278.7

i 1,356.9

( i 210.3)

i 1,459.0

Net income

—

i 156.3

—

i 156.3

Other comprehensive loss:

Foreign currency translation

—

( i 45.4)

Changes in unrealized pension cost, net of tax of $ i 4.7

—

( i 13.7)

Stock-based compensation

—

i 18.9

—

i 18.9

Issuance of common stock and related taxes

i 0.2

( i 4.9)

—

( i 4.7)

Balance at December 28, 2018

i 33.9

i 292.7

i 1,513.2

( i 269.4)

i 1,570.4

Net income

—

i 262.9

—

i 262.9

Other comprehensive income:

Foreign currency translation

—

i 23.1

Changes in unrealized pension cost, net of tax of $ i 2.4

—

( i 13.3)

Reclassification of tax effects ^(a)

—

i 7.7

( i 7.7)

—

Stock-based compensation

—

i 20.0

—

i 20.0

Issuance of common stock and related taxes

i 0.3

( i 2.5)

—

( i 2.2)

Balance at January 3, 2020

i 34.2

i 310.2

i 1,783.8

( i 267.3)

i 1,860.9

(a)The Company reclassified $ i 7.7 million of tax benefits from "Accumulated other comprehensive loss" to "Retained earnings" for the tax effects resulting from the December 22, 2017 enactment of the Tax Cuts and Jobs Act in accordance with the adoption of Accounting Standards Update 2018-02, "Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" in the first quarter of 2019.

See accompanying notes to the Consolidated Financial Statements.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. i SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

i Organization: Anixter International Inc. and its subsidiaries (collectively referred to as "Anixter" or the "Company"), formerly known as Itel Corporation, which was incorporated in Delaware in 1967, is a leading distributor of enterprise cabling and security solutions, electrical and electronic wire and cable solutions and utility power solutions through Anixter Inc. and its subsidiaries.

i Basis of presentation: The Consolidated Financial Statements include the accounts of Anixter International Inc. and its subsidiaries. The Company's fiscal year ends on the Friday nearest December 31 and includes 53 weeks in 2019 and 52 weeks in 2018 and 2017. Certain prior period amounts have been reclassified to conform to the current year presentation.

i Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Anixter's significant estimates include allowance for doubtful accounts, inventory obsolescence, pension obligations, goodwill and indefinite-lived intangible assets, deferred tax assets and uncertain tax positions.

i Cash and cash equivalents: Cash equivalents consist of short-term, highly liquid investments with an original maturity i three months or less. Such investments are stated at cost, which approximates fair value. /

i Receivables and allowance for doubtful accounts: The Company carries its accounts receivable at their face amounts less an allowance for doubtful accounts, which was $ i 30.4 million and $ i 39.9 million at the end of 2019 and 2018, respectively. On a regular basis, Anixter evaluates its accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances, as well as credit conditions and history of write-offs and collections. The amounts charged to income for doubtful accounts were $ i 10.1 million, $ i 8.5 million and $ i 10.0 million in 2019, 2018 and 2017, respectively. A receivable is considered past due if payments have not been received within the agreed upon invoice terms. Receivables are written off and deducted from the allowance account when the receivables are deemed uncollectible. /

Inventories: Inventories, consisting primarily of purchased finished goods, are stated at the lower of cost or market. Cost is determined using the average-cost method. The Company has agreements with some vendors that provide a right to return products. This right is typically limited to a small percentage of total purchases from that vendor. Such rights provide that Anixter can return slow-moving product and the vendor will replace it with faster-moving product chosen by the Company. Some vendor agreements contain price protection provisions that require the manufacturer to issue a credit in an amount sufficient to reduce Anixter's current inventory carrying cost down to the manufacturer’s current price. The Company considers these agreements in determining the reserve for obsolescence.

At January 3, 2020 and December 28, 2018, the Company reported inventory of $ i 1,354.7 million and $ i 1,440.4 million, respectively (net of inventory reserves of $ i 50.0 million and $ i 51.5 million, respectively). Each quarter the Company reviews for excess inventories and makes an assessment of the net realizable value. There are many factors that management considers in determining whether or not the amount by which a reserve should be established. These factors include the following:

•Return or rotation privileges with vendors

•Price protection from vendors

•Expected future usage

•Whether or not a customer is obligated by contract to purchase the inventory

•Current market pricing

•Historical consumption experience

•Risk of obsolescence

If circumstances related to the above factors change, there could be a material impact on the net realizable value of the inventories.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Property and equipment: At January 3, 2020, net property and equipment consisted of $ i 126.0 million of equipment and computer software, $ i 39.5 million of buildings and leasehold improvements, $ i 8.4 million of finance leases and $ i 1.0 million of land. At December 28, 2018, net property and equipment consisted of $ i 125.8 million of equipment and computer software, $ i 36.5 million of buildings and leasehold improvements and $ i 1.0 million of land. Equipment and computer software are recorded at cost and depreciated by applying the straight-line method over their estimated useful lives, which range from i 2 to i 20 years. Buildings are recorded at cost and depreciated by applying the straight-line method over their estimated useful lives, which are up to i 40 years. Leasehold improvements are depreciated over their useful life or over the term of the related lease, whichever is shorter. Upon sale or retirement, the cost and related depreciation are removed from the respective accounts and any gain or loss is included in income. Maintenance and repair costs are expensed as incurred. Depreciation expense, including an immaterial amount of finance lease depreciation, was $ i 37.2 million, $ i 31.7 million and $ i 28.2 million in 2019, 2018 and 2017, respectively.

The Company evaluates the recoverability of the carrying amount of its property and equipment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. In order to measure an impairment loss of property and equipment, the Company estimates the fair value by using an orderly liquidation valuation. An orderly liquidation value is the amount that could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell the asset in the existing condition where it is located, as of a specific date, assuming the highest and best use of the asset by market participants. The valuation method also considers that it is physically possible, legally permissible and financially feasible to use the asset at the measurement date. The inputs used for the valuation include significant unobservable inputs, or Level 3 inputs, as described in the accounting fair value hierarchy, based on assumptions that market participants would use. A second step of the analysis is performed by comparing the orderly liquidation value to the carrying amount of that asset. The orderly liquidation values are applied against the original cost of the assets and the impairment loss measured as the difference between the liquidation value of the assets and the net book value of the assets.

Costs for software developed for internal use are capitalized when the preliminary project stage is complete and Anixter has committed funding for projects that are likely to be completed. Costs that are incurred during the preliminary project stage are expensed as incurred. Once the capitalization criteria has been met, external direct costs of materials and services consumed in developing internal-use computer software, payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use computer software project (to the extent of their time spent directly on the project) and interest costs incurred when developing computer software for internal use are capitalized. At January 3, 2020 and December 28, 2018, capitalized costs, net of accumulated amortization, for software developed for internal use were approximately $ i 60.8 million and $ i 64.7 million, respectively. Amortization expense charged to operations for capitalized costs was $ i 7.2 million, $ i 6.6 million and $ i 5.5 million in 2019, 2018 and 2017, respectively. Interest expense incurred in connection with the development of internal use software is capitalized based on the amounts of accumulated expenditures and the weighted-average cost of borrowings for the period. Interest costs capitalized for fiscal 2019, 2018 and 2017 were $ i 0.9 million, $ i 0.1 million and $ i 0.3 million, respectively.

i Leases: The Company adopted Accounting Standards Update ("ASU") 2016-02, Leases, as of December 29, 2018. The adoption of this standard is discussed below within the section titled "Recently issued and adopted accounting pronouncements." At contract inception the Company determines if an arrangement is a lease. Operating leases are included in "Operating leases", "Current operating lease obligations" and "Operating lease obligations" on the Consolidated Balance Sheets. Finance leases are included in "Property and equipment, net", "Accrued expenses" and "Long-term debt" on the Consolidated Balance Sheets. The gross amount of the balances recorded related to finance leases was immaterial as of January 3, 2020, and December 28, 2018. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components and has elected to account for these components as a single lease component.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Operating lease assets and liabilities are recognized at the commencement date, based on the present value of the future minimum lease payments. A certain number of these leases contain rent escalation clauses either fixed or adjusted periodically for inflation or market rates that are factored into the Company's determination of lease payments. Anixter also has variable lease payments that do not depend on a rate or index, primarily for items such as common area maintenance and real estate taxes, which are recorded as variable expense when incurred. The operating lease asset includes advance payments and excludes incentives and initial direct costs incurred. As most of Anixter’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date to discount payments to the present value. Most operating leases contain renewal options, some of which also include options to early terminate the leases. The exercise of these options is at the Company's discretion. Lease terms include these options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Goodwill: The Company evaluates goodwill for impairment annually at the beginning of the third quarter and when events or changes in circumstances indicate the carrying value of reporting units might exceed their current fair values. The Company assesses goodwill for impairment by first performing a qualitative assessment, which considers specific factors, based on the weight of evidence, and the significance of all identified events and circumstances in the context of determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount using the qualitative assessment, Anixter performs the two-step impairment test. The Company may also bypass the qualitative assessment and proceed directly to the two-step impairment test. The first step of the impairment test is to identify a potential impairment by comparing the fair value of a reporting unit with its carrying amount. The estimates of fair value of a reporting unit are determined using the income approach and the market approach as described below. If step one of the test indicates a carrying value above the estimated fair value, the second step of the goodwill impairment test is performed by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The implied residual value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.

The income approach is a quantitative evaluation to determine the fair value of the reporting unit. Under the income approach fair value is determined based on estimated future cash flows discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit and the rate of return a market participant would expect to earn. The inputs used for the income approach are significant unobservable inputs, or Level 3 inputs, as described in the accounting fair value hierarchy. Estimated future cash flows are based on internal projection models, industry projections and other assumptions deemed reasonable by management.

The market approach measures the fair value of a reporting unit through the analysis of recent sales, offerings, and financial multiples (earnings before interest, tax, depreciation and amortization ("EBITDA")) of comparable businesses, which would be considered Level 2 in the fair value hierarchy. Consideration is given to the financial conditions and operating performance of the reporting unit being valued relative to those publicly-traded companies operating in the same or similar lines of business.

In connection with the annual assessment of goodwill at the beginning of the third quarter of 2019, the Company bypassed the qualitative assessment and performed a quantitative test for all reporting units and utilized a combination of the income and market approaches. As a result of this assessment, the Company concluded that no impairment existed and the carrying amount of goodwill to be fully recoverable.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Intangible assets: i As of January 3, 2020 and December 28, 2018, the Company's intangible asset balances are as follows:

(In millions)

Average useful life (in years)

Gross carrying amount

Accumulated amortization

Gross carrying amount

Accumulated amortization

Customer relationships

i 6- i 20

i 503.6

( i 176.4)

i 500.1

( i 143.7)

Exclusive supplier agreement

i 21

i 22.3

( i 5.6)

i 22.1

( i 4.5)

Trade names

i 3- i 10

i 22.6

( i 13.5)

i 21.8

( i 12.6)

Trade names

Indefinite

i 4.9

—

i 4.9

—

Non-compete agreements

i 1- i 5

i 9.2

( i 7.9)

i 9.2

( i 6.5)

Intellectual property

i 8

i 2.5

( i 0.5)

i 2.3

( i 0.2)

Total

i 565.1

( i 203.9)

i 560.4

( i 167.5)

Anixter continually evaluates whether events or circumstances have occurred that would indicate the remaining estimated useful lives of intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. Trade names that have been identified to have indefinite lives are not being amortized based on the expectation that the trade name products will generate future cash flows for the foreseeable future. In 2017, the Company recorded an impairment charge of $ i 5.7 million related to certain indefinite-lived trade names in its NSS reporting unit. This impairment charge is included in "Operating expenses" in the Consolidated Statement of Income. The impairment charge was recorded as Anixter no longer plans to use certain trade names on certain products. All remaining indefinite-lived trade names are expected to be used on existing products for the foreseeable future.

For definite-lived intangible assets, the Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. The Company's definite-lived intangible assets are primarily related to customer relationships. In order to measure an impairment loss of customer relationships, Anixter estimates the fair value by using an excess earnings model, a form of the income approach. The analysis requires making various judgments, including assumptions about future cash flows based on projected growth rates of revenue and expense, rates of customer attrition and working capital needs. The assumptions about future cash flows and growth rates are based on management’s forecast of the asset group. The key inputs utilized in determining the fair value of customer relationships include significant unobservable inputs, or Level 3 inputs, as described in the accounting fair value hierarchy. Inputs included discount rates derived from an estimated weighted-average cost of capital, which reflected the overall level of inherent risk of the asset group and the rate of return a market participant would expect to earn, as well as customer attrition rates.

Intangible amortization expense is expected to average $ i 33.6 million per year for the next i five years. The Company's definite lived intangible assets are amortized over a straight line basis as it approximates the customer attrition patterns and best estimates the use pattern of the assets.

/ i i

Other, net: The following represents the components of "Other, net" as reflected in the Consolidated Statements of Income:

Years Ended

(In millions)

Other, net:

Foreign exchange loss

( i 2.2)

( i 8.2)

( i 3.4)

Cash surrender value of life insurance policies

i 4.4

( i 1.3)

i 2.4

Net periodic pension benefit

i 2.4

i 5.1

i 0.2

Loss on extinguishment of debt

i —

( i 4.6)

i —

Other

( i 1.6)

( i 1.2)

i 0.2

Total other, net

i 3.0

( i 10.2)

( i 0.6)

Certain subsidiaries of Anixter conduct business in a currency other than the legal entity’s functional currency. Transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. The increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that is included in "Other, net" in the Consolidated Statements of Income.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company purchases foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated accounts on its reported income. The foreign currency forward contracts are not designated as hedges for accounting purposes. The Company's strategy is to negotiate terms for its derivatives and other financial instruments to be highly effective, such that the change in the value of the derivative offsets the impact of the underlying hedged item (e.g., various foreign currency-denominated accounts). Its counterparties to foreign currency forward contracts have investment-grade credit ratings. Anixter expects the creditworthiness of its counterparties to remain intact through the term of the transactions. The Company regularly monitors the creditworthiness of its counterparties to ensure no issues exist which could affect the value of the derivatives.

The Company does not hedge i 100% of its foreign currency-denominated accounts. In addition, the results of hedging can vary significantly based on various factors, such as the timing of executing the foreign currency forward contracts versus the movement of the currencies as well as the fluctuations in the account balances throughout each reporting period. The fair value of the foreign currency forward contracts is based on the difference between the contract rate and the current exchange rate. The fair value of the foreign currency forward contracts is measured using observable market information. These inputs would be considered Level 2 in the fair value hierarchy. At January 3, 2020 and December 28, 2018, foreign currency forward contracts were revalued at then-current foreign exchange rates with the changes in valuation reflected directly in "Other, net" in the Consolidated Statements of Income offsetting the transaction gain/loss recorded on the foreign currency-denominated accounts. At January 3, 2020 and December 28, 2018, the gross notional amount of the foreign currency forward contracts outstanding was approximately $ i 130.2 million and $ i 96.3 million, respectively. At January 3, 2020 and December 28, 2018, the net notional amount of the foreign currency forward contracts outstanding was approximately $ i 95.4 million and $ i 75.7 million, respectively. While all of the Company's foreign currency forward contracts are subject to master netting arrangements with its counterparties, assets and liabilities related to these contracts are presented on a gross basis within the Consolidated Balance Sheets. The gross fair value of assets and liabilities related to foreign currency forward contracts are immaterial.

The combined effect of changes in both the equity and bond markets resulted in changes in the cash surrender value of the Company's company owned life insurance policies associated with the sponsored deferred compensation program.

Fair value measurement: Assets and liabilities measured at fair value on a recurring basis consist of foreign currency forward contracts and the assets of Anixter's defined benefit plans. The fair value of the foreign currency forward contracts is discussed above in the section titled "Other, net." The fair value of the assets of Anixter's defined benefit plans is discussed in Note 8. "Pension Plans, Post-Retirement Benefits and Other Benefits". Fair value disclosures of debt are discussed in Note 5. "Debt".

The Company measure the fair values of goodwill, intangible assets and property and equipment on a nonrecurring basis if required by impairment tests applicable to these assets. The fair value measurements of goodwill, intangible assets and property and equipment are discussed above.

