Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Anixter Second Quarter 2018 Results Conference Call. Thank you. Lisa Gregory, Vice President of Investor Relations, you may begin your conference

Great. Thank you, Chris. Good morning, and welcome to Anixter's second quarter 2018 earnings conference call. With me here today to discuss our financial results are Bill Galvin, President and Chief Executive Officer; and Ted Dosch, Executive Vice President and CFO. Following their prepared remarks, we will open the line to take your questions. Before we begin, I want to remind everyone that we will be making forward-looking statements in today's presentation, which are subject to a number of factors that could cause actual results to differ materially from what is indicated here. We do not undertake to update these statements and refer you to our SEC filings for more information. Today's presentation includes both GAAP and non-GAAP financial results, the reconciliation of which is detailed in our earnings release and in the accompanying slide presentation that is posted on our Investor Relations website. Now, I will turn the call over to Bill.

Good morning and thank you for joining us to review our second quarter 2018 financial results. As you know, this will be the first call I'll lead as CEO, as Bob has retired at the end of June. We are grateful for Bob's leadership and commitment to the company, and we will continue to benefit from his insight and knowledge of the business as he will continue to serve on the board. Turning to this morning's call. I will provide an overview of our second quarter results and share our outlook for full year sales, and I will briefly review some of my top priorities for the company. Today's remarks will reference the accompanying slide presentation that is posted on our Investor Relations website. Following the remarks, Ted will discuss our financial performance in more detail and provide additional thoughts on our outlook for the rest of the year. We will then take your questions. Turning to our financial results. As you'll see on slide 4, sales in the fourth – sales in the quarter increased by 6.8% to a quarterly record of $2.1 billion. Unless otherwise noted, all of our comparisons refer to the second quarter of 2018 versus the second quarter of 2017. Adjusting for the favorable impacts from the higher average price of copper, currency fluctuations and acquisitions, organic sales increased 4.9%. This was significantly above our projection of 2% to 3% and was the second highest organic sales growth rate in six years. As expected, our Network & Security Solutions segment returned to growth in the second quarter. The growth was broad based across all segments and geographies. As for the total business, the second quarter of 2018 GAAP earnings per diluted share was $1.02. And adjusted diluted earnings per share was $1.53, an increase of…

Thanks, Bill, and good morning, everyone. Before I move into the details, I want to remind you that today's earnings release includes non-GAAP measures which are reconciled to GAAP measures in the financial tables that accompany our release. We believe the non-GAAP measures we disclosed provide the best representation of our ongoing operational performance, and I will begin with a summary of these expense items. Current quarter results included operating expense of $24.2 million pre-tax and $17.1 million after-tax, primarily comprised of $9.7 million of amortization of intangible assets and $9.2 million of restructuring charge, which I will discuss shortly. Prior-year results included operating expense of $9 million pre-tax and $6.1 million after-tax of amortization of intangible assets. Excluding the impacts of the above items, second quarter 2018 adjusted earnings per diluted share increased 12.5% to $1.43 (sic) [$1.53]. All of my comments this morning including year-over-year and sequential comparisons are based on continuing operations only and on an adjusted earnings basis. Bill covered the sales and gross margins. I'll move directly to our expense trends. Operating expense of $347.8 million compares to prior-year operating expense of $313.1 million. Excluding the non-GAAP operating expense items I outlined earlier, adjusted operating expense of $323.6 million compares to $304.1 million, an increase of 6.4%. The increase was driven by inflationary pressures including freight expense and employee benefits, which was primarily higher medical expense, along with increased investment in our technology platform. Similar to the first quarter, freight expenses specifically had an unfavorable impact approximately 20 basis points on operating expense as a percent of sales. Current quarter adjusted operating expense was 15.1% of sales, which compares to 15.2%. We have initiatives in place to combat higher freight expense as well as more efforts to make our overall expense structure more competitive. We…

Your first question comes from Shawn Harrison of Longbow Research. Your line is open.

My first question. I really just want to – Ted, if possible, thinking about the OpEx dollars, looking at the third quarter, maybe you could break out how much of the inflation you're going to see if maybe $20 million year-over-year is freight versus medical versus M&A versus the technology investments you're making.

Yes. Let me just – using Q2 as an example and break it out into three buckets for you and they're each about 1/3, 1/3 and 1/3 with the freight expenses being about 1/3 of that increase, volume-related variable expenses being about 1/3 of that increase and the other 1/3 is primarily from these additional technology investments and the higher medical benefits. I would expect probably similar kind of comparison in Q3.

And with the acquisition, is the OpEx profile similar to Anixter in terms of just the percentage of sales?

It's slightly higher. But considering the size of the business, that won't skew the overall percentage.

Okay. And then, I know the conversation for the past couple of quarters has been on pipeline conversion into backlog into actual billings. Obviously, you're seeing some acceleration of that with the improved guidance. But maybe you could just speak to how that conversion – is it going to – do you see it even improving further here in the back half of the year from pipeline to actual backlog?

Yeah, Shawn. It's Bill. I would say that the rate of conversion is similar, but the trend continues to improve. So, as we're tracking backlog and pipeline, our outlook then says we expect that to continue. So, as the time progresses, we're converging that into revenue, and I expect that same rate of conversion to continue.

Okay. Thank you.

