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Executives

Patricia A. Bergeron - VP, IR and Corporate Relations

Dominic J. Pileggi - Chairman and CEO

Kenneth W. Fluke - Sr. VP and CFO

Analysts

Amit Daryanani - RBC Capital Markets

Meredith Taylor - Lehman Brothers

Jeffrey Beach - Stifel Nicolaus

Alex Rygiel - FBR Capital Markets

Christopher Glynn - Oppenheimer

Brent Rakers - Morgan Keegan

Steven Gambuzza - Thomas & Betts

Satish Athavale - KSA Capital Partners

David Sachs - Hockey Capital

Thomas & Betts Corp. (TNB) Q2 FY08 Earnings Call July 23, 2008 11:00 AM ET

Operator

Greetings ladies and gentlemen. Welcome to the Thomas & Betts Second Quarter 2008 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Tricia Bergeron, Vice President of Investor and Corporate Relations for Thomas & Betts. Thank you, Ms. Bergeron, you may begin.

Patricia A. Bergeron - Vice President, Investor Relations and Corporate Relations

Good morning, and thank you for joining the Thomas & Betts Corporation's second quarter 2008 conference call. Our comments today contain time-sensitive information that is accurate only as of today's live broadcast. These comments may also include forward-looking statements, which make assumptions about our operations, business, economic and political environment, including without limitation, customer demand, government regulation, terrorist acts and acts of war.

These forward-looking statements are subject to risks and uncertainties detailed in the Risk Factors section of our Form 10-K for the 2007 fiscal year. Dominic Pileggi, Thomas & Betts's Chairman and Chief Executive Officer, will begin our formal remarks with a review of business highlights. Ken Fluke, Senior Vice President and Chief Financial Officer will then review the financial results. We will then take questions from the investment community.

I will now turn the call over to Dominic for a review of our business highlights.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Good morning, and thank you for joining us today. Thomas & Betts again turned in a very solid performance with second quarter sales and earnings slightly better than our expectations. Sales were up 26%, helped by acquisitions and growth in international markets, offsetting residential-related softness.

Earnings from operations grew 42%, helped primarily by our recent acquisitions; a favorable legal settlement also contributed. Our segment margins were strong with improvements seen in all our segments when adjusted for the impact of the acquisitions. Fundamentally, our businesses are healthy; our acquisitions are performing as expected; our integration activities are tracking to our aggressive timetable; and our balance sheet is in excellent shape.

Taking a look at our markets, demand remains mixed in the second quarter. Residential construction remains very weak, but we believe that it is at or near the bottom. We don't expect to see growth resume in this market until late next year at the earliest.

Residential-related markets, such as light commercial construction, speculative projects and utility distribution weakened in the second quarter. We believe these segments will continue to recede slightly for the balance of the year. On the positive side, the activity in heavy construction, large industrial and infrastructure projects remains healthy and should continue for the balance of the year.

International, commercial and industrial markets, which account for more than one-third of our revenue, continue to show resilience. Thomas & Betts has intensified its focus on specific international markets that require spec-grade commercial, industrial, and utility products and systems. This leaves us positive about the future of these markets. Based on what we see today, the trends we saw in the second quarter of 2008, will continue through the first half of 2009.

As previously mentioned, overall, our markets are mixed. Despite weakness in certain markets, there are notable pockets of strength that should bode well for Thomas & Betts and help us to continue to perform well in the back half of 2008, and into the first half of 2009. It is difficult to see any further out in the next 12 months with any degree of certainty.

In our electrical segment, sales increased 32%, with acquisitions contributing 27%. As in the first quarter, underlying electrical sales volume declined by approximately 2% in the quarter. Electrical segment earnings were a very solid 20.1% of sales in the quarter. This is an impressive performance given the dilutive impact of acquisitions and the volume decline in the underlying business. In fact, underlying electrical segment margins improved, when compared to the second quarter of 2007.

Turning now to our other business. Sales in our Steel Structures segment were essentially flat with last year. As a result of a more favorable product mix, year-over-year steel segment earnings increased to $10.5 million or 18.7% of sales. We remain very optimistic about the outlook for this business. To be able to satisfactorily manage the growing demand for electricities, utilities are expected to invest nearly twice as much in transmission and distribution projects than in power generation over the next couple of decades. Part of that spending will be used to improve reliability and expand capacity. Part will go toward replacing aging infrastructure; and some will be used to connect alternative energy sources, such as wind and solar farms, to the primary transmission grid.

As you know, we added manufacturing capacity to an existing plant earlier this year, in order to provide additional flexibility in meeting these longer-term market needs. Looking forward, we expect higher sales in the second half of the year compared to the first, in this business.

Activity for future major projects is very high, as utilities plan for significant grid enhancements, upgrades and expansions. In fact, it may be the highest level we have ever experienced. However as a reminder, there can be considerable variability as to the timing, when these projects actually come to fruition. Sales in our HVAC segment were up 6% in the second quarter, primarily due to pricing and foreign currency. Segment earnings improved significantly to $6 million or 18.1% of sales compared to $5 million or 15.9% of sales last year. The earnings improvement was driven by pricing and improved product mix. This is an excellent performance for this segment, especially given the softness in certain commercial markets and the business with the product line, heavily weighted toward heating products.

As pleased as we are with our performance in the challenging markets, we are particularly proud of the progress our employees have made in integrating six new businesses into Thomas & Betts. Over the past 12 months, we have added nearly $0.5 billion in annual revenues and more than one-half dozen leading brands to our electrical product portfolio. In doing so, we strengthened our strategic position, expanded our market presence, and solidified our platform for growth.

On our last conference call, we spoke at length about the integration of Lamson and Sessions' four distribution centers into our centralized distribution center, and our one-order, one-shipment, one-invoice operating model.

