Welcome to the Wesco international Incorporated Fourth Quarter and Full Year 2016 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Mary Ann Bell, Vice President of Investor Relations. Please go ahead.

Thank you Gary and good morning ladies and gentlemen. Thank you for joining us for Wesco's international conference call to review our fourth quarter and full-year financial results. Joining me on today's call are trained 12 and Dave Schulz, Executive Vice President and Chief Financial Officer . This conference call includes forward-looking statements and therefore actual results may differ materially from expectations. Additional information on WESCO International, please refer to the company's secretary filings including the risk factors described therein. The following presentation includes a discussion of certain non-GAAP financial measures. Information required by regulation G of the exchange act with respect to such non-GAAP financial measures can be obtained via Wesco's website at WESCO . Means to access this conference call via webcast was disclosed in the press release and was posted on our corporate Representative like. Replays of this conference call will be archived and available the next seven days. With that I would now like to turn the call over to John Engel.

Thank you Maryanne . Morning everyone and thank you for joining us today to review our fourth quarter and full-year 2016 results which I am happy to say are in line with our original and updated Outlook. Looking first at the fourth quarter on slide 3 were down 3.6% but grew sequentially reflecting improving momentum in our business. This marks the first time in five years we have sequential growth in work date adjusted organic sales in the fourth quarter. Operating margin was in line with our expectation as we took additional actions to reduce our cost in improve productivity three cash flow generation remains strong enabling us to reduce debt and get back within our target financial rut leverage range in for the full-year sales operating margin and EPS were down versus prior year but were in line with our expectations . We delivered free cash flow of over 150% of adjusted net income our strongest performances 2009 and also successfully completed the acquisition of AED last March. In addition we also completed the early redemption of $345 million of convertible debt . Last year which the provide our capital structure, reduced our interest expense and eliminated future EPS dilution associated with these debts instruments. The new year is starting off as expected with January month of sales low single digits on consolidated basis and that is with a few days left in the month. Now let's turn to the market environment starting first on page 4 with our industrial performance. We experienced a 7% workday adjustment organic sales decline in the fourth quarter with the U.S. down 5% and Canada down 14% in local currency. With that said we're beginning to see improving momentum with our industrial customers. Workday adjust organic sales were up 2% sequentially in the…

Thank you John and good morning everyone. Moving to page 8 we provided a fourth quarter sales Outlook of down 1% to down 4%. Actual sales were near the bottom of this range down 3.7% . As John noted organic sales were down 3.6% reflecting a competitive environment across multiple end markets was flat. Our acquisitions of Needham electric and AED had a two percentage sales which was offset by the impact of one fewer work day in a small headwind from foreign currency translation. Our core backlog decreased 3% from Q3 to Q4 in line with typical seasonal impact and was down 3% from year end 2015. Gross margin was 19.4% in the quarter down 10 basis versus a prior year and down 30 basis points sequentially. During the quarter we recorded several one-time charges that collectively made up more than the full reduction of gross margin versus the prior year. The largest of these was resolve the prior-year contract dispute. No further liability is expected for this matter. SG&A expenses for the third quarter were $250 million including acquisitions which added approximately $5 million of incremental SG&A. Excluding acquisitions core SG&A decreased by $12 million compared to last year. This reflects our cost reduction actions over the last 7/4 to eliminate more than 950 positions and exit or consolidate more than 14 branches along with ongoing discretionary spending controls. Operating margin was 4.6% within our Outlook range of 4.5% to four-point 8% . Operating margin was down 20 basis points from the prior-year driven by lower sales in the nonrecurring charges I just mentioned. The effective tax rate was 26% down 200 basis points from the prior-year adjusted rate and below our expectations of approximately 30% due to the impact of several one-time items. Going forward we expect…

[Operator Instructions]. The first question comes from Deane Dray with RBC. Please go ahead.

Maybe we can start John with your observation that you are beginning to see signs of a recovery. You gave a couple specifics. You talk about sequential improvement, some optimism in the industrial customers, but maybe expand also on the comment that half of the industrial end markets are contributing so maybe that's a good place to start.

