Good day, ladies and gentlemen. Welcome to Anixter International's First Quarter Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Chris Kettmann for opening remarks. Please go ahead, sir.

Thank you. Good morning, and thank you, all for joining us to discuss Anixter's First Quarter 2010 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 today from Anixter's management team are Bob Eck, President and CEO; Dennis Letham, Chief Financial Officer; and Ted Dosch, Senior VP of Finance. 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 in this conference call, including words such as believe, expect, intend, anticipate, contemplate, estimate, plan, project, should, may, will 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, including the severity of current economic and financial market conditions, the level of customer demand, particularly for capital projects in the markets we serve, changes in supplier sales strategies or financial viability, political, economic or currency risks related to foreign operations, inventory obsolescence, copper price fluctuations, customer liability, risks associated with accounts receivable, the impact of regulation and regulatory investigated in legal proceedings and legal compliance risks, potential impairment of goodwill and risks associated with the integration of acquired companies. These uncertainties may cause our actual results to be materially different than those expressed in any forward-looking statements. We do not undertake to update any forward-looking statements. Please see the Company's SEC filings for more information. At this point, I'll turn the call over to Dennis.

Thank you, Chris. For those of you who been with us on prior calls, or who I've talked to from time to time, either on the phone or in conferences, you could probably tell by the sound of my voice I'm fighting through some sinus conditions this morning. So I'm going to limit my comments to a few general remarks and then I'll turn this over to Ted for a more detailed review of the results for the quarter. Let's start by reviewing some of the expectations we'd set out for this quarter during our last call. For those of you who were with us on the last few calls, you'll remember that we reported a series of quarters where our daily sales run rate was flat. We also said that it would take two or three quarters of solid GDP growth to generate the business needs or confidence within our customer base to drive renewed sales growth. In this context, we have stated that we felt it would be late in the first quarter or during the second quarter of 2010 before we began to see improved demand patterns developing. The daily sales of the first quarter started similarly to the past few quarters but as we got deeper into the quarter, there were noticeable improvements in the daily sales run rate for certain areas of our business. The positive trends then became more broad-based across the various end markets and geographies in which we operate. These improved trends have continued into the early weeks of the second quarter, leaving us pretty much where we expected to be at this stage in the recovery. As is always the case, our backlog equals approximately four weeks of sales and a high percentage of our orders continue to ship within 24 to 48 hours of receipt. So while the trends of the past few weeks have been positive, some uncertainty in the macroeconomic environment remains and there's no guarantee that these positive trends will continue. That said, assuming the economy continues to grow, our expectation would be for continued growth in our business as well. Before Ted discusses the drivers of our operating performance, let me start by saying that this quarter's performance was in line with our internal expectations that we had communicated during the past several calls. The most significant event affecting that earnings was the loss incurred on the early retirement of debt which Ted will discuss in more detail later. Excluding that, the first quarter was a very straightforward quarter from an operating perspective. We feel very good about the business given the positive start to our year from a sales, earnings and cash flow perspective. At this point, let me turn it over to Ted for a more detailed discussion of the first quarter results.

Thank you, Dennis. Consistent with our expectations, sales were up 5% sequentially but down almost 5% year-on-year on an organic basis. The sequential improvement is largely attributable to the fewer number of holidays in the first quarter when compared to the fourth quarter of 2009. The expected decline year-on-year was driven by three important factors. First, as mentioned in previous quarters, we believe that we needed to see six to nine months of GDP growth before our customer base would begin to see their respective businesses grow. Secondly, we exited a major lower margin customer contract in Q4 of last year. Lastly, our Electronic Wire & Cable business and our Aerospace business didn't hit their bottom until Q2 2009, making for a challenging year-over-year comparison in the current quarter. In the first quarter we reported flat year-on-year sales. After adjusting for $44.1 million of favorable foreign exchange effects, and an estimated $15.8 million of favorable copper prices, we saw an organic decline in sales of approximately 5%. Approximately half of that organic decline was due to our decision to exit the Alcatel-Lucent contract, which contributed $31.7 million of sales in last year's first quarter. In addition, it is important to note that the organic sales decline in each of our geographic segments and end markets continued to shrink from previous quarters. Looking at first quarter sales trends within each of our end markets, we experienced the following: On a worldwide basis, Enterprise Cabling and Security Solutions sales, exclusive of foreign exchange effects, declined organically by 4% as compared to the first quarter of last year. All of this organic decline can be attributed to our decision to exit the previously mentioned Alcatel-Lucent contract. Within this end market, Security sales grew an estimated 2% compared to first quarter of 2009, exclusive…