Overall, we are very pleased with the integration process. The move was completed on schedule, and although we initially experienced some pressure in maintaining our best-in-class service levels, we anticipate returning to our consistent and very high normal service levels during the third quarter.

During the second quarter, we also moved aggressively to finish consolidating certain administrative and back office functions of our acquired businesses. In addition, as planned, we transitioned many of the acquisitions onto our centralized IP systems. The majority of the significant integration activity is now behind us. And looking forward, we are well positioned to begin to realize the savings from these activities beginning in the third quarter. In total, we expect more than $20 million in annual savings from the integration activities, and have incorporated these savings into our earnings guidance.

As you know, during the second quarter, we sold our minority interest in privately held Leviton Manufacturing Company back to Leviton for approximately $300 million. We first purchased our interest in 1994 for approximately $50 million. A lot has changed in the ensuing years, but one thing has never changed, even after the passing of Harold Leviton… Leviton's commitment to remaining private.

We not only believe that we received fair value for our holdings, but divesting this asset at this time was in the best interest of our shareholders. I am also pleased to report that our announced divestiture of the plastic pipe business of Lamson & Session continues to progress well. During the process, it became apparent that we would be able to get a higher price for the assets if we sold them in pieces.

We have now entered into definitive agreements to sell certain assets, including the PVC pipe business, for approximately $50 million. These agreements are expected to close during the third quarter. Notably, we are also progressing well in the process to sell the remaining HDPE pipe business. We will provide more details as soon as these processes are completed.

In looking at our guidance for the full year 2008, we continue to believe that we will have an excellent year. Opportunities in the markets that remain healthy, combined with further improvement from our acquisitions, and price increases taken recently to offset high commodity and energy-related costs, leave us confident that we will be able to offset the weakness seen in residential and related markets.

We have increased our outlook for the full year 2008 earnings to a range of $5.50 to $5.65 per diluted share. The increase primarily reflects the net gain on the Leviton sale and the non-cash tax charge. The best biggest risk to achieving our projected results continue to be the risk facing all industrial manufacturers… the potential negative impact of market uncertainty, and continued tightening in credit availability, and volatility in commodity cost and availability.

Thank you very much for your continued interest in, to your interest in and support of Thomas & Betts. I will now turn the call over to Ken Fluke to review our financials in more detail.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Thank you, Dominic, and good morning. As noted in our press release, our second quarter EPS included $1.63 per share net benefit, related to the previously announced sale of our minority ownership interest in Leviton, the favorable legal settlement received during the quarter, and a non-cash tax charge. The underlying $0.91 per share reported in the second quarter was 14% higher than the $0.80 per share recorded in the second quarter of 2007. This performance was slightly better than the guidance we provided on our last conference call. We achieved this result despite greater than anticipated weakness in residential and related markets. It was especially pleasing to see higher underlying electrical segment earnings as a percentage of sales, before the impact of recent acquisition activity, as net volume was lower than last year. Second quarter volume trends were very similar to what we saw in the first quarter.

Turning now to the financial highlights of the second quarter. Consolidated sales increased 26% on a year-over-year basis. This increase breaks down approximately as follows… 22 points from acquisitions; 4 points from foreign currency; 3 points of net price; and 3 points of negative net volume.

In our key electrical segment, which includes all of the acquisitions, sales were up 32% year-over-year, with 27 points from acquisitions; 4 points from foreign currency; 3 points of net price; and 2 points of negative net volume. We saw a modest increase in demand for industrial products in the quarter, but these were again offset by continued weakness in markets influenced by residential construction, such as retail, utility distribution, and some areas of light commercial construction. These market dynamics also had a similar dampening impact on the performance of our acquisitions.

Gross margin in the quarter increased 70 basis points to 31.2% compared to 2007. Improved mix in our electrical and Steel Structures segments, as well as the addition of higher margin products from the acquisitions, contributed to this improvement. SG&A as a percent of sales decreased approximately 1 percentage point, reflecting the $12 million favorable legal benefit, somewhat offset by the negative impact of acquisitions, inclusive of amortization and other purchase accounting expenses.

Year-over-year, earnings from operations grew 42% in the quarter, with the acquisitions and the benefit of the legal settlement contributing significantly to this performance. As expected, there were no significant integration expenses in the quarter. Net interest expense increased by $8 million, largely as a result of funding required for our acquisition activity.

As you can see on the separate line item entitled Gain on the Sale of Equity Interest, the company realized $170 million pre-tax gain on the sale of its Leviton ownership interest back to Leviton. The tax rate in the second quarter increased significantly from 31% to 42% as a result of the Leviton transaction and a non-cash tax adjustment to deferred taxes related to prior periods. As expected, the impact from discontinued operations was not meaningful in the quarter. This leaves us with net earnings of $2.54 per diluted share compared to $0.80 per share in the second quarter of 2007. And now, a few comments about the first-half performance compared to last year.

For the first half of 2008, sales increased 26%. This breaks down approximately as follows… 23 points from acquisitions; 4 points from foreign currency; 2 points of net price; and 3 points of negative net volume. The 70 basis point improvement in gross profit as a percent of sales primarily reflects the favorable impact of higher margins from acquisitions.

As a percent of sales, SG&A was flat with last year. Higher SG&A related to acquisitions was offset by the favorable legal settlement. The 33% improvement in earnings from operations was the result of the earnings generated by the acquisitions, as well as a favorable legal settlement. Net interest expense increased $17 million, reflecting the funding required for acquisitions, and the effective tax rate was 9 points higher than last year, reflecting the gain from the sale of our Leviton interest and the non-cash tax charge. Net earnings of $186 million were significantly higher than last year, recognizing the previously mentioned second quarter net benefits.