The inputs used in the determination of fair values are categorized according to the fair value hierarchy as being Level 1, Level 2 or Level 3. In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets or liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

i Revenue recognition: Anixter is a leading global distributor of network and security solutions, electrical and electronic solutions and utility power solutions. Through a global distribution network along with supply chain and technical expertise, Anixter helps customers reduce the risk, cost and complexity of their supply chains. Anixter is a leader in providing advanced inventory management services including procurement, just-in-time delivery, material management programs, turn-key yard layout and management, quality assurance testing, component kit production, storm/event kitting, small component assembly and e-commerce and electronic data interchange to a broad spectrum of customers with nearly i 600,000 products. Revenue arrangements primarily consist of a single performance obligation to transfer promised goods or services. See Note 10. "Business Segments" for revenue disaggregated by geography. /

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Sales to customers and related cost of sales are primarily recognized at the point in time when control of goods transfers to the customer. For product sales, this generally occurs upon shipment of the products, however, this may occur at a later date depending on the agreed upon sales terms, such as delivery at the customer's designated location, or based on consignment terms. In instances where goods are not stocked by Anixter and delivery times are critical, product is purchased from the manufacturer and drop-shipped to the customer. Anixter generally takes control of the goods when shipped by the manufacturer and then recognizes revenue when control of the product transfers to the customer. When providing services, sales are recognized over time as control transfers to the customer, which occurs as services are rendered.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company estimates different forms of variable consideration at the time of sale based on historical experience, current conditions and contractual obligations. Revenue is recorded net of customer discounts, rebates and similar charges. When Anixter offers the right to return product, historical experience is utilized to establish a liability for the estimate of expected returns, which was $ i 36.7 million and $ i 35.0 million at January 3, 2020 and December 28, 2018, respectively. Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue. The Company has elected to treat shipping and handling as a fulfillment activity. The practical expedient not to disclose information about remaining performance obligations has also been elected as these contacts have an original duration of one year or less or are contracts where the Company has applied the practical expedient to recognize service revenue in proportion to the amount Anixter has the right to invoice. The Company typically receives payment i 30 to i 60 days from the point it has satisfied the related performance obligation.

At December 28, 2018, $ i 17.2 million of deferred revenue related to outstanding contracts was reported in "Accrued expenses" in the Company's Consolidated Balance Sheet. This balance primarily represents prepayments from customers. During the year ended January 3, 2020, $ i 14.9 million of this deferred revenue was recognized. At January 3, 2020, deferred revenue was $ i 11.6 million. The Company expects to recognize this balance as revenue within the next twelve months.

i Advertising and sales promotion: Advertising and sales promotion costs are expensed as incurred. Advertising and promotion costs included in operating expenses on the Consolidated Statements of Income were $ i 15.6 million, $ i 15.8 million and $ i 10.6 million in 2019, 2018 and 2017, respectively. The majority of the advertising and sales promotion costs are recouped through various cooperative advertising programs with vendors. /

i Shipping and handling fees and costs: Shipping and handling fees billed to customers are included in net sales. Shipping and handling costs associated with outbound freight are included in "Operating expenses" on the Consolidated Statements of Income, which were $ i 133.1 million, $ i 139.7 million and $ i 119.1 million in 2019, 2018 and 2017, respectively. /

i Stock-based compensation: The Company measures the cost of all share-based payments to employees, including grants of employee stock options, using a fair-value-based method. Compensation costs are determined based on the fair value at the grant date and amortized over the respective vesting period representing the requisite service period. The Company accounts for forfeitures of share-based payments as they occur.

Accumulated other comprehensive loss: Unrealized gains and losses are accumulated in "Accumulated other comprehensive loss" ("AOCI"). These changes are also reported in "Other comprehensive income (loss)" on the Consolidated Statements of Comprehensive Income. These include unrealized gains and losses related to the Company's defined benefit obligations and foreign currency translation. See Note 8. "Pension Plans, Post-Retirement Benefits and Other Benefits" for pension related amounts reclassified into net income.

Investments in several subsidiaries are recorded in currencies other than the U.S. dollar ("USD"). As these foreign currency denominated investments are translated at the end of each period during consolidation using period-end exchange rates, fluctuations of exchange rates between the foreign currency and the USD increase or decrease the value of those investments. The results of operations for foreign subsidiaries, where the functional currency is not the USD, are translated into USD using the average exchange rates during the periods reported, while the assets and liabilities are translated using period-end exchange rates. The assets and liabilities related translation adjustments are recorded as a separate component of AOCI, "Foreign currency translation." In addition, as Anixter's subsidiaries maintain investments denominated in currencies other than local currencies, exchange rate fluctuations will occur. Borrowings are raised in certain foreign currencies to minimize the exchange rate translation adjustment risk.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

i Income taxes: Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based upon enacted tax laws and rates. The Company maintains valuation allowances to reduce deferred tax assets if it is more likely than not that some portion or all of the deferred tax asset will not be realized based on available evidence. Anixter recognizes the benefit of tax positions when a benefit is more likely than not (i.e., greater than i 50% likely) to be sustained on its technical merits. Recognized tax benefits are measured at the largest amount that is more likely than not to be sustained, based on cumulative probability, in final settlement of the position.

Net income per share: Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The Company had i 0.2 million, i 0.3 million, and i 0.4 million in 2019, 2018 and 2017, respectively, of additional shares related to stock options and stock units included in the computation of diluted earnings per share because the effect of those common stock equivalents were dilutive during these periods. Antidilutive stock options and units are excluded from the calculation of weighted-average shares for diluted earnings per share. For 2019, 2018 and 2017, the antidilutive stock options and units were immaterial.

/ i

Recently issued and adopted accounting pronouncements: In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases, which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. In July 2018, the FASB issued additional authoritative guidance providing companies with an optional transition method to use the effective date of ASU 2016-02 as the date of initial application of transition and not restate comparative periods. The Company adopted the standard in the first quarter of 2019 using this optional transition method. The Company elected the package of practical expedients, which allows it to carry forward historical lease classification, the practical expedient to not separate non-lease components from lease components, and the short-term lease accounting policy election as defined in ASU 2016-02. The Company implemented internal controls and a lease accounting information system to enable the preparation of financial information on adoption. The standard had a material impact on the Company's Consolidated Balance Sheet, but did not have an impact on the Consolidated Statements of Income. The most significant impact was the recognition of right-of-use assets of $ i 244.1 million and lease liabilities of $ i 249.6 million for operating leases, while accounting for finance leases remained substantially unchanged.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from the December 22, 2017 enactment of the Tax Cuts and Jobs Act (the "Act") that are stranded in accumulated other comprehensive income. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted this standard effective the first quarter of fiscal year 2019 and elected to reclassify $ i 7.7 million of tax benefits from "Accumulated other comprehensive loss" to "Retained earnings" within its Consolidated Financial Statements.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting, which will expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted this standard effective the first quarter of fiscal year 2019. The result of this adoption did not have a material impact on the Consolidated Financial Statements.

i Recently issued accounting pronouncements not yet adopted: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of adoption of this ASU, but it is not expected to have a material effect on the Company's Consolidated Financial Statements.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which removes step two from the goodwill impairment test. Step two measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. The new guidance requires an entity to perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the impact the adoption of this ASU will have on its methodology for evaluating goodwill for impairment subsequent to adoption of this standard.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Changes to the Disclosure Requirements for Fair Value Measurement, which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General: Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. The standard is effective for Anixter's financial statements issued for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes, which clarifies existing guidance and removes certain exceptions to the general principles for income taxes. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its Consolidated Financial Statements.

The Company does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on its Consolidated Financial Statements or disclosures.

NOTE 2. i ACCRUED EXPENSES

Accrued expenses consisted of the following:

(In millions)

Salaries and fringe benefits

i 136.2

i 109.7

Other accrued expenses

i 194.1

i 199.3

Total accrued expenses

i 330.3

i 309.0

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 3. i RESTRUCTURING CHARGES

The Company considers restructuring activities to be programs whereby Anixter fundamentally changes its operations, such as closing and consolidating facilities, reducing headcount and realigning operations in response to changing market conditions. i The following table summarizes activity related to liabilities associated with restructuring activities:

Restructuring Activity

Q2 2018
Plan

Employee-Related Costs (a)

Facility Exit and Other Costs (b)

Total

Balance at December 29, 2017

i —

Charges

i 9.6

i 0.5

i 10.1

Payments and other

( i 2.9)

( i 0.3)

( i 3.2)

Balance at December 28, 2018

i 6.7

i 0.2

i 6.9

Payments and other

( i i 4.9 / )

( i 0.1)

( i 5.0)

Balance at January 3, 2020

i 1.8

i 0.1

i 1.9

(a)Employee-related costs primarily consist of severance benefits provided to employees who have been involuntarily terminated.

(b)Facility exit and other costs primarily consist of lease termination costs.

Q2 2018 Restructuring Plan

In the second quarter of 2018, the Company recorded a pre-tax charge of $ i 2.1 million, $ i 1.3 million and $ i 1.1 million in its Network & Security Solutions ("NSS"), Electrical & Electronic Solutions ("EES") and Utility Power Solutions ("UPS") segments, respectively, and an additional $ i 5.4 million at its corporate headquarters, primarily for severance-related expenses associated with a reduction of approximately i 260 positions. In the third quarter of 2018, the Company recorded an additional $ i 0.2 million charge at its corporate headquarters. The $ i 10.1 million charge related to the second quarter 2018 plan primarily reflects actions related to facilities consolidation, systems integration and back office functions. This charge was included in "Operating expenses" in the Company's Consolidated Statement of Income for fiscal year 2018. The majority of the balance included in accrued expenses of $ i 1.9 million as of January 3, 2020 is expected to be paid by the first half of 2020.

NOTE 4. i LEASES

The Company adopted ASU 2016-02, Leases, as of December 29, 2018, using the modified retrospective approach. Prior year financial statements were not recast under the new standard and, therefore, certain prior period amounts have been disclosed in conformity with prior year presentation.

Substantially all of Anixter's office and warehouse facilities are leased under operating leases. The Company also leases certain equipment and vehicles primarily as operating leases. A certain number of Anixter's leases are long-term operating leases and expire at i various dates through 2038. i Lease costs are included within "Operating expenses" in the Company's Consolidated Statements of Income and were as follows:


	Year Ended
(In millions)	January 3, 2020
Lease cost
Operating lease cost	$	i 79.0
Variable lease cost	i 22.2
Short-term lease cost	i 1.2
Total lease cost	$	i 102.4

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Total rental expense was $ i 107.3 million and $ i 100.9 million in 2018 and 2017, respectively.

The weighted-average remaining lease term and weighted-average discount rate under operating leases were as follows:


	January 3, 2020
Lease term and discount rate
Weighted-average remaining lease term	i 6.5 years
Weighted-average discount rate ^(a)	i 5.9	%

(a)Upon adoption of ASU 2016-02, the discount rate used for existing leases was established as of December 29, 2018.

/ i

Maturities of operating lease liabilities at January 3, 2020 were as follows:


(In millions)
2020	$	i 75.4
2021	i 59.2
2022	i 54.4
2023	i 40.8
2024	i 32.0
2025 and thereafter	i 81.6
Total lease payments	$	i 343.4
Less imputed interest	i 61.4
Present value of lease liabilities	$	i 282.0

Operating lease payments include $ i 17.4 million related to options to extend lease terms that are reasonably certain of being exercised. As of January 3, 2020, the Company has additional leases related to facilities that have not yet commenced of $ i 7.5 million. These operating leases will commence in fiscal year 2020 with lease terms of three to i eleven years. Anixter subleases certain real estate to third parties. During the year ended January 3, 2020, the Company recognized income of $ i 1.1 million, which was included within "Operating expenses" in the Company's Consolidated Statements of Income. Aggregate future minimum rentals to be received under non-cancelable subleases at January 3, 2020 were $ i 3.7 million.

During the year ended January 3, 2020, leased assets obtained in exchange for operating lease obligations were $ i 348.3 million. The operating cash outflow for amounts included in the measurement of operating lease obligations was $ i 63.5 million.

NOTE 5. i DEBT

Debt is summarized below:

(In millions)

Long-term debt:

6.00% Senior notes due 2025

i 247.3

i 246.9

5.50% Senior notes due 2023

i 347.9

i 347.4

5.125% Senior notes due 2021

i 398.3

i 397.4

Revolving lines of credit

i 56.0

i 260.0

Finance lease obligations

i 6.0

i 0.9

Other

i 8.8

i 6.1

Unamortized deferred financing costs

( i 4.6)

( i 6.0)

Total long-term debt

i 1,059.7

i 1,252.7

Certain debt agreements entered into by Anixter's operating subsidiaries contain various restrictions, including restrictions on payments to the Company. These restrictions have not had, nor are expected to have, an adverse impact on the Company's ability to meet cash obligations. Anixter International Inc. has guaranteed substantially all of the debt of its subsidiaries.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Aggregate annual maturities of debt before accretion of debt discount as reflected on the Consolidated Balance Sheet at January 3, 2020 are as follows: 2020 - $ i 8.8 million, 2021 - $ i 398.3 million, 2022 - $ i 0.0 million, 2023 - $ i 403.9 million, 2024 - $ i 0.0 million and $ i 247.3 million thereafter.

The Company's average borrowings outstanding was $ i 1,406.6 million and $ i 1,433.8 million for the fiscal years ending January 3, 2020 and December 28, 2018, respectively. The Company's weighted-average cost of borrowings was i 5.5% for the year ended January 3, 2020 and i 5.3% for the years ended December 28, 2018 and December 29, 2017, respectively. Interest paid in 2019, 2018 and 2017 was $ i 74.3 million, $ i 73.9 million and $ i 70.6 million, respectively.

At the end of fiscal 2019, Anixter had approximately $ i 524.7 million and $ i 134.3 million in available, committed, unused borrowings under the $ i 600.0 million U.S. accounts receivable asset based revolving credit facility and $ i 150.0 million U.S. inventory asset based revolving credit facility, respectively. All credit lines are with financial institutions with investment grade credit ratings. Borrowings under these facilities are limited based on the borrowing base criteria as described below.

The Company is in compliance with all of its covenants and believes that there is adequate margin between the covenant ratios and the actual ratios given the current trends of the business.

Revolving Lines of Credit and Canadian Term Loan

On October 5, 2015, Anixter, through its wholly-owned subsidiaries, Anixter Inc., Anixter Receivables Corporation ("ARC") and Anixter Canada Inc., entered into certain financing transactions in connection with the consummation of the acquisition of Power Solutions, including a U.S. accounts receivable asset based revolving credit facility in an aggregate committed amount of $ i 600.0 million ("Receivables Facility"), a U.S. inventory asset based revolving credit facility in an aggregate committed amount of $ i 150.0 million ("Inventory Facility") for a U.S. combined commitment of $ i 750.0 million ("Combined Commitment"). Additionally, the Company entered into a Canadian term loan facility in Canada in an aggregate principal amount of $ i 300.0 million Canadian dollars, the equivalent to approximately $ i 225.0 million USD, with a five-year maturity ("Canadian Term Loan"). In connection with these financing transactions, the Company incurred approximately $ i 6.7 million in financing transaction costs, of which approximately $ i 5.4 million was capitalized as deferred financing costs and will be amortized through maturity using the straight-line method, and approximately $ i 1.3 million was expensed as incurred.

On November 16, 2018, Anixter amended the Receivables and Inventory Facilities to extend the maturity date from October 5, 2020 to November 16, 2023. An additional $ i 2.1 million of deferred financing costs were capitalized and will be amortized through maturity.

Receivables Facility

On October 5, 2015, Anixter, through its wholly-owned subsidiary, ARC, entered into a Receivables Facility, which is a receivables based revolving credit facility in an aggregate committed amount of $ i 600.0 million. Borrowings under the Receivables Facility are secured by a first lien on all assets of ARC and supported by an unsecured guarantee by Anixter International, Inc.

The Receivables Facility has a borrowing base of i 85% of eligible receivables, subject to certain reserves.

In connection with the entry into the Receivables Facility, on October 5, 2015, Anixter Inc. and ARC entered into a Third Amended and Restated Receivables Sale Agreement (the "Amended and Restated RSA"), which amended and restated the existing Second Amended and Restated Sales Agreement. The purpose of the Amended and Restated RSA is (i) to reflect the entry into the Receivables Facility and the termination of the Second Amended and Restated Receivables Purchase Agreement, and (ii) to include in the receivables sold by Anixter Inc. to ARC receivables originated by Tri-Northern Holdings, Inc. and its subsidiaries (collectively, the "Tri-Ed Subsidiaries") and subsidiaries acquired in the Power Solutions acquisition (the "Power Solutions Subsidiaries").

