The Anixter family is stepping down from Anicom Inc., one of the largest wire and cable specialists in the United States, following the completion of an internal investigation into alleged accounting irregularities that surfaced earlier this year.
Anicom, Rosemont, Ill., said it concluded its internal investigation into accounting matters and plans to revise its financial statements for the first quarter of 2000, as well as 1999 and 1998. As a result of the in-house probe, the company expects to restate 1998 and 1999 results, lowering reported pretax earnings by $34.4 million.
The company also announced several new elements of a restructuring plan that it hopes will push the company back to profitability by mid-2001. Along with trimming back its workforce 10% and its previously announced plan to take a pretax charge of up to $5 million, the company's founders will be retiring at year-end.
Well-known in the wire world as the founders of Anixter Inc. and Anicom, a nine-year-old wire specialist, the Anixter family, Alan, William "Bill", and Scott, are retiring from the company effective at the end of this year. Anicom interim Chief Executive Thomas Reiman said, "The Anixter family was the architect of this industry. Alan and Bill were the pioneers when they founded Anixter Brothers over 40 years ago. Alan and Scott, with Bill's guidance on the board, built Anicom from scratch to a more than $500 million distribution specialist across North America."
The company reports that it is nearing a decision on a new CEO. Reiman said the company is close to concluding a search that has involved a screening process by its board of directors and senior management team.
Anicom plans to file its second- and third-quarter results when it files revised 1998 and 1999 audited financial statements, probably before the end of the year. Including restructuring charges, the company expects second-quarter pretax losses of $13.4 million on revenue of $143.4 million.
Anicom expects third-quarter losses of $4.37 million on revenue of $149.6 million, including restructuring charges.
Meantime, trading in Anicom stock remains halted. NASDAQ officials have barred trading in Anicom shares since the accounting problem first surfaced, and trading won't resume until the company formally files its revised results with the Securities and Exchange Commission.
As the driving forces behind Anixter International, which quickly became the largest wire and cable specialist in the electrical industry, Bill and Alan Anixter were widely respected in the wire and cable world. They sold their interests in Anixter Brothers Inc. in 1986 to a company controlled by financier Sam Zell. Now a publicly traded company, Anixter has no Anixter family involvement.
The Anixter family got back into the wire business in the early 1990s when Bill, Alan and Alan's son, Scott, co-founded Anicom. Propelled by an intense acquisition drive that included the purchase of 16 companies in over four years, the company grew to $537 million in sales in 1999. Anicom went public in 1995.
Electrical distributors' gross profit and net profit (before taxes) for 1999 both came in below 1998 levels, according to the financial norms of the electrical wholesaling industry just released by the Electrical Manufacturers' Credit Bureau (EMCB), Temecula, Calif.
In 1999, distributors saw gross profit before taxes at 20.10%, slightly behind 1998's 20.19%. In the notes accompanying the data, EMCB underscores that the national chains, which were first included in the norms calculation last year, "tend to dominate the annual statistics." Noted EMCB, "The gross profit percentages of WESCO and Graybar are around 18%, which reduces the 1999 overall gross profit percentage." Nonetheless, the 20.10% gross profit fits right into the range of reported industry performance over the last ten years, as can be seen in the accompanying chart. The 1999 gross profit of 20.10%, although a bit on the low side, is not the lowest by any means.
Net profit before taxes was also lower at 2.21% in 1999, said EMCB, after coming in at 2.46% in 1998. The 2.21% rate is still respectable in the context of rates achieved in past the 10 years. At times, net profit has fallen below the 2% mark. The statistics are also broken down according to net-worth groupings. As in past years, distributors in some mid-size net-worth categories managed to pump up gross profits higher than their very small and very large counterparts and brought more to the bottom line, too.
In 1999, distributors saw assets shift from cash and receivables into inventories.
According to EMCB, "The percentage of cash, receivables and current ratio dropped for 1999 while gross profit and net profit percentages also declined slightly. These results indicate there may have been a slight slowing in the electrical industry in 1999."
EMCB's national norms data for 1999 and 1998 both include results of national chains Graybar Electric Co., St. Louis, and WESCO International Inc., Pittsburgh, which makes these financial measures more representative of the entire electrical distribution industry, but not directly comparable to previous years' norms.