Thanks, Dennis and Ted. Thanks, everyone for joining us today. We are pleased with how the first quarter of this year unfolded. While the year started similar to the daily pace we experienced through much of last year, sales and bookings improved throughout the quarter and into April. Our sales performance was largely in line with our expectations and we were pleased to see growth over the prior year in the month of March. In addition, we saw the benefit during the quarter of the expense reduction actions taken in late 2008 and 2009, and our management team continues to focus on managing costs as there are still some economic uncertainty. Finally, we continue to evaluate our balance sheet in light of the continuing strong cash flow. We reduced leverage further in the quarter, while at the same time, returning over $41 million to shareholders in the form of share buybacks. The Enterprise Cabling and Security Solutions end market has begun to show improving trends. Recently Gartner released an updated forecast of IT spending increasing their outlook to 5.3% growth over prior year. This reinforces recent project trends that we have seen globally in the enterprise market indicating some pent-up need for IT infrastructure enhancement and expansion. Project wins in both data center and other IT projects increased in the first quarter in North America and EMEA, while the Emerging Markets show the normal seasonal weakness in the first quarter. Our Federal Government teams continue to show strong growth in the U.S. and Canada, as government spending on data and security continues to expand. We continue to enhance our position as an industry technology leader through our Seminar Series on data center efficiency, security and sustainability. The Seminar Series provides insight on how best to design and build a data…

[Operator Instructions] First up, we'll hear from Hamzah Mazari. [Crédit Suisse] Hamzah Mazari - Crédit Suisse First Boston, Inc.: Question on your OEM Supply business, it appears to be rebounding nicely. Is it too early to make a call on Europe starting to get to more normalized levels of profitability that you had maybe a couple of years ago? And then how much of a benefit is restocking versus actual organic demand increases in that business? Is it possible to quantify that or is that too tough to tell right now?

Hamza, this is Bob. I'll try to answer both your questions and Dennis and Ted will jump in and tag team like we normally do here. I'm going to answer your second question first. We, I think, tried to address the restocking question as we were coming through the last couple of quarters. We generally don't have customers carrying lots of stock. When you look at our OEM Supply business in all geographies, we do a fair amount of direct line feed which means we're directly replenishing bins at the customer site. The customer owns little to no inventory and we're doing just in time bin replenishment. So there's not a meaningful restock sort of effect to look for there. We'll track -- and I think the number show we're sort of tracking improvement in industrial production. On that question of getting Europe to more normalized profitability, I think the right answer is, it will take sometime, we need to see more volume come back. If you think about -- you quoted a couple of year ago sort of time period, we've had significant volume loss in the business over that time period. So we need to get some recovery. We did take a lot of expense reduction actions as well which will benefit us, so we should get to reasonable profitability at a lower level of volume than a couple of years ago. But frankly, we need to see some of our initiatives pan out and we need to see economic recovery, which to me is probably the most important factor.

Yes, I think, on that point, Bob, over the course of the last call and some conferences we've been recently, we've talked about Europe. We've talked about our goal for 2010 to begin -- as a first step get Europe back in the black. The fact that we are marginally back in the black in the first quarter is a nice first step towards getting the trend moving in the correct direction. Hamzah Mazari - Crédit Suisse First Boston, Inc.: And then on your operating expenses, it seems like a lot of the employee costs have come back, which is what you're seeing with a lot of companies which is fair. How should we be thinking about that number sequentially going forward given your guidance or expectation for year-over-year growth in the back half of this year?