Yes. I think what is encouraging for us is particularly the improvement in industrial. It was clearly down year-over-year but it grew sequentially. That's our big end market segment. And it is really industrial sequential growth Q3 to Q4 that helped drive the whole company to slightly positive on a workday adjusted basis sequential growth which is notable because that is not our typical seasonality. When you get underneath the bed I think there are two things I would like to site. First there are terms of getting activity levels, they are strong . More specifically for global counts and integrated supply , those types of opportunities - the bidding activity levels are up year-over-year and sequentially from the fourth quarter. So that is an encouraging data point in a good leading indicator. And then when I mentioned about over half of the customer groups in global accounts were up sequentially , again that is our global account customer segments that we reviewed with you in the past. And what I think is notable about that Dean is that two of the segments that are part of the segments that are up sequentially our two of our largest segments and that is oil and gas and oils and mining. They grew potentially Q3 to Q4. So I think my sense is that - and we gave some indications on where we thought the market was in our framework for 2017 in the Outlook call last month, but I think now in retrospect when we look at the whole quarter industrial picked up . The momentum vector is positive. It is still very early days and it has a long way to go and we're not growing again yet. As a setback in our Outlook call but I think we're encouraged I that start and thus far in January, our sales are down low single digits and so again, being consistent with the momentum vector exiting the fourth quarter.

That low single digit - that is company overall, correct?

That is consolidated company overall.

In then ABL construction you had some reaffirm the Outlook for nonresident being up modestly. Any change in customer behavior either through the election or any hesitancy to commit to projects given the expectation there will be some government funding on infrastructure? How do you see that playing out real-time?

Maybe I will first start with the composition of our results. U.S. was down 3% in the quarter for construction. So better than Q3. Not as good as Q2. Notably though Canada was flat. If you were to look underneath the U.S., we had some regions grow, some regions shrink . So there was not a wholesale - it's not like a wholesale decline across all portions of the U.S. it was kind of dollars in terms of where it occurred and where it did not occur. When you look at Canada, it is interesting when you look at it in aggregate. Prairies were down double digits and that is the area that includes Alberta and it is the most directly impacted by oil and gas. But the rest of Canada - this is for construction only - the rest of Canada grew. To offset the prairies double-digit decline. So backlog is healthy , consistent with normal seasonality. That is how we're set up exiting the year and entering 2017 . And I would say our conversations thus far our - I think there is still some wait and see. There is increased optimism. Our book to bill is starting out very strong in January, but typically we would expect a pretty strong book to bill to start the year . I think what is going to be important for us is as we move through the first quarter and enter the second and build for the construction season, that we start seeing the increased optimism translating into increased troop bookings. So hopefully that gives you a little color on construction.

And just last question for me if I could - on the utility when. I know recently you walked away from a new contract for renewal contract with the utility because pricing got silly. How did this play out ? Was pricing a factor? How does this compare versus the business that you walked away from?

We feel as strong as we have ever felt about the strength of our utility value proposition in the relationships. In the value we can bring the utility customers. I think it was a solid quarter. Particularly given the fact that we had growth in both the U.S. and Canada in utility. We had one new customer win as we outlined on that page in the webcast that we also had - I did not mentioned this in the spirit - we also had two renewal that were notable. One new win and two renewals . And we did not have ABP of having to walk away was our disciplined from any large customer renewal or win opportunity like we had earlier. With that said I think it is a competitive pricing environment utilities are facing some real challenges because of the lackluster economic growth. If you look at electrical - electricity demand - as that demand curve has created a challenging set of business conditions for them. I think we're hopeful to get an uptick in GP and demand picks up. Hopefully that is a better Outlook for utilities but in the meantime they have really been taking a hard look at their supply chain trying to squeeze more productivity, looking for more value and some are choosing - and certain competitors may choose a different business model to go out after that. We will maintain our margin discipline. Bottom line is one new win into renewals, maintain our margin discipline and feel very good about the utility business.

The next question comes from Joshua Pokrzywinski with Buckingham Research group. Please go ahead.

Let's continue the threat on January John. If I look over the past couple years not to dictate deep into the archives but January 2015 was officiously tough comp for you I kind of roll out some these daily numbers into February . If we build a little momentum could you go positive in the first quarter? On a stand one monthly basis?