Turning now to cash flow and the balance sheet. We expect to again have an excellent cash generation performance for the full year 2008. As a reminder, the first half of the year tends to be less favorable in terms of operating cash generation as compared to the second half, due to the timing of certain seasonal payments. We finished the quarter with $288 million in cash and $665 million in total debt. We collected $300 million in the second quarter from the sale of our minority interest in Leviton. And it should be noted that we have future cash outflow obligations of approximately $100 million related to this transaction, primarily for taxes and other considerations. Most of this will be paid out in the third quarter.

During the quarter, we paid off $115 million in notes that came due in May, and used an additional $75 million for further debt reduction. Further impacts to cash flow in the first half included $19 million of capital expenditures, and we expect to spend approximately $50 million for the full year. We continue to make some progress in reducing inventory levels, and plans are in place to reduce them more significantly during the next six months. The impact of these efforts will be partially masked by the upward pressure of higher raw material costs on inventory valuations.

Overall, our balance sheet is well positioned to support our strategic initiatives, and exhibits excellent financial strength and flexibility. Finally, a few comments about our 2008 guidance. As we have noted, our underlying first half performance was slightly better than our prior guidance. Looking forward, we see nothing that materially changes our overall outlook for the year. We expect slightly weaker net sales volume than anticipated on our last conference call, to be offset by higher commodity and energy-related price increases.

On the earnings side for the year when compared to our April guidance, we see further improvements in pricing and operating expense management offsetting the modest decline in net volumes. Benefits from integration activities undertaken in the first half of the year should contribute to our second half operational performance when compared to the first half of the year. We are raising our full year earnings guidance to a range of $5.50 to $5.65 per diluted share, primarily due to the $1.50 net benefit related to the gain from the Leviton sale and non-cash tax charge. The increased guidance also includes approximately $0.07 per share for the benefit of lower net interest and a slightly lower effective income tax rate. The favorable benefit from the legal settlement was included in our previous guidance.

Key assumptions for the second half of the year that support our 2008 guidance include the following -- year-over-year net sales growth of approximately 20%, and just over 10% for the third and fourth quarters, respectively. When compared to the first half of 2008, these sales estimates include tougher comparisons that include the acquisitions made at various points throughout the second half of last year; includes more pricing, and less impact from foreign currency.

Net interest expense is expected to be approximately $8 million per quarter, reflecting lower average net debt levels. The effective tax rate should approximate 32% for the second half of the year. And on average, fully diluted shares outstanding should approximate 58.5 million. In closing, we are extremely… executing extremely well on our aggressive plans to integrate our acquisitions, and are looking forward to the completion of what should be another exceptional year for Thomas & Betts in 2008.

Thank you for your continued interest in Thomas & Betts. I will now turn the call back to Tricia.

Patricia A. Bergeron - Vice President, Investor Relations and Corporate Relations

Thank you. This call is the property of Thomas & Betts Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Thomas & Betts Corporation is strictly prohibited. A telephone replay of today's call will be available through 12:00 midnight on Wednesday, July 30th, 2008. The number to access the replay is 201-612-7415. The account number is 9517 and the pass code is 290715. In addition, the recorded webcast will be available on our corporate website, www.tnb.com.

Thank you. We will now open the call up for questions. Latoya?

Question And Answer

Operator

Thank you. [Operator Instructions]. Our first question comes from Amit Daryanani from RBC Capital Markets. Please proceed with your question.

Amit Daryanani - RBC Capital Markets

Thanks a lot, good morning guys.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Good morning, how are you?

Amit Daryanani - RBC Capital Markets

Good. Just had a question… looking at all the cash infusion we're getting from Leviton and the sale of the PVC business. Could you just maybe talk about, what's the priorities in terms of cash usage, is it lowering debt, looking for international acquisitions or stepping up and doing a buyback, I guess?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Well, Amit, we're pretty proud of our ability to generate cash and having such a strong balance sheet. If you look at our recent past, you could see we have a history of returning excess cash to our shareholders; more recently, in the form of stock buyback, which we do have an authorization to purchase shares and certainly would consider that option. But I think our history of returning that cash to the shareholders in some form, I think is pretty good. And Amit, you also kind of made… you made the comment about maybe acquisitions in overseas. And quite frankly, right now, it's, with the way the currency is, that's pretty expensive. And we really haven't seen anything there that excites us currently.

Amit Daryanani - RBC Capital Markets

Fair enough. And then just on the acquisition, I mean, you guys have done a fairly good job in integrating these deals so far. It looks like the operating margins of the acquired business are around 11.9% or so. Could you just give a sense of how much room is there to continue to expand these margins beyond the $20 million, of cost savings you're going to get from the warehouse integration?

Dominic J. Pileggi - Chairman and Chief Executive Officer

A couple of comments around there. I mean, one obviously, we are somewhat volume-sensitive. I mean, we've shown in the past, if we do get more volume, we can drop it to quite substantially and disproportionately. But I think also here more recently in this year, we've shown very well too that, we can still put up very decent results, even if you don't have improvements, significant improvements, in volume. The one thing the acquisitions do give us is a lot more things to work on. I mean, we… with having them in there, we think we're going to see further improvements in the profitability on those acquisitions as time goes on, including the second half of the year. We're pretty excited about the opportunities that we see, we've highlighted as far as synergistic opportunities. And quite frankly, we're optimistically we may actually be able to find a few more as time goes on. So if you look at it, we're pretty positive about where we're at right now and being able to still show some more, further margin expansion.

Amit Daryanani - RBC Capital Markets

I guess that sort of understand, as there are options that use to expand margins beyond just the price, revenue leverage that we would get from them, right?

Dominic J. Pileggi - Chairman and Chief Executive Officer

What was that last piece?

Amit Daryanani - RBC Capital Markets

I am saying, from the acquired companies there are opportunities to expand margins beyond, 12% plus $5 million savings from, quarterly from the warehouse integration.

