Good day everyone and welcome to our Anixter second quarter Earnings Call. Today’s call is being recorded at this time for opening remarks and introductions I would like to turn the call over to Mr. Chris Kettman please go ahead sir.

Thank you. Good morning, and thank you, everyone for joining us today to discuss Anixter’s second quarter 2008 results. By now, everyone should have received a copy of the press release, which was sent out earlier this morning. If anyone still needs a copy, you can either go to Anixter’s website or call Chris Kettmann at 312-553-6716 and I can resend the information. On the line with us today from Anixter’s management team are Bob Eck, President and CEO; and Dennis Letham, Senior Vice President of Finance and CFO. After management completes their opening remarks, we will open the line for a Q&A session. Before we begin, I want to remind everyone that statements on this call, including words such as believe, expect, intend, anticipate, contemplate, estimate, plan, should, may or similar expressions are forward-looking statements. They are subject to a number of factors that could cause the company’s actual results to differ materially from what is indicated here. These factors include general economic conditions, technology changes, changes in supply or a customer relationship, risks associated with the integration of recently-acquired companies, commodity price fluctuations, exchange rate fluctuations and new or changed competitors. Please see the company’s SEC filings for more information. At this point, I’ll turn the call over to Dennis.

Thank you, Chris. Good morning, everyone, and thank you for joining us. We’re pleased to report second quarter results that exceeded the expectations we laid out for the investment community following the end of the first quarter, particularly relating to company sales growth. As noted in our first quarter conference call on April 22, we anticipated seeing normal seasonal consecutive quarter sales growth patterns from the first to second quarter of mid to high single digit percentage growth. Even better, our sales grew 10% from the first to second quarter of this year, topping our own internal expectations. We also noted at that time that our year-on-year sales growth presented us with a difficult comparison, as we saw the first to second quarter of 2007 grow 14%, which was well above the historical trend line. With reported second quarter year-on-year sales growth of 7%, we are pleased to have exceeded our expectation. Lastly, during our first quarter earnings call, we expressed that operating margins in the second quarter would begin to trend back toward the full year 2007 average of 7.5%. Thanks to better than expected sales growth, operating margins, excluding the charge associated with retirement of the company’s former CEO that was announced on May 19, increased from 6.9% in the first quarter to 7.8% in the recently completed quarter. As a result, our operating margins for the first half of 2008 were 7.4%. With that overview, let’s now turn to the actual financial results for the second quarter, which included sales of $1.62 billion, which were up 7% from the $1.51 billion reported in the year ago quarter. Operating income of $121.8 million, inclusive of the $4.2 million of expense associated with retirement of our former CEO, increased 5% from $116.1 million in last year's second quarter. Excluding…

Thanks, Dennis. Thanks everyone for joining us today. We’re very pleased with the results Dennis has just described for the second quarter in what continues to be an uncertain economic environment. Beginning with the enterprise cabling and security solutions business, we continue to work through the difficult comparison to large project volume last year in the U.S. and Europe. As Dennis noted, we experienced slow growth in the North American enterprise business, but the performance reflects successfully replacing during the first half of this year over $30 million of specific customer project (inaudible) from the first half of 2007 in enterprise cable. That project and new customer growth coupled with the continued healthy growth in security sales reflects the progress we are making expanding our product offering and adding new customers. In the European enterprise business, we are again working through replacing some large project volume from last year. The bulk of that volume occurred in late 2006 through the first half of 2007 and was largely concentrated in the United Kingdom. So as we go forward, some of that difficult comparison will be behind us. More importantly, however, the security initiative in EMEA continues to gain traction and we have seen positive sales growth on the continent, particularly in France and the Nordic countries. The emerging market growth was strong in the quarter as Dennis mentioned. This is a combination of solid, local and day-to-day business coupled with a pickup in project spending by U.S.-based multinationals. We also see very strong growth in security sales in the emerging markets. The trends that have been driving our enterprise business, data centers, demand for greater bandwidth and the correspondingly higher performing cable systems that support greater bandwidth and the migration toward IP security all continue in place. Focusing on two key…

Thank you, sir. (Operator Instructions). And we’ll take our first question from Celeste Santangelo with Merrill Lynch.

