Good morning. And Welcome to the WESCO International Second Quarter 2015 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Dan Brailer, Vice President of Investor Relations and Corporate Affairs. Please go ahead sir.

Good morning, ladies and gentlemen. Thank you for joining us for WESCO International's conference call to review our second quarter 2015 financial results. Participating in today's conference call are, John Engel, Chairman, President, CEO; and Ken Parks, Senior Vice President and Chief Financial Officer. This conference call includes forward-looking statements, and therefore, actual results may differ materially from expectations. For additional information on WESCO International, please refer to the company's SEC filings, including the risk factors described therein. Finally, 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 Web site at wesco.com. Means to access this conference call via webcast was disclosed in the press release and was posted on our corporate Web site. Replays of this conference call will be archived and available through July 30th of this year. I would now like to turn the call over to John Engel.

Thank you, Dan. Good morning, everyone. We had a challenging second quarter continued weakness in the industrial market and in Canada, foreign exchange headwinds and a slow seasonal start in the non-residential construction markets weighs heavily on our results. Organic sales were down 3% reflecting flat sales in the U.S. and a 7% decline in Canada. As a result profitability was negatively impacted and was down versus prior year. In late April we acquired Hill Country a commercial, construction, electrical distributor with approximately $140 million in annual sales and then off to a solid start. We also step up our share repurchase program in the second quarter during our first half buyback to approximately 1.1 million shares. Our capital structure is in good shape and we continue to take a disciplined approach to acquisitions that supplemental our growth strategy. As we look to the second half we expect reduced demand in commodity driven end markets and foreign exchange headwinds to continue. Based on our second quarter results in this challenging market backdrop we're reducing our full year financial outlook. Actions initiated in the second quarter to streamline and simplify our business are expected to improve profitability in the second half. Ken will review these actions and outline the financial impact and our revised full year outlook in his commentary. Moving to Page 4 for our industrial performance. We experienced a decline in industrial in the second quarter driven by our oil and gas, metals and mining and OEM customers. With U.S. sales down 4% and Canada sales down 12% in local currency. Lackluster economic growth the strong U.S. dollar and weak global commodity prices are all laying on the manufacturing sector. Our industrial customers are responding to these challenging macro economic conditions by adjusting stocking levels, there is slowing down…

Thanks John and good morning. Our outlook was for second quarter consolidated sales to be flat to down 3% from the prior year. Second quarter sales ended up by $1.92 billion which is a decrease of 4.4% from the prior year sales declined 3% organically and foreign exchange reduced sales by another 3 points. Acquisitions partially offset these declines adding 1.6% to the top-line and pricing for the second quarter was neutral. Organic sales growth per workday decelerated as we move through the quarter April was flat, May was down 4% and June declined 6%. Sequentially, organic sales per workday grew 1%. Our direct oil and gas sales continued to decline year-over-year but were weaker than expected in the second quarter which were down approximately 30% year-over-year compared to down 10% in the first quarter. Based on the year-to-date results and the expectation for continued softness in oil prices we now expect our direct oil and gas sales to be down approximately 30% for the full year or an impact on over our 2015 sales growth of approximately 3%. Overall backlog is essentially unchanged from the year-end 2014 with the U.S. backlog flat and Canada up 7% on a local currency basis. Versus the second quarter of last year U.S backlog declined 7% and Canada backlog is essentially unchanged on a local currency basis. Month-to-date July consolidated sales are approximately 3% lower than the prior year and down approximately 2% organically. However the book-to-build ratio has strengthened with both the U.S. and Canada now earning above 1.0. Gross margin was 19.9% in the quarter and that's down 60 basis points from the prior year and down 30 basis points sequentially. Gross margin was driven lower by business mix, lower rebate accruals and continued competitive market pricing pressures. SG&A expenses for…

We will now begin the question-and-answer session. [Operator Instructions]. And our first question comes from David Manthey of Robert W. Baird. Please go ahead.

First-off on the construction weakness. I understand the industrial side of the business given the current environment. But could you discuss your construction trends relative to what seems under relatively healthy and maybe even and improving market and now WESCO is more and then just straight structures but it seems weaker than the overall environment. Can you help us understand that?