Dominic J. Pileggi - Chairman and Chief Executive Officer

That is true

Amit Daryanani - RBC Capital Markets

And then just a final clarification, and I will hop up [ph]. We are looking at 0% organic growth for 2008. I guess, assumes the back half, units would be down 2%, 3% offset by pricing?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Yes, I think the best way to look at this, we don't see any significant change in the volume dynamics in the second half and then what we probably what we have seen here in the first half. The only exception may possibly be, it will be a little bit more, I think Dominic, quoted up that we should may be have some stronger sales and still structures our business in the second half than maybe what we saw in the first.

The market dynamics for that business are very positive, are going forward. And then as I called out, we are going to comparing against strong, international currencies in second half, and those will summer [ph]. So, you will see less pricing being a factor in second half and you definitely should seek pricing become more of a factor in the second half than what we saw in the first.

Amit Daryanani - RBC Capital Markets

Perfect, thanks a lot guys.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Thank you.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from Meredith Taylor with Lehman Brothers. Please proceed with your question.

Meredith Taylor - Lehman Brothers

Hi, good morning.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Good morning, Meredith.

Meredith Taylor - Lehman Brothers

I was really impressed with the margins in electrical that you put up this quarter. You talked about, couple of factors there, volume do leverage offset by higher margins from new products. I was wondering, if you can give us a little bit more granularity around the various put and takes there. As well as whether you had any modest benefits from the cost take out, that you did in the first quarter?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Meredith, If we have, I would say very modest, if any of the take-outs that we did in the first quarter, that starts to be more of the factor here when we get in the second half, okay. When it does, I think it reflect some of the cost takeoffs that we have been doing all along. I mean, last year we did, I think we called out, we took out one of our manufacturing facilities during the year and obviously, we see the benefits of that this year and I think more of what we are seeing on that is more may be, activities that were more in place and done in prior periods, not necessarily wrapped around the acquisitions here recently. But that will become, we believe more of a factor as time goes on here, in the second half of the year and beyond.

Meredith Taylor - Lehman Brothers

Okay. How much would you say of a benefit was the cost take-outs that you reference from last year in this quarter?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

This is it, they were more relatively modest. I mean, they are not huge numbers. I think, we called out at the time that one I just highlighted, in particular may give us a million dollar benefit a quarter, if I remember correctly from last year. So obviously, that happen, that facility is closed, has been for some time. And you know, Dominic's is better, our guide to do an excellent job in managing that, and in times like that, that becomes very important and I think we are seeing the benefits of that too.

Meredith Taylor - Lehman Brothers

Okay, okay. And then from the volume side, you talked a little bit about some modest service disruption associated with the integration of Lamson & Sessions into for distribution centres, since the one and the one billing, one invoicing system. Was that a negative to volume or did you get some up tick from having them on the consolidated system?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Well, as you said, consolidating four warehouses Meredith, into one, is a huge task and frankly we gave our central distribution centre a drink of water with the fire hose there. But… and we did experience some temporary service disruption, which by the way we really appreciate, our customers that… that customer partners' support in the way they hung in there with us, and my hats off to our employees, for how they handled that situation. And just to finalize that, I think the good news is, that is back on track and as we said in our prepared remarks, in the third quarter, we should be back to our standard, excellent service levels. And I would say that that was… very slightly affected overall volume in the quarter.

Meredith Taylor - Lehman Brothers

Okay, and then one last question and I'll turn it over to somebody else. Can you just give us a sense of how the overall volume trends trended from month-to-month? Did you see any change in momentum? I know in the first quarter, you talked about things getting off to a slow start. Was there any change this quarter on a month-to-month basis?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

No really it wasn't -- it wasn't really any significant difference month to month, Meredith that would be worth noting throughout the quarter.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah, because you know again, we're talking overall… relatively modest net volume deterioration. It wasn't anything that was dramatically moving differently that would say that those trends should be any different going forward.

Meredith Taylor - Lehman Brothers

Okay, great. Thanks a lot.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Thank you, Meredith.

Operator

Our next question comes from Jeff Beach with Stifel Nicolaus. Please proceed with your question.

Jeffrey Beach - Stifel Nicolaus

Yes, good morning. Congratulations on a good quarter.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Thanks, Jeff.

Jeffrey Beach - Stifel Nicolaus

Couple of questions. First, when I try to adjust for your charges and benefits for the corporate expense, it looks like it ran well over $15 million. And I think you've suggested before, about $12 million a quarter. Can you talk about what was in the second quarter corporate?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah, it was little bit higher than what I anticipated. I guess, I'm always little optimistic on that particular line, but we saw some additional expenses in what we weren't planning on, wrapped around a couple of areas in the legal arena.

Jeffrey Beach - Stifel Nicolaus

Is that, are we still looking at a lower level than now for the remainder of the year?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah, I would hope so.

Jeffrey Beach - Stifel Nicolaus

Okay. Also hearing about so many good markets and seeing volume off somewhat, can you give us some sense as to, how much your volume is off and some of the markets that are related to residential, such as specifically the electric utility side of your business?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Jeff, I don't know if I give you exact numbers, but what I would tell you is as you know, residential generally is not a huge part of our portfolio but we obviously saw the slowdown in not only the residential, but those residential related and as we call the speculative commercial construction and obviously, the push in of the utility of business that related to residential. We also saw down, so I couldn't break that down to you exactly, but wasn't a large number, I don't know if Ken can exactly.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Jeff, we don't have that put [ph] here, but I guess, my comment would be, it was more as a percentage and then we will add overall in the portfolio.

Jeffrey Beach - Stifel Nicolaus

Okay.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Go ahead.

Jeffrey Beach - Stifel Nicolaus

And last question, I'm surprised that your confidence going out through the first half of 2009, can you go into a little bit of commentary about why you see the current trends extending well into 2009.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Okay. We'll both take a stab at that, but I think as we said in the prepared remarks, I think we're going to see for the balance of the year, pretty much what we… and into the first half of 2009 as you mentioned, exactly what we saw in, what we witnessed at Q2 was trends and as you know we talked about being very close to the marketplace and we really don't see anything out there that jumps out, that says there is going to be any changes.