Good morning.

Good morning Celeste.

Good morning. Could you breakdown the components of your North American enterprise business and talk about the trends there? So I think you said that the day-to-day business was solid in the quarter? Could you talk maybe about the larger projects? What you are seeing, office construction versus data centers and what you expect in Q3?

Well, Celeste, I think it’s challenging for us, as we’ve said in the past, to split out specific details on office construction versus data centers, and another point that we’ve, I think, frequently made is that one of the benefits in the enterprise business really is real estate churn versus just new construction. So it would be difficult in any kind of accurate way for us to split out data centers versus real estate churn versus new construction. I think the point is that we saw some challenges in project spending due to specific customer spending last year that we’ve said had to do with unique investments those customers were making. As we then look forward this year, we’ve really worked on replacing a bunch of business that we knew wouldn’t repeat. I think I highlighted that we replaced about $30 million in that business in the first half. So we are seeing project business across multiple vertical markets. We’re also seeing strong day-to-day business, good sales to contractors as well, which to us is really a lot of day-to-day flow that indicates there’s good mid-market activity. And as we’ve always said, there’s a lot of move, add, and change activity that goes on in the enterprise market that doesn’t really necessarily constitute a large project, but drives a lot of spending.

Okay. And then, looking at the supplier volume growth incentives, could you talk about whether that was, you feel that was transitory or is that permanent? And then, what does that mean for gross margins going forward?

I think there’s an element of that that’s probably going to continue to play out over the balance of the year. As I commented in my remark a couple minutes ago, this was largely in the enterprise cabling market. And as you could tell from the fact that enterprise cabling in North America was only up 2% overall year-on-year in the quarter and embedded in there was 16% growth in security, there is an issue with some of the key data cable suppliers’ year-on-year volumes and where we sit relative to any volume growth incentive programs. And I would expect that the levels at which we’re recognizing those right now would probably continue for the balance of the year.

Great. Thank you.

Our next question comes from David Manthey with Robert W. Baird.

Hi, guys. Good morning.

Good morning, David.

Good morning, David.

I’m wondering if you could talk about with the OEM price increases, could you single out what the gross profit impact was in terms of basis points in the current quarter? And Bob, I think you said you hope to recapture that by the end of the second half. But just so we know what the swing factor is?

Well, on the OEM supply business, we’re probably running a good quarter of a point below gross margin expectations that would be steel price related. And the problem right now is chasing a moving target. We were pretty clear, I think, in the first quarter call that we thought we were taking appropriate actions to pass through those increases based on what had happened in the first quarter. Unfortunately in the second quarter, if anything, that the trend accelerated a little bit more which gives us a bigger gap to chase over the balance of the year. But I think Bob was clear in his comments, we’re taking action on that and would expect to close that gap during the second half of 2008.

Yeah. I think, David, the challenge is that if steel prices continue to run up at a rapid pace, we’ll chase it for a while because you go through a cycle of negotiating an increase with a customer. And as you have a start date for that increase to take effect, if prices from suppliers continue to run up, you’re kind of chasing, as Dennis said, a moving target. We feel pretty good that we’re making progress on it. But it will be somewhat subject to how steel prices continue to move as we go through the rest of the year.

Okay. And if you said it’s a 0.25% just in the industrial wire and cable business, I guess overall it’s a pretty small number?

Well, we’re talking about the industrial fast -- total OEM supply business is about 20% of our volume. About a quarter of that comes from aerospace, which isn’t impacted quite the same way. Different metals mix in that product set. So we’re dealing with about, call it, 15% of our company-wide volume where this is an issue.

Okay. Right. OEM supply. Okay. Did you see any pricing on the enterprise cabling side this quarter?