Hamzah, this is Dennis. One of the things that confuses the analysis a little bit when you get into sort of a line-by-line comparison is the impact of FX on translating the foreign operations. So if we look at the first quarter results and the fact that we ended up with a $1.270 billion in sales, and we ended up with 4.5% operating margins and you look back into 2009, there were quarters when we had similar revenue and similar operating margins, yet we know we have had expense reduction actions subsequent to that time period that would have led you to conclude -- what should have gotten more operating leverage here in Q1. But what's happening is we're getting some of that revenue growth from translation, but it also means that the expenses are translating in higher numbers. And to the extent that a lot of that translation impact is coming out of Europe, where there is negligible profitability at the moment, it means you're getting some gross up in the various lines of the income statement. And it's a little harder to sort out the productivity gains, just off of the base of the financial statements. Hamzah Mazari - Crédit Suisse First Boston, Inc.: You commented that your expectations, your results came in line with expectations you had internally. Is the month of April running ahead of your internal expectations, if you could just add some color there?

I guess the way that I'd characterize it, Hamzah, is it's running in line with what we had hoped to see. In other words, the improvement that we saw as the first quarter pulled to a close has continued in April, so good sales and good booking rates, consistent with the improvements we saw in March.

And consistent with our statements in the last couple of quarters, that we would expect to see the recovery starting to have an impact that would generate positive year-on-year comparisons by the time we got to the second quarter or middle of 2010.

Next up, we'll hear from Shawn Harrison of Longbow Research.

First, in looking at the Electrical business within Europe, maybe I missed this on the earlier comments, but sales has all essentially doubled quarter-over-quarter; if you could articulate just what happened there, given the highest level of sales I've seen in probably 12 to 24 quarters.

Shawn, I think there might be -- we were up, I think consecutive quarter basis, at about 15% on Wire & Cable, okay? The number that you have that's the higher number might be resulting from your taking number off of our current release and comparing it to a historical number that you had. We have done some reclassification on that sales breakdown on the back of the earnings release, where we've taken a chunk of business that we had been reporting as OEM; and we're now reporting it as Wire & Cable because of a determination we made that a series of locations acquired with the acquisition of Infast a number of years ago, serve us better as being part of the Wire & Cable business, where they can be used to drive a wire-and-cable-based OEM initiative, as opposed to being part of the fastener-based OEM supply business. So we can help you sort out the right comparisons maybe offline after the call, okay?

In terms of days of sales, what is the change quarter-to-quarter? What will you pick up or lose June quarter versus March quarter in terms of selling days?

Yes, the first quarter basically has no holidays in it, other than the fact it ended on Good Friday which impacted our European and Latin American businesses. We start Q2 with Easter Monday, which also impacts most of Europe and Latin America. We pick up Memorial Day, which we always have in Q2, and that really is it for holidays of consequence for the second quarter. So we would have basically one last day than we had in Q1.

So that's maybe 1.5% sequential sales headwind?

Right, each day based on 65 days in a full quarter would be 1.5%.

And then at the same time, in the Alcatel-Lucent unwind, it looks like it's essentially completed, correct?

That is correct.

I guess, going forward, the key question I have is in terms of your -- last quarter, you talked about price increases flowing through from your customers, and there is a delayed effect from you benefiting from those price increases. You could talk about what you're seeing in terms of how price increases are flowing through from customers to you, as well as to some of your peers and how that'll benefit you going forward.

Shawn, that comment, I think, was specifically around how copper flows through. And I think I made a comment earlier in my prepared comment about copper, and that we are beginning to see some pass-through. I think we've generally been saying it takes the impact of a rising or falling copper price in the current demand environment, something like roughly two quarters to work its way through the supply chain when you look at basically raw material at manufacturers, work-in-process and finished goods inventory at manufacturers and then inventory and distribution. So the only price increase stuff is really around the spot price of copper.

So the past three that your suppliers are doing right now, say, for the March quarter, that will begin to benefit you later in the June quarter and at the September quarter is the correct way to match that?

Yes, and I think actually where copper has kind of settled right now, there is not going to be a lot of new copper impact sequentially.

Even though the number of your suppliers did raise prices, you just put our price announcements in the quarter.