Yes, Dave. On a local currency basis Canada was down 3%, so let me start with Canada and I'll move to the U.S. Canada was down 3% so we had clearly began to see the impacts in the Canadian market of global oil pricing and global commodity pricing. When you get underneath the covers and look at that, both Wesco and Eecol were down, roughly equal percentages and the Wesco sales declines were driven more out in the western provinces in the praire as will be expected. And versus are seeing some kind of partially offset by growth that we're seeing in like Greater Toronto area. And that's true for Canada for overall. And in Eecol we saw declines and not all of four regions but in three of the four regions. So, that's the context of Canadian picture. When you move to the U.S., we did a sampling of the series of projects across a number of our contractors that we serve in the U.S. and many of our contractors serve a variety of projects, different types of projects, they're pure commercial based contractors. Many of our contractors serve multiple segments of non-resi. What we clearly found is those projects that were focused on infrastructure were down significantly, in some cases no projects, right? So, remember there is no MRO stream with what we sell the contractors, it is truly project business. So, when the project is done and there is not another project, there is no sales until you get that project. And what we found on really kind of across the board both in U.S. and Canada for that matter on the commercial projects is nice growth. And so I spent the good number of weeks in June and July visiting a series of branches and doing some personal inspection of what kind of the activity levels are and so we're seeing growth with commercial and other segments, outside of what's been driven by infrastructure, we've had some new wins in healthcare, in education and our product categories of Datacom and lighting grew in the quarter. So, but it's not enough to offset the -- what we're seeing with the contractors that are serving the infrastructure oriented markets. And by the way one other thing I would mention, some of those projects -- they're not all large projects, right? So, for some oil and gas companies in particular, there is smaller projects that are tied to the maintenance and the turnaround efforts and what we've seen is a good number of them have deferred or kicked out, kind of kicked the can on some other turnarounds, so they can do that forever. I think that will have to ultimately -- those activities ultimately kick in, but that's another aspect as driving at it, that opposed just that new construction.

And you outlined some of your cost-cutting efforts, last quarter you said you're still adding to the sales force, I would imagine that's come to a halt now. But when you look at the range of things that you've done in terms of headcount reductions, facility consolidations, any mandatory unpaid leaves things of that nature, would you think you say you expect your SG&A to be flat to down then, in the second half, as the majority of the benefits from those efforts start to kick in?

Yes, absolutely, as mentioned in the comments, we took actions in the quarter that reduced headcounts as well the branches but while that generates a gross savings, there is a cost of doing it, so in the second quarter that kind of neutralized itself, and we expect to see the majority of those savings come through in the second half as well as the impact of the ongoing cost controls. When you roll all that up you should see exactly what you outlined which is flat to down SG&A in the second half of the year.

And Dave, one last comment. With respect to the sales force, and how we're managing it, I think we're clearly trying to drive productivity there and that was a driver and some of the headcounts that were already executed in the second quarter. With that said, we are still doing selective additions in some areas, where we're under penetrated and we got confidence that with increased coverage capacity, we're going to get a nice uptick in sales, so we're taking careful approach relative to the front-end and being very thoughtful about where we need to incrementally invest.

And our next question comes from Deane Dray of RBC Capital Markets. Please go ahead.

I wanted to get some more color regarding the 30% projection for down in your oil businesses and the context here is oil is not one of your core end markets and I know you had to put that together from sort of a bottom up analysis of what your exposures are, so how do you arrive at that 30%? What sort of precision do you have? And just to clarify, does that include FX or is that on a local currency basis?