There’s been some pricing that’s come through. The major manufacturers have indicated price increases. Those typically take about three or four months to work their way into the market. So we’ve seen some price increase activity, but not a huge upside benefit. I guess the important thing is that in our business mix we have a lot of contracted customers where we have contracted pricing that is agreed between us, the end customer; the manufacturer is typically involved in that. And so, those prices tend to not be affected by the type of increases that were announced by some of the players back in April, and I believe there were some more announced in June.

And when you look at the second half, what are your expectations in terms of increasing growth rate because of those price increases?

I wouldn’t expect that the price increases will have a significant impact on the growth rate.

Okay. And then, finally, in terms of product additions, could you talk about the number of SKUs this year versus the year ago period in terms of the number of SKUs you’ve added?

I don’t have that data point, Dave, in front of me.

One way, David, to think of this as well is that some of the products we’ve had as part numbers, and we’re selling more of them. So we launch an initiative in security and we add, I’ll make it up, a couple of thousand new part numbers in security. But as we continue to penetrate, we add those products then across more of the business. The same thing is happening with the wire and cable additions. It’s not so much lots and lots of new SKUs as more sales of SKUs that we may have had in the business, but not sold in any meaningful level.

It does get -- the SKU comp gets a little bit distorted by the OEM supply business where there’s a lot of very unique SKUs. If you just picked up today’s earnings announcement and you compared it to last year’s earnings announcement, at the very end there’s a little section called About Anixter that just gives about four or five key data points. I think a year ago, we were talking about over 350,000 SKUs. And today, in the release we’re saying nearly 400,000 SKUs, but I would caution that a lot of that is due to a lot of very unique parts in the OEM supply business.

Understood. All right. Thanks, guys.

Our next question comes from Edward Wheeler with Buckingham Research.

Hi, good morning.

Morning, Ed.

Very nice quarter. You talked a lot about -- and certainly optimistically about some of the growth initiatives and some of the actions you’re taking to broaden the sales growth, and then we have the 2% organic operating expense increase. I guess I -- just feels like that’s unsustainable. Could you add a little color as to just kind of where that OpEx growth ought to be given what you’re trying to do?

Well, one of the things -- the OpEx growth, if you do nothing, if you kind of hold the structure steady, probably has inherent in it somewhere between 3.5, 4.5% inflation year-on-year. One of the things that’s working positively to bring down that actual comparison at the moment is any of our variable compensation, bonuses, incentives, and that sort of thing, which are tied to planned expectations with plans having been built in the latter months of 2007. To the extent that we are short of planned expectations on the year, we have less variable compensation expense, which is offsetting some of the inflation that’s inherent in the structure as it is today. I think it’s also clear that in kind of the core parts of the business, we’re being very careful about productivity issues. If we get an opening, we’re making sure we only fill it if the productivity stats dictate that we need to fill it, which then gives us the flexibility to invest in people in resources around the initiatives that are important to growth.

And that was my -- one of my other questions is quote activity, I guess it’s holding kind of steady the way it’s been for a while?

What type of activity, Ted?

Quote activity.

Quote?

Yes, quote activity what we see in our project boards are holding reasonably steady. We’ve got a lot of strength in wire and cable particularly with the EPC companies with energy-related projects with resources and we’re seeing good quote activity continued steady quote activity in the enterprise business. We’re not seeing big downward trends anyplace. So we’re pretty comfortable with the backlog of project work at this point.

And to repeat a point Bob made earlier, we’ve seen good quote activity in the OEM supply business and some good realization with some significant new contract activity over the last several months.

I guess you answered the question. The other question I had and that was I think CommScope specifically talked about some pricing toward the end of the first quarter or early in the second quarter and I think you maybe suggested that takes several months to impact and your overall thought is that we really won’t see much of that in the results.

Yes, that’s right.

Thanks. Great quarter.

Thank you.

Thanks, Ted.

Our next question comes from Jeff Beach with Stifel Nicolaus.

Yes, good morning, and congratulations on another great quarter.

Thank you.

Thanks, Jeff.