There have been some list price announcements in the quarter, products that are sold off of list prices. And those announcements tend to work their way fairly quickly. The list price announcements work their way fairly quickly, because everybody in the supply chain who is buying that product from that manufacturer takes up their selling price to reflect it. I think importantly, they're fairly small moves. And honestly, I would say they're positive in the sense that it's directionally better for us than price decreases, but they aren't going to create dramatic upward pressure on revenue.

Depreciation and amortization, what was it this quarter? And then if my math is right, total or net interest expense should be in the 13-ish million dollar range for the June quarter?

Yes, depreciation, John, for the quarter was $5.7 million, amortization, $2.9 million; so combined, about $8.6 million for the two of those.

And then on the interest expense side?

Interest expense was $15.6 million for the quarter. And we said that over the last three quarters, due to the debt reduction, there'd be a reduction in interest expense of about $10.9 million over those three quarters.

And you could roughly just divide that by three to get the third quarter number.

And that's off the first quarter amount, not the December quarter amount?

Correct.

Matt McCall of BB&T Capital Markets is up next. Matthew McCall - BB&T Capital Markets: Dennis, I think you talked about in one of the previous questions translation impact and how that kind of clouds the progress with the incremental margin. Can you give us a look of what the new cost structure does to incremental margin, what the flow through of each sales dollar does to gross profit and then to the operating line? I know mix is going to have a lot to do with that, but can you give us just some broad or high level detail?

Well, I think the first point there would be picking up on the comments Ted made earlier. When you look at from a spend standpoint, we've actually gotten about $12 million out year-on-year in the first quarter. Now that will go down as the year unfolds, because some of those actions were taking effect as 2009 played out. But at least as far as first quarter goes, you've got an annualized impact there of $40-plus million; which if you look at that based on the context of the announcements maybe when we did the restructuring charges very much in line with gross amount of spend that we said we would get out combined between the two restructuring charges. You're right that in terms of the takedown of incremental margins and the leverage you get will be dependent on the mix that you get. And I think to try to be any more specific about it, the general comments we've made in the past, that we'd expect to get somewhere around 40% to 50% of the incremental GP dollars brought down to the operating profit line, would imply a level of prediction about mix that we don't have at the moment. Matthew McCall - BB&T Capital Markets: And then Bobby [Robert Eck] talked about some of the initiatives in Latin America, and you talked about some investments there. Are the investments enough to note? And then what would be the expectations of the benefits of those investments over the next couple of years? You can maybe bunch all those investments together, but just specifically I was curious about Latin America.

I'll give you just some generalized comments. The investment side described really have to do with hiring people, a lot of which had been done in late 2009, some of which was done in early 2010. I would say their investments, particularly given the cost sort of per headcount in Latin America, are sort of built into the run rate. I wouldn't try to adjust the model based on what those headcount adds were. We believe we're beginning to see benefit already in our Wire & Cable sales in the emerging markets from those additions. We think we'll see more benefit as the year unfolds, and we will periodically adjust our inventory based on the success we're having with that market in Latin America. Matthew McCall - BB&T Capital Markets: And then housekeeping notes. What was the share count at the end of the quarter? And have we done any incremental buybacks, either debt or shares since the end of Q1?

No, everything that we have announced as being done in the first quarter, obviously was equivalent to total activity on that front. Since then, the actual share count outstanding for the quarter was $34.2 million. We ended the quarter at $33.9 million.

Next we'll go to David Manthey, Robert W. Baird. Kyle O'Meara - Robert W. Baird & Company, Inc.: This is actually Kyle O'Meara on for Dave. Assuming the improvement that you saw in late first quarter and April trends persist to the balance of the second quarter, would it be better to actually begin to see normal seasonal sequential trends in 2Q versus 1Q? I think we'd talked about it a little bit last quarter, which should be something in the mid-single digits.

I guess the answer is maybe. We're trying to be a little cautious. As we said, we saw really positive developments in March. We've seen that in April as well, which would indicate that you'd certainly see sequential growth if those trends continue. I'm being kind of cautious about putting a stake in the ground that we're back to the normal seasonal trends, because I think it's a little early to call that. Kyle O'Meara - Robert W. Baird & Company, Inc.: How should we think about working capital going forward, assuming we start getting back to normal growth in the back half of the year? And maybe in terms of incremental working capital for each dollar of revenue, do you have anything, some color around that at all?

