Good morning. My name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to the BlueLinx Fourth Quarter 2014 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. And Ms. Caroline Lowden, you may begin your conference.

Thank you, Jennifer, and good morning everyone. Thank you for joining us for the BlueLinx fourth quarter 2014 earnings conference call. This call is being webcast on the company's Web site at www.bluelinxco.com. The earnings release and presentation slides for this call can be found in the Investor Relations section of the company's Web site. Joining us on the call today are Mitch Lewis, CEO; and Susan O'Farrell, CFO. Before I turn the call over to Mitch to discuss our current results, I want to remind you that this presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including statements about our future operations and financial performance. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from those provided, including, but not limited to those identified in our press release and discussed in our filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date of this presentation. And we undertake no obligation to revise them in light of new information. Today's presentation includes references to non-GAAP financial measures the reconciliation of these to the most comparable GAAP measure is included as an appendix and is posted on our Web site at bluelinxco.com. With that, I'll turn the call over to Mitch.

Thanks Caroline, and good morning. I would like to talk briefly about the highlights of our fourth quarter and what we are currently seeing in our markets and then I will turn it over to Susan, who will walk you through our financials in more detail. Our fourth quarter was another solid quarter and which we continue to enjoy momentum compared to our prior year performance. This now makes six quarters in a row where we have outperformed our prior year adjusted EBITDA. Our adjusted EBITDA in Q4 of $1.9 million is a $2.9 million improvement from the fourth quarter in 2013, but more importantly it's the first time we have had positive adjusted EBITDA in the fourth quarter since 2006. Our full year performance of $24.6 million in adjusted EBITDA was also a nice improvement. It's $23.3 million more than 2013 and the best annual adjusted EBITDA we had at BlueLinx since seven years. There are many areas that we have been working on that have contributed to this improvement, but I will let Susan discuss these in more detail. While our adjusted EBITDA improved; our revenue for the quarter declined by 3% from 2013 levels on a comparable basis. You may recall that we had an extra fiscal week of sales in 2013 with a 14-week fourth quarter, which impacted our comparative sales by approximately $20 million. We are also a little surprised by the scale of the decline in revenue during the winter holidays at the end of December. It appears that the timing of the holidays effectively shortened our last two fiscal weeks to only 2.5 work days each week. Even with the decline, we experienced at the end of the year, during the fourth quarter when you account for the additional week in 2013, our…

Thank you, Mitch, and good morning everyone. It's a pleasure to speak to you today about business as well as our fourth quarter and full year results. First, I would like to comment on the status of our capital structure. As Mitch mentioned we are pleased to share with you that we successfully extended our U.S. revolving credit facility of $447.5 million until April 2017 along with our Tranche A $20 million loan facility until June 2015. This demonstrates the strong support of our lending partners and their continued confidence and the improvements we have made in our business. We had approximately $60 million in excess availability under our asset-backed revolving credit facilities at the quarter-end. That was approximately $14 million above December 2013. As we work through establishing a strong foundational and long-term capital structure refinancing our existing mortgage is still a key part of that strategy. The value of our real estate as appraised in 2006 was approximately $322 million. Over the past eight years, we have since sold 10 properties which collectively have sold for almost 15% over the 2006 appraised value. Our mortgage balance as of January 3, 2015 of approximately $172 million including our prepaid principle represents a significant amount of value still available to unlock. We continue to evaluate various scenarios for ultimately replacing our real estate financing and look forward to sharing more with you on this status our mortgage in the future. As Mitch already highlighted, we are pleased with the continued progress of our business. Our fourth quarter continuing our record of success over the past year; we delivered more EBITDA in 2014 than we did in any years since the housing downturn began in 2007. This is a testament to the hard work of our associates and bodes well for…