I’ve got a couple of questions. First, you’re showing very good growth in Europe. Can you describe the growth from the economy in Europe versus Anixter’s strong performance? Are you seeing slowing end markets there? It didn’t sound like it from the commentary, but I was just curious if you could comment about the direction of the economy in Europe versus your high growth, to start with.

Yeah. It really crosses three business units and a lot of variables. If you looked at the OEM supply business first, what we’ve seen, and this has been typical of what we’ve seen in our OEM supply business around the world, there’s individual customers who may have slowing activity. And we’ve seen some of that in the European business. On the other hand, we have other customers who either because they are taking share in the market or are in a more rapidly growing market tend to pick up. So I think if you looked at OEM supply, the U.K. market is beginning to slow a touch because there tends to be some talk about some macroeconomic factors there, but it’s being offset by growth with other customers and other geographies. In wire and cable, I think it’s important to look at, again, the expansion in continental Europe and the Middle East, which has just gone very well, and it’s an effort that we’ve put time into over the past couple of years, we’ve put people in place, and we’ve put managers in place, built the right supply relationships and customer relationships. And so after a couple of years of really investing in the front end of that, this year we’ve seen good growth, and it’s not being impacted so much by the economy because, as we’ve said, we’re a fairly small market share player in the EMEA wire and cable business, again outside U.K. And so, we have the opportunity to grow faster than the market and really not disrupt the market because we are a pretty small player there today.

On that point, Bob, it’s important like in the second quarter, we did see some softness in the U.K. market year-on-year on electrical wire and cable that our growth initiatives overall helped us overcome in electrical wire and cable in Europe.

Absolutely. And again, we saw growth in the enterprise business, which came both from the security investment as well, again, as investment in continental Europe where we’ve struggled in the past, and we’ve seen good pickup there which is offsetting slowness in the U.K. We’re just trying to recover from big project spend last year.

I think in general if you look at Europe, we would probably mirror what you read in the press in that the U.K. has been softer for us this year than it was a year ago. But the continent has held together pretty well, which when combined with our specific growth initiatives, has left us with decent growth coming out of Europe.

Yeah, and I think important to remember, when we talk about continental Europe, we roll into that number our Middle East business as well.

Right.

All right. Thanks. That was a good answer. Second, security growing 16% in North America this quarter, were you up specifically in security against good project sales as well in the second quarter of last year? Are we seeing because of the size of security a more of a mid-teens growth rate ahead? Can you help us there?

We were up against strong project business in the second quarter last year. We had a couple of significant very large volume projects. So we were really quite pleased with 16% growth for the quarter given the volume that we had last year. I think going forward; we’re targeting a growth rate in the 20 to 25% annual compound growth rate in security for the next couple of years as we see it. That’ll come from around the world in different buckets, but the expectation out of North America should be strong growth approaching that companywide average.

All right. Thanks. Last question is on visibility looking ahead. I’d like you to describe how see the markets out -- how long out ahead here, do you have, what you would call reasonable visibility? And even if it’s a guess, do you think we’ll see reasonably good growth across your markets in North America and Europe through the end of the year?

Jeff, I think we’ve touched on this point in calls from time to time over the years. Basically, we don’t have a lot of hard visibility backlog here at any point in time is typically in the range of about a month. We have pipelines on project type activity, pipeline tools that give us project activity outlook that extend beyond that. But projects are 15, 20% or so of our enterprise and electrical wire and cable business. The real issue here is as you get your bulk of your business day to day, short order, so there’s not a lot of long-term visibility, and nothing really has changed in that regard from how we would have answered the question one year or five years ago really in that respect, I think.

Yeah. And I think if you looked at the OEM supply business, we also have project boards there. The question of what that leads us to conclude is that all of those are opportunities we’ll compete with somebody else on. We’ll win some, we’ll lose and it’s hard to take those and say that gives us a specific outlook on the business.

I think an important point on outlook for volume though in terms of growth rates is if you look at where we ended up in the second quarter of this year with sales of 1000, 000, 616, we only need 2 or 3% growth from Q2 to Q3 to push kind of the raw year-on-year growth number up around 8%, which gets us back closer to our target at 8 to 12% growth rate. And we know that comparisons start to get a little easier in the second half of this year versus last year. So, I think our ability to generate decent year-on-year growth is pretty good.