So, we built it up as you know, as we went into the December outlook call and that's where we defined it to be about 10% on a direct oil and gas exposure for the total of our sales. It's a little more than half in the U.S. that's what we stated at that time 25% to 30% in Canada and the remainder in the rest of the world. The precision around those numbers has actually stayed pretty accurate, we look at it on a customer by customer basis we build it up on the branches and the locations where we serve those customers the most and it's obviously moved around a little bit the reality is the overall exposures has move down as we move through the year only because the sales have move down but as 10% of total sales it's fade the precision around the number has been pretty accurate. When you talk about what our outlook is for being down 30%, we did the same thing we actually do forecasting of our business at the lowest level or the branch level and as we're getting those forecast and we're having the branches break out their oil and gas exposure in both our U.S. business, finance leaders and operational leaders as well as the Canadian CFO and Canadian operational leader has been able to kind of calibrate that data each month as we move through the year. So, as we look at the second half what I would tell you to your kind of follow on question would likely be where has decline gotten larger versus what we thought since we started the year saying we thought it will be down 15% to 20%, and now we are saying around 30%. The Canadian numbers has stayed relatively the same as far as projections of decline from beginning of year through the end of the year where we've seen that growth to be a little bit bigger and take us to 30% overall in the U.S. exposure. As we look at some of the Gulf Coast region, some of the large projects as well as some of the California Costal exposures. So where we would see the more impacted in the second half is in the U.S. and that's what will take us to the 30%. As far as FX in or out it's actually -- there is enough softness around the number I would tell you the answer is yes FX is in that number, FX has moved around just a tiny bit from the beginning of the year the FX movement has not changed our outlook either for our overall sales or our oil and gas exposure.

Ken just to clarify in that bottom up analysis by branch are you including indirect exposures and how are you defining that?

You are not surprised to hear that that's the harder piece to get. We obviously talk through it because in there, there were certain regions where we talk to branches about forecast take Western Canada where we know the indirect exposure is relatively larger in certain regions or certain locations and more it looks more direct than in direct. But the reality is as hard to define. So when I tell you 30% down year-over-year that is truly as we define a direct exposure, we do know that there has indirect exposure that carries on to that. And the reality is as we believe that's what we're seeing an impact as you saw in the press release and in the commentary to this point a lot of the industrial space.

And Dean I'll tag on that and it's not just the indirect due to oil and gas but I think it's important to also note that metals and mining which is another vertical that we have strengthened that we served over the years we're seeing both the direct and an indirect effect there. And then if you look at our global accounts space where we're really seeing the year-over-year decline is in oil and gas, metals and mining and OEM since selected OEM customers which that in response to overall manufacturing headwinds in those particular production rates maybe down.

And on a second topic John in the first opening remarks you comment on a robust M&A pipeline and it evidently it looks like you passed on a big asset in the utility space and maybe just give us some context here. I know you don’t typically go after underperforming businesses but was there an opportunity for you there was it price and does that change the competitive dynamics on the utility distribution business for you over the near-term?

Yes, Deane I appreciate that question as you've said the HD Supply sold their power solution business to Anixter and I think as you know and I think most of our investors know that is the portion of HD Supply that WESCO competes with. And in that business is their utility business and serving utility customers and we go head-to-head with that part of their business as a competitor. And it also includes more I'll call it classic electrical distribution predominantly in the South Eastern portion of the United States. So, any of the major not even major I'll say any M&A activities that are occurring in our space are on the porphyry. You can absolutely bet that we are aware of it, in some cases we're aware of it before others and we get it a chance for potentially drive some type of exclusive transaction. But in all cases we are engaged in the process we're constantly evaluating all opportunities. The way I would answer the question is this with that set up Dean. Look we feel really good about our utility business if you look at the momentum that we have the value proposition, the consistent results and is on set it really was kind of the first part of our company we focused on this one less go strategy and we're yielding strong results. So we respect the HD Supply's utility business and their capabilities, we've been competing with them a long time. We feel really good about our business. I would say in terms of Anixter taking them on it's going to be very interesting to see what Anixter attempts to do with them. That’s about all I'll say, from our perspective tough we've got high confidence in our business, our capabilities and I think we've got a really strong track record in core utility over the last four plus years.

Our next question comes from Steve Tusa of JP Morgan. Please go ahead.