Yes. We're not going to call that. You have our guidance and our framework for the first quarter. And I think - let's be very clear, when Dave and I went to our Outlook call and all the discussions , we do have as our core plan and our external Outlook returning to growth in 2017. But our framework entering the year was much more back half driven. And the reality is there is increased optimism with customers and increasing bull ship taste upon what may occur and what the new administration may try to spark economic growth but none of that has occurred yet. So we will see. Josh as we move through the quarter I think we do have accelerating momentum in industrial and backlog is healthy . We have giving you our framework for Q1 which says that we will be flat to down three . Obviously we would love to do better than that but that is our current Outlook.

And then one thing I noticed that was not president in the slide deck - you guys used to report pricing in that quarter way out where it had been. Is that starting to flatten out? I know you don't have pricing your guidance explicitly but can you give us an update on how that is trending especially price increases coming in from the wires?

Dave's commentary he mentioned it Josh. Pricing was flat in the quarter. So you can think of that as an incremental positive versus what we have had the last two quarters. With that said I do not want to characterize or mischaracterize the pricing environment, the competitive environment is as competitive as ever we have not seen a material uptick in demand yet. In terms of supplier pricing increases, in the fourth quarter - and I foreshadowed this in our Q3 earnings call. They are about as we expected they would be picked a generally range from 1% to 5% and we get a forward-looking was suppliers are planning and work with them on that and that look is anywhere from 60 to 90 to 120 days out depending on the supplier and the category. For the first quarter as is typical for the first quarter , the number of supplier price increases are much greater in number because there are certain suppliers that view that third quarter in the calendar year as to set their pricing strategies in place. But the ranges typical on what we have been seeing historically kind of in the 1% to 5% range. Depending on what category, by what supplier . There are a few selected categories but it is only a few that are about 5% on certain select categories that may be have more steel content or there is a particular pricing strategy for that supplier to take it up a bit that I would characterize it as somewhat typical thus far.

And one final one. I guess congrats on you guys getting back in your target leverage earnings. Is there a plan to push that bar a bit lower and bias towards the midpoint? Or just being back in the range again, do you feel like you to license to go out and be on the offensive with M&A again?

That is a self-imposed range. And I said very consistently over the years, we're confident even operating above it. If the right deal comes along. We acquired AED in March of last year. We were above the leverage range. We were above 35 when we did it. It is good that we got back within it. We would like to be within that range for the majority of the time. Would like to operate within that range. It just gives us more flexibility obviously. It is good that we're back within. We did foreshadow in forecast 80 back within the 35 range by year-end. With that said again we managed this pipeline process. We can't control deal timing and we're very comfortable operating anywhere within that range or even above the high end of the range . As we have that in the past for the right deal.

The next question comes from Andrew Buscaglia with Credit Suisse. Please go ahead.

Can you talk little bit about SG&A. You brought that down about 4% on a core basis this quarter in a good job throughout the year. What do we expected 17 as sales start to ramp? Do you think you can still keep that growth rate of SG&A below sales and 17?

One thing we our focused on - as we anticipate with our Outlook we expect sales will recover in 2017 . Obviously the company has been very focused on cost management. We will remain cost focused as we think about SG&A going forward. While we're also making the investments that we believe we need in order to be competitive in take advantage of the end market recovery. We will stay focused on cost. Obviously we're expecting top line recovery . We will stay focused. We will make the investments that we believe are appropriate going forward.

Okay. And then similar question I think as we - just given your strong cash flow here. What you're looking at and what is the environment rate like now for M&A. I know you were looking at bolt-ons in your core electrical space. What you seeing in the near term?

I would tell you that for the well-run companies there price expectations are relatively high in terms of multiple . And that really did not change even to the challenging economic period of the last couple years - the "industrial recession. The best run companies can command both multiples. Publicly traded company's obviously there has been increases in equity prices in the markets but the overwhelming majority of the opportunities in our pipeline number our private companies. Right? Because 99% of our competitors are public companies. The short answer is well run companies demand higher multiples. It is relatively consistent and it really becomes more of an issue of do they want to be part of WESCO our do we want them part of us? It is a value proposition. If you are looking at just maximizing price through the transaction and they are not looking at strategically what or where the company goes post-acquisition, integration with WESCO , what happens to the employees - we will let some of those opportunities go. For us it is really about the value creation and staying consistent with our strategy. So we paid multiples over the years . We have net with Westinghouse. We paid deposit range from five times up to just 10 times and we will continue to maintain that discipline.