Okay. Maybe this will help me a little bit, in the discussions you have right now with some of your largest cyclical companies in -- let’s say in your industrial markets, are they still indicating a reasonably good level of activity and optimism looking out past next month, four to six weeks?

Yeah. I think that’s a very customer specific question. Some customers are challenged right now, like I mentioned in the consumer discretionary space, some of those customers are challenged right now and are looking at tighter production runs and tighter spending. Other customers are doing really quite well. I think there are specific customers in retail that are spending a lot of money, there are specific customers in energy that are spending a lot of money, there are customers in alternative energy that are spending money. So it’s hard to draw one broad answer. Again, we operate in so many geographies and across so many customer verticals that where one type of customer or segment is soft, other segments are strong.

All right. Thanks a lot.

And our next question comes from Nat Kellogg with Next Generation.

Hi, guys, great quarter. Just a couple of sort of housekeeping things. Did you guys give a D&A expense for the quarter?

Hold on for one second, I’ll get that for you. Six million for the quarter, that brings the year-to-date number to 12.3 million, that’s for depreciation. Amortization of intangibles 2.1 in the quarter brings the full year number to 4.2 million.

Okay. That’s great. And then, if I looked at operating margins in Europe looked pretty good. I mean there’s nice expansion, both sequentially and year-over-year. And I’m just wondering was there anything specific there that helped to drive that? And do you know, how sustainable do you guys think that is?

Yeah. It was really volume driven. We talked about 16% growth in the OEM supply business in Europe. We talked about 48% growth outside the U.K. in the wire and cable business. We had growth in the enterprise business as well. So we’re getting leverage on volume, which is one of the stories we’ve talked about, that as we grow, particularly in continental Europe, leverage the existing expense base that’s already in place to, in effect, manage the back office, accounting and tax and operations. As we get enough volume, we leverage that and we begin to open up the margins a bit.

I would say on the point of sustainability on Europe, one thing to keep in mind is Europe is probably during the course of the year our most cyclical business in that when we get to the third quarter, we get these extended vacation periods, which impacts sales volume, which is going to give you a little bit of de-leveraging. Also when you look at Europe, today we’re getting about 40% of our total sales volume out of the OEM supply business. That customer base in OEM supply tends to be the type of customers that have one and two-week factory shutdowns, either around vacations or model year changes in Q3, and then will again have one to two-week factory shutdowns around the Christmas/New Year’s holiday period. So that European business tends to have or should typically have its strongest performance in the first two quarters of the year and a little soft in the second two quarters of the year.

Okay. Whereas the U.S. business, we should probably see a little bit of cyclical...

Yeah. U.S. business doesn’t have quite -- it’s got less OEM supply in the total mix, and we don’t have that same level of vacation impact in Q3 that we typically see out of Europe.

Okay. All right. That’s helpful. And then just on the buyback, I mean, obviously you guys said the cap is a little bit sort of closer to the higher end, I think you talked about 40 to 50%, and it’s sort of closer to 50% now, but obviously you guys are generating good cash flow. I mean, are our acquisitions looking more or less appealing these days? I mean, obviously your stock continues to be pretty cheap, despite a little bit nice performance today. I’m just wondering if you could talk a little bit about sort of how you see that capital allocation going forward?

I think on the acquisition question, we’ve talked in the past about the markets being a little tight, not seeing a lot of opportunities. We’re seeing a couple more opportunities open up now. So I think we’ve said we’re interested in acquisitions that fit well with our initiatives, our expansion initiatives. So we’ll continue looking at those. If the right opportunities come along, we’ll try to take advantage of them. Other than that, I think, given the amount of cash we’re generating at the growth rates we’re at, we’re very comfortable with the debt-to-capital structure we’re sitting with today.

