Good day, and welcome to the Anixter International's Third Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Lisa Meers for opening comments and remarks. Please begin when ready, Ms. Meers.

Thank you, Carla. Good morning, and thank you all for joining us for Anixter's Third Quarter 2013 Earnings Call. Today, I'm joined by Bob Eck, President and CEO; and Ted Dosch, EVP and CFO, to discuss our third quarter financial results. After their remarks, we'll open the lines to take your questions. Before we begin, I want to remind everyone that we will be making forward-looking statements in this presentation, which are subject to a number of factors that could cause Anixter's 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. In conjunction with today's earnings announcement, please find a supplemental slide deck that can be accessed on the Investor Relations portion of our website at www.anixter.com/investor that will further detail the quarter. Today's earnings announcement includes both GAAP and non-GAAP financial results, the reconciliation of which is detailed in our earnings release and in the aforementioned slides posted on our website. Now, I'll turn the call over to Bob.

Good morning. Thank you for joining us for a review of our third quarter 2013 operating and financial results. Today, I will offer my perspective on our business in the current operating environment, update you on each of our reporting segments and discuss our strategy to grow and gain share in each of our end markets. Then I will turn the call to Ted to detail our financial performance and frame how we are looking at the fourth quarter of 2013, after which we will both take your questions. When we last updated you on our second quarter earnings call and our Investor Day in early August, we were more optimistic on how sales would progress through the quarter. While we were awarded multiple projects that had been in our pipeline for some time, we experienced some delays in how those projects were delivered. In addition, we were -- we won incremental business that should shift in the fourth quarter and early next year. The production volume increases, signaled by our OEM customers in June and early July, will reduce later in the quarter, although still above the first half production rates. We believe that our markets are improving. However, the pace is not as strong or as immediate as we had anticipated. Starting with some of our highlights, we experienced steady improvements in certain markets, including significant sales and a profitability improvement in OEM Supply and over 7% sales growth in our European region with sales increases in all segments. Margin performance was strong with an increase in gross margin versus both the prior year and the prior quarter, helping to mitigate the impact of weaker-than-expected sales. A softer market in Canada, which represents close to 20% of our combined ECS and Wire & Cable segments in North America,…

Thanks, Bob, and good morning, everyone. Our press release highlighted several items from both the current quarter and prior year quarter that impacted the comparability of results. We streamlined our release by summarizing all of these items in a table at the end of the financial statements, which reconciles the GAAP financial results with the non-GAAP adjusted results. Our goal is to add clarity to the impact of each of these items and how they affected year-over-year comparability. Third quarter results for this year, including net favorable noncash earnings adjustment of $0.10 per diluted share related to closing prior tax years, partially offset by an increase in the full year tax rate applied to the first 2 quarters of the year. And as you recall, our third quarter of 2012 included noncash charges of $28.2 million or $0.84 per diluted share related to an impairment charge and an associated inventory valuation adjustment, along with an increase in the full year tax rate applied to the first 2 quarters of the year. All of my following comments this morning pertain to result from continuing operations, and year-over-year comparisons exclude the impact of these adjustments. As Bob discussed, we reported total third quarter sales of $1.56 billion, a 3.2% decrease compared to a year ago. Organic sales growth decreased by 2.2%. Recorded sales would have declined by approximately 2.7% after adjusting for the conclusion of a large security contract in the fourth quarter of last year. Moving down the income statement, we reported operating income of $92.4 million, a 3.4% decline; net income of $50.4 million, a 5% increase; and diluted earnings per share of $1.52, a 6% increase, all compared to the prior year. We estimate that the negative earnings impact of the previously mentioned Security contract was $0.01 per diluted…

[Operator Instructions] We'll take our first question from Dave Manthey of Robert W. Baird. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: First question here, in terms of the low single digit same-store sales growth, does that factor out the impact of the extra selling days, the meeting, is that daily sales or is that just overall organic sales? And related to that, I think we're using 66 days, but I guess you're saying, effectively, it's more like [indiscernible]. Is that all correct?