Do you think having move past the election, could free up some of this? Or does this mean strictly multiples are too high and sellers don't want to sell?

I am commenting more about what our opportunities set in the pipeline is ticked the overwhelming number of opportunities are private companies. What drives that honestly is not the election , the cycle or any uncertainty in the market. It is more about governance in governing transition. Who is the owner operator. Individual or family. Are they at the point through estate planning they want to transition, do something else? Do they have a son or daughter or cousin that they can hand the business off to? Yes or no? It is those kind of triggers that are determining the timing more so I am talking the private company targets that we're in our pipeline. That is what determines it more than anything related to the election.

The next question comes from Matt Duncan with Stephens Inc. Please go ahead.

I was just curious specifically on the industrial piece of the business. You had some of your more industrial or manufacturing driven peers that saw pretty strong finish 2016 and I think it is creating a lot of optimism out there. And that piece of your business specifically, what monthly sales trend are you seeing? Is it similar to what some of the more. Industrial public guys are talking about?

Remember our mix is a little different. Right? First thing I would say - I think you are aware of this - but those that are much more higher percentage MRO , they are seeing - and we talk about this in the past - when things start to recover, what is going to kick in first? What will kick in first is MRO before CapEx in even some selected OEM . I guess the comment I would make is that if you get underneath the bat a bit, as I mentioned in response to Dean's question, we're encouraged with the sequential pickup in kind of the quarter over all as it moved through the quarter and we're seeing it in the form of MRO and we're also seeing it in the form of OEM. We have real nice capabilities that support OEM and those activity levels I would lead it as picked up sequentially in the quarter and the discussions about future opportunities in Q1 picking up a bit also. What we have not seen yet is really the un-locking or the movement of CapEx. That is not what drove our sequential uptick in the fourth quarter . That's is an important point. And I think that is in important potential driver as we move through 2017 and increase growth going forward.

The second thing I've got. Historically when you were talking about the guidance of giving us a few pointers on how SG&A expense may trend sequentially and of growth market . I do not know if you are prepared to do that but it might be helpful to put parameters around that if you can't and then on the sales guide for the year at the midpoint 2%, are you prepared to talk about how that shakes out in the first half or back half?

Matt , we're not going to provide you with the details between the quarterly split on our full-year Outlook. Obviously provide you with Q1 as John mentioned earlier we would anticipate that we would see a stronger back on the front. We have not provided you any more specific than that.

And I think the only other comment is follow-up with Mary Ann Bell . She could take you through how we think about that but you recall - this is typical seasonality. Costs are higher than the first quarter and the percentage of sales versus the other three and the Outlook that we have provided is consistent with normal history , historical seasonality and I think Josh's question earlier - when do we start inflecting positive? Again I think we absolutely have a return to growth plan planned this year and that is what we're driving to. It is good to have to start of the year with positive momentum but our first quarter Outlook as I have returned to growth built-in yet. I would love to be able to beat that but right now I think indications are - the message is momentum improved to the third quarter . Insofar in January it is consistent with that. And now it is a matter of what the slope rate is versus when we start turning positive on a reported comp basis.

The next question comes from Christopher Glenn with Oppenheimer. Please go ahead.

I have a question on Canada. It seems to be showing a little more tendency for circle pivot now been the U.S. Coming from a deeper trough . It was worse than the U.S. for quite a period of time. Now there is less pressure in the quarter. Out of that trough are you seeing the signs to give real conviction for cyclical momentum emerging up North?