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Inventory Facility

On October 5, 2015, Anixter and certain of its wholly-owned subsidiaries, including the Tri-Ed Subsidiaries and Power Solutions Subsidiaries, entered into the Inventory Facility, an asset based lending revolving credit facility, in an aggregate committed amount of $ i 150.0 million. Borrowings under the Inventory Facility are secured by a first lien on Anixter Inc.'s and certain of its subsidiaries' personal property and supported by a guarantee by Anixter International Inc.

The Inventory Facility has a borrowing base, (a) with respect to appraised eligible domestic inventory, of the lesser of (i) i 85% of the net orderly liquidation value of such inventory; and (ii) i 75% of book value of such inventory, plus, (b) with respect to eligible domestic inventory not appraised, i 40% of the net orderly liquidation value of such inventory, less (c) certain reserves.

The Receivables Facility and the Inventory Facility (collectively, the "Combined Facilities")

The Combined Facilities drawn pricing will range from LIBOR plus 125 basis points when the combined unused availability (the "Combined Availability") under the Combined Facilities is greater than $ i 500.0 million or LIBOR plus 150 basis points when Combined Availability is less than $ i 500.0 million. Undrawn fees are 25 basis points.

Acquisitions and restricted payments will be permitted, subject to, among other things, (i) Combined Availability of at least $ i 131.3 million after giving pro forma effect to any acquisition or restricted payment or (ii) (a) Combined Availability of at least $ i 93.8 million and (b) maintenance of a minimum fixed charge coverage ratio of at least i 1.1x, after giving pro forma effect to the acquisition or restricted payment.

Canadian Term Loan

On October 5, 2015, Anixter, through its wholly-owned subsidiaries, Anixter Canada Inc. and Tri-Ed ULC, entered into a $ i 300.0 million Canadian dollars (equivalent to approximately $ i 225.0 million USD) Canadian Term Loan. During 2017, the Company repaid $ i 100.2 million of the outstanding balance. The Company incurred $ i 0.2 million of additional interest expense in 2017 due to the write-off of deferred financing costs on the early payment of debt. The Canadian Term Loan was guaranteed by all present and future material Canadian subsidiaries of Anixter Canada Inc. and Tri-Ed ULC as well as Anixter Mid Holdings BV. The Canadian Term Loan was secured by a first priority security interest in all of the assets of Anixter Canada Inc. and each of its Canadian subsidiaries, which comprised the borrowing group.

In the fourth quarter of 2017, the Company paid off the Canadian Term Loan in full.

6.00% Senior Notes Due 2025

On November 13, 2018, the Company's primary operating subsidiary, Anixter Inc., completed the issuance of $ i 250.0 million principal amount of Senior notes due 2025 ("Notes due 2025"). The Notes due 2025 were issued at a price that was i 98.75% of par, which resulted in a discount related to underwriting fees of $ i 3.1 million. The discount is reported on the Consolidated Balance Sheet as a reduction to the face amount of the Notes due 2025 and is being amortized to interest expense over the term of the related debt, using the effective interest method. In addition, $ i 0.8 million of deferred financing costs were paid, which are being amortized through maturity using the straight-line method. The Notes due 2025 pay interest semi-annually at a rate of i 6.00% per annum and will mature on i December 1, 2025. In addition, Anixter Inc. may at any time prior to September 1, 2025, redeem some or all of the Notes due 2025 at a price equal to i 100% of the principal amount plus a "make whole" premium. At any time on or after September 1, 2025, Anixter Inc. may redeem some or all of the Notes due 2025 at a price equal to i 100% of the principal amount, plus accrued and unpaid interest. If the Company experiences certain kinds of changes of control, Anixter Inc. must offer to repurchase all of the Notes due 2025 outstanding at i 101% of the aggregate principal amount repurchased, plus accrued and unpaid interest. The proceeds were used along with available borrowings under Anixter's revolving lines of credit to retire the Company's Senior notes due 2019. Anixter International Inc. fully and unconditionally guarantees the Notes due 2025, which are unsecured obligations of Anixter Inc.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

5.50% Senior Notes Due 2023

On August 18, 2015, the Company's primary operating subsidiary, Anixter Inc., completed the issuance of $ i 350.0 million principal amount of Senior notes due 2023 ("Notes due 2023"). The Notes due 2023 were issued at a price that was i 98.75% of par, which resulted in a discount related to underwriting fees of $ i 4.4 million. The discount is reported on the Consolidated Balance Sheet as a reduction to the face amount of the Notes due 2023 and is being amortized to interest expense over the term of the related debt, using the effective interest method. In addition, $ i 1.7 million of deferred financing costs were paid, which are being amortized through maturity using the straight-line method. The Notes due 2023 pay interest semi-annually at a rate of i 5.50% per annum and will mature on i March 1, 2023. In addition, Anixter Inc. may at any time redeem some or all of the Notes due 2023 at a price equal to i 100% of the principal amount plus a "make whole" premium. If the Company experiences certain kinds of changes of control, Anixter Inc. must offer to repurchase all of the Notes due 2023 outstanding at i 101% of the aggregate principal amount repurchased, plus accrued and unpaid interest. The proceeds were used to partially finance the Power Solutions acquisition. Anixter International Inc. fully and unconditionally guarantees the Notes due 2023, which are unsecured obligations of Anixter Inc.

5.125% Senior Notes Due 2021

On September 23, 2014, the Company's primary operating subsidiary, Anixter Inc., completed the issuance of $ i 400.0 million principal amount of Senior notes due 2021 ("Notes due 2021"). The Notes due 2021 were issued at a price that was i 98.50% of par, which resulted in a discount related to underwriting fees of $ i 6.0 million. Net proceeds from this offering were approximately $ i 393.1 million after also deducting for approximately $ i 0.9 million of deferred financing costs paid that are being amortized through maturity using the straight-line method. The discount is reported on the Consolidated Balance Sheet as a reduction to the face amount of the Notes due 2021 and is being amortized to interest expense over the term of the related debt, using the effective interest method. The Notes due 2021 pay interest semi-annually at a rate of i 5.125% per annum and will mature on i October 1, 2021. In addition, Anixter Inc. may at any time redeem some or all of the Notes due 2021 at a price equal to i 100% of the principal amount plus a "make whole" premium. If Anixter Inc. and/or the Company experience certain kinds of changes of control, it must offer to repurchase all of the Notes due 2021 outstanding at i 101% of the aggregate principal amount repurchased, plus accrued and unpaid interest. The proceeds were used by Anixter Inc. to repay amounts outstanding under the accounts receivable credit facility, to repay certain additional borrowings under the 5-year senior unsecured revolving credit agreement that had been incurred for the specific purpose of funding the Tri-Ed acquisition, to provide additional liquidity for maturing indebtedness and for general corporate purposes. Anixter International Inc. fully and unconditionally guarantees the Notes due 2021, which are unsecured obligations of Anixter Inc.

Short-term borrowings

Anixter has borrowings under other bank revolving lines of credit totaling $ i 8.8 million and $ i 6.1 million at the end of fiscal 2019 and 2018, respectively. The Company's short-term borrowings have maturity dates within the next fiscal year. However, all of the borrowings at the end of fiscal 2019 have been classified as long-term at January 3, 2020, as the Company has the intent and ability to refinance the debt under existing long-term financing agreements.

Retirement of Debt

In the fourth quarter of 2018, Anixter retired the below described i 5.625% Senior notes due 2019, which had a maturity value of $ i 350.0 million. The proceeds from the issuance of Notes due 2025 and available borrowings under Anixter's revolving lines of credit were used to settle the maturity value. The Company paid a $ i 3.9 million make whole premium and incurred $ i 0.7 million of additional expense due to the write-off of discounts and deferred financing costs on the early payment of debt.

On April 30, 2012, the Company's primary operating subsidiary, Anixter Inc., completed the issuance of $ i 350.0 million principal amount of Senior notes due 2019 ("Notes due 2019"). The Notes due 2019 were issued at a price that was i 98.25% of par, which resulted in a discount related to underwriting fees of $ i 6.1 million. Net proceeds from this offering were approximately $ i 342.9 million after also deducting for approximately $ i 1.0 million of deferred financing costs paid that were amortized through maturity using the straight-line method. The discounts were reported on the Consolidated Balance Sheet as a reduction to the face amount of the Notes due 2019 and were amortized to interest expense over the term of the related debt, using the effective interest method. The Notes due 2019 paid interest semi-annually at a rate of i 5.625% per annum and were scheduled to mature on i May 1, 2019.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In the fourth quarter of 2017, the Company paid off the Canadian Term Loan in full.

The retirement of debt did not have a significant impact on the Company's Consolidated Statements of Income.

Fair Value of Debt

The fair value of Anixter's debt instruments is measured using observable market information which would be considered Level 2 in the fair value hierarchy described in accounting guidance on fair value measurements. The Company's fixed-rate debt consists of Senior notes due 2025, Senior notes due 2023 and Senior notes due 2021.

At January 3, 2020, the Company's total carrying value and estimated fair value of debt outstanding was $ i 1,059.7 million and $ i 1,122.1 million, respectively. This compares to a carrying value and estimated fair value of debt outstanding at December 28, 2018 of $ i 1,252.7 million and $ i 1,261.7 million, respectively. The decrease in the carrying value and estimated fair value is primarily due to lower outstanding borrowings under Anixter's revolving lines of credit.

NOTE 6. i COMMITMENTS AND CONTINGENCIES

As of January 3, 2020, the Company had $ i 56.1 million in outstanding letters of credit and guarantees.

From time to time, Anixter is party to legal proceedings and matters that arise in the ordinary course of business. As of January 3, 2020, the Company does not believe there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company's financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters.

NOTE 7. i INCOME TAXES

Income Before Tax Expense: Domestic income before income taxes was $ i 244.2 million, $ i 167.8 million and $ i 178.1 million for 2019, 2018 and 2017, respectively. Foreign income before income taxes was $ i 49.2 million, $ i 55.4 million and $ i 59.5 million for 2019, 2018 and 2017, respectively.

Tax Provisions and Reconciliation to the Statutory Rate: The components of Anixter's tax expense and the reconciliation to the statutory federal rate are identified below. i Income tax expense was comprised of:

Years Ended

(In millions)

Current:

Foreign

i 21.7

i 24.2

i 21.7

State

i 10.3

i 9.4

i 8.3

Federal

i 39.9

i 34.2

i 99.4

i 71.9

i 67.8

i 129.4

Deferred:

Foreign

( i 3.5)

( i 2.5)

i 0.2

State

i 0.5

i 0.2

i 2.0

Federal

( i 38.4)

i 1.4

( i 3.0)

( i 41.4)

( i 0.9)

( i 0.8)

Income tax expense

i 30.5

i 66.9

i 128.6

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Reconciliations of income tax expense to the statutory corporate federal tax rate of i 21% were as follows:

Years Ended

(In millions)

Statutory tax expense

i 61.6

i 46.9

i 83.2

Increase (reduction) in taxes resulting from:

State income taxes, net

i 9.7

i 7.9

i 4.4

Foreign tax effects

i 3.5

i 11.9

i 2.0

Change in valuation allowance

( i 42.3)

( i 0.6)

( i 0.3)

Impact of tax legislation

i —

( i 2.1)

i 35.6

Foreign derived intangible income deduction

( i 4.5)

i —

Other, net

i 2.5

i 2.9

i 3.7

Income tax expense

i 30.5

i 66.9

i 128.6

Impact of Tax Legislation: On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act made significant changes to the U.S. tax code. The changes impacting the Company beginning in the fourth quarter of 2017, the period of enactment, include:

•The reduction of the U.S. corporate tax rate to i 21% results in an adjustment to the Company's U.S. deferred tax assets and liabilities to the lower rate. The impact of the deferred tax adjustment was measured and recorded as an increase in earnings for the quarter ending December 29, 2017, of $ i 14.4 million. The impact was revised and a deferred tax adjustment of $ i 0.7 million was recorded as a decrease in earnings for the quarter ending December 28, 2018; and

•The tax reform legislation will subject the earnings of the Company's cumulative foreign earnings and profits to U.S. income taxes as a deemed repatriation. The estimated provisional impact of the deemed repatriation decreased earnings for the quarter ending December 29, 2017 by $ i 50.0 million. The tax impact was revised to $ i 47.2 million and finalized in 2018.

The Act subjects U.S. shareholders to tax on Global Intangible Low-Taxed Income ("GILTI") earned by certain foreign subsidiaries. The Company is electing to recognize the tax on GILTI as a period expense in the period tax is incurred. Under this policy, the Company has not provided deferred taxes related to temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period.

Tax Payments: The Company made net payments for income taxes in 2019, 2018 and 2017 of $ i 87.1 million, $ i 88.4 million and $ i 76.4 million, respectively.

Net Operating Losses: Anixter International Inc. and its U.S. subsidiaries file a U.S. federal corporate income tax return on a consolidated basis. At January 3, 2020, various of Anixter's foreign subsidiaries had aggregate cumulative net operating loss ("NOL") carryforwards for foreign income tax purposes of approximately $ i 89.7 million which are subject to various provisions of each respective country. Approximately $ i 71.9 million of the NOL carryforwards may be carried forward indefinitely. The remaining NOL carryforwards expire at various times between 2020 and 2028.

Foreign Tax Credit Carryforwards: At January 3, 2020, the Company estimated and accrued provisional transition taxes. As a result of the transition tax, the Company estimates that it will also have foreign tax credit carryforwards of $ i 41.7 million. At December 28, 2018, a full valuation allowance was recorded against the deferred tax asset related to foreign tax credits as there was not sufficient foreign-source income projected to utilize the foreign tax credits. After considering the relevant evidence in assessing the realizability of the deferred tax asset related to foreign tax credits, in particular the effects of changing to a U.S.-center-led business model during 2019, the Company reversed its valuation allowance in the amount of $ i 41.7 million in 2019.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Undistributed Earnings: Undistributed earnings of Anixter's foreign subsidiaries amounted to approximately $ i 680.0 million at January 3, 2020. The Act converted the U.S. system of taxing foreign earnings from a worldwide system to a territorial system. Future distributions of foreign earnings by Anixter affiliates abroad will no longer result in U.S. taxation. In converting to a territorial system the Act levied a one-time transition tax on deferred foreign earnings as of 2017. Anixter has calculated the net combined U.S. tax impact on this deemed repatriation to be approximately $ i 47.2 million and plans to elect to pay the federal portion of this tax liability in installments over i eight years. Despite the conversion to a territorial system, Anixter considers the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, Anixter may be subject to withholding taxes payable to the various foreign countries. With respect to the countries that have undistributed earnings as of January 3, 2020, according to the foreign laws and treaties in place at that time, estimated foreign jurisdiction withholding taxes of approximately $ i 37.6 million would be payable upon the remittance of all earnings at January 3, 2020.

Deferred Income Taxes: Significant components of the Company's deferred tax assets (liabilities) included in "Other assets" and "Other liabilities" on the Consolidated Balance Sheets were as follows:

(In millions)

Deferred compensation and other postretirement benefits

i 38.4

i 36.0

Foreign NOL carryforwards and other

i 26.1

i 28.1

Operating lease obligations

i 67.6

i 1.6

Accrued expenses and other

i 9.1

i 8.4

Inventory reserves

i 8.7

i 8.5

Unrealized foreign exchange

i 0.5

i 2.7

Allowance for doubtful accounts

i 6.5

i 7.9

Federal and state credits

i 54.5

i 50.6

Gross deferred tax assets

i 211.4

i 143.8

Property, equipment, intangibles and other

( i 74.8)

( i 90.1)

Operating lease assets

( i 66.5)

i —

Gross deferred tax liabilities

( i 141.3)

( i 90.1)

Deferred tax assets, net of deferred tax liabilities

i 70.1

i 53.7

Valuation allowance

( i 38.3)

( i 79.1)

Net deferred tax assets (liabilities)

i 31.8

( i 25.4)

Uncertain Tax Positions and Jurisdictions Subject to Examinations: i A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal 2017, 2018 and 2019 is as follows:


(In millions)
Balance at December 30, 2016	$	i 5.0
Reductions for tax positions of prior years	( i 0.3)
Balance at December 29, 2017	$	i 4.7
Additions for tax positions of prior years	i 0.6
Reductions for tax positions of prior years	( i 0.6)
Balance at December 28, 2018	$	i 4.7
Additions for tax positions of prior years	i 0.1
Reductions for tax positions of prior years	( i 2.6)
Balance at January 3, 2020	$	i 2.2

Interest and penalties accrued for unrecognized tax benefits were $0.2 million in 2019, 2018 and 2017. The Company estimates that of the unrecognized tax benefit balance of $ i 2.2 million, all of which would affect the effective tax rate, $ i 0.2 million may be resolved in a manner that would impact the effective rate within the next twelve months. The reserves for uncertain tax positions, including interest and penalties, of $ i 3.0 million cover a range of issues, including intercompany charges and withholding taxes, and involve various taxing jurisdictions.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Only the returns for fiscal tax years 2014 and later remain open to examination by the Internal Revenue Service ("IRS") in the U.S., which is Anixter's most significant tax jurisdiction. For most states, fiscal tax years 2015 and later remain subject to examination. In Canada, the fiscal tax years 2015 and later are still subject to examination, while in the United Kingdom, the fiscal tax years 2018 and later remain subject to examination.