Yes, Dave. The number we're quoting there with the low single-digit sales growth is total sales, not on a per day basis. You'll remember that typically, the seasonality results in a drop in sales from Q3 to Q4 of about 3%. So the fact that we have these additional billing days which, you're right, we're estimating to be 2.5 to 3 incremental days year-over-year because you look at a day like Christmas Eve, which effectively we're operating, but always is a very short selling day, so that the incremental days from the week 14, combined with some of these project delays from Q3, is how we get at that low single-digit growth rate year-over-year and a sequential increase from Q3 when it normally would be a decrease. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Okay. And second, looking at the gross margin, I think you mentioned maybe it would decline slightly as you went into the fourth quarter based on this days issue. But is it also potentially under pressure as some of these project delays got pushed into the fourth quarter, and as those start to happen, outweighing the day-to-day business might put a little pressure on GP? And then also, on the copper side, I seem to remember that copper was up a little bit towards the fourth quarter last year. Would the impact be the same in the fourth quarter this year in terms of year-over-year declines that we saw in the third quarter, or would it actually get a little bit worse eventually?

Dave, this is Bob. I'll take the first part about margin and how that may or may not relate to the delays, and then Ted will pick up the copper piece. So on margin, honestly, I don't think the projects hitting in Q4 will have a meaningful downward impact on margin. The margin we earn, the gross margin we earn on projects is dependent on a variety of factors, including the supply chain services that we use in the projects and a variety of other factors. Certainly, what we're hearing from general contractors, particularly, is that a lot of the delays are being used by end customers to try to squeeze better pricing and terms, but these projects are already awarded. The margins are already fixed, so we have good visibility into that. And we're not forecasting that the push of the project activity from Q3 into Q4 is going to have a meaningful negative impact on gross margin.

And then on the copper piece, Dave, you're right, there was a little bit of an uptick in copper price in Q4 of last year. But as you saw, in Q2, copper price, on average, was down 8%. It was down 9% in Q3. And sitting here today, the margin's at $3.44 for copper. That would be a 7% decline from Q4 of last year. So I think it would be reasonable to use a similar estimate of the impact of copper in Q4 as what we saw in Q3.

And we'll take our next question from Steve Fox from Cross Research.

Just a couple of big-picture questions. First of all, with regard to the environment you just described, it sounds like the push-outs were not related to Europe given the numbers you just went over. If you could just sort of talk about that, the European environment? And then secondly, Bob, as we look at some of the push-outs and some of the causes behind it, I'm not sure if you specifically were saying that some of the U.S. government budget issues had something to do with it or if that's changing confidence. But if you could just sort of talk about why you think this is -- things are going to improve from here, that you can get into a consistent environment as opposed to sort of the fits and starts that we've had all year?

Thanks, Steve. I'll go through this. And if I miss parts of your question, come back with a follow-up. We're having a little bit of breakup on our end here. So I'll go with what I think I've got here. Basically, the push-out is very much, I think, driven by a couple of things, the main factor being customers not necessarily needing the capacity right now. That gives the customer the flexibility to say, "I'm going to delay this project for a while, and I'm going to create some pressure on the suppliers and see if I can get this project for a little bit lower cost than maybe I had budgeted for the project." The reason I think customers feel like they don't need the capacity right now is that, frankly, there's a lack of confidence broadly across the economy. And I'm not going to go into sort of a political speech, but I think we're all very familiar with a lot of disruption, certainly, in the U.S. I think there's still questions about the trend in Europe from a macro perspective. And I think that's creating some challenge and some competence. In Latin America, I think specifically, we're bouncing out of a more recessionary environment in Brazil. We've got some challenges in Mexico, similarly. And I think that also has caused a little bit of a lack of confidence. And that's what's caused the delays in these projects. The reason we're optimistic as we look out -- by the way, you had one point, I think it was about the government shutdown specifically impact us, and the answer is no. We had no measurable impacts at all from the government shutdown. Our view as we look out is that, look, we actually won these projects, so -- and…

Yes, that hit on basically all of the points in my question that I was getting at, except I just want to clarify one thing, which is around Europe. So relative to Europe, are you saying that, that's still under pressure? Because the growth rate you've highlighted in Europe was pretty good. So was there any signs of sort of that lack of confidence, or would you call it more of a recovery scenario?