I still think the overall condition and I will call them the economic and end market condition Chris , are challenging . Against that backdrop , we obviously feel really good about the strength of our Canadian business , the capabilities and how we're performing. As you look across Canada geographically in the fourth quarter, the distribution of performance is very consistent with the third quarter which is challenges continue in the prairies including Alberta , down double digits, but we had nice growth in three PC and Ontario. That story is what manifests itself as we move through 2016 and still occurred in the fourth quarter and I think it will occur for some time. The question is when does the Prairie bottom and turned the other way and now you get into what is the Canadian government going to do to - the liberatory and government was elected late 2015 in the fourth quarter. What is Trudeau going to do relative to supporting oil sands related investment, LNG etc. relative to supporting oil sands related investment, LNG etc. It will be interesting to see what happens if the Keystone pipeline does get approved. Obviously it opens up opportunities for both sales and U.S. and Canada and we will have to see how the Canadian government response because now it has new leadership right? With all that said I feel really good about our Canadian business and quality in obtaining the value we're obtaining and the customers. And if you look at the retaining results, to your point they are solid given the market backdrop. The key thing is going to be - I think it will take some time still until the customers, particularly in metals gas oil and mining - are they confident and begin to start turning on the capital investments again? That will be the key. We have not seen that yet. That is something we're monitoring very closely.

Thanks for that in on the gross margin. That is really merged towards a neutral year-over-year dynamic or pretty close. I am just wondering if it is time to move to a bias? Some upward bias versus the flat minus trend for the gross margin?

I think when you calibrate our gross margin performance versus the hand we worked out economic actor , inflationary environment, economic pressures, we feel pretty good about how we performed [indiscernible]. When you calibrate again for external conditions out of our control.

I think the key question will be do we turn - does growth pickup and consequent we does inflation pickup and to the degree that it does, that will provide a more supportive environment for managing pricing increases through . The other headwind we had in 2016 was business mix . So our higher gross margin segment was down much more precipitously - i.e. the signature industrial in Canada so when you look at that to the extent we get the industrial recovery, that will help some of the mix drive perspective as well.

The next question comes from David Manthey with Robert W. Baird and Company. Please go ahead.

So if we look at the sequential trends we're talking quite a bit here about what you are seeing and how those trends are going if we think about the second quarter relative to the first, it is typically up mid-single digits. And so what I am wondering is if you are seeing growing strength this year should that be the standard? Should be 4% or 5% or greater to give us an indication that things are picking up or is there some reason why seasonality would be different this year versus the past several?

I think the question is going to be - here is our current framework. The construction season and the start of that has a big impact on Q2 versus Q1. If that trends consistent more typical normal seasonality maybe I think it could help a bit. I think the big wild card will be industrial. What is the shape? Hopefully we truly have bottomed and we're in an industrial recovery in what is the shape of that? And what I mean by is does MRO and OEM - are those demands picking up sequentially ? Building momentum? And when does CapEx start to pick kick in. ? Once CapEx kickstand that will drive better sequential improvement. That is a question of when.

Okay. And you sort of indicated you will see a back Acceleration in you needed over 3% growth in the second to the fourth quarters to get to the midpoint of your guidance, but if you are able to regain growth this year, should we expect 50% to 60% read through margins immediately or is it possibly higher or lower right after the gate? Id normalizes and 18? Or how should we think about those read through margins from GP to EBIT?

Excellent question. We have given you our framework for 2017 , right? And so I think the question - let's be very clear we're still very focused on 50% operating margin pull through over the mid-to long term. Now to the extent we're getting nice improvement in our topline , we return to growth and there is positive momentum but we're going to make a decision on - we kind of gave you our thoughts on this and Dave and I in the Outlook call - how do we feather in incremental investments, right? Because I want to make absolutely sure we're taking advantage of when that starts to occur - if and when that starts to occur, the improving economic backdrop to really build on the accelerating momentum and get the leverage in our future operators all so we have investments we want to make, we're being very thoughtful about when we start those we want to make sure that we stabilize and we're getting this return to growth. That is the only thing I would say, Dave, depending on how we feather in the incremental investments that could essentially eat into a bit of the operating profit pull through , but not in a material sense. That is not our operating framework. Over the mid-to long term. You see how we have operated over the long term and typically when we get that topline growth kicking in , we can still incrementally invest in get excellent pull through. That is our model that is what we want to get back to.

The next question comes from [indiscernible].

John, I just had a question on your service portfolio. Maybe give us a sense of how that has evolved over time it was running 25%. Can it be higher? And what advantage does it specifically give you? Is it just a sticky relationship with the customer? Or is there anything more to that as you take long term about the business?