Yes, I don't think we'll have any significant amount of working capital investment this year. As we've said for a couple of quarters, we've come into 2010 or expected to come into 2010 with a more OEM supply inventory than we optimally need, and that we would work that out during the course of 2010. This was the whole issue of how long manufacturing lead times were, which caused a lot of inventory to pile up there. I think that the combination of the reduction of those inventories, plus the fact as we stopped trying to draw down inventories, where on a more normal replenishment cycle puts a little more payables on the books at the same time. Those two things would argue that for the full year, there shouldn't be much incremental working capital invested in the business from where we started the year. Kyle O'Meara - Robert W. Baird & Company, Inc.: Is there much seasonality of the Lucent business that's rolling off? Or is that pretty consistent quarter-to-quarter?

You can assume in terms of comparison to last year. It was around $30 million to $32 million a quarter for the first three quarters, and around $15 million in the fourth quarter.

And we now will hear from Jeff Beach, Stifel, Nicolaus. Jeffrey Beach - Stifel, Nicolaus & Co., Inc.: You had a great improvement in your profitability in Europe, and it is much more than sales. Can you give just us a rough idea of the $6.5 million sequential improvement, just kind of a ballpark guess on how much was sales and cost reductions, and anything else involved there?

I think, first, the $6.5 million you must be referring to sequential, not year-over-year? Jeffrey Beach - Stifel, Nicolaus & Co., Inc.: Yes, I'm sorry. It is sequential, yes.

So let me first go back to year-over-year, where we saw a significant improvement in our OEM Supply business year-over-year. And as we've talked before, that is one of our higher margins businesses, and we also had a stronger Wire & Cable business still with us in Q1 of last year. So the higher margins last year Q1 compared to this year, combined with the significant cost reductions that we've -- the actions we took over the course of the last year is what contributed to that slight negative profitability last year Q1 to the stronger profitability in Q1 of this year. On a sequential basis, though, we also saw very strong growth in net OEM Industrial business. And as you remember, we talked in the past, Q4 is when we tend to experience more significant downtime by the customers of ours in that OEM Supply business with factory shutdowns and so forth around Q4. So we actually had a much stronger volume to leverage in that part of the business going from Q4 to Q1, and it's the business that contributed most to that growth. Similarly, Wire & Cable improved sequentially. And as we've said a number of times from a gross margin standpoint, if you stack up the three end markets from lowest to highest, it runs Enterprise to Wire & Cable to OEM Supply. So basically, we had some mix improvement, as well as the benefit of the expense reductions.

It's big volume increase in Europe quarter-to-quarter, were up from about $230 million to $253 million. So that's important, and there is not much currency impact sequentially in there either. That's really long and... Jeffrey Beach - Stifel, Nicolaus & Co., Inc.: Looking ahead into the second quarter, can you just, in Europe specifically here, talk about seasonality regarding the mix regarding Enterprise, Wire & Cable, OEM, pluses and minuses in maybe industries like you had mentioned, with the OEM Industrial being down hit in the fourth quarter by factory shutdowns? Could you just talk a little bit about the progression in Europe as much as you can?

The seasonal pattern in Europe basically has two things to look at. One would be in the OEM Supply business. The first half of the year should be the strongest part of the year. The second half in the third quarter, you're going to get customers join factory shutdowns for vacation, pooling changes, that sort of thing. Fourth quarter, you get the holiday shutdowns that impacted -- and then broadly speaking for Europe, you'd get the extended European vacations in the third quarter and the holiday impact in Q4. So generally speaking, in Europe, our first half of the year should be the stronger half of the year, setting aside whatever organic growth patterns you have across the year.

Our next question will come from Brent Rakers, Morgan Keegan. Brent Rakers - Morgan Keegan & Company, Inc.: First, on tax rate guidance, I know obviously that number kind of moves in and out by the quarter. But I guess, 38% to 39% kind of adjusted levels this quarter with Europe profitable. If we make the assumption that Europe stays modestly profitable for the course of 2010, would that enable you to give us maybe more of a starting point on the tax rate?