Yes, Steve, I think the issue in Europe was weak comps, a tough quarter last year. And so we had some growth across all the businesses, as we indicated. But we just really had a crummy quarter last year in Europe. And again, I think some of that's pent-up demand, and some of it in the OEM business is new contracts that we've won that are ramping up, as well as some of our customers having products that, in the segments or the markets they're in, are pretty successful right now. And that's driving volume of those customers as well.

Our next question comes from Ryan Merkel with William Blair. Ryan Merkel - William Blair & Company L.L.C., Research Division: So can you quantify for us how much in awarded sales got pushed from 3Q to potentially 4Q and early next year?

Yes, actually, we think it's going to account in the fourth quarter for about 1% top line growth. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And then just following up on that average daily sales question for the fourth quarter. I just want to make sure I understand this. So did you say it's 66 billing days, but you're looking at it as more like 65?

Yes. What we're estimating is that we have an incremental 2.5 to 3 days over last year's 62, so call it 65 effective billing days based on the way the holidays fall. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. So that kind of -- adjusted organic daily sales kind of down 3%-ish if I use 65. That would be similar to this current quarter, but we've got 1% top line growth kind of coming in because of the delayed projects. So it was really the disconnect, then, that it's just the seasonally softer quarter?

Yes, absolutely, especially as we see in our OEM Supply business with a large percentage of customers that take factory shutdowns throughout that entire Christmas-New Year's week, and some of them scheduled 2 weeks down for maintenance. And then in both our Latin America and European regions, as you know, the way the holidays fall, it's very common in some of those countries to take an entire week off, not just the specific holidays of Christmas and New Year's, et cetera. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And then just turning to Canada. What happened in August and September because, Bob, I think as you said, the quarter started fine? And that was the way the rhetoric read in the 2Q transcript. So maybe just speak to what really changed.

I think what happened was we -- when we talk about delays, we saw some delays in projects in Canada as well. So we do have projects there that have pushed out. But as I said earlier, we also saw a bit more overhang, frankly, in mining in Eastern Canada from this process. The part in Québécois has been going through and trying to renegotiate extraction royalties with the mining companies that has absolutely put a stop on capital investment in mining in that part of Canada. And we saw a little bit of a dip in project activity in Western Canada, but we think that was more timing than a major trend. Ryan Merkel - William Blair & Company L.L.C., Research Division: And what's the timing related to?

Well, we just think it's delays in how the projects are getting engineered, and we'll see that activity start to come around Q4 and into next year as well. Ryan Merkel - William Blair & Company L.L.C., Research Division: So your view now in Canada is that this recent volatility is more just a temporary pause?

Yes. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And last one for me. I don't know if you can do this, but I'm just curious, if I break out Canada and I break out EM, I'm just trying to get a sense, is the U.S. business tracking better or stable? And I'm really looking at all 3 of the segments.

Yes. If breaking it into 3 helps, I'd say in ECS, fairly stable; Wire & Cable, also fairly stable; but OEM supply, gradually improving. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. All in U.S. Okay.

Yes.

We'll take our next question from Gary Farber of CL King. Gary Farber - CL King & Associates, Inc., Research Division: Just a couple of questions. One is just on the competitive environment. Can you discuss if that's been impacted at all, given that things are pacing a little bit slower?

Yes, I think -- Gary, this is Bob. The competitive environment is about the same as we've seen throughout the year. Frankly, lots of competition in all of the places we're in. I think we don't see that abating. We think we're -- we believe, as we look at the markets and we try to triangulate data from our suppliers and from customers, we think that in most of the markets we're in, we're either holding our position or gaining, but competition is pretty intense and continues to be. When you have these kind of subdued levels of activity, everybody's scrambling to get every opportunity that's out there. Gary Farber - CL King & Associates, Inc., Research Division: Right. And then just on the gross margins, are the gross margins that you reported in the quarter, are those sustainable going forward, or you think they'll be moving around?