NOTE 8. i PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS

The Company's defined benefit pension plans are the plans in the U.S., which consist of the Anixter Inc. Pension Plan, the Executive Benefit Plan and the Supplemental Executive Retirement Plan ("SERP") (together the "Domestic Plans") and various defined benefit pension plans covering employees of foreign subsidiaries in Canada and Europe (together the "Foreign Plans"). The majority of these defined benefit pension plans are non-contributory and, with the exception of the U.S. and Canada, cover substantially all full-time domestic employees and certain employees in other countries. Retirement benefits are provided based on compensation as defined in both the Domestic Plans and the Foreign Plans. The Company's policy is to fund all Domestic Plans as required by the Employee Retirement Income Security Act of 1974 ("ERISA") and the IRS and all Foreign Plans as required by applicable foreign laws. The Executive Benefit Plan and SERP are the only two plans that are unfunded. Assets in the various plans consist primarily of equity securities and debt securities.

The measurement date for all plans is December 31st. Accordingly, at the end of each fiscal year, the Company determines the discount rate to be used to discount the plan liabilities to their present value. The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate at the end of 2019 and 2018, the Company reviewed rates of return on relevant market indices and concluded the Willis Towers Watson Global Rate Link Model was consistent with observable market conditions and industry standards for developing spot rate curves. These rates are adjusted to match the duration of the liabilities associated with the pension plans.

At January 3, 2020 and December 28, 2018, the Company determined the consolidated weighted-average discount rate of all plans to be i 2.75% and i 3.59%, respectively, and used these rates to measure the projected benefit obligation ("PBO") at the end of each respective fiscal year end. Due primarily to actuarial losses, the PBO increased to $ i 586.5 million at the end of fiscal 2019 from $ i 504.1 million at the end of fiscal 2018. The consolidated net unfunded status was $ i 71.0 million at the end of fiscal 2019 compared to $ i 55.2 million at the end of 2018.

A significant element in determining net periodic benefit cost in accordance with U.S. GAAP is the expected return on plan assets. For 2019, the Company had assumed that the weighted-average expected long-term rate of return on plan assets would be i 6.01%. This expected return on plan assets is included in the net periodic benefit cost for the fiscal year ended 2019. As a result of the combined effect of valuation changes in both the equity and bond markets, the plan assets produced an actual gain of approximately i 16.8% in 2019 and an actual loss of approximately i 4.2% in 2018. The fair value of plan assets is $ i 515.5 million at the end of fiscal 2019, compared to $ i 448.9 million at the end of fiscal 2018. The difference between the expected return and the actual return on plan assets is amortized into expense over the service lives of the plan participants. These amounts are reflected on the balance sheet through charges to "Accumulated other comprehensive loss," a component of "Stockholders’ Equity" in the Consolidated Balance Sheets.

In the fourth quarter of 2019, the Company amended the Anixter Inc. Pension Plan in the U.S. to allow for terminated employees a one-time option to receive a cash payout of their vested benefits if the present value of the benefit was under $125,000. This resulted in an additional $ i 10.9 million of lump sum payments. The cash payout did not result in a settlement charge as the amount did not exceed the service and interest costs of the plan in 2019.

In the fourth quarter of 2017, the Company transferred the benefits of certain retirees or beneficiaries to a third-party annuity provider. The Company paid $ i 11.3 million of additional contributions into the plan using excess cash from operations to fund the contributions. The plan purchased an $ i 11.3 million annuity contract with a third-party insurance carrier and transferred the related pension obligations to the carrier. The funding of the premiums did not result in a settlement charge as the amount did not exceed the service and interest costs of the plan in 2017.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In the third quarter of 2015, the plan was frozen to entrants first hired or rehired on or after July 1, 2015. Anixter Inc. makes an annual contribution to the Employee Savings Plan on behalf of each active participant who is first hired or rehired on or after July 1, 2015, or is not participating in the Anixter Inc. Pension Plan. The amount of the employer annual contribution to each active participant's account will be an amount determined by multiplying the participant's salary for the Plan year by either: (1) 2% if such participant's years of service as of August 1 of the Plan year is fewer than five, or (2) 2.5% if such participant's years of service as of August 1 of the Plan year is five or greater. This contribution is in lieu of being eligible for the Anixter Inc. Pension Plan.

All non-union domestic employees hired or rehired before July 1, 2015, earn a benefit under a personal retirement account (hypothetical account balance). Each year, a participant’s account receives a credit equal to i 2% of the participant’s salary ( i 2.5% if the participant’s years of service at August 1 of the plan year are i five years or more). Active participants become fully vested in their hypothetical personal retirement account after i three years of service. Interest earned on the credited amount is not credited to the personal retirement account but is contributed to the participant’s account in the Anixter Inc. Employee Savings Plan. The interest contribution equals the interest earned on the personal retirement account balance as of January 1^st in the Domestic Plan and is based on the 10-year Treasury note rate as of the last business day of December.

In 2019 and 2018, the Society of Actuaries released new mortality tables and improvement projection scales. After reviewing the new information as well as the defined benefit plan’s population, the Company updated U.S. mortality improvement assumptions in 2019 and 2018 for purposes of determining its mortality assumption used in the U.S. defined benefit plans' liability calculation. In 2019, the Company selected the white collar version of the Pri-2012 tables projected generationally using the Society of Actuaries’ MP-2019 projection scale. The updated U.S. mortality assumptions resulted in an increase of $ i 5.2 million to the benefit obligation as of the end of 2019, prior to reflecting the discount rate change. In 2018, the Company adjusted the long term mortality improvement projection assumption to i 80% of the Society of Actuaries’ mortality improvement scale to reflect the Company’s long-term expectations. The updated U.S. mortality assumptions resulted in a decrease of $ i 2.8 million to the benefit obligation as of the end of 2018, prior to reflecting the discount rate change.

The assets of the various defined benefit plans are held in separate independent trusts and managed by independent third party advisors. The investment objective of both the Domestic and Foreign Plans is to ensure, over the long-term life of the plans, an adequate level of assets to fund the benefits to employees and their beneficiaries at the time they are payable. In meeting this objective, the Company seeks to achieve a level of absolute investment return consistent with a prudent level of portfolio risk. Anixter's risk preference is to refrain from exposing the plans to higher volatility in pursuit of potential higher returns.

The Domestic Plans’ and Foreign Plans’ asset mixes as of January 3, 2020 and December 28, 2018 and the asset allocation guidelines for such plans are summarized as follows.

Domestic Plans

Allocation Guidelines

Min

Target

Max

Global equities

i 42.5

i 30

i 37

i 45

Debt securities:

Domestic treasuries

i 20.9

i —

i 24

i 40

Corporate bonds

i 7.0

i —

i 8

i 40

Other

i 14.4

i 9

i 14

i 19

Total debt securities

i 42.3

i 9

i 46

i 99

Property/real estate

i 15.2

i 9

i 16

i 23

Other

i —

i 1

i 5

i 100.0

i 100

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Domestic Plans

Allocation Guidelines

Min

Target

Max

Global equities

i 40.1

i 37

i 46

i 66

Debt securities:

Domestic treasuries

i 15.6

i —

i 12

i 34

Corporate bonds

i 16.3

i —

i 17

i 34

Other

i 14.5

i 9

i 14

i 19

Total debt securities

i 46.4

i 9

i 43

i 87

Property/real estate

i 12.6

i —

i 10

i 19

Other

i 0.9

i —

i 1

i 5

i 100.0

i 100

Foreign Plans

Allocation Guidelines

Min

Target

Max

Equities:

Domestic equities

i 0.4

i —

International equities

i —

i 2

Global equities

i 39.3

i 14

i 34

i 39

Total equities

i 39.7

i 16

i 36

i 41

Debt securities:

Domestic treasuries

i 0.4

i —

Corporate bonds

i 8.1

i —

Other

i 37.1

i 16

i 42

i 73

Total debt securities

i 45.6

i 16

i 42

i 73

Property/real estate

i 6.3

i —

i 14

i 22

Insurance products

i 8.3

i 8

Other

i 0.1

i —

i 14

i 100.0

i 100

Foreign Plans

Allocation

Guidelines

Target

Equity securities

i 60

Debt securities

i 30

Other investments

i 10

i 100

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The pension committees meet regularly to assess investment performance and reallocate assets that fall outside of its allocation guidelines. The variations between the allocation guidelines and actual asset allocations reflect relative performance differences in asset classes. From time to time, the Company periodically rebalances its asset portfolios to be in line with its allocation guidelines.

For 2019, the U.S. investment policy guidelines were as follows:

•Each asset class is managed by one or more active and passive investment managers

•Each asset class may be invested in a commingled fund, mutual fund, or separately managed account

•Investment in Exchange Traded Funds ("ETFs") is permissible

•Each manager is expected to be "fully invested" with minimal cash holdings

•Derivative instruments such as futures, swaps and options may be used on a limited basis; For funds that employ derivatives, the loss of invested capital to the Trust should be limited to the amount invested in the fund

•The equity portfolio is diversified by sector and geography

•The real assets portfolio is invested Real Estate Investment Trusts ("REITs") and private real estate

•The fixed income is invested in U.S. Treasuries, investment grade corporate debt (denominated in U.S. dollars), and other credit investments including below investment grade rated bonds and loans, securitized credit, and emerging market debt

The investment policies for the Foreign plans are the responsibility of the various trustees. Generally, the investment policy guidelines are as follows:

•Make sure that the obligations to the beneficiaries of the Plan can be met

•Maintain funds at a level to meet the minimum funding requirements

•The investment managers are expected to provide a return, within certain tracking tolerances, close to that of the relevant market’s indices

The expected long-term rate of return on both the Domestic and Foreign Plans’ assets reflects the average rate of earnings expected on the invested assets and future assets to be invested to provide for the benefits included in the projected benefit obligation. The Company uses historic plan asset returns combined with current market conditions to estimate the rate of return. The expected rate of return on plan assets is a long-term assumption based on an analysis of historical and forward looking returns considering the respective plan’s actual and target asset mix. The weighted-average expected rate of return on plan assets used in the determination of net periodic pension cost for 2019 is i 6.01%.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table sets forth the changes and the end of year components of "Accumulated other comprehensive loss" for the defined benefit plans:

(In millions)

Changes to Balance:

Beginning balance

i 126.7

i 112.2

Recognized prior service cost

i 3.8

i 4.0

Recognized net actuarial gain

( i 8.5)

( i 7.5)

Settlement

( i 0.4)

i —

Prior service cost arising in current year

i —

i 0.4

Net actuarial loss arising in current year

i 20.4

i 21.8

Foreign currency exchange rate changes

i 2.5

( i 4.2)

Ending balance

i 144.5

i 126.7

Components of Balance:

Prior service credit

( i 9.0)

( i 12.8)

Net actuarial loss

i 153.5

i 139.5

i 144.5

i 126.7

Amounts in "Accumulated other comprehensive loss" expected to be recognized as components of net period pension cost in 2020 are as follows:


(In millions)
Amortization of prior service credit	$	( i 3.4)
Amortization of actuarial loss	i 9.4
Total amortization expected	$	i 6.0

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following represents a reconciliation of the funded status of the Company's pension plans for fiscal years 2019 and 2018:

Pension Benefits

Domestic Plans

Foreign Plans

Total

(In millions)

2019

2018

2019

2018

2019

2018

Change in projected benefit obligation:

Beginning balance

i 261.5

i 275.8

i 242.6

i 257.6

i 504.1

i 533.4

Service cost

i 3.1

i 3.5

i 5.7

i 5.9

i 8.8

i 9.4

Interest cost

i 10.9

i 10.3

i 6.9

i 6.8

i 17.8

i 17.1

Actuarial loss (gain)

i 41.4

( i 19.9)

i 34.8

( i 4.0)

i 76.2

( i 23.9)

Benefits paid from plan assets

( i 18.5)

( i 7.4)

( i 7.9)

( i 8.1)

( i 26.4)

( i 15.5)

Benefits paid from Company assets

( i 1.2)

( i 0.8)

i —

( i 1.2)

( i 0.8)

Plan amendment

i —

i 0.5

i —

i 0.5

Settlement

i —

( i 1.5)

( i 0.5)

( i 1.5)

( i 0.5)

Plan participants contributions

i —

i 0.1

Foreign currency exchange rate changes

i —

i 8.7

( i 15.7)

i 8.7

( i 15.7)

Other

i —

( i 0.1)

i —

( i 0.1)

i —

Ending balance

i 297.2

i 261.5

i 289.3

i 242.6

i 586.5

i 504.1

Change in plan assets at fair value:

Beginning balance

i 260.4

i 280.8

i 188.5

i 209.1

i 448.9

i 489.9

Actual return on plan assets

i 55.6

( i 13.0)

i 25.5

( i 6.9)

i 81.1

( i 19.9)

Company contributions to plan assets

i —

i 6.3

i 7.4

i 6.3

i 7.4

Benefits paid from plan assets

( i 18.5)

( i 7.4)

( i 7.9)

( i 8.1)

( i 26.4)

( i 15.5)

Settlement

i —

( i 1.5)

( i 0.5)

( i 1.5)

( i 0.5)

Plan participants contributions

i —

i 0.1

Foreign currency exchange rate changes

i —

i 7.1

( i 12.6)

i 7.1

( i 12.6)

Other

i —

( i 0.1)

i —

( i 0.1)

i i — /

Ending balance

i 297.5

i 260.4

i 218.0

i 188.5

i 515.5

i 448.9

Reconciliation of funded status:

Projected benefit obligation

( i 297.2)

( i 261.5)

( i 289.3)

( i 242.6)

( i 586.5)

( i 504.1)

Plan assets at fair value

i 297.5

i 260.4

i 218.0

i 188.5

i 515.5

i 448.9

Funded status

i 0.3

( i 1.1)

( i 71.3)

( i 54.1)

( i 71.0)

( i 55.2)

Included in the 2019 and 2018 funded status is accrued benefit cost of approximately $ i 17.5 million and $ i 16.5 million, respectively, related to two non-qualified plans, which cannot be funded pursuant to tax regulations.