Your next question comes from David Manthey of Baird. Your line is open. David J. Manthey - Robert W. Baird & Co., Inc.: Hi. Good morning, all. First off, Bill, when you look through your priorities, I think number three was profitability and you said your goal was to accelerate sales and increase gross margin, leading to strong EBITDA. Could you give us some more detail on how you plan to accelerate sales and improve gross margin?

Yes. Sure, David. I think it's a long conversation, right? There's many aspects to that, but I also mentioned in the first one this customer access model. So, one way is to take all the available solutions that we have and bring that to every customer. So, establishing an efficient sales model that we can bring security solutions into utilities and wireless technology into the electrical – different markets, that to me is a big opportunity for us. And the more efficient we get at that, the more we'll be able to exceed what I would consider as normal market growth. So, that's one thing. There are other areas, like I mentioned, on the acquisition. Just that the new software that we have, now, access to, software and solutions in access control and intrusion, gives us the opportunity then to take and expand that into other markets, as well as things like utilities. So, we have a very strong utility business now with the acquisitions in North America. The opportunity to leverage our global footprint to bring this same kind of value propositions to customers around the world gives us a unique opportunity. Then, you take those sales opportunities for growth to exceed what the market grows, and then, we're considering – we're continuing to look at operational efficiencies that drive us better growth with better return on that growth. So, we have focuses up and down all of that expense control, revenue growth, margin improvement, and the end result, of course, is driving much more – better improvement over EBITDA on a consistent basis. David J. Manthey - Robert W. Baird & Co., Inc.: Okay. Thanks for that. It sounds like cross-selling is a major focus for you. But in addition, as you look down the segments and the sub segments of the company, are there any areas, specifically, of the business that are big enough and growthy enough in and of themselves to move the needle overall for the company? I mean, you mentioned normal market growth. And I'm just wondering if, as you look at the segments of the business, are there any of the major categories that you're more excited about in terms of your ability to outgrow the market?

Yeah. Again, the fact that we have this global footprint and taking things like the OEM business – and we mentioned it's been strong performance in OEM and it's really a service-based solution, right? So, leveraging our current footprint to invest and grow in that gives us a unique opportunity. So, I'm really excited about that. I'm excited about our ability to leverage all the new solution sets we've picked up on the HD Supply acquisition in commercial construction to leverage that into not just commercial construction opportunities, but industrial opportunities. And then, the ongoing expansion of our wireless business and AV business, which I've mentioned a few times, David, is a great opportunity. It's such a fragmented market. The opportunity to consolidate that and support customers in this changing technology – and I keep going back to how technology is blurring the lines. You can't just run a business anymore and say it's all electrical. Electrical is being controlled by communication devices, and we have to remain nimble and run an organization that we can leverage all of those solutions into the types of customers we're calling on. So, we call on such a broad market of vertical – different vertical companies and installers who (36:04) support those that bringing all of that to this new world of emerging technology gives us unique opportunity. So, I'm kind of excited about that. And then, of course, I know you've been talking to folks and hearing 5G. Things like that and IoT will continue to drive investment.

The other thing I would add to that Dave is UPS. UPS once again had the highest growth rate – the highest organic growth rate of our three segments. We continue to see that fueled by, I'll say, three primary reasons: one is expanded product sets with existing customers; two is taking on and winning contracts with new customers; and, third, penetrating into product categories that had traditionally been manufacturer direct. The combination of those three, we believe, will continue to allow us to grow this business at a rate greater than market growth for the segment. David J. Manthey - Robert W. Baird & Co., Inc.: Okay. Thank you. And if I could, just one more in here, Bill, are there any changes to your incentive program relative to Bob's targets as CEO that were outlined in the proxy?

It's probably early to tell at this point, David. I think there are some focuses – you're talking about the executive comp or you're talking about field compensation strategies? Just want to make sure I understand the question. David J. Manthey - Robert W. Baird & Co., Inc.: What you specifically are compensated on?

No, there's no relative difference to what Bob had.

(37:39) the metrics being used as well as the targets that are set for, certainly, the balance of this year is the same as what was approved by the board back at the beginning of the year for each of the named executive officers. David J. Manthey - Robert W. Baird & Co., Inc.: Got it. Thank you.

Your next question comes from Ted Wheeler of Wheeler Capital (38:03). Your line is open.

Can you hear me all right?

Yes, yes. Good morning, Ted (38:11).

Okay. Good. As you intensify this and analyze the cross-selling opportunities, I wonder how you see the competitive landscape. In other words, are there people kind of executing this concept today? Are you bumping up against new competitors? Just wonder if you could give some color on what you see there.

If you look at the individual opportunity, Ted (38:37), you'd say, yeah, we're coming up against new competitors as we expand kind of our reach across all these solutions. The reality is we're not coming up against to a lot of competitors that expand all of it. So, the leverage you have is – if we're talking to a customer who dealt with five different solution for buyers for all of these technologies, they're now able to deal with one. So, to me, I see this breadth and depth and global presence as a leverage that will be hard to replicate by competitors. Because of the technical knowledge that's required for this, it's – again, this distribution market is so fragmented and the technology is so fragmented. That opportunity to provide customers with such a breadth and depth of technical knowledge and innovation and supply chain and all of that becomes hard to replicate globally.

Thank you.

You're welcome.

There are no further questions at this time. I will now return the call to our presenters.

Great. Thank you. That concludes today's call. If you have any additional questions, please do not hesitate to reach out to Ted or Lisa. As always, thank you for listening to today's call.

This concludes today's conference call. You may now disconnect.