Yes, I think the -- as you saw there, we had an outstanding quarter for gross margin with sequential improvement very nicely, especially in OEM Supply. I would expect to see that possibly be a little lower in Q4, but should track fairly closely. And I -- the reason why I say a little bit lower in OEM Supply is depending on the customer mix and the volume levels will have some impact there in Q4. But we believe, just like we talked about at our Investor Day, specifically in OEM Supply, the performance improvements that we're making there, combined with gradually increasing volumes, will allow us to continue to improve both gross margin and the bottom line in that business. Gary Farber - CL King & Associates, Inc., Research Division: Great. So is it fair to say as you go beyond the quarter, given all the initiatives you have, you'd expect that, that number should sort of gradually tick upwards?

Yes, yes, but more so in the OEM Supply business than the other 2. Correct. Gary Farber - CL King & Associates, Inc., Research Division: Right. And then one just last one. On acquisitions, if you could provide any update as far as what the marketplace looks for acquisitions?

I don't think it's really any different than what we discussed last quarter or at Investor Day in August. We continue to work a lot of different opportunities. Our top 3 priorities, as we've discussed, have -- really haven't changed. But there's nothing that we can comment on that we'd say is imminent, and yes, which you'll see us take action on here in the short term.

[Operator Instructions] We'll take our next question from Shawn Harrison of Longbow Research.

Two clarifications. I guess with the, sequentially, the fourth quarter being better than seasonal because of the extra days, does that mean that we should see a similar type of negative impact as we move into the March quarter of an extra 3 points of negative incremental seasonality just because of how fourth quarter shook out?

Yes, yes. We typically would show an uptick of a couple percent, at least 2% or 3% from Q4 to Q1. I think it's a little premature, based on how volatile the business has been for all the reasons we've said, to pin that down more specifically now. But all else being equal, the drop in billing days from Q4 to Q1 will put a little downward pressure on the sequential sales performance.

Okay. Then as we look at OEM Supply, I mean, congrats on the margins this quarter. That was the best we've seen in awhile. But as we look to '14 and your heavy truck customers forecasting better volumes, I mean, is there a way that we could think of for each dollar of revenue growth that dropped through to the EBIT line for that business now that we're kind of back on more solid footing?

You're talking operating profit leverage?

Operating profit leverage, just for OEM Supply now that it looks like all the cost saves are in the model and you're kind of back in the...

Yes, that's a great question because delivery is 40%. Operating profit leverage in Q3 is not something that will be sustainable for very long. But I would expect it, assuming that the volume continues to gradually improve, I would expect this -- that business, in particular, to be the one that has the higher leverage -- highest leverage of the 3 segments and one that we should be delivering double-digit-type operating profit leverage.

Okay. When do you -- I mean, I guess, the current momentum, we probably anniversaried that going into the March-June quarters, just on the year-over-year basis just because of the timing of the restructuring actions?

You're talking expense standpoint, yes. But keep in mind, the first couple of quarters of this year had relatively weak volumes. And so we should be anniversary-ing against a little bit easier comp on the top line when we get into Q1 of next year. But you're right, we won't have as much incremental cost savings from our restructuring actions, that's correct.

Okay. And then, I guess finally, on the data center portion of ECS, I think it's been talked about in the past, maybe it's just slow to update. I mean, I think it was even talked about a little bit on this call, just people looking at capacity and [indiscernible]. But are you concerned that maybe there's any secular shift going on in the business, so the upgrade cycle has just been pushed out and so what you could expect historically just no longer applies?

I'm not sure, Shawn, I know how to answer that other than the fact that we're sitting now in the eighth quarter of basically a flat to slightly down data center market. I wouldn't have expected that, as you know, from my comments in prior quarters. So I'm not sure the driver's so much a major secular trend change in data centers as much as this confidence issue that's causing a general softness in capital spending.

We'll take our next question from Noelle Dilts of Stifel. Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division: First, just expanding a bit on Ryan's question, a few back. Is there any way you can break out how much Canada, on the whole, was down in the quarter?