We feel really good about the core service offerings , the values they provide and it does create a stickier relationship for us. We're very confident and that is clear in our customer renewal rates , renewal retention rates in just a discussion we have with customers and the feedback they give us. We have not updated that 25%. That is typically something we do on investor day and it is something we're planning to take a fresh look at and give you a sense of that in our investment day later this year. I would like to. I have had this aspiration and we're not anywhere near there yet. This is a long term aspiration to the extent these services are really productized better in can we begin to start charging for them in some incremental way? This is a longer term discussion. Right now we're seeing the benefits in retention. So the essence we're providing this volume add an it is in the context of the whole relationship and the pricing structures that exist in these multiyear agreements, but is there an ability to get some different incremental price for these services because we're quote unquote offering product diversions of them. That is more of a long term vision. And I think that speaks to being a much more value added supply chain solutions partner. That is where we're heading . I feel we have made really nice progress and we really haven't exploded this out to the investors in some time in terms of the breadth and wet the power service offering so we will take a no on that. I think it is something we highlight where we have our investor note date later in the year.

Just to follow up and turn it over, is there any difference when your cash tax rate and your book taxes. The reason I ask is I've just starting to gauge cash flow savings impact of corporate taxes go down. Is there anything going on in the cash tax side that we should be aware of in terms of judging that benefit? Thank you.

Currently our cash tax rate is very similar to our effective tax rate pics we do not have a large double-digit cash tax rate versus our effective taxes. Obviously we're still evaluating some of the tax proposals that are out there both with the new administration, with the new house. Is difficult for us to comment on it at this time until those proposals are finalized but one of the things that we're focused on is whether or not there will be a change in the overall U.S. corporate tax rate. Obviously that would reduce our cash taxes , but there are some other elements of those proposals which may have an impact on cash tax rates which we're still evaluating.

The next question comes from [indiscernible].

Just a follow-up on the price discussion earlier. Are you assuming any pricing in the Outlook for 1Q?

We don't ever do that. We don't build prices substance into our Outlook.

Okay. I'm just wondering it sounds like the last couple quarters you started to see some of the suppliers put into some pricing and it sounds like there is some expected in 1Q as well, but is that a margin headwind for you guys? If you are not at least in the reported couple periods? Seen down a flat price?

I think again the way I think about it is there are suppliers that are trying to push price increases all throughout the quarter three 2015 and 2016 and the ability to do that is a function at a very detailed level, a competitive dynamic for that type of customer and that product category and what the capacity is in it is called the value chain and how that whole price volume relationship works. It has been a very challenging environment because the demand has that been strong and robust. There has been hunting of capacity in it has been in low-inflation environment. We experienced some rising pressures . There is competitive pricing pressures but met our pricing effectiveness in Q3 of last year was a negative half-point in this is now flattish so we feel good about - again that's kind of our ability to push that through so we're feeling pretty good about that all in and we again don't forecast pricing in our Outlook and earlier I did comment relative to what we're seeing so far from suppliers and their desire to push pricing increases through and this has a forward look of 90+ days out that they are looking at 1% to 5% on average, depending on the category. And some selectively higher - but they are much greater in number but that is typical for a first quarter. So we will have to see how that really manifests itself as we move through.

What will determine the ability to push it to is the whole supply demand equation and are we getting up to in demand and can you start moving. Customers have been very reticent to any price increases.

I guess is where I was going. Is there a risk maybe it is only temporary the next couple quarters but at the end markets are still weak - we have seen the inflation building that may create some near term margin pressure because the inflation is happening. I guess it would be hard for me to see how we haven't margin pressure greater than what we have right now over honestly the last 6 to 8/4. The only thing I would say is that we're working a whole set of willing kind of margin expansion initiatives, supply chain related initiatives that we have outline. I think that helped us deliver the margins we had last year against the competitive [indiscernible] we're facing and we're going to continue to drive those and execute those at hopefully build better execution momentum on those. That is not as continuous.

John, a follow-up on a comment earlier about feathering in this investment spending. Is fair to assume that in 1Q there is no assumed incremental year-over-year headwind from investment spending? In maybe there won't be until we start to see a return to growth?