Can you just talk specifically about the -- I guess automation channel. You talked about I guess OEM is little bit in new news there and how weak that was. Is that related to any particular industry or do you have a hard time kind of figuring out where those OEM, they're sending machine. I think most of them are like packaging guys, right? Any further color on that OEM channel would be helpful.

I would say that our OEM business Steve has a very broad mix to it. So it's not just the machine builders that you alluded to and clearly the machine builders are an important segment for the automation and control side of our business among others where we're partnered with Rockville and other major supplier. But our OEM mix, our OEM business is actually much boarder than that, keep in mind that over the last 10 years we've done a series of acquisitions in the value added distribution space that have been focused on the OEM demand stream. It started with Carlton-Bates back in literally a decade ago. And then we've done a number of other acquisitions RS Electronics, AA Electric and the light that we've integrated in with Carlton-Bates. So my references to OEM challenges were specific with respect to some of our global accounts customers. Across our broader OEM customer base we're seeing a mix bag of results, in some cases we're getting some growth in some cases it's somewhat flattish with certain customers it's somewhat down. From a product category standpoint, I would say that category is relatively stable. We had growth as I mentioned earlier in response to Dave's question, we had growth in lighting, we had growth in our Datacom and growth in our IP security. And then where do we have declines from a product category standpoint and within wire and cable and core electrical distribution and control and the rest of the category is kind of fit in the middle. So that just kind of gives you a spectrum Steve of where we're seeing categories growing versus category declining in second quarter.

So you think of stuff with your partners like Rockville on the automation side or whoever else Siemens maybe telling. Is that growing to you, is that kind of stable and flat?

First of all I think the company we mentioned are terrific companies and we have excellent relationships and I feel good about there is this level of stability in those relationships and how that’s performing. Net-net I would say the overall industrial market is not recovering its array, overall we all had hoped and expected at this point in the cycle. But we're not seeing a lot of volatility there.

So it is not like destocking that stuff to point that.

Absolutely not. And in fact I think we're very focused on if you look at our working capital Ken mentioned that in the quarter our working capital metrics are healthy. We have not, we have not re-risk -- are going into a mode where we've been trimming our inventories. We are very focused on strategically our availability metrics and are still rate metrics inside each product category. And we think it's incredibly important that we maintained those metrics effectively to support customer satisfaction, where I mentioned destocking in my comment earlier was with respect to customers driving destocking from their perspective in their warehouses. And in fact some customers are very aggressively trying to push more inventories back on us. And have us pick that up and manage it whether it's a VMI program or as part of one of our other boarder value creation solutions.

That helps a lot. Just to be clear your automation business is -- it sounds like it's kind of flat basically or it's down?

I'll say it's stable.

Our next question comes from Robert Barry of Susquehanna. Please go ahead.

Looks like the gross margin trend has gotten a little worse sequentially, any reason to expect it should improve in the back half?

Yes, let me give you the sequential movement because it's important to consider as I give you a full year comment. The sequential movement is driven primarily by changes in the volume rebate accruals and we talked about business mix overall bid and the competitive pricing. Effectively as we see the top line soften up a bit as you know from watching the business closely that puts a bit more pressure on our volume rebates year-over-year, it takes a little bit of growth each year to kick up that number, to keep that absolute number of volume rebates flat without program changes. So, as we move from first quarter to second quarter, we adjusted those accruals to some degree and that has a little bit of a catch up and it from the first quarter when the outlook was a little bit stronger. So if you think about the year what I'd tell you is I wouldn't anticipate any real significant improvement in gross margins as we move through the balance of the year. We might get a little bit of uplift if the business mix shifts a little bit if we see a little bit more of help from the industrial side and then the reality is as we continue to work programs with our suppliers, we will also continue to try the drive improvements in programs not just driven by volume year-over-year but lot of words to say. I think that the outlook for margins is probably relatively stable to what you see in the first half as we move through the balance of the year.

The $0.40 on cost saves is that heavily weighted to the fourth quarter, is it more balanced between 3Q and 4Q?