Noncurrent asset

i 17.8

i 15.4

i 0.2

i 18.0

i 15.6

Current liability

( i 1.1)

( i 1.2)

i —

( i 1.1)

( i 1.2)

Noncurrent liability

( i 16.4)

( i 15.3)

( i 71.5)

( i 54.3)

( i 87.9)

( i 69.6)

Funded status

i 0.3

( i 1.1)

( i 71.3)

( i 54.1)

( i 71.0)

( i 55.2)

Weighted-average assumptions used for measurement of the projected benefit obligation:

Discount rate

i 3.33

i 4.28

i 2.15

i 2.84

i 2.75

i 3.59

Salary growth rate

i 3.75

i 3.28

i 3.26

i 3.51

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following represents the funded components of net periodic pension cost (benefit) as reflected in the Company's Consolidated Statements of Income and the weighted-average assumptions used to measure net periodic pension cost for the years ended January 3, 2020, December 28, 2018 and December 29, 2017:

Pension Benefits

Domestic Plans

Foreign Plans

Total

(In millions)

2019

2018

2017

2019

2018

2017

2019

2018

2017

Recorded in operating expenses:

Service cost

i 3.1

i 3.5

i 4.7

i 5.7

i 5.9

i 8.8

i 9.4

i 10.6

Recorded in other, net:

Interest cost

i 10.9

i 10.3

i 11.1

i 6.9

i 6.8

i 6.9

i 17.8

i 17.1

i 18.0

Expected return on plan assets

( i 14.4)

( i 16.0)

( i 14.9)

( i 11.0)

( i 9.8)

( i 8.8)

( i 25.4)

( i 25.8)

( i 23.7)

Net amortization

i 1.6

i 0.6

i 2.5

i 3.2

i 2.9

i 3.0

i 4.8

i 3.5

i 5.5

Settlement charge

i —

i 0.4

i 0.1

i —

i 0.4

i 0.1

i —

Total recorded in other, net

( i 1.9)

( i 5.1)

( i 1.3)

( i 0.5)

i —

i 1.1

( i 2.4)

( i 5.1)

( i 0.2)

Total net periodic pension cost (benefit)

i 1.2

( i 1.6)

i 3.4

i 5.2

i 5.9

i 7.0

i 6.4

i 4.3

i 10.4

Weighted-average assumption used to measure net periodic pension (benefit) cost:

Discount rate

i 4.28

i 3.78

i 4.36

i 2.84

i 2.70

i 2.99

i 3.59

i 3.26

i 3.73

Expected return on plan assets

i 6.25

i 5.68

i 4.81

i 4.79

i 6.01

i 5.63

i 5.59

Salary growth rate

i 3.75

i 3.76

i 4.63

i 3.26

i 3.04

i 3.01

i 3.51

i 3.36

i 3.73

Fair Value Measurements

The following presents information about the Plan’s assets measured at fair value on a recurring basis at the end of fiscal 2019, and the valuation techniques used by the Plan to determine those fair values. The inputs used in the determination of these fair values are categorized according to the fair value hierarchy as being Level 1, Level 2 or Level 3.

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets that the Plan has the ability to access. The majority of pension assets valued by Level 1 inputs are comprised of global equity securities.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. The majority of pension assets valued by Level 2 inputs are comprised of common/collective/pool funds (i.e., mutual funds). These assets are valued at their net asset values and considered observable inputs, or Level 2.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. The only pension assets valued by Level 3 inputs relate to property and real estate funds.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Plan’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Disclosures concerning assets measured at fair value on a recurring basis at January 3, 2020 and December 28, 2018, which have been categorized under the fair value hierarchy for the Domestic and Foreign Plans by the Company are as follows:

As of January 3, 2020

Domestic Plans

Foreign Plans

Total

(In millions)

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Asset Categories:

Equity securities:

Domestic

i —

i 0.8

i —

i 0.8

i —

i 0.8

i —

i 0.8

International ^(a)

i —

Global

i —

i 126.3

i —

i 126.3

i 39.8

i 45.9

i —

i 85.7

i 39.8

i 172.2

i —

i 212.0

Debt securities:

Domestic treasuries

i —

i 62.2

i —

i 62.2

i —

i 0.8

i —

i 0.8

i —

i 63.0

i —

i 63.0

Corporate bonds

i —

i 20.7

i —

i 20.7

i —

i 17.8

i —

i 17.8

i —

i 38.5

i —

i 38.5

Other

i —

i 43.0

i —

i 43.0

i —

i 80.8

i —

i 80.8

i —

i 123.8

i —

i 123.8

Property/real estate

i —

i 45.3

i —

i 13.7

i —

i 13.7

i —

i 13.7

i 45.3

i 59.0

Insurance products

i —

i 18.1

i —

i 18.1

i —

i 18.1

i —

i 18.1

Other

i —

i 0.3

i —

i 0.3

i —

i 0.3

Total at January 3, 2020

i —

i 252.2

i 45.3

i 297.5

i 40.1

i 177.9

i —

i 218.0

i 40.1

i 430.1

i 45.3

i 515.5

(a)Investment in funds outside the country where the pension plan originates is considered International.

As of December 28, 2018

Domestic Plans

Foreign Plans

Total

(In millions)

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Asset Categories:

Equity securities:

Domestic

i —

i 44.1

i —

i 44.1

i —

i 44.1

i —

i 44.1

International ^(a)

i —

i 68.2

i —

i 68.2

i —

i 68.2

i —

i 68.2

Global

i —

i 104.3

i —

i 104.3

i —

i 104.3

i —

i 104.3

Debt securities:

Domestic treasuries

i —

i 40.5

i —

i 40.5

i —

i 44.2

i —

i 44.2

i —

i 84.7

i —

i 84.7

Corporate bonds

i —

i 42.4

i —

i 42.4

i —

i 12.3

i —

i 12.3

i —

i 54.7

i —

i 54.7

Other

i —

i 38.0

i —

i 38.0

i —

i 38.0

i —

i 38.0

Property/real estate

i —

i 32.7

i —

i 0.3

i —

i 0.3

i —

i 0.3

i 32.7

i 33.0

Insurance products

i —

i 18.6

i —

i 18.6

i —

i 18.6

i —

i 18.6

Other

i 2.5

i —

i 2.5

i 0.8

i —

i 0.8

i 3.3

i —

i 3.3

Total at December 28, 2018

i 2.5

i 225.2

i 32.7

i 260.4

i 0.8

i 187.7

i —

i 188.5

i 3.3

i 412.9

i 32.7

i 448.9

(a)Investment in funds outside the country where the pension plan originates is considered International.

Changes in Anixter's Level 3 plan assets, which are included in operations, for the years ended January 3, 2020 and December 28, 2018 included:

(In millions)

December 28, 2018 Balance

Actual return on plan assets

Purchases, sales and settlements

January 3, 2020 Balance

Asset Categories:

Property/real estate

i 32.7

i 3.1

i 9.5

i 45.3

Total Level 3 investments

i 32.7

i 3.1

i 9.5

i 45.3

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(In millions)

December 29, 2017 Balance

Purchases, sales and settlements

December 28, 2018 Balance

Asset Categories:

Property/real estate

i —

i 32.7

Total Level 3 investments

i —

i 32.7

The Company estimated future benefits payments are as follows at the end of 2019:

Estimated Future Benefit Payments

(In millions)

Domestic

Foreign

Total

2020

i 10.9

i 5.6

i 16.5

2021

i 11.6

i 5.6

i 17.2

2022

i 12.4

i 6.1

i 18.5

2023

i 13.2

i 6.6

i 19.8

2024

i 14.2

i 7.2

i 21.4

2025-2029

i 80.6

i 53.2

i 133.8

Total

i 142.9

i 84.3

i 227.2

The accumulated benefit obligation in 2019 and 2018 was $ i 293.2 million and $ i 258.2 million, respectively, for the Domestic Plans and $ i 253.3 million and $ i 212.6 million, respectively, for the Foreign Plans. The Company had i 9 plans in 2019 and i 10 plans in 2018 where the accumulated benefit obligation was in excess of the fair value of plan assets. For pension plans with accumulated benefit obligations in excess of plan assets the aggregate pension accumulated benefit obligation was $ i 261.8 million and $ i 220.3 million for 2019 and 2018, respectively, and aggregate fair value of plan assets was $ i 208.3 million and $ i 179.0 million for 2019 and 2018, respectively.

The Company currently estimates that it will make contributions of approximately $ i 6.6 million to its Foreign Plans in 2020. In addition, the Company estimates that it will make $ i 1.1 million of benefit payments directly to participants of its two domestic unfunded non-qualified pension plans. The Company does not expect to make a contribution to its domestic qualified pension pension plan in 2020 due to its overfunded status.

Defined Contribution Plan

Anixter Inc. adopted the Anixter Inc. Employee Savings Plan effective January 1, 1994. The Plan is a defined-contribution plan covering all non-union domestic employees. Participants are eligible and encouraged to enroll in the tax-deferred plan on their date of hire and are automatically enrolled approximately i 60 days after their date of hire unless they opt out. The savings plan is subject to the provisions of ERISA.

In the third quarter of 2015, Anixter Inc. amended the Anixter Inc. Pension Plan in the U.S. whereby employees first hired or rehired on or after July 1, 2015 are no longer eligible to participate in the Anixter Inc. Pension Plan. Anixter Inc. will make an annual contribution to the Employee Savings Plan on behalf of each active participant who is first hired or rehired on or after July 1, 2015, or is not participating in the Anixter Inc. Pension Plan. The amount of the employer annual contribution to each active participant's account will be an amount determined by multiplying the participant's salary for the Plan year by either: (1) i 2% if such participant's years of service as of August 1 of the Plan year is fewer than five, or (2) i 2.5% if such participant's years of service as of August 1 of the Plan year is i five years or greater. This contribution is in lieu of being eligible for the Anixter Inc. Pension Plan.

Effective January 1, 2014, Anixter began matching contributions to equal i 50% of a participant's contribution up to i 5% of the participant's compensation. The Company also has certain foreign defined contribution plans. Contributions to these plans are based upon various levels of employee participation and legal requirements. The total expense related to defined contribution plans was $ i 14.4 million, $ i 13.8 million and $ i 13.3 million in 2019, 2018 and 2017, respectively.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Deferred Compensation Plan

A non-qualified deferred compensation plan was implemented on January 1, 1995. The plan permits selected employees to make pre-tax deferrals of salary and bonus. Interest is accrued monthly on the deferred compensation balances based on the average ten-year Treasury note rate for the previous i three months times a factor of i 1.4, and the rate is further adjusted if certain financial goals are achieved. The plan provides for benefit payments upon retirement, death, disability, termination or other scheduled dates determined by the participant. At January 3, 2020, the deferred compensation liability included in "Accrued expenses" and "Other liabilities" on the Consolidated Balance Sheet was $ i 3.4 million and $ i 42.2 million, respectively. At December 28, 2018, the deferred compensation liability included in "Accrued expenses" and "Other liabilities" on the Consolidated Balance Sheet was $ i 3.4 million and $ i 42.0 million, respectively.

Concurrent with the implementation of the deferred compensation plan, the Company purchased variable, separate account life insurance policies on the plan participants with benefits accruing to Anixter. To provide for the liabilities associated with the deferred compensation plan and an executive non-qualified defined benefit plan, fixed general account "increasing whole life" insurance policies were purchased on the lives of certain participants. Prior to 2006, the Company paid annual premiums on the above company-owned policies. The last premium was paid in 2005. Policy proceeds are payable to Anixter upon the insured participant’s death. At January 3, 2020 and December 28, 2018, the cash surrender value of $ i 41.4 million and $ i 37.0 million, respectively, was recorded under this program and reflected in "Other assets" on the Consolidated Balance Sheets.

NOTE 9. i STOCKHOLDERS' EQUITY

Preferred Stock

Anixter has the authority to issue i 15.0 million shares of preferred stock, par value $ i 1.00 per share, i none of which were outstanding at the end of fiscal 2019 and 2018.

Common Stock

Anixter has the authority to issue i 100.0 million shares of common stock, par value $ i 1.00 per share, of which i 34.2 million shares and i 33.9 million shares were outstanding at the end of fiscal 2019 and 2018, respectively.

Share Repurchases

Anixter did not repurchase any shares during any of the periods presented in these Consolidated Financial Statements.

Stock-Based Compensation

During the second quarter of 2017, the Company's shareholders approved the 2017 Stock Incentive Plan consisting of i 2.0 million shares of the Company's common stock. Prior approved stock incentive plans have been closed and will not be allowed to issue future stock grants. At January 3, 2020, there were approximately i 1.3 million shares reserved for issuance under the 2017 incentive plan.

Restricted Stock Units and Performance Units

The grant-date value of the stock units is amortized and converted to outstanding shares of common stock on a one-for-one basis over a three, four or six-year vesting period from the date of grant based on the specific terms of the grant. Compensation expense, net of the reversal of costs associated with forfeitures, associated with the stock units was $ i 17.2 million, $ i 15.7 million and $ i 15.5 million in 2019, 2018 and 2017, respectively.

During the first quarter of 2016, Anixter initiated a performance-based restricted stock unit ("performance units") program. For 2016, 2017 and 2018, performance units will vest in one-third tranches to be evaluated on the anniversary of the first, second and third performance cycles. Each evaluation period will be based on the achievement of the Company's total shareholder return ("TSR") relative to the TSR of the S&P Mid Cap 400 index. The issuance of the vested shares will be on the final vesting date of year three. The granted units will be adjusted based on the specific payout percentage of the grant agreement. For 2019 performance units, each evaluation period will be based on the Company's adjusted EBITDA margin for each of the performance periods with a three year overall TSR modifier relative to the TSR of the peer group companies determined by the Company's compensation committee calculated at the end of the three performance cycles. The fair value of each performance unit tranche is estimated using the Monte Carlo Simulation pricing model at the date of grant.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Under the current stock incentive plan, the Company pays its non-employee directors annual retainer fees and, at their election, meeting fees in the form of stock units. Currently, these units are granted quarterly and vest immediately. Therefore, the Company includes these units in its common stock outstanding on the date of vesting as the conditions for conversion are met. However, the actual issuance of shares related to all director units are deferred until a pre-arranged time selected by each director. Compensation expense associated with the director stock units was $ i 2.8 million, $ i 2.4 million and $ i 2.5 million in 2019, 2018 and 2017, respectively.

The total fair value of stock units that vested was $ i 16.7 million, $ i 14.8 million and $ i 14.4 million in 2019, 2018 and 2017, respectively.

The following table summarizes the activity under the director and employee stock unit plans:

(units in thousands)

Director

Stock

Units (a)

Weighted

Average

Grant Date Fair

Value (b)

Employee

Stock Units (c)

Weighted

Average

Grant Date Fair

Value (b)

Outstanding balance at December 30, 2016

i 341.1

i 52.90

i 727.4

i 56.25

Granted

i 31.3

i 80.81

i 222.4

i 85.65

Converted

i —

( i 155.4)

i 76.51

Canceled

i —

( i 50.7)

i 59.25

Outstanding balance at December 29, 2017

i 372.4

i 55.25

i 743.7

i 60.61

Granted

i 34.5

i 70.92

i 237.9

i 74.98

Converted

( i 26.0)

i 60.95

( i 192.6)

i 64.15

Performance unit adjustments^(d)

i —

( i 12.6)

i 89.00

Canceled

i —

( i 52.0)

i 70.80

Outstanding balance at December 28, 2018

i 380.9

i 56.28

i 724.4

i 63.16

Granted

i 46.7

i 59.26

i 287.8

i 59.88

Converted

( i 43.4)

i 60.76

( i 259.9)

i 53.63

Performance unit adjustments^(d)

i —

( i 44.2)

i 48.61

Canceled

i —

( i 22.6)

i 67.34

Outstanding balance at January 3, 2020

i 384.2

i 56.13

i 685.5

i 66.20

(a)All director units are considered convertible although each individual has elected to defer conversion until a pre-arranged time.

(b)Director and employee stock units are granted at no cost to the participants.

(c)All employee stock units outstanding are not vested at year end and are expected to vest.

(d)Adjustments based on final evaluations for non-vested performance stock units.

The weighted-average remaining contractual term for outstanding employee units is i 1.9 years.

The aggregate intrinsic value of units converted into stock represents the total pre-tax intrinsic value (calculated using Anixter's stock price on the date of conversion multiplied by the number of units converted) that was received by unit holders. The aggregate intrinsic value of units converted into stock for 2019, 2018 and 2017 was $ i 17.8 million, $ i 16.1 million and $ i 13.2 million, respectively.

The aggregate intrinsic value of units outstanding represents the total pre-tax intrinsic value (calculated using Anixter's closing stock price on the last trading day of the fiscal year multiplied by the number of units outstanding) that will be received by the unit recipients upon vesting. The aggregate intrinsic value of units outstanding for 2019, 2018 and 2017 was $ i 103.1 million, $ i 59.5 million and $ i 84.8 million, respectively.

The aggregate intrinsic value of units convertible represents the total pre-tax intrinsic value (calculated using Anixter's closing stock price on the last trading day of the fiscal year multiplied by the number of units convertible) that would have been received by the unit holders. The aggregate intrinsic value of units convertible for 2019, 2018 and 2017 was $ i 37.0 million, $ i 20.5 million and $ i 28.3 million, respectively.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Stock Options

Options previously granted under these plans have been granted with exercise prices at the fair market value of the common stock on the date of grant. All options expire i ten years after the date of grant. These options were granted with vesting periods of i four years representing the requisite service period based on the specific terms of the grant. The Company generally issues new shares to satisfy stock option exercises as opposed to adjusting treasury shares. The fair value of stock option grants is amortized over the respective vesting period representing the requisite service period. The Company did not grant any stock options to employees during 2019, 2018 or 2017.