Yeah. And if you’ve noticed over the last few quarters, I mean basically almost -- very closely we’ve been matching the cash flow from operations each quarter with the amount of buybacks and keeping that debt-to-total cap number hanging right in the 49 to 50% range. So...

Okay. That’s helpful. And then, just last if you could, and this is my last question, but if you guys could just give a little more color on sort of the factory automation initiatives. I’m just sort of curious about if are there any particular industries or verticals where you think that they’re sort of ripe for the picking, and where geographically if there is just more focus on the U.S. or Europe, but just a little more color there would be great.

Yeah. In terms of industry, honestly we aren’t being terribly industry-specific at the moment. It’s a new initiative for us, and we think actually the right way to attack initiative is first to build relationships and create both supply chain and technical value for the control system integrators. And the control system integrators work across many vertical end markets. So it would be wrong to target a specific vertical end market and say we think its right for the picking. We think the integrators are ripe to be helped and are really responding very well to our message. The U.S. versus Europe question is, has less to do with the markets and state-of-technology evolution and it has to do with how we’re trying to launch the initiative. Both are good market opportunities. It’s easier for us to launch an initiative in the U.S., put resources in place. And frankly, make mistakes along the way. It’s our expectation whenever we launch a new initiative that we’ll have fits and starts. And if we can have those fits and starts in a big market that doesn’t have some of the cost pressure that the European market has, it gives us a way really to build the initiative, make our mistakes, correct mistakes, retool and then quickly roll that initiative into the rest of the world. It’s our expectation we’ll carry the factory automation initiative into Europe later this year or early next year. And actually, we’re looking at it in Brazil as well.

Okay. Great. That’s very helpful. Congratulations on a great quarter, guys. And that’s all I got. Thanks for taking my questions.

Thanks.

Thanks.

(Operator Instructions) and we’ll take our next question from Edward Wheeler with Buckingham Research.

Yeah. Thanks for taking another call. I had one quick question. And that was, in the last downturn in the early 2001 timeframe, you were pretty quick at responding to demand and pulling down expenses. And I guess you have a playbook of things you are prepared to do. Just where do you sit if the world gets a little uglier? I mean are you seeing any indications that you need to implement some of those decisions that you did prior? Or kind of -- do you have any color on that? I guess...

I think the thing I would distinguish between the earlier time period and now is we in the 2001 timeframe came into that period with heavy exposure in the telecom market and with alternate carriers. And when we saw that market collapse, there was a clearly identifiable set of costs around that people, facilities and that sort of thing that we took very quick action on. I don’t see us having any particular end market or vertical market exposure today that would suggest that we would be taking similar-type action. But I think if you look at second quarter and what we talked about before on expenses, pretty much mirrors the game plan for the moment unless there’s a dramatic change in the economy. And that is, carefully manage head count particularly around turnover, only replace open spots when productivity statistics for a given location or a subset of the business suggests that you need the head count, carefully manage all of your variable costs and continuing to invest in the initiatives that you believe and are confident you can success with regardless of what’s happening in the economy in general. And I think that would be the playbook for the short term.

Great. Thank you.

(Operator Instructions) And it appears there are no further questions at this time. I would like to turn the conference back over to our speakers for any additional or closing remarks.

Thanks again, everyone for joining us on the call today. We continue to see solid growth in the industrial wire and cable, OEM supply and security markets, our existing customers project pipelines coupled with our ability to add new customers gives us confidence as we look forward to the remainder of the year. As we look forward for the enterprise business, it is interesting to note that IBM recently released a survey indicating that 40% of IT executives at financial services firms expect increase spending this year and next, in spite of the credit crisis and losses many firms have recorded. This is similar to data from IDC indicating that U.S. IT spending will grow through the year. These surveys coupled with our project boards leads us to expect sequential growth in through Q3 and over prior year in the enterprise business. Our ability to invest in growth initiatives while managing run rate expenses positions us well to continue to achieve good operating leverage, while building our organization to support our customer and partner suppliers, supply chain and global expansion needs. Thanks.

And that concludes today’s teleconference thank you for your participation, you may now disconnect.