It's probably -- there is probably a bit more in the fourth quarter than the third driven by as we remove positions from the organization, that saving starts to generate relatively quickly and we mentioned the number of positions that we took out in the second quarter. As we consolidate branches which are a little bit more heavily weighted to completion in the third and fourth quarter, those savings well were little bit latter, because there is more cost, there is more action, there's more things to be done to have that completed. But I would tell you that on the $0.40 it's not overly skewed to the fourth quarter, it's a little bit more heavily weighted as far as net savings to the four.

And then as we think about next year annualizing that maybe it's a little more than 40?

Part of it is -- part of the incremental savings this year is due to structural cost reductions related to the headcount in the branches and a portion of it is due to our ongoing discretionary controls -- cost controls around travel, over time, all those kinds of things that we can squeeze pretty quickly and we've been doing that for the last couple of years. As we woke up into 2015, what I'm going to tell you -- I mean 2016, I am going to differ that answer a little bit until we get to the outlook section, but what I would try to have you think about is not all of the savings that we're generating this year are structural, so therefore it doesn't all get annualized into the 2016 number but as we get closer to our 2016 outlook, we will definitely size that for you.

And then maybe just finally 3Q looks like that sales outlook flat to down three is estimate point -- few points better than Q2 even as the comps little tougher sounds like oil and gas getting worse, what do you assume is getting better that's going to drive that with?

Well, we mentioned at the book-to-bill rate is stepping up and we can see the parts of the business where that book-to-bill ratio is stepping up, the July month-to-date numbers the U.S. is still kind of running where it was running in the second quarter kind of a flattish year-over-year number, on an overall consolidated basis. Canada has improved a little bit month-to-date while it's still down, it's not down as much. So we do think oil and gas will get tougher, we expect to see maybe some -- a little bit of improvement in the commercial side of the construction business as well as continued health and the utility space. So those are probably the biggest variables of movement.

Our next question comes from Ryan Merkel of William Blair. Please go ahead.

I wanted to ask about the rest of world segment was down quite a bit in the quarter. Can you just talk to what was the big driver there?

I think we've taken through that business before in terms of mix shifts, it's really when you look at our model there, it's driven by global accounts, integrated supply and capital projects. And it's very much oriented towards the larger infrastructure industries and so the challenges in the global mining, oil and gas markets are well with foreign exchange -- foreign exchange impact isn't just Canada or U.S. but it's the other countries we operate in as well. And what we've seen is the same effects we're seeing in Canada in the U.S. in those large infrastructure industries impacting us. We had some nice new wins over the last year and a half and those are rolling out, but that it's the lot of headwinds wrapped around the oil, gas, metals and mining fundamentally.

Then same question on oil and gas, this might be hard to answer but I'm assuming that the upstream piece is what's really hurting there. Are you able to sort of break that down, you have a downstream and midstream portion to that market outperforming?

It is primarily the upstream fee, so I'll tell you that part of the growth in the decline outlook is sizing a little bit more decline and to the downstream side. We've seen that as a part of the movement in the first half of the year, but I would still tell you that the biggest chunk of the decline year-over-year that we're seeing so far is still in the upstream side incrementally softer in the downstream side.

And that's not unexpected, I mean this is what we expected and the challenge is that specifically I will give you some examples in Western Canada where our customers are looking at prioritizing productivity projects and would -- I'm using the term productivity. So getting more out of what they've already have in place and operating as oppose to the new projects in the front end investments. So with that said there's been deferrals of turnarounds and maintenance but fundamentally where the project activity is been evaluated appears to be more of that type. And so that -- that builds the challenge as you move forward because to the extent of the new upstream projects are not being worked at all when that ultimately turns on again at some point in the future there will be a time lag right until that impacts our sales results.

The next question comes from Christopher Glynn of Oppenheimer. Please go ahead.

So, just wanted to look at the volume linearity with the third quarter expected flat to down to three, so it implies 5% to 8% sequential improvement which seems like a lot by historical linearity, so just was worrying what's driving that?