Obviously to repeat it, but the residential is very weak and we think it's going to stay that way and the rest of the business, speculative business related to residential, we think will continue as I think I used the word slightly recede and we think we're going to see that continue.

But the heavier commercial business is continuing to be very, very active and we really don't see any reason why that would change in that time period and that's really driven by the large public projects, the institutional projects and the infrastructure projects and there is real demand for that right now. And when you look at the industrial market itself, we think that's basically going to remain steady and again should do that through that time period, not seeing any reason why it wouldn't.

And in the utility market, just to touch every market, the non-residential utility market, the traditional and alternative power generation and transmission should remain healthy. I think we all read the same news papers there, so I think that should continue into 2009. And we also see strong potential in the international markets, specifically those that require spec-grade products and services in commercial, industrial and infrastructure projects and I think that bodes well for us so being close to those end markets and seeing the project activity. We think the non-residential generally is going to have some pockets of strength and some of it will continue to chug along as it is.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

And Jeff, I think what your really seeing in this period of time is the great balance that we have is as far as products we have, the markets we satisfy both product related as well as geographic. As Dominic called out more than a third of our business is done outside the U.S. and those markets look pretty good.

As you know, the transmission business as far as is more than 10% of the total company sales and I think we are very pleased with the activity that we see in that arena and HVAC's are also doing very well, which is again just under 10% of the business.

So, you are talking those dynamics even before the mix which has some very positives in it that's still are doing well.

Jeffrey Beach - Stifel Nicolaus

All right, thanks.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Alex Rygiel with FBR Capital Markets. Please proceed with your question.

Alex Rygiel - FBR Capital Markets

Thank you. Good morning, gentlemen.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Hi Alex.

Alex Rygiel - FBR Capital Markets

Ken, just one clarification if you consider Canada part of the North America what percentage of rest of world makes up your revenue base?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

I don't have that here in front of me. To be quite honest because we really look at this electrical segment, more globally in nature, it's really how we run it that way, and I just don't have that piece here, I mean, I can dig it out but…

Alex Rygiel - FBR Capital Markets

Okay. Because you dig out in your 10-K if I remember, correct?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Yes, that's I am saying. It will be there.

Alex Rygiel - FBR Capital Markets

Okay. Ken, did you say year-over-year net sales growth in the third quarter would be about 10%.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

What I called out Alex and I tried to go slow…

Alex Rygiel - FBR Capital Markets

Okay. I just wanted a clarification.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

When I say it was about 20% year-over-year for the third [ph] in that sales increase.

Alex Rygiel - FBR Capital Markets

Got you.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Okay. And a little more than 10 in the fourth.

Alex Rygiel - FBR Capital Markets

Perfect. That's what I… clarification I wanted. And then can you talk about a little about the steel structures business because clearly the wind farm [ph] market is about to take off and as it relates to the wind farm market, there is two opportunities. There is transmission poles and there are wind towers. First, can you address, what you think the growth you could be in transmission poles and then address, why we haven't seen Thomas & Betts talk about the wind towers and if you do have an interest in getting into wind towers over the next couple of years?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Okay. Let's take your second question first, about the wind towers. We are not in the wind tower business. It's a different technology that making the multiple [ph] and so that's not part of our business. Obviously, we are in the transmission line, almost a 100% of our business is in transmission, so we will clear that up. Okay. And we don't have any plans on the table now to get into wind towers. Okay.

We obviously like wind not only because of the transmission and the potential that it has for to the poles but it's also beneficial to our overall electrical business and in a big way. But as I said in my remarks the activity level with the utilities around transmission pole is probably as heavy we believe as heavier than we've ever seen it. So, we are very optimistic about that market. But as you heard to say a 100 times, we have to… that can vary, until these projects actually come to provision, you just can't count your chickens before they hatch. But the activity levels are very high, and eventually, this business is going to continue to grow whether it's related to wind or just regular fossil fuel as well as solar farms.

So it's all of those things that make us very optimistic about the wind, the transmission related to all those things and wind towers just we are not in, and doing our time to be here.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

And Alex, you know we acquired few of our core electrical products that go into the guts, of those wind towers. So that's also beneficial to us. So, wind tower is also probably the one thing, the only thing, we don't participate in that whole program.

Alex Rygiel - FBR Capital Markets

And I am still trying to understand, but kind of a follow up here, I have looked at Trinity Industries and they have built a very large wind tower business over the last three years, from zero to doing to something like $400 million a year this year and they've got a backlog of something like a $1.5 billion or so of wind towers. Why is it, that somebody like Trinity that doesn't have a pole business per say could enter that market and see very dramatic rapid growth. But Thomas & Betts would avoid it.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Well Alex, they are different technologies and we got to see down their engineers to give it to you in great detail. But ours are made with the press break, it's a totally different technology to make a wind tower, which we don't do. It's actually simple, as it is.

Alex Rygiel - FBR Capital Markets

Fair enough, thank you.

Operator

Our next question comes from Christopher Glynn from Oppenheimer. Please proceed with your question.

Christopher Glynn - Oppenheimer

Good afternoon.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Hi Chris, how are you doing?

Christopher Glynn - Oppenheimer

Doing well, thanks. On the $20 million in annualized savings from the integrations, I guess $5 million a quarter run rate. What do you think you have realized in the second quarter.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

The second quarter

Christopher Glynn - Oppenheimer

Against the $5 million. 2, 3?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

In the second quarter?

Christopher Glynn - Oppenheimer

Yes.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

As I caught out earlier, very modest. Okay, that's more going to be ramping up here in the third and will probably be at the 4, 5 run rates when we hit the fourth.