Yes. I think that is how we're starting the year. But we may - obviously we have great opportunities to do some incremental investment and that is day-to-day running the business. The business leaders and product category leaders are making their cases every day, but Dave and I both want to make absolutely sure that we had a solid ACE and we're in a recovery . And we will make those decisions as we move along. I think at I have provided you the way we think about in the framework , so we want to make sure that we have confidence that the momentum is clearly improving and we're confident it will continue before we start . Met a quick housekeeping item on industrial. What is the mix now OEM versus CapEx versus MRO in your industrial business. We have not disclosed that . That is not in any of our material so we will not hit that in this call.

The next question comes from Chris Bell from UBS [ph]. Please go ahead.

I just kind of want to go back to the dynamics between I guess December in January. The low single-digit kind of trend that you are seeing in January seems like it is pretty normal. I guess my question is really around the dynamics of December and some other distributors have noted some potential year end budget flush or pull forward into December . Did you guys see anything like that? Or I guess what is the dynamics in September in January. And then I guess in line with that how does the New Year's holiday affect the two months.

We did not see those dynamics - not material. No year-end budget flush, no significant movements even holiday budget. Again you have to look at our mix. We have MRO, electrical industrial, we have OEM and we have capital projects and this just gets to our core mix. Our business mix , our product category and services mix is broader than some of the other companies you are referencing. Bottom line is no we did not have those effects.

And a second question in terms of gross margins. In the past you guys have talked about supplier volume rebates. This is the first year - you are looking for growth in terms of topline. How should we maybe think about that for 17 in terms of like impact on gross margin line going forward for that year ?

Supplier volume rebates kind of a reset every year and the biggest factor in those - overall growth is in important variable to look at. There is no doubt about it that mix is really what matters. I think that will ultimately be the determining factor . What product categories which suppliers are growing versus not growing ? We could be growing over all but the mix may be such that certain products that have better SDR curves are not growing at the same rate or vice versa. With all that said, when we return to growth we would expect an obviously we would get some leverage with SDR, no debt.

The next question comes from Stephen Tusa from JPMorgan. Please go ahead.

The inventories? Picked up a little bit. Year over year and the percentage of sales I think quarterly as well you had a bit more of a drawdown from 3Q to 4Q last year. Anything going on their? Is that stabilized the reduction because you are more optimistic about growth? Any meaningful tweaks their ?

What you said is exactly what we did. I think we're very focused on inventory availability and fill rates. And when you look at the inventory position we had as we exited the year it is not an area we really clamp down on excessively. We want to make sure we're well positioned given the start of this accelerating momentum we're seeing. So you are spot on.

And that would be given that most of these commentary around the optimism is around industrial? Is that kind of the primary where you are building a bit?

So again that is insightful question because when you think about our different end market segments, we're going to have a higher percentage of direct shift sales for construction versus industrial. So to the extent industrial is recovering. We need to make sure that we have the appropriate stock positions. The answer is yes.

Okay. That makes a ton of sense. As far as oil and gas is concerned, what adjusted high-level are you seeing bear and the conversation of the customers typically in oil and gas.

I don't think we gave me the explicit oil gas number for the quarter so let me hit that out there that we you can follow-up.

We said for the year we're down approximately 20% of the quarter we were down 18%. Still down double digits but not down as much as earlier quarters . And I mentioned in response Steve to Dean's question as he was asking about the sequential momentum one of the verticals - we saw that sequential sales increase in the fourth quarter versus the third was oil and gas. That is encouraging. With that said I think there is still discussions with customers. By and large they want to make sure oil prices are really stabilizing at this level. And one or Q2 or three months does not necessarily mean that they are stable at these levels. I think that is what is impacting fundamentally decisions on CapEx being released which - with that said some of our customers are planning on spending meaningful CapEx in their plans for 17. But that - if you want to set the clock back a year ago, they had the same plans for 16 and they kicked the can on a lot of those investments right? I think that is where we're. I think our own momentum is incrementally positive and that is good. In we were down not as bad year-over-year . And the discussions of customers are little bit more encouraging but I think we're not seeing it yet in terms of the CapEx.