There was no compensation expense associated with the stock options in 2019. Compensation expense associated with the stock options in 2018 and 2017 was $ i 0.8 million and $ i 0.1 million, respectively. There were no unvested stock options in 2019 and 2018. The total fair value of stock options that vested was $ i 0.5 million in 2017.

The following table summarizes the activity under the employee option plans:

(options in thousands)

Employee

Options

Weighted Average

Exercise Price

Balance at December 30, 2016

i 488.2

i 48.68

Exercised

( i 88.7)

i 56.43

Balance at December 29, 2017

i 399.5

i 46.96

Exercised

( i 51.8)

i 29.64

Balance at December 28, 2018

i 347.7

i 49.54

Exercised

( i 147.0)

i 32.14

Balance at January 3, 2020

i 200.7

i 62.27

Options exercisable at year-end:

2017

i 399.5

i 46.96

2018

i 347.7

i 49.54

2019

i 200.7

i 62.27

The weighted-average remaining contractual term for options exercisable and outstanding for 2019 was i 2.9 years.

The aggregate intrinsic value of options exercised represents the total pre-tax intrinsic value (calculated as the difference between Anixter's stock price on the date of exercise and the exercise price, multiplied by the number of options exercised) that was received by the option holders. The aggregate intrinsic value of options exercised for 2019, 2018 and 2017 was $ i 4.6 million, $ i 2.4 million and $ i 2.2 million, respectively.

The aggregate intrinsic value of options outstanding represents the total pre-tax intrinsic value (calculated as the difference between Anixter's closing stock price on the last trading day of each fiscal year and the weighted-average exercise price, multiplied by the number of options outstanding at the end of the fiscal year) that could be received by the option holders if such option holders exercised all options outstanding at fiscal year-end. The aggregate intrinsic value of options outstanding for 2019, 2018 and 2017 was $ i 6.9 million, $ i 1.5 million and $ i 11.6 million, respectively.

The aggregate intrinsic value of options exercisable represents the total pre-tax intrinsic value (calculated as the difference between Anixter's closing stock price on the last trading day of each fiscal year and the weighted-average exercise price, multiplied by the number of options exercisable at the end of the fiscal year) that would have been received by the option holders had all option holders elected to exercise the options at fiscal year-end. The aggregate intrinsic value of options exercisable for 2019, 2018 and 2017 was $ i 6.9 million, $ i 1.5 million and $ i 11.6 million, respectively.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Summary of Non-Vested Shares

The following table summarizes the changes to the non-vested shares:

(shares in thousands)

Non-vested Performance Shares (a)

Weighted-average Grant Date Fair Value

Balance at December 28, 2018

i 147.9

i 47.73

Granted

i 58.1

i 62.00

Vested

( i 55.2)

i 17.40

Performance unit adjustments^(b)

( i 44.2)

i 48.61

Canceled

i —

Balance at January 3, 2020

i 106.6

i 70.84

(a)All non-vested stock performance units are expected to vest.

(b)Adjustments based on final evaluations for non-vested performance stock units.

As of January 3, 2020, there was $ i 13.6 million of total unrecognized compensation cost related to non-vested stock units which is expected to be recognized over a weighted-average period of i 1.4 years. As of January 3, 2020, all compensation cost related to options granted to employees has been fully recognized.

NOTE 10. i BUSINESS SEGMENTS

Anixter is a leading distributor of network and security solutions, electrical and electronic wire and cable solutions and utility power solutions. The Company has identified NSS, EES and UPS as reportable segments. Within its segments, the Company is also organized by geographies. Anixter's geographies consist of North America, which includes the U.S. and Canada, EMEA, which includes Europe, the Middle East and Africa, and Emerging Markets, which includes Asia Pacific and Central and Latin America.

Corporate expenses are incurred to obtain and coordinate financing, tax, information technology, legal and other related services, certain of which were rebilled to subsidiaries. The Company also has various corporate assets which are reported in corporate. Segment assets may not include jointly used assets, but segment results include depreciation expense or other allocations related to those assets as such allocation is made for internal reporting. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis. Intercompany transactions are not significant. No customer accounted for more than i 3% of sales in 2019.

The categorization of net sales by end market is determined using a variety of data points including the technical characteristic of the product, the "sold to" customer information, the "ship to" customer information and the end customer product or application into which product will be incorporated. Anixter also has largely specialized its sales organization by segment. As data systems for capturing and tracking this data evolve and improve, the categorization of products by end market can vary over time. When this occurs, the Company reclassifies net sales by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.

Segment Financial Information

Segment information for 2019, 2018 and 2017 are as follows:

(In millions)

2019

NSS

EES

UPS

Corporate (a)

Total

Net sales

i 4,696.2

i 2,352.0

i 1,797.4

i —

i 8,845.6

Operating income (loss)

i 325.5

i 139.5

i 83.5

( i 181.0)

i 367.5

Depreciation

i 9.4

i 7.3

i 3.7

i 16.8

i 37.2

Amortization of intangible assets

i 16.4

i 5.4

i 13.2

i —

i 35.0

Total assets

i 2,224.8

i 1,085.2

i 943.6

i 555.2

i 4,808.9

Capital expenditures

i 3.1

i 1.7

i 14.6

i 20.6

i 40.0

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2018

NSS

EES

UPS

Corporate (a)

Total

Net sales

i 4,347.0

i 2,342.7

i 1,710.5

i —

i 8,400.2

Operating income (loss)

i 272.2

i 132.3

i 75.4

( i 170.2)

i 309.7

Depreciation

i 3.8

i 2.4

i 3.6

i 21.9

i 31.7

Amortization of intangible assets

i 17.0

i 7.0

i 13.3

i —

i 37.3

Total assets

i 2,319.3

i 1,097.4

i 905.5

i 330.9

i 4,653.1

Capital expenditures

i 8.7

i 2.0

i 6.7

i 25.0

i 42.4

2017

NSS

EES

UPS

Corporate (a)

Total

Net sales

i 4,114.4

i 2,225.5

i 1,587.5

i —

i 7,927.4

Operating income (loss)

i 262.6

i 114.3

i 73.1

( i 137.1)

i 312.9

Depreciation

i 3.1

i 2.4

i 3.9

i 18.8

i 28.2

Amortization of intangible assets

i 14.4

i 8.4

i 13.3

i —

i 36.1

Total assets

i 1,947.1

i 1,068.3

i 871.4

i 365.4

i 4,252.2

Capital expenditures

i 3.7

i 1.9

i 1.7

i 33.8

i 41.1

(a)Corporate "Total assets" primarily consists of cash and cash equivalents, deferred tax assets, and corporate fixed assets. Total assets in 2019 include the impact of the Company's adoption of ASU 2016-02, Leases, which resulted in the recognition of right-of-use assets for all leases with terms of more than 12 months.

The items impacting operating expense and operating income by segment in 2019, 2018 and 2017 are reflected in the tables below. All other items impacted consolidated results only and were not allocated to segments.

Year Ended January 3, 2020

(In millions)

NSS

EES

UPS

Corporate

Total

Amortization of intangible assets

( i 16.4)

( i 5.4)

( i 13.2)

i —

( i 35.0)

Merger costs

i —

( i 12.8)

Restructuring charge

i —

( i 0.5)

i 0.1

i 0.4

i —

Acquisition and integration costs

i —

i 0.3

Total of items impacting operating expense and operating income

( i 16.4)

( i 5.9)

( i 13.1)

( i 12.1)

( i 47.5)

Year Ended December 28, 2018

(In millions)

NSS

EES

UPS

Corporate

Total

Amortization of intangible assets

( i 17.0)

( i 7.0)

( i 13.3)

i —

( i 37.3)

Restructuring charge

( i 2.1)

( i 1.3)

( i 0.7)

( i 5.3)

( i 9.4)

Acquisition and integration costs

( i 2.6)

i —

( i 0.3)

( i 2.9)

CEO retirement agreement expense

i —

( i 2.6)

U.K. facility relocation costs

( i 0.2)

( i 0.8)

i —

( i 1.0)

Total of items impacting operating expense and operating income

( i 21.9)

( i 9.1)

( i 14.0)

( i 8.2)

( i 53.2)

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Year Ended December 29, 2017

(In millions)

NSS

EES

UPS

Corporate

Total

Amortization of intangible assets

( i 14.4)

( i 8.4)

( i 13.3)

i —

( i 36.1)

Restructuring charge

i —

i 0.5

( i 0.1)

( i 0.4)

i —

Acquisition and integration costs

i —

( i 2.3)

Impairment of intangible assets

( i 5.7)

i —

( i 5.7)

Total of items impacting operating expense and operating income

( i 20.1)

( i 7.9)

( i 13.4)

( i 2.7)

( i 44.1)

Geographic Information

The Company attributes foreign sales based on the location of the customer purchasing the product. In North America (U.S. and Canada), sales in the U.S. were $ i 6,294.6 million, $ i 6,004.7 million and $ i 5,771.5 million in 2019, 2018 and 2017, respectively. Canadian sales were $ i 858.0 million, $ i 837.4 million and $ i 772.5 million in 2019, 2018 and 2017 respectively. No other individual foreign country’s net sales within EMEA or the Emerging Markets were material in 2019, 2018 and 2017. The Company's tangible long-lived assets primarily consist of $ i 147.9 million of property and equipment in the U.S. No other individual foreign country’s tangible long-lived assets are material.

The following table summarizes net sales by geographic areas for the years ended January 3, 2020, December 28, 2018 and December 29, 2017:

Years Ended

(In millions)

December 29, 2017

Sales

Net Sales

% of Total

Net Sales

% of Total

Net Sales

% of Total

Net Sales

North America

i 7,152.6

i 80.9

i 6,842.1

i 81.5

i 6,544.0

i 82.5

EMEA

i 625.5

i 7.0

i 660.3

i 7.8

i 626.3

i 7.9

Emerging Markets

i 1,067.5

i 12.1

i 897.8

i 10.7

i 757.1

i 9.6

Net sales

i 8,845.6

i 100.0

i 8,400.2

i 100.0

i 7,927.4

i 100.0

The following table summarizes total assets and net property and equipment by geographic areas for the years ended January 3, 2020 and December 28, 2018:

(In millions)

Total assets

North America

i 3,861.1

i 3,709.4

EMEA

i 299.2

i 302.2

Emerging Markets

i 648.6

i 641.5

Total assets

i 4,808.9

i 4,653.1

(In millions)

Net property and equipment

North America

i 156.2

i 144.2

EMEA

i 9.5

i 9.7

Emerging Markets

i 9.2

i 9.4

Net property and equipment

i 174.9

i 163.3

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Goodwill Assigned to Segments

The following table presents the changes in goodwill allocated to the Company's reporting units from December 29, 2017 to January 3, 2020:

(In millions)

NSS

EES

UPS

Total

Balance as of December 29, 2017

i 408.8

i 181.7

i 187.6

i 778.1

Acquisition related ^(a)

i 73.2

i —

i 73.2

Foreign currency translation and other

( i 9.3)

( i 0.8)

( i 9.2)

( i 19.3)

Balance as of December 28, 2018

i 472.7

i 180.9

i 178.4

i 832.0

Acquisition related ^(a)

i 0.2

i —

i 0.2

Foreign currency translation and other

( i 9.3)

i 0.4

i 5.4

( i 3.5)

Balance as of January 3, 2020

i 463.6

i 181.3

i 183.8

i 828.7

(a) In the second quarter of 2018, the Company completed the acquisition of security businesses in Australia and New Zealand for $ i 150.1 million, including a preliminary net working capital adjustment of $ i 4.6 million. The transaction was financed primarily from borrowings under the revolving lines of credit. The purchase price was preliminarily allocated to $ i 32.6 million of working capital and $ i 60.6 million of intangible assets during the year ended 2018. Acquisition costs were $ i 2.6 million. The year ended 2018 results include approximately $ i 71.9 million of sales from the acquired entities. The purchase price allocation was finalized in 2019.

NOTE 11. i SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.

i Anixter International Inc. guarantees, fully and unconditionally, substantially all of the debt of its subsidiaries, which include Anixter Inc., its 100% owned primary operating subsidiary. Anixter International Inc. has no independent assets or operations and all subsidiaries other than Anixter Inc. are minor. i The following summarizes the financial information for Anixter Inc.:

ANIXTER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

Assets:

Current assets

i 3,035.3

i 3,171.6

Property and equipment, net

i 179.5

i 169.1

Operating leases

i 265.1

i —

Goodwill

i 828.7

i 832.0

Intangible assets, net

i 361.2

i 392.9

Other assets

i 132.9

i 92.9

i 4,802.7

i 4,658.5

Liabilities and Stockholder's Equity:

Current liabilities

i 1,492.8

i 1,630.3

Long-term debt

i 1,065.9

i 1,260.7

Operating lease obligations

i 213.0

i —

Other liabilities

i 172.6

i 199.6

Stockholder’s equity

i 1,858.4

i 1,567.9

i 4,802.7

i 4,658.5

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

ANIXTER INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Years Ended

(In millions)

Purchase Agreement, dated July 15, 2015, by and among HD Supply, Inc., HD Supply Holdings, LLC, HD Supply GP & Management, Inc., HD Supply Power Solutions Group, Inc., Brafasco Holdings II, Inc. and Anixter Inc. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on July 17, 2015, Exhibit 2.1).

Net sales

i 8,845.6

i 8,400.2

i 7,927.4

Operating income

i 374.9

i 316.4

i 319.4

Income before income taxes

i 300.1

i 229.1

i 243.2

Net income

i 268.1

i 160.9

i 112.6

Comprehensive income

i 277.9

i 101.8

i 153.2

NOTE 12. i SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the unaudited interim results of operations for each quarter in the years ended January 3, 2020 and December 28, 2018. The Company's fiscal year includes i 53 weeks in 2019 and i 52 weeks in 2018, with the extra week in 2019 in the fourth quarter. As of February 12, 2020, Anixter had i 1,597 shareholders of record.

(In millions, except per share amounts)

Year ended January 3, 2020

First

Quarter^(a)

Second

Quarter^(b)

Third

Quarter^(c)

Fourth

Quarter^(d)

Net sales

i 2,108.5

i 2,262.6

i 2,222.2

i 2,252.3

Cost of goods sold

i 1,689.6

i 1,812.6

i 1,775.8

i 1,791.8

Operating income

i 74.6

i 105.7

i 101.8

i 85.4

Income before income taxes

i 56.0

i 85.6

i 82.1

i 69.7

Net income

i 39.1

i 63.5

i 59.3

i 101.0

Income per share:

Basic

i 1.15

i 1.86

i 1.74

i 2.95

Diluted

i 1.14

i 1.86

i 1.73

i 2.93

(a)In the first quarter of 2019, "Operating income" includes $ i 8.8 million of intangible asset amortization and a reversal of acquisition and integration costs of $ i 0.3 million.

(b)In the second quarter of 2019, "Operating income" includes $ i 8.8 million of intangible asset amortization.

(c)In the third quarter of 2019, "Operating income" includes $ i 8.8 million of intangible asset amortization.

(d)In the fourth quarter of 2019, "Operating income" includes $ i 8.6 million of intangible asset amortization and $ i 12.8 million of merger costs. "Net income" includes a $ i 45.9 million tax benefit related to the reversal of deferred income tax valuation allowances, partially offset by $ i 0.8 million of tax expense related to prior year tax positions.

ANIXTER INTERNATIONAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(In millions, except per share amounts)

Year ended December 28, 2018

First

Quarter^(a)

Second

Quarter^(b)

Third

Quarter^(c)

Fourth

Quarter^(d)

Net sales

i 1,964.2

i 2,137.9

i 2,179.0

i 2,119.1

Cost of goods sold

i 1,579.4

i 1,718.8

i 1,754.9

i 1,689.1

Operating income

i 61.6

i 71.3

i 89.5

i 87.3

Income before income taxes

i 45.7

i 49.0

i 68.6

i 59.9

Net income

i 32.1

i 34.8

i 47.6

i 41.8

Income per share:

Basic

i 0.95

i 1.03

i 1.41

i 1.23

Diluted

i 0.94

i 1.02

i 1.40

i 1.22

(a)In the first quarter of 2018, "Operating income" includes $ i 9.3 million of intangible asset amortization, $ i 0.3 million of acquisition and integration costs and $ i 0.2 million of U.K. facility relocation costs.

(b)In the second quarter of 2018, "Operating income" includes $ i 9.7 million of intangible asset amortization, a restructuring charge of $ i 9.2 million, $ i 2.3 million of acquisition and integration costs, $ i 2.6 million of CEO retirement agreement expense and $ i 0.4 million of U.K. facility relocation costs.