Christopher Glynn - Oppenheimer

Okay.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

And I think Dominic called out that, it's a little more than $20 million and we still are looking at other opportunities.

Christopher Glynn - Oppenheimer

Okay. And then just extremely optimistic language around the transmission prospects there. Do you have specific lines to say in some of the major cordons [ph] opening up and getting started in 2009?

Dominic J. Pileggi - Chairman and Chief Executive Officer

It's a little too early to discuss that, Chris.

Christopher Glynn - Oppenheimer

Okay. And then on the guidance just trying to seize out specifically back in the second half EPS guidance. I guess, if we backout the Leviton gain and text charge, we are looking at 4 to 4.15, and what does that, I am getting, that would incorporate a $1.4 for the second quarter?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Yeah, but you are also given us some credit obviously for the settlement of these legacy legal claims which is about $12 million or $0.13. I think I called it out in my remarks that, you know, what we would look at the underlying, it was more like $0.91 type level in the quarter.

Christopher Glynn - Oppenheimer

So, in fact, in the $1.4, I think that just adds back to the $0.80 which includes the $0.13. So, based on the 4 to 4.15, we are building $0.66 in the first quarter and $1.4 second, right?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

I'm trying to follow you but I'm struggling a little bit, okay? I mean, I think the best way to look at that is to look at the run rate that we actually had in the second quarter is more like the $0.91, okay? And then I would try to go from there and to the second half of the year also that type of level okay? They are not going to repeat the $12 million benefit that we got from these are legal claims.

Christopher Glynn - Oppenheimer

Okay, thanks. I'll follow-up.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Okay.

Operator

Our next question comes from Brent Rakers with Morgan Keegan. Please proceed with your questions.

Brent Rakers - Morgan Keegan

Good morning. Wanted to follow-up more on the inflation impact in the quarter; both your cost increases and your price increases with the customers. Any impact -- any net dollar impact in terms of the pricing effect in Q2?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Obviously that's a little hard to put exact dollar amount on. I think the best way to look at it in Q2 was that you saw more price in our numbers than what you have seen in the first quarter, which was planned. And that pretty well probably covered us for the commodity increase that we saw on the particular quarter, okay? But I would say though that it probably did not cover the significant increase that we saw on impacts from higher energy type costs, okay? I think we probably lagged that here in the second quarter. If you look at the pricing actions that have already been implemented, quite frankly we think we'll get that back to parity here very quickly here in the second half of the year.

Brent Rakers - Morgan Keegan

Ken, do you have any sense as to how much that impact would be in the second quarter?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

In the second quarter...

Brent Rakers - Morgan Keegan

In terms of lagging the -- keeping up with the rising energy costs.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

How -- to be honest with it, that's tough, okay? It'll be a few million dollars that much I can say but how many few I'd have a tough time right now just.

Brent Rakers - Morgan Keegan

That's very, very.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Put out the number okay.

Brent Rakers - Morgan Keegan

Very helpful and in terms of the second half of the year I apologize if I missed it but do you have a sense of what price inflation would be as of right now the second half of this year?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Yeah I think what we are going to see in I didn't call it out but my guess is in the second half of the year I'm trying to remember the numbers that it's probably going to be maybe double what we actually saw in the second quarter.

Brent Rakers - Morgan Keegan

Okay. So again you use the number roughly 6% for the second half?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Yeah I think that'll be in the ballpark.

Brent Rakers - Morgan Keegan

And then back to the issues about maybe some of the integration later disruptions at some of the DCs in the second quarter. When you look at the sequential revenue trend in the acquired revenues and making adjustment for the Homac deal, not being a full first quarter. You didn't see near the sequential increase in that business that you saw either in this period or in past periods from your core is there something unique in terms of the seasonality of the acquired operations or is that a reflection on the disruption or is that a reflection on the end markets that they are serving just performing a lot we do right now?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

I think it's probably got a little bit of all those things that you mentioned and just more a little bit I wouldn't think there is one thing in particular I would call out. The disruption was probably a little bit, it wasn't huge. Its seasonality in the macro sense is probably is a little bit different than the rest but again we are not talking big numbers I guess its just like I said it's probably just a little bit different than based in our portfolio.

Brent Rakers - Morgan Keegan

Okay and then

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

And I do make the comment that markets that they actually serve also had a dampening impact (trying) them to.

Brent Rakers - Morgan Keegan

And then just to clarify I mean when you reviewed kind of the markets that were performing better than others it certainly seems like the markets that are, you guys are seeing they are performing a lot weaker really they are all pretty heavily concentrated in these acquired operations so, I guess what would give you the confidence in the second half that you can hit some of these synergy targets with the end markets that those acquired markets are certainly performing below expectations?

Dominic J. Pileggi - Chairman and Chief Executive Officer

First of all, I, be careful with the assumption that they are all related to I guess you're assuming the residential and residential related markets. That's not a really true statement. There is some of them that go into industrial markets. There is some that go into the non-residential segments and some that go into the utility markets that are not related to residential so your assumption is not accurate there. And what was the second half of your question?

Brent Rakers - Morgan Keegan

I guess the point Dominic, I mean when you talk about some of the weak pockets of light non-residential and even utilities, distribution being a little bit softer. I guess if you can give me a sense, it sounds like industrial obviously is the lead performer in terms of the strongest end-market. How much of those acquired businesses would actually serve the industrial end-market.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Industrial has been a strong market, but also the non-residential, as I said the larger projects have also been very robust. The international has been healthy so it's not just a industrial. I think Ken made the statement that one of the other things that I think really benefits us is the balance we have not only in our product offering but the balance we have in our markets and also geographically and I think we're benefiting from that right now. And I don't think that it's accurate that all of the acquisitions are particularly suited for the residential and light commercial. That's just not factual.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

And Brent I think your second part of your question you are asking what makes us confident about the synergy of us getting it to realize those and I think the biggest confidence we have is the majority of those efforts are already behind us and they have already happened, they are already done, they are already quantified. So that makes it a lot easier for us to have that kind of confidence going in the second half of the year.