Well those questions were good, I think this will be the really good one. On sourcing - Rockwell has given us a number - they have a big plant in Mexico that they kind of sell about 5% to 10% of the U.S. production comes from Mexico. Obviously you guys are a big buyer there. I don't believe the number that you have given out at least on cross-border sourcing is out of material. I guess dating back in over the last several weeks or even months since the election, is there any update that you have found in your supply chain? Any areas that would be I guess more exposed to sourcing a cross-border? Is there any kind of extra color you can give - you've talked to the chain. I'm sure everyone is going back to try to check this out. Is there any more color on your cross-border sourcing?

I would ask you to think about in two ways. One is where do we sourced directly? i.e. West Coast sourced directly outside the U.S. and where do we sell outside the U.S. Look at both import and export. That is a very small percentage of our purchases and sales. And I see us as having really kind of a diminished impact on any of the other things that are being discussed versus other companies that are in the publicly traded space and have a large percentage of their products in a private label. In essence if they are a private label they've got their own supply chain and they are not buying from another supplier that is a U.S. manufacturer in a lot of cases . So there is one distinction. The other point I would make is that for our supply base we buy and sell for the most part in each country. Now Rockwell is a terrific supplier partner. And to the extent Rockwell is impacted there are pieces of portfolio given their manufacturing footprint and they are bringing them back into the U.S. That will impact Rockwell and their entire channel partner base in we will work with Rockwell to manage that appropriately in terms of managing debt to the customers. That is a way I think about it. Our supply base is fundamentally a branded supplier. Wesco is a branded supplier wrapped around world-class manufacturing supplier brands. So that is how we think about it. And we have always said that particularly for current carrying price - we don't do private label. Private-label is always an opportunity for us as we went into the future for certain categories but we absolutely shied away from electrical current carrying products because of the liability. So that is the way I would ask you all to think about it. Again the amount that we direct import and direct sale export is very small percentage. It is a very low single-digit perspective.

The next question comes from Ryan Cieslak from KeyBanc Capital Markets. Please go ahead.

The first question I had date you mentioned there is some nonrecurring charges that hit the nonrecurring margin line can you quantify that?

That is correct. We did not quantify specifically. We had at 10 basis point reduction . More than all of that was made up by some of these one-time items none of which was material on its own.

And then the other question I had as I look at the CIG sale , not to limit greater, below what you are looking for, I think you had mentioned - John some weakness with the federal government year-end spending. Just some additional granularity around that. What happened there? How should we be thinking about that run rate going into the first quarter and maybe what you are assuming for your sake and markets for the first quarter?

We have some real breadth of customers in CIG. Just to be clear, it is government agencies, federal state and local level, schools, hospitals, property management firms, financial institutions and the like. There is some breath there . What we saw was a slowdown in government , government activity levels , we saw that in the third quarter . We saw eight in the fourth quarter. We feel very good about our value proposition and services in product we provide to government customers . But we clearly saw it could slow down. Our government - business with our government customers through in this first half of the year after going in 2015 but they declined in the second half and so we saw that decline in the third quarter and continued in the fourth quarter. And that was partially offset by some growth in broadband and IT security. How do we think about it going into 20 2017? Have a very strong and broad pipeline ? The bidding activity levels are solid . And we would expect particularly with our respect to government we see some pickup in activity levels more around quoting in we have laid out a framework for 2017 to have low single digit to mid-single-digit growth for CIG which includes government growing at those levels. That is our framework for 2017.

So if I hear you right, John , there is nothing coming out of the December quarter here that makes you feel any different about that upper low single digit to mid-single digits for 17? You feel like there is another there that that business can eventually recover?

Yes. The only other thing I would say and I will say this because it will also be helpful for Mary Ann and her follow-up . We did have one large global account customer , very large global account customer and we had some nonrepeating projects that occurred in 2015 but did not occur in Q4 2016 . Now that global account customer is still a strong customer. We effect renewed an agreement with them - a three-year agreement in the fourth quarter. That is the only other contributor. If you look at CIG , it is down a little bit more than it has been in some time. When you add it all up it was government - this one big customer, but all in I think our framework for '17 is intact. We see low to mid single-digit growth all in with government at that level as a supporter as well.

This concludes our question and answer session. I would like to turn the conference back over to John Engel for any closing remarks.

Thank you all again. We did go a little bit longer. We wanted to finish with all the calls in the queue. Thank you for your time this morning and your continued support and Mary Ann and Dave are around to take any further questions. Have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.