Thank you, Mitch, and good morning everyone. It's a pleasure to speak to you today about business as well as our fourth quarter and full year results. First, I would like to comment on the status of our capital structure. As Mitch mentioned we are pleased to share with you that we successfully extended our U.S. revolving credit facility of $447.5 million until April 2017 along with our Tranche A $20 million loan facility until June 2015. This demonstrates the strong support of our lending partners and their continued confidence and the improvements we have made in our business. We had approximately $60 million in excess availability under our asset-backed revolving credit facilities at the quarter-end. That was approximately $14 million above December 2013. As we work through establishing a strong foundational and long-term capital structure refinancing our existing mortgage is still a key part of that strategy. The value of our real estate as appraised in 2006 was approximately $322 million. Over the past eight years, we have since sold 10 properties which collectively have sold for almost 15% over the 2006 appraised value. Our mortgage balance as of January 3, 2015 of approximately $172 million including our prepaid principle represents a significant amount of value still available to unlock. We continue to evaluate various scenarios for ultimately replacing our real estate financing and look forward to sharing more with you on this status our mortgage in the future. As Mitch already highlighted, we are pleased with the continued progress of our business. Our fourth quarter continuing our record of success over the past year; we delivered more EBITDA in 2014 than we did in any years since the housing downturn began in 2007. This is a testament to the hard work of our associates and bodes well for…

[Operator Instructions] And our first question comes from the line of Tristan Thomas with Sidoti.

Hi. How is everyone?

Nice. Thanks. Good morning.

Good morning.

Good morning.

Couple of questions. First, regarding the decline in structural products, was that simply you guys lost and [we do] [ph] sales through holidays, or where you maybe declining some sales in each margin requirements and maybe just provide a little more color in that?

Yes, sure. I mean some of it as I alluded to was in the last couple of weeks where holidays fell on a Thursday, so we effectively lost the back-end of the day, on Wednesday, Thursday and Friday, which we really didn't anticipate and obviously did not see in 2013. We continued to do as you know in 2013 we had a strong emphasis early to move a lot of structural products build-up inventory in that regard and then had to move out of that position. So there is an element there, but at the same time Tristan, it's a reflection of change in the organization to focus more on generating profitable sales irrespective of what the product categories are. And so there is an emphasis which we are now starting to see of selling all of our products that would value-add to the customer. So we are feeling good about what we saw in the fourth quarter and not being a continuing cycle for the company going forward.

Okay. Are you seeing maybe any tangible results and trying to really empower your General Managers trying to get close to the local markets, I mean is that really taken hold or is that something that's going to play a little more in 2015?

No. We are already starting to see results for that I would – when I think about specific examples, they feel more like early in the year events. Maybe we had competitive situations where the General Managers were quickly and we are able to either garner this year or protect the existing customers where I think in the past it might have been unworldly with the structure that we had. So I think we are starting to see it now, I think the [indiscernible] as I mentioned when you make a fundamental cultural shift like we are making in the company, it does take time. But we are now starting to see the benefits of that. I would not say that there were a lot of EBITDA benefit or bottom line benefit in the fourth quarter of last year. But, we are certainly starting to see that now.

Okay. Just regarding the weather, I mean is that going to have a meaningful impact on your first quarter 2015 results or you can't straight it enough in regions that have may affected by all of the snow that maybe it's just going to be a slight hiccup?

Yes. So weather is always interesting because you don't really know through the quarter how it ultimately impacts you. Generally and obviously hurts when you have the kind of weather particularly in New England area that we had. But then it ultimately tends to drive demand. So the question often is when the weather breaks. From a competitive standpoint, everything is down to the last year, at this time it was worse across the country we have experienced so far this year. I mean obviously, pockets of the country are different. But on a consolidated basis last year was more problematic from a weather perspective. So that's – I know that's waffling answer. I think the bottom-line is, as I mentioned we are out of the gates and we feel good about that from a revenue standpoint in January. And our expectations are that we are going to continue to do well this year. But, where it actually falls in the next 30 to 60 days, it's hard to tell at this point.

Okay. Just one final question, just a remainder for myself, if you do unlock value in the mortgage that's going to be used to pay down the revolver, correct?

Absolutely, Tristan.

Absolutely, Tristan.

Okay. Thank you guys.

Thank you.

Your next question comes from the line of Alan Weber with Robotti & Company.

Good morning. The first question was, when you talked about the real estate, I missed what you said the appraised value was?

So in 2006, we had appraisals done and since then we have actually sold 10 properties. So if you take the pro rata portion, the remaining, it's about $322 million would be the appraised value for 2006.