Brent Rakers - Morgan Keegan

Okay and then there is one final question, when you strip through all of the unusual items. If you could maybe verify this, what was the kind of the core tax rate in the quarter?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

I'd have to go back and look, but my guess if I remember correctly was approximately between 31 and 32.

Brent Rakers - Morgan Keegan

Okay, okay great. Thanks a lot.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Thank you Greg

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Thank you

Operator

Our next question comes from Steven Gambuzza with Thomas & Betts. Please proceed with your question.

Steven Gambuzza - Thomas & Betts

Good morning. I am sorry.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Hey you joined us. Welcome aboard. They introduced you Thomas & Betts.

Steven Gambuzza - Thomas & Betts

I am on the payroll. I just had a question about the guidance for Q3 and Q4. I think you said you are looking for 20% of sales growth year-over-year in Q3 and then 10% year-over-year in Q4 is that accurate?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Well actually little bit more than intent in the fourth yes.

Steven Gambuzza - Thomas & Betts

Okay. It looks like just mathematically if you just multiplied it out. That implies about roughly equivalent sales in Q3 and Q4 so it was really flat sales in Q4 off of Q3.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Yeah I would say they are probably very similar.

Steven Gambuzza - Thomas & Betts

Okay and then I guess just thinking about the drivers in Q3. You have pretty much of full quarter of benefit from the Lamson acquisition and one month of benefit in Q4. So it sounds like we are kind of expecting that there is going to be both price increases or the organic revenue growth is going to pick up slightly in Q4 to offset the roll-off of the acquisition benefit.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Yeah I am following you. Yeah we should see some of the pricing catching up with the -- for some of the energy cost. That has hit us earlier, so you'll see that in second half of the year.

Steven Gambuzza - Thomas & Betts

It will be more, probably more felt in Q4 than in Q3 it sounds like?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Excuse me well, maybe a little bit. But it will still be healthy still in the third because of those actions are already implemented.

Steven Gambuzza - Thomas & Betts

Okay and then just on the earnings guidance, just to use the reported numbers where your, the first half earnings reported including all of the items which are in your full with your guidance now, is 310 just taking reported numbers for Q1 and Q2 and the midpoint of your 2008 guidance is 558. So that implies that the back-half is going to be about 248 and I was just curious if you could give us some sense that's off above 172, reported last year in the second half of the year. Would you expect your earnings contribution to be roughly flat and for roughly even in Q3 and Q4 or do you expect more of a contribution in the fourth quarter?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Well I'm trying to think on top of my head because I didn't give obviously guidance by quarter and looking at that but. I guess with the comment I would add as a reminder that our HVAC business is big seasonal one and that's use of their big (inaudible) in the four. So if you looked at us historically, that'll be more of a factor in the fourth quarter and than what they'll be able to contribute to us in the third. I think I also called out that it will be at. We believe in the run rates for our synergies on an annualized basis in the fourth quarter and not quite to that level in the third. And we also said that the pricing our bet will be beneficial to us in the third. But it probably be a little more beneficial to us again in the fourth. So--

Steven Gambuzza - Thomas & Betts

Well I guess even with the synergies, even if you back out $0.20 of synergies, assuming that was all earned in the second half of the year. It seems like really you are expecting margins to increase in the second half of the year versus last year.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Yeah, I would say we were expecting to see continued further improvements in margins.

Steven Gambuzza - Thomas & Betts

Okay, great. Thank you, very much.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

You're welcome.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Thank you Steve.

Operator

Our next question comes from Satish Athavale from KSA Capital Partners. Please proceed with your question.

Satish Athavale - KSA Capital Partners

Good morning, gentleman.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Good morning, Satish.

Satish Athavale - KSA Capital Partners

Dominic, I would like to go over the tax line item, if we could. I guess you had reported, tax line was $108.692 million. And I am trying to back out all the unusual items during the quarter. How much was the tax on Leviton gain during the quarter? It looks like $68.3 million. But I just want to make sure, I have the right numbers?

Dominic J. Pileggi - Chairman and Chief Executive Officer

I think that's about right. I think probably there may be an easier way to answer that, as I think answered earlier to that though the underlying tax rate in the quarter was probably between 31 and 32.

Satish Athavale - KSA Capital Partners

Right exactly that's what I am trying to get to. And I cannot get to that [trend]. So I am just going through the individual items. The Leviton gain, tax on that looks like $68.3 million if I take your $1.74.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah I think I maybe I misspoke that's the year-to-date would be between 31 and 32.

Satish Athavale - KSA Capital Partners

Right okay so then the second item which was kind of unusual was the tax charge, which was about $14 million.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah.

Satish Athavale - KSA Capital Partners

And then the third item was the tax on the legal gain, which looks like about $4.4 million. Do I have that right?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Marginally I have all t he piece….

Satish Athavale - KSA Capital Partners

Because your pre-tax number on the legal gain was $12 million and you say that EPS benefit was about $0.13. So I suggest after tax, number of about $7.6 million.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah

Satish Athavale - KSA Capital Partners

And the difference between the two would be the tax, which is about $4.4 million. Right?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah, it's probably, if I were exactly about closer to 30%.

Satish Athavale - KSA Capital Partners

Right. So looks like your adjusted tax benefit during the quarter from all these unusual items was about $86.7 million,

Dominic J. Pileggi - Chairman and Chief Executive Officer

Okay.

Satish Athavale - KSA Capital Partners

And on that basis your income expense adjusted for all the items would be about $21.9 million in the quarter. Its round about right?