The same things as we outline just a few minutes ago a little bit better on the commercial construction side. We know program are at schedules and the utility space those are bigger chunkier programs we know how they roll up we have a couple that are ramping up. I would say the same thing on the integrated supply business and those are the biggest movements in the sequential set of numbers. We're not expecting anything significantly different in our current outlook for the overall industrial space and CIGs relatively small as a percentage of total sales compared to the others. So it's really more on the construction utility and with space.

And of the $0.40 savings for the year. Did you quantify how much of that was realized in the first half? That was a neutral, right?

No there was a little bit realized in the first half because we launched it back as we were going through the first quarter. It was probably I'll say 20% or so realized in the first half, the remainder has to come in the second half.

But $0.40 is a net number correct?

Correct.

Our next question comes from Matt Duncan of Stephens Inc. Please go ahead.

Just going back to the construction business for a minute. It was really wet in Texas and the Northeast had a lot of weather as well. Was there any sort of short-term impact from that kind of staff or was that really just sort of a softer end market that hopefully gets a little better?

I wouldn’t call out any weather, Matt. I mean I heard a little bit and noise about it but not material.

Ken on the SG&A cost cutting actions. The SG&A dollar expense was a little higher I think than a lot of people expected in the quarter and it sounds like you had some expense and some benefit and maybe they offset each other but. How much expense was there and then was there any sort of one-time cost that seems so associated with the Hill Country acquisition in that number.

Good question. And I want to make sure that comes across clearly as you're thinking about the SG&A and OpEx numbers. In the quarter as well as -- as far as [program] called one-time cost related to the acquisitions there was a little bit but it wasn’t a big number it was not a big number that would call out to you. I did point out in the script that in the quarter Hill Country contributed about $4 million of SG&A that would not have been in our outlook, when we gave you the outlook in our April call at the end of the first quarter. So, you have $4 million of step up just due to the roll-in of Hill Country. And then if you take that out we were down in core SG&A as I pointed out at around the $8 million year-over-year. As far as the cost actions there were a few million dollars of cost related to the actions that we took in the quarter and the cost related to people and closures. And slightly more than that in savings but I'll just say slightly more than that, they essentially netted each other. We effectively work to manage that to whether it was a new neutral and we would generate be able to generate the fall through of the savings as we move to the second half of the year. But really no big, big chunky numbers that you would typically look at and think those kind of restructuring. But I would just think the net impact of the programs in the second quarter were neutral, no significant one-time acquisition cost other than the roll-in of Hill Country from an SG&A perspective. And then the saving starts to flow now that we're in July and moving through the rest of the year.

And the last question I've got just on M&A. Your leverage is kind of back up towards the higher end of the range. Does that preclude you guys from doing any kind of larger acquisitions right now? Do you have to be a little more careful with the balance sheet to give in the sales are in a decline position at this point. Just how are you thinking about the size of M&A that you can do right now?

I think we've shown the ability and the desire given the right opportunity we'd be rolling to go above our sales prescribed controlled band of 2 to 3.5 total debt-to-EBITDA. So we showed that before with Eecol and we showed how quickly we can de-lever. And then remember the cash generation portion the ability of the business is terrific and its shaping the first half. So the answer is no, Matt I think the other -- the important thing is and I know we've gone through this in the past. We view that as one of our true value creation levers obviously the core business the organic part of our business is value creation lever number one, and we talked about the performance and the challenges there and what we're doing about it. Value creation lever number two is acquisitions and we don’t look at that episodically. So we got phase gaining process, we manage our pipeline and we are working that continuously. So what do -- we do have very much disciplined approach where we will make the decision when a property is put in play whether we want to play. In many cases we try to put certain properties in the plan certain times and be exclusive. Of the last 12 acquisitions we've done since June of 2010. The majority of those had no investment banker in the loop. It is really an important point. So we are able to inspire the transaction and yes they want to be part of us. We want them to be part of us and obviously in that case you probably have a pretty decent price if we win-win from both parties perspective. So that’s the approach we take and we're not going to turn it on again turn it off again in terms of evaluation analysis screening and pipeline management process. We do have the discipline to make the decision as we move through these processes to remove things here to phase gate or do we pause and we don’t ever disclose what we were analyzing and what we were engaged in, because any given time there is a -- let's just say there is a number of non-disclosure agreements that are in place. We are working with various companies and that’s continues but I can tell you there is a number of acquisition so far in the first half and in second quarter. We were far down the path on that we decided not to move forward and that’s not atypical because either we couldn’t agree on valuation or condition has changed in their respective business or multitude of factors. So I want to give you a little more color on the answer the short answer is no.