Well, I don't think you want to take that loss out of there, because the rate that we book to in total is the full year rate, everything inclusive. So we're just a hair under 40% as our estimated full year effective rate right now. That's what's reflected in total and the results for the first quarter. If Europe stays at roughly the level of profitability that it's at right now, probably it doesn't have much of an impact on the rate. Brent Rakers - Morgan Keegan & Company, Inc.: And Dennis, just to clarify, three months ago, I think you've got a lot more conclusive on a lower number from three months ago. Is that correct? And is that primarily the profitability in Europe?

Yes, it's the swing from the fact that Europe last year, including restructuring and that sort of thing, had losses in it. And now you're looking at, at least at the operating profit lines, sort of break even to marginally profitable which puts us in a much better position in Europe. Brent Rakers - Morgan Keegan & Company, Inc.: And then I guess just to harp more on the seasonality question, you've talked before about this Q1 to Q2 of a mid-single digits. And you want to play a little bit more of a wait-and-see approach there. Could you maybe just talk about some of the facts, because I know you just touched on Europe a little bit, first half to second half? But what factors would impact that normally seasonally stronger second quarter versus first then company-wide basis?

Brent, I think what we're trying to leave you with is that we think we're in a different environment than in sort of a stable, chugging-along economy, where the seasonal patterns are somewhat predictable in the different end markets. Because of that, we're not so much trying to talk about seasonality as we're trying to talk about the impact of economic recovery, which has derived improvement in our average daily sales and improvement in our booking rates in margin continuing through April. We are kind of saying that this isn't as much a seasonality story as it's an economic recovery issue. Brent Rakers - Morgan Keegan & Company, Inc.: When you just look at the organic growth numbers and compare and contrast North America to Europe, Europe is actually, I think stronger in one category or maybe the other two, it's very comparable year-over-year. If you could talk about what kind of factors between just the macro conditions in Europe versus the U.S., and maybe versus company initiatives and market share shifts in those different geographies?

I think the answer is, the further you fall, the more room you have to bounce back.

Europe certainly was down more. It was down the most than any of the regions we operated in over the last 12 to 18 months.

Our next question comes from Jeffrey Germanotta, William Blair. Jeffrey Germanotta - William Blair & Company L.L.C.: My question has to do with sales capacity and incremental margins. If we look back to 2008, you generated peak revenue of $6.1 billion, with peak operating margins in 2007 of 7.5%. Is there anything structural in the business today that, assuming the global economy grows 2.5% to 3%, it would prevent you from getting back to those levels in a few years? And as we grow, what kind of incremental expense for every dollar of sales, what kind of variable expense should flow through SG&A?

The peak part of the question, in terms of peak margin of 7.5%, I think we have said pretty consistently over the last couple of years that was achieved being in an environment, where you had strong demand; manufacturers on the Wire & Cable side were operating high levels of capacity utilization and to the extend the copper was up solidly north of $3 a pound. The stars were all kind of aligned to get profitability out of the commodity at that time. And we estimate that, that probably was giving us about 75 basis points of operating margin at that point in time. But in today's environment, until you get back to get the stars kind of aligned as I just described, we think would not be achievable. So the question is, how do we get from the 4.5% back towards the 6.75% type of range? And I think part of that question is -- the first part is really we need volume, right, because we're running at $1 billion below the volume levels that we were at in that time period. That will give us a lot of leverage. As we look at the cost structure, keep in mind that last year, we took out about 10% to 11% of our headcount. We suffered about a 16% organic sales decline overall, which leaves us, we believe, with a good bit of, call it, capacity in the organization to add volume with minimal headcount additions. So it will certainly be direct variable cost, but minimal headcount additions in the short run that will close a big chunk of that gap. But then the real question is, how long does it take us to get to the $6 billion in volume? If we were to go through a real strong recovery, we'd get back 18 to 24 months. We'd probably get pretty close to the profile we had before. If it's a more modest recovery, then it takes us three or four years to get back to that volume. Then there will be some inflation eating away at the expense structure that will kind of cap our ability to get back to those peak levels, which is why the strategic things that Bob's been talking about become so important. We need to get product line expansion, especially on our foreign businesses. We need to proliferate the presence of the Wire & Cable and OEM Supply business into more countries, and we need to get deeper geographic penetration in our foreign countries. All of those things will allow us to get better leveraging of the cost structure outside of North America that today, on an operating leverage basis, is being underutilized comparatively. Jeffrey Germanotta - William Blair & Company L.L.C.: As we look to the year ahead -- for every dollar of sales, are we going to be picking up $0.15 of incremental SG&A to generate that?