Yes, as you know, Noelle, we don't report U.S. versus Canada with -- which are the 2 components of what we call North America. However, as Bob said, Canada does make up approximately a little less than 20% of the total revenue. And we can say that in the quarter, the Canadian business year-over-year revenue-wise was down in the low double digits, 10%, 11% type of decline, so kind of to size this for you, the relative magnitude of the drivers that Bob described. Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then do you think that with some of this eastern -- some of the issues in Eastern Canada, I mean, do you there's a bit of a deferred demand in that market, or do you think it will kind of go back to just run rate levels when you see those issues resolved?

My guess is that when those issues resolve, we'll go back to run rate issues -- run rate levels. I don't think we're expecting to see a big sudden surge when all the issues are sorted out in Québec. Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then on the security market, 7% growth, which was nice, but obviously below the rates that you were looking at a few quarters ago. I mean, as you look forward, where do you think that security growth rate levels out?

I think what's happening in security right now for us is that some of the large corporations that are deferring some of their other capital spending are deferring some of their security spending right now as well. If you look at the non-res construction, there's not a lot of new buildings going up, which would drive more security spend. So I think non-res construction has to come back, capital spending has to come back, and we'll see a bigger pickup in security. We also have an issue that's focused more on the SMB sector of the market, which is an area where we think there may be some growth opportunity for us to attain. Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great, that's helpful. And just one last, if I can squeeze it in. But just trying to expand on your Emerging Markets comment. Can you talk about, if you're seeing any signs of improvement in South America, particularly in Brazil and Peru, just what you're thinking there in terms of timing of some of this activity?

Yes, actually we are seeing improvement in both Brazil and Peru. We have project wins that were locked down during the quarter. We had expected some of them to bill in the quarter which are going to bill in Q4 and into Q1. So we're actually seeing good activity in Brazil. We're seeing reasonable activity in Peru as well. And I think they've gone through kind of a secular or a cyclical trough and will be coming back. Mexico seems to look about the same. So honestly, I'm optimistic about Latin America as we go into next year, given what really this year was an underperformance given what we had expected to see.

We'll take our next question from Brent Rakers from Wunderlich Securities.

I apologize if I missed this from earlier. Have you given a backlog number, both for ECS and Wire & Cable?

No, we haven't. We typically don't report those. But I think consistent -- we don't report specific dollars. But consistent with Bob's earlier comments, what we are seeing, especially in the ECS business, is a nice increase in the backlog, both from end of Q3 versus Q2 as well as at a year-over-year comparison. And I think also telling, with some of these projects being pushed out, a nice increase in the ECS backlog as we look at from the end of September to 3 weeks into the new quarter.

Ted, I guess one other related question to that. If you adjust for some of these deliveries slipping and pull those out of backlog, is the backlog still up year-over-year in that business?

Yes.

Okay. And then just to get a -- kind of wrap up the whole, the prevailing bid activity, do you quantify at all the bid activity year-over-year? Is that moving consistent with your backlog trend right now as well?

Yes, we think so.

Okay, great. And then a couple of questions on the margins. You talked a bit about gross margins. And I think in the queue, you've got a comment, I think, within North American ECS about a renewed focus on margin realization in North America Enterprise. Would you care to elaborate on that and maybe talk about what targets might be for that segment?

I don't think we want to talk about what the targets are specifically. But the way to think about it is that we saw margin in that business deteriorate. We felt the margin deterioration was in part due to the growth of security in the mix, which tends to be a little bit lower margin than our traditional data infrastructure business. But we also felt there was a component of it that's simply sales discipline and driving to better behavior around pricing. And the initiatives have really been around driving pricing behavior. And that's where we've seen the progress in gross margin. And that -- we believe that's sustainable.

Okay, great. And then just a final question, and I think Ted commented earlier about maybe a tighter cost focus going forward given some of the demand trends we're seeing. Does that also reflect any change to any of your gross spending targets going forward as well?