So in 2006, we had appraisals done and since then we have actually sold 10 properties. So if you take the pro rata portion, the remaining, it's about $322 million would be the appraised value for 2006.

$322 million of the remaining properties?

Yes. That's already the [pro rata] [ph] amount. And so we get comfort in that appraisal because it's certainly dated and as we look to refinance at that time, do the appraisals obviously, if we do the appraisals in advance, we can't use them. We will have to have appraisals done at that time. But that's why we looked back at what we sold as property score over the past eight years just to get comfort around where that is appraisal was. We get fresh appraisals when that's time.

Yes. That's already the [pro rata] [ph] amount. And so we get comfort in that appraisal because it's certainly dated and as we look to refinance at that time, do the appraisals obviously, if we do the appraisals in advance, we can't use them. We will have to have appraisals done at that time. But that's why we looked back at what we sold as property score over the past eight years just to get comfort around where that is appraisal was. We get fresh appraisals when that's time.

Okay, great. And then my question on, when you look at the quarter – when you look at the year, the improvement to EBITDA basically came from the reduced expenses relative with sales kind of being down or flat, just wondering what you see in 2015 in terms of revenue whether you see growth or where you really stand there and how much more reduced expenses can we see in 2015?

So let me answer that in couple of ways. Before 2014 in addition to the expense reduction we also as you know had a gross margin improvement. So we are really focused on that. We talk about organizationally the best opportunity when we buy so much material on such a high percentage of raw cost structure is to work hard on improving margin across the company. So that's gross margin. So we will continue to of course to emphasize that and as we've talked about in the past, we're really focused on the contribution margin. So we want to make sure that we are attacking opportunities that we have that are incrementally profitable to the company. And so that's clearly an opportunity that touches not only the gross margin level, but also the operating cost as well. As it relates to 2015, we're typically reluctant to give guidance about that – about the performance of the business. I would generally say in all areas of the business is a core value for BlueLinx to continuously improve. And so we look at opportunities to be more efficient. But we certainly don't have the view that there is a wide-scale opportunities to slash SG&A at this business at all.

Okay. And I've realized you don't want to give guidance, particular point do you think your EBITDA actually will exceed interest expense or cash interest?

Well, we generally don't give guidance. But, I can tell you we understand that's very important and we're working hard to get there. And we're making good progress and we'll continue to make good progress.

Okay, great. Thank you very much.

Your next question is from the line of [Mark Kaufman with Donnelley Capital] [ph].

Good morning. As it pertains probably to the last question, do you think you have the right footprint now going forward with your distribution centers. And just thinking about it regionally, is there any impact from the change in oil prices on negative basis that you might think off?

Yes. So that's a great question. I would start with answering it this way from a footprint standpoint. We actually last year closed two facilities that are small facilities not a lot of revenue. And they were local regional decisions to do that. So it didn't impact our, international customer base and certainly didn't materially impact the business. We've talked about internally and I think it's important from a perspective standpoint to understand that we view we have overall market share for a product less than 10%. And so as you look at opportunities within BlueLinx there is tremendous market share gain opportunities. And now that we've embarked on this new strategy to go local, we are really reluctant to do a short-term full scale review of our landscape and footprint, when we have such low market shares because, we view the opportunities where we are, we know the opportunities of where we are tremendous and so we want to – we want to really attack that. So certainly short-term we don't view that there is going to be a whole scale review of the footprint that we have. And we'll, continue to try to gain share at the local level. As it relates to oil in particular, Texas is often talked about as a potential risk. It is interesting when you look at the Texas market today versus, where it was last time there was a buzz, it's much less reliant on energy than it was before. And in fact I think I saw just recently last couple of weeks an economist who was estimating the economy is, well under 15% now reliant on energy generally. And so there are pockets like Houston from a metropolitan standpoint that is more reliant and I think that will likely impact that economy. But we go back to the point that we don't have a dominant market share anywhere across the country. And so when you have such small share in a highly fragmented market, our challenge to the team is irrespective of what's going on in the end markets, let's grow our share and get the business bigger.

Thank you.

Sure.

[Operator Instructions] And we do have a follow-up question from Alan Weber with Robotti & Company.