Our next question comes from Josh Pokrzywinski of Buckingham Research. Please go ahead.

I guess just to go back on this construction comment that you pointed out in the slide and the prepared remarks about these contractors who are working on more industrial versus commercial construction. Do you have a sense for how that weighs out, I guess I would have thought that when you say construction or contractor business that really is a proxy for more commercial type activity. Is that more of an even split of commercial versus industrial then maybe people pod or is it just hard to pin down.

I'll give you a little bit of color and John may want to give you some commentary as well but. It's not just hard to pin down, it also moves. So when we look at customers because that’s how we track our activity, we track it by customer, we can see it in the system we know what certain EPCs have done what they're doing with those this year. And there are cases where it's a big contract and because we're aware of the big contract you think about how that get's through the business it comes through with an RFP proposal close to contact negotiation. But we'll know where that’s going, but there is a big group in that 30 plus percent of our business that we don’t have hands on visibility all the time to know where that work is occurring, the big ones we do. So from year-to-year and I think John mentioned earlier we took a look at as we saw construction moving in the quarter going in and looking at a sampling of projects or it wasn’t really a methodical sampling but we knew where we had big jobs that were moving year-over-year comparatively. And we can tell that the downs were more on the industrial side of that -- of that space, of the construction space and the ups were more on the commercial construction. That's probably a proxy directionally for the moves in the entire population within that construction slice, but I would be very cautious because I don't think I could give you a really accurate number to say I can take that slice of the pie and tell you that x percent is industrial and x percent is really commercial based, because it does move.

And the only other thing I would add, I don't have really much to add that was a good summary Ken, but Josh would be that I think a lot of times there are different folks that use the word commercial or proxy for non-resi. Now look there is some good data out there -- different people find it different ways, but if you want to reference kind of McGraw Hill dodge, their definition would say commercial is roughly a third of the total non-resi construction, right? And then there are many other segments manufacturing, education, healthcare, et cetera, et cetera. So there's many ways to cut this thing, what we were trying to distinguish was by going in and looking at specific projects with specific contractors where we are seeing the activity and where we are seeing the activity as Ken said, just to put an exclamation point on it, we're seeing growth with commercial, we're seeing some growth in healthcare, some growth in education, so some of these other verticals that are outside of the heavy infrastructure based project activity but in for those we're seeing -- that's like a light switch, right? They're lumpy and, you know, some of that activity is ground to a complete halt.

Is it fair to say -- and that's very helpful color, I appreciate that. Is it fair to say that those are probably a bigger part of the base than maybe you had thought going into your sampling?

No, no, Not at all. I mean again just think about others take you back over time, think about WESCO's deep roots are construction. So core WESCO is construction. The legacy WESCOs are construction way back in the Westinghouse space and it would basically very little, virtually very-very little resi. It was non-resi, and it was broad based and then over the years how has our mix evolved, we've taken you through that in terms of the acquisitions and when we picked up Datacom, the Datacom acquisition seeing a built on that platform that also was construction of a different ilk. But we are broad based non-residential construction. You name the type of project and we are capturing and doing it somewhere in the company.

And then just a follow-up on a couple of earlier comments, you mentioned that book-to-bill, had peaked up about one and I think it was June and July in the U.S and Canada. How does that look seasonally normal, I would imagine like as Canada strengthened in the second half, that's typical anyway. How does that over one number compared to what you'd normally expect?

It should be over one. That's it, I mean we're not citing that, Ken's not trying as to say okay this is atypical on a positive, but it is typical and so we would expect it to be there, that's the good news.

Yes, in other words it's not moving against expectations? I think there's everything else is happening, right.