Dominic J. Pileggi - Chairman and Chief Executive Officer

I am trying to follow you but (inaudible) here

Satish Athavale - KSA Capital Partners

Basically, yeah I start off with your tax line item which…

Dominic J. Pileggi - Chairman and Chief Executive Officer

Okay, but I think what you'll find out two things. I think if you looked at the second quarter, you probably muffed up effective tax rate that was probably closer to 30, I think year-to-date it was probably between 31 and 32. And I think what I guided to for the second half of the year was approximately 32. I think that's probably, hopefully that'll be helpful for you.

Satish Athavale - KSA Capital Partners

Okay, great. And if I could follow-up just one more thing.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah.

Satish Athavale - KSA Capital Partners

On your 2008 full year guidance, I guess your prior outlook range was $393 to $408?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yes.

Satish Athavale - KSA Capital Partners

Which included the $0.13 of the legal settlement gain.

Dominic J. Pileggi - Chairman and Chief Executive Officer

That is correct.

Satish Athavale - KSA Capital Partners

Okay so then going back to your outlook now, it's about $550 to $565 and I back-out about - above [ph] in combined Leviton gain as well as the deferred tax charge?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yep.

Satish Athavale - KSA Capital Partners

The delta looks like it's about $0.07 compared to the…

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yep, and we call that out.

Satish Athavale - KSA Capital Partners

Right?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yep, we called that out.

Satish Athavale - KSA Capital Partners

And looks like, if my calculation for the tax rate for the second quarter is correct, the lower tax rate of about 30%, compared to your guidance 33, accounts for about $0.04 in EPS contribution in the second quarter. Is that correct?

Dominic J. Pileggi - Chairman and Chief Executive Officer

I would say that that number was about $0.03 if I remember correctly, okay?

Satish Athavale - KSA Capital Partners

Okay, so $0.03. So yeah, so I'm trying to get to the net change in the guidance versus what you had said at the end of first quarter, and it looks like 7 minus 4, about -- or 7 minus 3, about $0.04 of additional EPS that you now expect for the full year?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah, and we call that out as being related to us having lower average debt levels now.

Satish Athavale - KSA Capital Partners

Right.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Obviously, that's due to the nice cash that we got from the sale of Leviton.

Satish Athavale - KSA Capital Partners

Okay. So, here is my question then. On an operational basis, do you now expect business to be a little better, than what you had thought at the end of first quarter, or is it the same?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Well, I think if you put – we went through, spent sometime going through all those pieces, and it would say that the underlying assumptions is that your earnings stream is going to be about the same with what we had expected, okay? I think I had called out in the guidance that's a -- the makeup of it is a little bit different. I think that the net volume is slightly lower than what we would -- had in our previous guidance, but we have a stronger pricing and a better expense management to offset any of that deterioration that may come from having a little lower net volume than what we had in our previous guidance.

Satish Athavale - KSA Capital Partners

Okay, great. Thank you.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Your welcome.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from [David Sachs with Hockey Capital]. Please proceed with your question.

David Sachs - Hockey Capital

Yeah, two quick ones, depreciation and amortization for the year is there any -- a more precise number you are thinking about?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Depreciation and amortization, if you look at that -- trying to remember off the top of my head...

David Sachs - Hockey Capital

21 in the quarter, 43 I think for the first half.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Okay. Usually in some of the reporting that we do we also include share counts. I'm just trying to give my mind straight around that just the deprecation and amortization impact going forward is probably going to and I'd say also including the share based comp because I think I called that up fairly last time. We'll be probably just under 25 a quarter.

David Sachs - Hockey Capital

Okay.

Dominic J. Pileggi - Chairman and Chief Executive Officer

And that would be also inclusive of share based comp, okay.

David Sachs - Hockey Capital

The CapEx number you mentioned in the call was $50 million?

Dominic J. Pileggi - Chairman and Chief Executive Officer

That's correct.

David Sachs - Hockey Capital

And then assets held for seller presently about a $100 million you just you mentioned that you were going to sell them in pieces, should we in aggregate after if there is any debt you've described to those, would we recover approximately the book value of those businesses?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah I would say that's a fair assessment.

David Sachs - Hockey Capital

Okay so the way to think about it is that 100 essentially pays for the taxes we have won the (Leviton) disposal, so our balance sheet shouldn't change at all other than cash from operations for the second half?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah I guess I'm going to try to answer slightly different. We don't expect any income statement impact due to this the sale of the assets.

David Sachs - Hockey Capital

Okay and then that interest expense number that you use for the second half is that assuming a $100 million in proceeds coming from the assets held for sale?

Dominic J. Pileggi - Chairman and Chief Executive Officer

Yeah but it probably doesn't sound fast but you are talking and I'm not going to see any of that type of impact in the third quarter I mean a lot of that has been called out that's definitely very late so you may have a couple of months benefit, a few months benefit of that later in the year.

David Sachs - Hockey Capital

Congratulations on a great performance in the quarter and a half.

Dominic J. Pileggi - Chairman and Chief Executive Officer

Okay. I appreciate that. Thank you.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Thank you

Operator

Our last question is a follow up question from Steven Gambuzza [ph] from Thomas & Betts. Please proceed with your question.

Steven Gambuzza - Thomas & Betts

Hi the tax rate of 32% is that what the full year tax rate is going to be or is that or it'll be for the second half of the year?

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

I call out that's what our guidance for the second half of the year we believe that tax rate will be.

Steven Gambuzza - Thomas & Betts

Great thanks a lot.

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

You're welcome.

Operator

I would like to turn the call back over to management for closing comments.

Patricia A. Bergeron - Vice President, Investor Relations and Corporate Relations

Thank you very much for joining us today. Bye

Kenneth W. Fluke - Senior Vice President and Chief Financial Officer

Bye

Operator

Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Source: Thomas & Betts Corp. Q2 2008 Earnings Call Transcript
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