(c)In the third quarter of 2018, "Operating income" includes $ i 9.6 million of intangible asset amortization, a restructuring charge of $ i 0.2 million, $ i 0.3 million of acquisition and integration costs and $ i 0.2 million of U.K. facility relocation costs.

(d)In the fourth quarter of 2018, "Operating income" includes $ i 8.7 million of intangible asset amortization and $ i 0.2 million of U.K. facility relocation costs. "Income before income taxes" includes a $ i 4.6 million loss on extinguishment of debt.

NOTE 13. i SUBSEQUENT EVENT

On January 13, 2020, Anixter and WESCO International, Inc. ("WESCO") announced that their boards of directors have unanimously approved a definitive merger agreement under which WESCO will acquire Anixter in a transaction valued at approximately $ i 4.5 billion. Under the terms of the agreement, each share of Anixter common stock will be converted into the right to receive $ i 70.00 in cash (subject to increase), 0.2397 shares of WESCO common stock and preferred stock consideration valued at $ i 15.89, based on the value of its liquidation preference. Based on the closing price of WESCO's common stock on January 10, 2020 and the liquidation preference of the WESCO preferred stock consideration, the total consideration represents approximately $ i 100 per Anixter share, giving effect to the downside protection. Based on the transaction structure and the number of shares of WESCO and Anixter common stock currently outstanding, it is anticipated that WESCO stockholders will own i 84% and Anixter stockholders will own i 16% of the combined company. The transaction is subject to Anixter stockholder approval, receipt of regulatory approval in the United States, Canada and certain other foreign jurisdictions, as well as other customary closing conditions.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of January 3, 2020 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based on this evaluation, the principal executive officer and the principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of January 3, 2020.

Ernst & Young LLP, an independent registered public accounting firm, has audited our Consolidated Financial Statements and our internal control over financial reporting. The Ernst & Young LLP reports are included herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Anixter International Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Anixter International Inc.’s internal control over financial reporting as of January 3, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Anixter International Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 3, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements of the Company, and our report dated February 20, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/ *ERNST & YOUNG LLP*

Chicago, Illinois
February 20, 2020

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by Item 10 is incorporated herein by reference to our definitive proxy statement or amendment to this Form 10-K to be filed with the SEC no later than May 2, 2020. Our Global Business Ethics and Conduct Policy and changes or waivers, if any, related thereto are located on our website at http://www.anixter.com/ethics.

Information regarding executive officers is included as a supplemental item at the end of Part I of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by Item 11 is incorporated herein by reference to our definitive proxy statement or amendment to this Form 10-K to be filed with the SEC no later than May 2, 2020.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by Item 12 relating to the security ownership of certain beneficial owners and management is incorporated herein by reference to our definitive proxy statement or amendment to this Form 10-K to be filed with the SEC no later than May 2, 2020.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by Item 13 is incorporated herein by reference to our definitive proxy statement or amendment to this Form 10-K to be filed with the SEC no later than May 2, 2020.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by Item 14 is incorporated herein by reference to our definitive proxy statement or amendment to this Form 10-K to be filed with the SEC no later than May 2, 2020.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Index to Consolidated Financial Statements, Financial Statement Schedules and Exhibits.

(1) Financial Statements.

The following Consolidated Financial Statements of Anixter International Inc. and Report of Independent Registered Public Accounting Firm are filed as part of this report.


						Page
Report of Independent Registered Public Accounting Firm						37
Consolidated Statements of Income for the years ended January 3, 2020, December 28, 2018 and December 29, 2017						39
Consolidated Statements of Comprehensive Income for the years ended January 3, 2020, December 28, 2018 and December 29, 2017						40
Consolidated Balance Sheets at January 3, 2020 and December 28, 2018						41
Consolidated Statements of Cash Flows for the years ended January 3, 2020, December 28, 2018 and December 29, 2017						42
Consolidated Statements of Stockholders’ Equity for the years ended January 3, 2020, December 28, 2018 and December 29, 2017						43
Notes to the Consolidated Financial Statements						44

(2) Financial Statement Schedules.

The following financial statement schedules of Anixter International Inc. are filed as part of this report and should be read in conjunction with the Consolidated Financial Statements of Anixter International Inc.:


						Page
I. Condensed financial information of registrant						90
II. Valuation and qualifying accounts and reserves						94

All other schedules are omitted because they are not required, are not applicable, or the required information is shown in the Consolidated Financial Statements or notes thereto.

(3) Exhibit List.

Each management contract or compensation plan required to be filed as an exhibit is identified by an asterisk (*).

Exhibit No.

Description of Exhibit

(2) Plan of acquisition, reorganization, arrangement, liquidation or succession.

2.1

2.2

Agreement and Plan of Merger, dated October 30, 2019, by and among CD&R Arrow Parent, LLC, CD&R Arrow Merger Sub, Inc. and Anixter International Inc. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on October 3 1 , 2019, Exhibit 2.1).

2.3

Amendment No.1 to Agreement and Plan of Merger, dated November 21, 2019, by and among CD&R Arrow Parent, LLC, CD&R Arrow Merger Sub, Inc., and Anixter International Inc. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on November 22, 2019, Exhibit 2.1).


Exhibit No.						Description of Exhibit
2.4						Amended and Restated Agreement and Plan of Merger, dated as of December 23, 2019, by and among CD&R Arrow Parent, LLC, CD&R Arrow Merger Sub, Inc. and Anixter International Inc. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on December 26, 2019, Exhibit 2.1).

2.5						Second Amended and Rest ated Agreement and plan of Merger, d ated as of January 1, 20 20, by and among CD&R Arrow Parent, LLC, CD&R Arrow Merger Sub, Inc. and Anixter Intern ational Inc. (Incorporated by reference from Anix ter Intern ational Inc. Current Report on Form 8-K filed on January 2, 2020, Exhibit 2.1).

2.6						Agreement and Plan of Merger , dated as of January 10, 2020, by and among WESCO International Inc., Warrior Merger Sub, Inc. and Anixter Inter national Inc. (Incorporated by ref erence from Anixter Intern ational Inc. Current R eport on Form 8-K filed on January 13, 2020, Exhibit 2.1).

(3) Articles of Incorporation and by-laws.

3.1						Restated Certificate of Incorporation of Anixter International Inc., filed with the Secretary of the State of Delaware on September 29, 1987 and Certificate of Amendment thereof, filed with the Secretary of Delaware on August 31, 1995 (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 3.1).

3.2						Amended and Restated By-laws of Anixter International Inc. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on February 24, 2012, Exhibit 3.1).

3.3						Second A me nded and Resta ted By-laws of Anixter International Inc. (Inc orporated by reference from Anixter International Inc. Current Report on Form 8-K filed on Oc tober 31, 2019, Exhibit 3.1).

3.4						Third Amended and Restated By-l aws of Anix ter International Inc. (Inc orporated by reference from Anixter International Inc. Current Report on Form 8-K filed on January 9, 2020, Exhibit 3.1).

(4) Instruments defining the rights of security holders, including indentures.

4.1						Indenture by and among Anixter Inc., Anixter International Inc. and Wells Fargo Bank, National Association, as Trustee, dated as of April 30, 2012, with respect to Debt Securities and Guarantees. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on April 30, 2012, Exhibit 4.1).

4.2						First Supplemental Indenture by and among Anixter Inc., Anixter International Inc. and Wells Fargo Bank, National Association, as Trustee, dated as of April 30, 2012, with respect to 5.625% Senior Notes due 2019. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on April 30, 2012, Exhibit 4.2).

4.3						Second Supplemental Indenture by and among Anixter Inc., Anixter International Inc. and Wells Fargo Bank, National Association, as Trustee, dated as of September 23, 2014, with respect to 5.125% Senior Notes due 2021. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on September 23, 2014, Exhibit 4.1).

4.4						Indenture by and among Anixter Inc., Anixter International Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee, with respect to Debt Securities and Guarantees dated September 6, 1996. (Incorporated by reference to Exhibit 4.1 to the Anixter International Inc. Registration Statement on Form S-3, file number 333-121428).

4.5						First Supplemental Indenture by and among Anixter Inc., Anixter International Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee, with respect to Debt Securities and Guarantees dated as of February 24, 2005. (Incorporated by reference to Exhibit 99.3 to the Anixter International Inc. Current Report on Form 8-K filed February 25, 2005, file number 001-10212).

Exhibit No.

Description of Exhibit

4.6

Indenture by and among Anixter Inc., Anixter International Inc. and Wells Fargo Bank, National Association, as Trustee, dated as of August 18, 2015, with respect to 5.50% Senior Notes due 2023 (including Form of Note). (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on August 18, 2015, Exhibit 4.1).

4.7

Registration Rights Agreement by and among Anixter International Inc., Anixter Inc., and Wells Fargo Securities, LLC, dated August 18, 2015. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed August 28, 2015, Exhibit 4.2).

4.8

Indenture, dated as of November 13, 2018, by an among Anixter Inc., Anixter International Inc. and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed November 13, 2018, Exhibit 4.1).

4.9

Registration Rights Agreement, dated as of November 13, 2018, by an among Anixter Inc., Anixter International Inc. and Wells Fargo Securities, LLC, as representative of the Initial Purchasers, related to the 6.00% Senior Notes due 2025. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed November 13, 2018, Exhibit 4.2).

4.10

Third Supplemental Indenture, dated as of November 12, 2018, by an among., Anixter International inc. and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed November 13, 2018, Exhibit 4.3).

(10) Material contracts.

10.1

Purchase Agreement between Mesirow Realty Sale-Leaseback, Inc. ("Buyer") and Anixter-Real Estate, Inc., a subsidiary of the Company ("Seller"). (Incorporated by reference from Anixter International Inc., Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2004, Exhibit 10.1).

10.2*

Anixter International Inc. 1989 Employee Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Registration Statement on Form S-8, file number 33-38364).

10.3*

Anixter International Inc. 1998 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Registration Statement on Form S-8, file number 333-56935, Exhibit 4a).

10.4*

Company’s Key Executive Equity Plan, as amended and restated July 16, 1992. (Incorporated by reference from Itel Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.8).

10.5*

Company’s Director Stock Option Plan. (Incorporated by reference from Itel Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Exhibit 10.24).

10.6*

Form of Stock Option Agreement. (Incorporated by reference from Itel Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.24).

10.7*

Form of Anixter International Inc. Stock Option Agreement (Revised for grants made to certain employees on or after March 1, 2010). (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2010, Exhibit 10.1).

10.8*

Form of Indemnity Agreement with all directors and officers. (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 2, 2009, Exhibit 10.2).

10.9*

Anixter International Inc. 1996 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.26).


Exhibit No.						Description of Exhibit
10.10*						Stock Option Terms. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.27).

10.11*						Stock Option Terms. (Effective February 17, 2010). (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 1, 2010, Exhibit 10.12).

10.12*						Anixter Inc. Amended and Restated Excess Benefit Plan, effective January 1, 2014. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 2, 2015, Exhibit 10.12).

10.13*						Forms of Anixter Stock Option, Stockholder Agreement and Stock Option Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.29).

10.14*						Anixter Inc. Deferred Compensation Plan, 2015 Restatement, effective July 1, 2015. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 30, 2016, Exhibit 10.14)

10.15*						(a) Anixter International Inc. 2006 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Form 10-Q for the quarterly period ended June 30, 2006, Exhibit 10.1).

						(b) First Amendment to the Anixter International Inc. 2006 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on September 10, 2014, Exhibit 10.1).

10.16*						(a) Anixter International Inc. 2010 Stock Incentive Plan. (Incorporated by reference to pages A-1 through A-3 of the Company’s Proxy Statement filed on April 8, 2010).

						(b) First Amendment to the Anixter International Inc. 2010 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on September 10, 2014, Exhibit 10.2).

						(c) Second Amendment to the Anixter International Inc. 2010 Stock Plan. (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q filed on July 28, 2015, Exhibit 10.1).

10.17*						Anixter International Inc. Management Incentive Plan effective May 20, 2004. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 2004, Exhibit 10.15).

10.18*						(a) Anixter International Inc. 2001 Stock Incentive Plan. (Incorporated by reference from Anixter International Inc. Registration Statement on Form S-8, file number 333-103270, Exhibit 4a).

						(b) First Amendment to the Anixter International Inc. 2001 Stock Incentive Plan effective May 20, 2004. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 2004, Exhibit 10.18).

10.19*						Form of Anixter International Inc. Restricted Stock Unit Grant Agreement. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 2, 2009, Exhibit 10.19).

10.20*						Form of Anixter International Inc. Restricted Stock Unit Grant Agreement. (Revised for grants made to certain employees on or after March 1, 2010). (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2010, Exhibit 10.2).


Exhibit No.						Description of Exhibit
10.21*						Anixter Inc. Amended and Restated Supplemental Executive Retirement Plan with Robert W. Grubbs and Dennis J. Letham, dated January 1, 2009. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended January 2, 2009, Exhibit 10.20).

10.22*						Employment Agreement with Robert W. Grubbs, dated January 1, 2006. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on January 5, 2006, Exhibit 10.1).

10.23*						Separation Agreement with Robert W. Grubbs, Jr., dated May 13, 2008. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on May 19, 2008, Exhibit 10.1).

10.24						(a) Five-Year Revolving Credit Agreement dated April 8, 2011 among Anixter Inc., Wells Fargo Bank, National Association, as Administrative Agent, and other banks named therein. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on April 14, 2011, Exhibit 10.1).

						(b) First Amendment, dated as of November 7, 2013, to its Five-Year Revolving Credit Agreement, dated as of April 8, 2011, among Anixter Inc., the Borrowing Subsidiaries party thereto, the Guarantors party thereto, the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on November 8, 2013, Exhibit 10.1).

						(c) Second Amendment and Incremental Facility Agreement dated August 27, 2014 to Five-Year Revolving Credit Agreement dated April 8, 2011, among Anixter Inc., Wells Fargo Bank, National Association, as Administrative Agent, and other banks named therein. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on August 28, 2014, Exhibit 10.1).

						(d) Fourth Amendment, dated as of August 4, 2015, to the Five-Year Revolving Credit Agreement, dated as of April 8, 2011, among Anixter Inc., the Borrowing Subsidiaries party thereto, the Guarantors party thereto, the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on August 6, 2015, Exhibit 10.3).

10.25						(a) Second Amended and Restated Receivable Sale Agreement dated May 31, 2011 between Anixter Inc., as Seller, and Anixter Receivables Corporation, as Buyer. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on June 2, 2011, Exhibit 10.1).

						(b) Amendment No. 1 to Second Amended and Restated Receivable Sale Agreement dated May 31, 2012 between Anixter Inc., as Originator and Anixter Receivables Corporation, as Buyer. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on June 1, 2012, Exhibit 10.1).

10.26						Third Amended And Restated Receivables Sale Agreement dated as of October 5, 2015 between Anixter Inc., as the Seller, and Anixter Receivables Corporation, as the Buyer. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on October 8, 2015, Exhibit 10.2).

10.27						(a) Second Amended and Restated Receivable Purchase Agreement dated May 31, 2011 among Anixter Receivables Corporation, as Seller, Anixter Inc., as Servicer, Falcon Asset Securitization Company LLC and Three Pillars Funding LLC, as Conduits, the Financial Institution party thereto, JPMorgan Chase Bank, N.A. and SunTrust Robinson Humphrey, Inc., as Managing Agents and JPMorgan Chase, N.A., as Agent. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on June 2, 2011, Exhibit 10.2).


Exhibit No.						Description of Exhibit
						(b) Amendment No. 1 to Second Amended and Restated Receivable Purchase Agreement dated May 31, 2012 among Anixter Receivables Corporation, as Seller, Anixter Inc., as the initial Servicer, each financial institution party thereto as a Financial Institution, Chariot Funding LLC (successor by merger to Falcon Asset Securitization Company LLC) and Three Pillars Funding LLC, as Conduits, SunTrust Robinson Humphrey, Inc. and JPMorgan Chase Bank, N.A. ("J.P. Morgan"), as Managing Agents, and J.P. Morgan, as Agent for the Purchasers. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on June 1, 2012, Exhibit 10.2).