I think it's a balancing, as we've said before, between the need to be very focused with our cost structure discipline, combined with making the -- continuing our strategic investments in the various areas that we've talked about before. So I think you will see us get -- that will translate into some very nice leverage. If we get an industry that grows, you might think of it back to like in 2010, when we, after a very tough last half of '08 and all of '09, we were able to show some very nice leverage into '010 and '011 because we maintained very strict cost discipline with headcounts and so forth, then we saw some nice revenue recovery. So that's really where I think the big opportunity is. We have an industry that is better than what we've seen recently, meaning better than flat or very slight growth. We'll be able to leverage that growth very nicely with our existing cost structure.

We'll take our final question from Hamzah Mazari with Crédit Suisse. Hamzah Mazari - Crédit Suisse AG, Research Division: The first question is just, could you remind us or update us how much of your total portfolio currently is project business? Is it still around 20% or so? And then, generally in a normalized cycle, I realize they're projects push-outs, but in a normalized cycle, usually, when do you usually sort of book a project and then you ship? What sort of a timeframe on sort of a large project, order of magnitude versus a small -- or however you want to sort of answer that?

So, Hamzah, this is Bob. The project mix is a little bit different between the Enterprise business and Wire & Cable. Wire & Cable tends to have a little bit lower project mix, more day-to-day, so sort of 10% to 15%-ish in the Wire & Cable business. 20% would really be a peak number. Enterprise tends to have a little more project activity, so more like, say, a 25% to 35% kind of number in that business. If you ask where we are today in the mix, we'd say we're low, on the low end like both of those businesses in terms of project mix. And the second question about when do projects typically bill, it actually depends a whole lot on the size of the project, which is probably intuitive. Smaller projects build pretty quickly. The book-to-bill timeframe is fairly quick. It may be a month or 2. For very large projects, the time period may take longer. I think the key thing when we're talking about these delays that's different is the timescale from being awarded a project until the material begins to ship to the project. And that's something we're experiencing a bigger lag in than we have in the past. That would normally be a much more compressed time period for us. Hamzah Mazari - Crédit Suisse AG, Research Division: Got you. And then just has there been any change in the mix of your project business in terms of, are you more levered to large projects now than you were in prior cycles, or has that mix not really changed for you?

I don't think that's really changed. We have some very large projects that we've been awarded, as well as some more small-sized projects we've been awarded. So I think the mix, in that respect, is fairly similar. Hamzah Mazari - Crédit Suisse AG, Research Division: Got you. And just last question for me. On the copper side, in the past, you've talked about sort of the leads and lags and how that flows through the P&L, and that's been helpful. Could you maybe give us a sense of, if copper stays where it is, when do you anniversary sort of the declines or headwind related to copper? Is that more of a second half '14 event, or how do you think about that?

It would really be probably a Q2 of 2014 because the price of copper stayed fairly constant, around $3.60 from Q2 of '12 all the way through to Q1 of '13. So if we end up with another negative impact in Q4 of this year similar to the last 2 quarters, then I would expect, again, if copper holds flat, we'd see a similar impact in Q1 before we then anniversary these copper prices in the approximately $3.30 range, which we began to experience in Q2 of this year.

Thank you for participating in the call today. In conclusion, with leading positions in large, diverse and highly fragmented markets, we believe our differentiated platform sets us up well to drive top line growth and margin expansion. Companies are under pressure to take costs out of their supply chain, minimize inventory on hand and manage complex projects, all while operating with an increasingly global footprint. Our value proposition is based largely on 3 capabilities which, together, take risk and cost out of our customers' business. Our global capabilities, the consistent operational discipline, quality and ability to work face-to-face with customers across multiple geographies and transact business in local currency and language, our technical value ad, which entails providing product recommendations, developing solutions for specific applications, managing quality control and our supply chain solutions, which help customers manage their costs, reduce headcount, reduce working capital and take risk out of their business. We believe we have attractive growth opportunities that we can capitalize on through our current business model strategies. Finally, in the end, it comes down to people, and I'm confident that we have the right team in place to drive our strategies, as they have done through the past year of very challenging market conditions. Thank you for joining us this morning.

This does conclude today's conference call. Thank you all for your participation.