I guess I'd look at it this way. The kind of rule of thumb we would look at is, how much of the incremental GP can we bring down to the operating profit line? And we think broadly speaking, we could bring 40% to 50% to the incremental gross profit dollars in generating to the operating profit line. Is that going to be every quarter? No. But that's kind of the rule of thumb that we're operating on as we move through an extended recovery period.

And we'll now hear from Nat Kellogg, Hudson Securities.

Guys, historically, I think we've talked about Enterprise. And I think you guys just mentioned earlier in the call, Enterprise tends to be a little bit lower gross margin business, and also it tends to come back a little bit sooner. And it sounds like maybe that trend is likely going to unfold over the next couple of quarters, and so just sort of curious about how that affects gross margin. And do you guys think that, that maybe will slow the gross margin recovery as that starts to come back?

Yes, I think that's fair to say. We wouldn't expect necessarily to see a decline in gross margin, because we have different margin patterns in different parts of the world as well. So it depends on how things come back. It depends on how quick the OEM Supply business comes back, but we do tend to see the project activity in Enterprise come back first. So if anything, that'll probably limit the growth in gross margin percentage as we move through the next quarter or two.

And then can you guys just give a little bit more detail on the Wire & Cable side, where you guys are seeing that activity? I mean, I assume most of it's not around the construction side. Just curious to see, maybe from a customer end market standpoint, the sequential increase, where you guys see that coming from?

I think I highlighted some of it. Our initiative to specialize our sales force in Wire & Cable between industrial sort of project business and OEM customer business is where we see the benefit. It's that OEM piece, where we get a pretty quick benefit as industrial production rates increase. I think then when you look at the project side of the business, I did talk about some project wins that we had in the quarter that we'll bill later in the year. And the project part of the business, we're not so much focused on the non-res construction space as we're more driven by corporate CapEx. Because these are oil and gas refining, as well as exploration and production projects. There are mining projects. So as the broad sort of global economy recovers, energy recovers fairly quickly, mining recovers quickly and actually, power gen and alternative energy -- power gen comes back, alternative energy is running in kind of its own sort of cycle now. So those are the kinds of places where we see project opportunities or project wins and they are, in my mind, that dependent on what you'd see in sort of non-res construction statistics.

Could you guys talk a little about acquisition? I know you've talked a little bit about sort of what your plans are for use of capital. But does your thoughts on acquisition, what sellers' expectations are like and where maybe you guys think that there might be some opportunities or not...

Well, I think we'd look for opportunities across basically what you've seen us do in the past. We've looked at typically smaller transactions, not huge transactions. We've looked at them in OEM Supply, and we're in cable fairly recently. We look at geographic fill-outs, so I wouldn't say there is a target that you would point your finger at. The biggest issue we've had is that there has not been a good pipeline of acquisition opportunities which makes some sense, right? I mean, sellers typically don't want to sell at the bottom of a recession, because they'll get a depressed valuation. So what we're hoping to see is that with some sign of recovery, there will be a little more interest on the part of sellers and we'll find some opportunities. But I wouldn't try to throw a dart in a target and say, "This is the specific thing we're looking at."

And at this time, there are no further questions. I'll turn the conference back over to our speakers for any additional or closing remarks.

Thank you. Thanks for joining us today. As the global economy appears to be entering a recovery phase, we are optimistic that we will benefit from an improving environment for capital spending. Our global reach, strategic initiatives and value-added business model position us well to support our customers in the improving economic environment. Thanks.

And ladies and gentlemen, that does conclude today's conference. We would like to thank you all for your participation and have a great day.