						(c) Amendment No. 2 to Second Amended and Restated Receivables Purchase Agreement, dated as of May 30, 2014, among Anixter Receivables Corporation, as Seller, Anixter Inc., as the initial Servicer, each financial institution party thereto as a Financial Institution, Chariot Funding LLC (successor by merger to Falcon Asset Securitization Company LLC), as a conduit, SunTrust Robinson Humphrey, Inc. and JPMorgan Chase Bank, N.A. ("J.P. Morgan"), as managing agents, and J.P. Morgan, as agent for the Purchasers. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on June 5, 2014, Exhibit 10.1).

						(d) Amendment No. 3 to Second Amended and Restated Receivables Purchase Agreement, dated as of August 27, 2014, among Anixter Receivables Corporation, as Seller, Anixter Inc., as the initial Servicer, each financial institution party thereto as a Financial Institution, Chariot Funding LLC (successor by merger to Falcon Asset Securitization Company LLC), as a conduit, SunTrust Robinson Humphrey, Inc. and JPMorgan Chase Bank, N.A. ("J.P. Morgan"), as managing agents, and J.P. Morgan, as agent for the Purchasers. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on August 28, 2014, Exhibit 10.2).

						(e) Amendment No. 5, dated as of August 4, 2015, to the Second Amended and Restated Receivables Purchase Agreement, among Anixter Receivables Corporation, as Seller, Anixter Inc., as Servicer, the Financial Institutions party thereto, Chariot Funding LLC (successor by merger to Falcon Asset Securitization Company LLC), as a conduit, SunTrust Robinson Humphrey, Inc. and JPMorgan Chase Bank, N.A. (“J.P. Morgan”), as Managing Agents, and J.P. Morgan, as Agent for the Purchasers. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on August 6, 2015, Exhibit 10.2).

10.28*						Anixter International Inc. 2014 Management Incentive Plan. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on May 29, 2014, Exhibit 10.1).

10.29*						Anixter International Inc. Change in Control Severance Agreement. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on September 10, 2014, Exhibit 10.3).


10.30						Stock Purchase Agreement by and among Tri-NVS Holdings, LLC, Tri-Northern Acquisitions Holdings, LLC and Anixter Inc. (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 3, 2014, Exhibit 10.1).

10.31						(a) Asset Purchase Agreement, by and between AIP/Fasteners LLC and Anixter Inc., dated February 11, 2015. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on February 13, 2015, Exhibit 10.1).

						(b) Amendment No. 1 to Asset Purchase Agreement, by and between AIP/Fasteners LLC and Anixter Inc., dated February 11, 2015. (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q filed on April 28, 2015, Exhibit 10.1).

						(c) Amendment No. 2 to Asset Purchase Agreement, by and between Optimas OE Solutions, LLC (formerly AIP/Fasteners LLC) and Anixter Inc., dated June 1, 2015. (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q filed on October 27, 2015, Exhibit 10.1).

						(d) Amendment No. 3 to Asset Purchase Agreement, by and between Optimas OE Solutions, LLC (formerly AIP/Fasteners LLC) and Anixter Inc., dated August 21, 2015. (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q filed on October 27, 2015, Exhibit 10.2)

10.32						Consulting agreement dated June 11, 2015 between Anixter Inc. and Giulio Berardesca. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on June 15, 2015, Exhibit 10.1).


Exhibit No.						Description of Exhibit
10.33						Purchase Agreement among Anixter Inc., Anixter International Inc. and Wells Fargo Securities, LLC, dated August 4, 2015. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on August 6, 2015, Exhibit 10.1).

10.34						(a) Credit Agreement (Receivables Facility), dated as of October 5, 2015, by and among Anixter Inc. and the other borrowers party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on October 8, 2015, Exhibit 10.1).

						(b) Waiver and First Amendment to Receivables Facility Loan Documents, dated as of September 19, 2016, by and among Anixter Receivables Corporation, Anixter Inc., the lenders party thereto and JPMorgan Chase Bank, N.A. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 30, 2016, Exhibit 10.34B).

10.35						(a) Credit Agreement (Inventory Facility), dated as of October 5, 2015, by and among Anixter Inc. and the other borrowers party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and the lenders party thereto. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on October 8, 2015, Exhibit 10.3).

						(b) First Amendment to Inventory Facility Loan Documents, dated as of September 19, 2016, by and among Anixter Inc. and the other borrowers party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and the lenders party thereto. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 30, 2016, Exhibit 10.35B)

10.36						Credit Agreement, dated as of October 5, 2015, by and among Anixter Canada, Inc. and Tri-Ed ULC, as borrowers, Anixter Mid Holdings B.V., as guarantor, The Bank of Nova Scotia, as Administrative Agent, and The Bank of Nova Scotia and Bank of America, N.A., Canada Branch, as lenders. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on October 8, 2015, Exhibit 10.4).

10.37						Form of Anixter International Inc. Performance Unit Grant Agreement. (Incorporated by reference from Anixter International Inc. Current Report on Form 10-Q filed on April 26, 2016, Exhibit 10.1)

10.38*						Anixter International Inc. 2017 Stock Incentive Plan. (Incorporated by reference to pages A-1 through A-11 of the Company's Proxy Statement filed on April 20, 2017).

10.39						Retirement Agreement between Anixter Inc. and Robert J. Eck (Incorporated by reference from Anixter International Inc., Quarterly Report on Form 10-Q for the quarterly period ended June 29, 2018, Exhibit 10.1).

10.40						Consulting Agreement between Anixter Inc. and William A Standish (Incorporated by reference from Anixter International Inc., Quarterly Report on Form 10-Q for the quarterly period ended June 29, 2018, Exhibit 10.2).

10.41						Purchase Agreement, dated October 29, 2018, by an between Anixter Inc., and Anixter International Inc., as guarantor, and Wells Fargo Securities, LLC, as representative of the initial purchasers named therein. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed October 30, 2018, Exhibit 10.1).

10.42						Second Amendment to Receivables Facility Credit Agreement, dated October 29, 2018, by and between Anixter Inc., and Anixter Receivables Corporation, the financial institutions party thereto, as lenders, and JPMorgan Chase Bank. N.A., as administrative agent. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed October 30, 2018, Exhibit 10.2).

10.43						Second Amendment to the Credit Agreement (Receivables Facility), dated October 29, 2018, by and between Anixter Inc., Anixter International Inc., certain wholly-owned subsidiaries names as loan parties therein, the financial institutions party thereto, as lenders, and Wells Fargo Bank, National Association, as administrative agent. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed October 30, 2018, Exhibit 10.3).

Exhibit No.

Description of Exhibit

10.44

Third Amendment to Receivables Facility Credit Agreement, dated November 16, 2018, by and among Anixter Inc., Anixter Receivables Corporation, the financial institutions party thereto, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed November 20, 2018, Exhibit 10.1).

10.45

Third Amendment to Inventory Facility Credit Agreement, dated November 16, 2018, by and among Anixter Inc., Anixter International Inc., certain wholly-owned subsidiaries named as loan parties therein, the financial institutions party thereto, as lenders, and Wells Fargo Bank, National Association, as administrative agent. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed November 20, 2018, Exhibit 10.2).

10.46*

First Amendment to the Anixter Inc. Amended and Restated Supplemental Executive Retirement Plan with Robert W. Grubbs and Dennis J. Letham, dated December 18, 2018. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 28, 2018, Exhibit 10.46).

10.47*

Second Amendment to the Anixter Inc. Amended and Restated Excess Benefit Plan, dated December 18, 2018. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 28, 2018, Exhibit 10.47).

10.48*

Second Amendment to the Anixter Inc. Amended and Restated Deferred Compensation Plan, dated December 18, 2018. (Incorporated by reference from Anixer International Inc. Annual Report on Form 10-K for the year ended December 28, 2018, Exhibit 10.48).

10.49

Anixter International Inc. 2019 Performance Unit Grant Agreement (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended March 29, 2019, Exhibit 10.1).

10.50

Anixter International Inc. 2019 Restricted Stock Unit Grant Agreement (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended March 29, 2019, Exhibit 10.2).

10.51

Voting and Support Agreement, dated as of October 30, 2019, by and among CD&R Arrow Parent, LLC, and Anixter International Inc. (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K filed on October 31, 2019, Exhibit 10.1).

10.52

Voting and Support Agreement, dated as of January 10, 2 020, by an d among WESCO International , Inc., and Anixter International Inc. (I nc orporated by r eference f rom Anixter International Inc. Current Report on Form 8-K filed on January 13, 2020, Exhibit 10.1).

(21) Subsidiaries of the Registrant.

21.1

List of Subsidiaries of the Registrant.

(23) Consents of experts and counsel.

23.1

Consent of Independent Registered Public Accounting Firm.

(24) Power of attorney.

24.1

Power of Attorney executed by Lord James Blyth, Frederic F. Brace, Linda Walker Bynoe, Robert J. Eck, F. Philip Handy, Melvyn N. Klein, Jamie Henikoff Moffitt, George Muñoz, Scott R. Peppet, Valarie L. Sheppard, William S. Simon, Charles M. Swoboda and Samuel Zell.

Exhibit No.

Description of Exhibit

(31) Rule 13a — 14(a) /15d — 14(a) Certifications.

31.1

William A. Galvin, President and Chief Executive Officer, Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Theodore A. Dosch, Executive Vice President-Finance and Chief Financial Officer, Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32) Section 1350 Certifications.

32.1

William A. Galvin, President and Chief Executive Officer, Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Theodore A. Dosch, Executive Vice President-Finance and Chief Financial Officer, Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(101) Extensible Business Reporting Language.

101.INS**

Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH**

Inline XBRL Taxonomy Extension Schema Document

101.CAL**

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB**

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE**

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

** Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for fiscal years ended January 3, 2020, December 28, 2018 and December 29, 2017, (ii) the Consolidated Balance Sheets at January 3, 2020 and December 28, 2018, (iii) the Consolidated Statements of Cash Flows for fiscal years ended January 3, 2020, December 28, 2018 and December 29, 2017, (iv) the Consolidated Statements of Stockholders’ Equity for fiscal years ended January 3, 2020, December 28, 2018 and December 29, 2017, and (v) Notes to Consolidated Financial Statements for fiscal year ended January 3, 2020.

Copies of other instruments defining the rights of holders of our long-term debt and our subsidiaries not filed pursuant to Item 601(b)(4)(iii) of Regulation S-K and omitted copies of attachments to plans and material contracts will be furnished to the Securities and Exchange Commission upon request.

References made to Anixter International Inc. and Itel Corporation filings can be found at Commission File Number 001-10212.

ANIXTER INTERNATIONAL INC.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ANIXTER INTERNATIONAL INC. (PARENT COMPANY)

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Years Ended

(In millions)

Operating loss

( i 6.1)

( i 5.4)

( i 5.2)

Other income:

Interest income, including intercompany

i 9.5

i 8.3

i 6.8

Income before income taxes and equity in earnings of subsidiaries

i 3.4

i 2.9

i 1.6

Income tax expense

i 0.7

i 0.6

Income before equity in earnings of subsidiaries

i 2.7

i 2.2

i 1.0

Equity in earnings of subsidiaries

i 260.2

i 154.1

i 108.0

Net income

i 262.9

i 156.3

i 109.0

Comprehensive income

i 272.7

i 97.2

i 149.6

See accompanying note to the condensed financial information of registrant.

ANIXTER INTERNATIONAL INC.

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ANIXTER INTERNATIONAL INC. (PARENT COMPANY)

BALANCE SHEETS

(In millions)

ASSETS

Current assets:

Cash and cash equivalents

i 0.5

i 0.2

Other assets

i 0.2

i 0.1

Total current assets

i 0.7

i 0.3

Other assets (primarily investment in and advances to subsidiaries)

i 1,861.8

i 1,571.9

i 1,862.5

i 1,572.2

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Accounts payable and accrued expenses, due currently

i 0.2

Other non-current liabilities

i 1.4

i 1.6

Total liabilities

i 1.6

i 1.8

Stockholders’ equity:

Common stock

i 34.2

i 33.9

Capital surplus

i 310.2

i 292.7

Retained earnings

i 1,783.8

i 1,513.2

Accumulated other comprehensive loss

( i 267.3)

( i 269.4)

Total stockholders’ equity

i 1,860.9

i 1,570.4

i 1,862.5

i 1,572.2

See accompanying note to the condensed financial information of registrant.

ANIXTER INTERNATIONAL INC.

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

ANIXTER INTERNATIONAL INC. (PARENT COMPANY)

STATEMENTS OF CASH FLOWS

Years Ended

(In millions)

Operating activities:

Net income

i 262.9

i 156.3

i 109.0

Adjustments to reconcile net income to net cash used in operating activities:

Equity in earnings of subsidiaries

( i 260.2)

( i 154.1)

( i 108.0)

Dividend from subsidiary

i 7.8

i 8.0

i 3.7

Stock-based compensation

i 2.8

i 2.4

i 2.5

Income tax expense

i 0.7

i 0.6

Intercompany transactions

( i 17.3)

( i 14.7)

( i 13.2)

Changes in assets and liabilities, net

( i 0.1)

Net cash used in operating activities

( i 3.4)

( i 1.5)

( i 5.5)

Investing activities:

Other

( i 1.0)

i —

Net cash used in investing activities

( i 1.0)

i —

Financing activities:

Proceeds from stock options exercised

i 4.7

i 1.5

i 5.0

Loans from subsidiaries, net

i —

i 0.7

Other, net

i —

( i 0.2)

Net cash provided by financing activities

i 4.7

i 1.5

i 5.5

Increase in cash and cash equivalents

i 0.3

i —

Cash and cash equivalents at beginning of period

i 0.2

Cash and cash equivalents at end of period

i 0.5

i 0.2

See accompanying note to the condensed financial information of registrant.

Note A — i Basis of Presentation

In the parent company condensed financial statements, our investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. Our share of net income of our unconsolidated subsidiaries is included in consolidated income using the equity method. The parent company financial statements should be read in conjunction with our Consolidated Financial Statements. See Note 5. "Debt" in the notes to the Consolidated Financial Statements for details on dividend restrictions from Anixter Inc. to the parent company.

ANIXTER INTERNATIONAL INC.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Years ended January 3, 2020, December 28, 2018 and December 29, 2017

(In millions)

Balance at

beginning of

the period

Charged to

income

Charged

to other

accounts

Deductions

Balance at

end of

the period

Description

Year ended January 3, 2020:

Allowance for doubtful accounts

i 39.9

i 10.1

( i 1.0)

( i 18.6)

i 30.4

Allowance for deferred tax asset

i 79.1

i 0.9

i —

( i 41.7)

i 38.3

Year ended December 28, 2018:

Allowance for doubtful accounts

i 43.8

i 8.5

( i 9.0)

( i 3.4)

i 39.9

Allowance for deferred tax asset

i 79.9

( i 0.6)

( i 0.2)

i —

i 79.1

Year ended December 29, 2017:

Allowance for doubtful accounts

i 43.6

i 10.0

( i 1.3)

( i 8.5)

i 43.8

Allowance for deferred tax asset

i 20.7

i 60.7

( i 1.5)

i —

i 79.9

ANIXTER INTERNATIONAL INC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Glenview, State of Illinois, on February 20, 2020.


			ANIXTER INTERNATIONAL INC.
			By:			/s/ *Theodore A. Dosch*
						Theodore A. Dosch
						Executive Vice President-Finance and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ William A. Galvin

President and Chief Executive Officer

(Principal Executive Officer)

William A. Galvin

/s/ Theodore A. Dosch

Executive Vice President — Finance

(Principal Financial Officer)

Theodore A. Dosch

/s/ Ilaria Mocciaro

Senior Vice President — Controller

(Principal Accounting Officer)

Ilaria Mocciaro

/s/ Lord James Blyth*

Director

Lord James Blyth

/s/ Frederic F. Brace*

Director

Frederic F. Brace

/s/ Linda Walker Bynoe*

Director

Linda Walker Bynoe

/s/ Robert J. Eck*

Director

Robert J. Eck

/s/ F. Philip Handy*

Director

F. Philip Handy

/s/ Melvyn N. Klein*

Director

Melvyn N. Klein

/s/ Jamie Henikoff Moffitt*

Director

Jamie Henikoff Moffitt

/s/ George Muñoz*

Director

George Muñoz

/s/ Scott R. Peppet*

Director

Scott R. Peppet

/s/ Valarie L. Sheppard*

Director

Valarie L. Sheppard

/s/ William S. Simon*

Director

William S. Simon

/s/ Charles M. Swoboda*

Director

Charles M. Swoboda

/s/ Samuel Zell*

Director