Just one more on the $0.10 of incremental savings that you guys are mining out of the business, safe to assume that, that $0.10 is netted against the kind of restructuring charges that you'd to take in 2Q to get them done? So this is $0.10 and lot of that of readout starting in the third quarter or is that $0.10 net and it looks really $0.15 once you get passed 2Q?

Yes, now let me see if I can answer this, this way will be clear. It is $0.10 net, it will come through in the third and fourth quarter, the restructuring that we've talked about the cost related to the actions taken are netted against that number already. So when I give you an incremental 10, it's an incremental 10 on top of the net 30 that we've already talked about.

And on top of the say are the stake of…..

Yes, yes, that's all in there.

Our next question comes from Sam Darkatsh of Raymond James. Please go ahead.

Most of my questions have been asked and answered, just a couple of final ones here. This is a little bit of a nuanced question compared to the other M&A related queries you've seen today John. But I guess after the Anixter power solutions deal, you now have five players of significant size in the electrical distribution space in a industry that obviously is pretty heavily bided and competitive. How necessary, how needed is it right now for some of the majors to start getting together in order for the entire industry to begin to earn its cost of capital on a regular basis?

I would answer it this way Sam and that's a terrific question. Well I think we don’t talk about this in quarterly earnings calls per-se, but we'd clearly talked about this in some investor presentations and conferences and as part of our Investor Days over the years. Our overall view of the industry, let's take a look at our industry our served markets and the complete value chain like that and we operate in the middle between supplier manufacturing partners and customers. Our view is that there -- it's been fragmented historically; I mean it's going through a consolidation phase. And I think we've seen M&A heating up in recent years, I'd say recent been coming out the through of the recession back in 2009 and obviously there has been some major moves in our supplier partner base. It starts with [indiscernible] and then it comes still size that the portion of TE time activity that's significant for a data company, as we look strategically at our supplier partner base we see that there is going to be -- our expectation with it, right, from a strategic planning standpoint but there will be continued consolidation. Now let's move to our part of the value chain. If you look at our part of the value chain it's still highly fragmented in terms of numbers of players but increasingly the big has gotten bigger and more diverse and what you've just stated is now you've got a handful count on one hand of larger more diverse players. And so our view of that part of value chain of which were in the middle and were a leader is that's also going to see a more rapid phase of consolidation. I'm not predicting in the next quarter or the next year but I think we're in an industry consolidation phase as we look in the next multi-year time horizon. So I think it's a terrific question, it matches our framework, it's how we look at the industry and quite frankly it matched my personal framework since my early days at WESCO. And I think we're starting to see some catalysts that are causing it to accelerate a bit. So look it will be interesting and to see how that plays out in the coming years.

A couple of housekeeping questions Ken if I could. The third quarter assumption for the Canadian dollar is that $0.79 or is that $0.77 where the Canadian dollar is today, I was confused versus the year or versus the quarter?

Yes. And we basically got it and the 79 for the balance of the year.

Between now and the rest of the year.

Yes.

And then finally, you said that the reversal of the vendor rebase allowance, what was the actual impact sequentially on gross margins of that reversal?

Yes. And it actually wasn’t a "reversal" as the catch up and the accrual adjustment, so we obviously took down the accrual process a little bit as the volume gets softer, 30 basis points of gross margins sequential decline occurred and most of it was related to the volume rebate.

So, that does or does not snap back because of that rebate change.

It will -- you'll get a little bit because we're catching up in the second quarter for the first and the second so there will be a little better than improvement but we also know that we'll be cautious about that because we are continuing to see pressure in the competitive environment as well. So that's why in an earlier question I said our kind of outlook even though we don’t give a specific outlook on gross margin it is that we think the second half probably looks a lot like the first half on gross margin.

We are going to take a break at this point. I think we only had a few folks left back in the queue and I know Dan's available will follow up appropriately and I know Dan has a full schedule already today, tonight to hours. So let me wrap with that again it was a challenging quarter we're very much focused on executing our strategy, we think you got a terrific value proposition and we're grinding away the execution. And thank you for your time today and your continued support. Have a good day.

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