Hi. When you talk about some of the cultural changes and I guess you've been there about a year, you said. So can you talk about the impact it had on revenues at the local branches where the some of the changes actually you think might have indirectly created some of the reduced revenue due to more focus on margin and like that?

Yes. I would say for sure when you compare to 2013 it did impacted our structural sales volume. So there was, in the second quarter of 2013, there is a real emphasis to grow share on commodity-based products. And so we didn't have that in 2014. We wanted to make sure that we were selling product that was incrementally profitable on a contribution margin basis. So we were not – we did not have a strategy in 2014 to just grow volume. But that I wouldn't say is a – was a local strategy change that was more of a contribution margin change and looking more closely at the potential profitability the products were least sold. In addition, there was a strategy that turned out to be a timing problem in 2013 where we beefed up on our inventory levels for short-term products that we had to move-off of. And in doing that from a comparative basis when you look at 2014, the comparative, the comparison obviously is hurt by the incremental volume that we had in 2013. So generally, I would say yes looking at product opportunities from a profitability standpoint compared to 2013, we did so less in 2014, but the fundamental cultural shift that we have in the company is not negatively impacting nor should it negatively impact our top-line growth.

And it is now – if I understood correctly is it now at the local level of the General Manager actually had – is it a real-time understanding of his gross margin and what products are profitable compared to where it was previously?

Yes. So there was – there were – there was good, there is great information that we have at BlueLinx. And they are really fantastic information systems. And so there has always been excellent data and information that a General Manager has related to gross margin, there has not been great data relative to contribution margins. So we've kind of missed the cost to serve piece of that over last couple of years. So that's a change that they have much better information and data than they had historically. The second piece of it, is that there were decisions that were made by the executive team to get into products or whether it was grow share or pricing that were pushed down to the organization that might make a lot of sense in certain territories within the company, but don't make sense in other areas. So that's a shift as well. I mean we're being much more collaborative quickly with our General Managers to make sure that any decisions or opportunities that we get and we can take advantage of – from economies of scale are fully supported at the local level.

Okay. And my final question was, I asked early about the EBITDA and interest and you don't want to give projections. I mean at the current level of housing starts, can you, I mean how do you see things over time? Can you improve the gross margins and gain market share to get to the point where EBITDA can exceed the interest, would you need an improvement in the overall end-market?

So let me answer that in two ways. The improvement in the overall end market, I know we have data on – well, I think you can see at our Web site that shows generally, we estimate that for every 100,000 incremental single-family housing starts that it drops approximately $22 million in EBITDA to the bottom-line. And so obviously, if the end markets – I should say when the end markets recover, we feel real-good about the prospects for the company. The second piece and we talk about this a lot internally is, an incremental gross margin of 1% to the company on our scale is very important. And so there are opportunities to do that and a lot of those opportunities also are implied within the cost to serve, where we need to make sure that we're getting value for the service that we provide and there are lots of opportunities to do that. So in addition to the operational savings that we've talked about, the efficiency that we've talked about to share growth that we expect, irrespective of what happens with the end markets, our [choice] [ph] is to make darn sure that we improve the performance of this business that we cover, certainly cover our cost of capital going forward irrespective of what the end markets do.

I appreciate the answer. And that $22 million EBITDA relative on a 100,000 incremental housing starts is that based upon the historical value-add, was that kind of the way you think you position today?

No. So we looked at our historical data going back gosh – more than seven years looking at how our business has performed because we're closely correlated to housing starts. I would say a little bit different in 2013, because of what Mitch described was just going after our growing market share not necessarily in a profitable way. So I would there was a decoupling in that year. But in general, we have used historical data and looked at current run rates. And that's the information that we have on our Web site that you can look at.

No. So we looked at our historical data going back gosh – more than seven years looking at how our business has performed because we're closely correlated to housing starts. I would say a little bit different in 2013, because of what Mitch described was just going after our growing market share not necessarily in a profitable way. So I would there was a decoupling in that year. But in general, we have used historical data and looked at current run rates. And that's the information that we have on our Web site that you can look at.

Okay, great. I guess though actually with the improvements you are making one would hope that actually if you got that kind of rebound in the end-market, you could do better than $22 million.

The $22 million was looking at a historical basis. And so if we are improving the performance of the business, if you want to make an assumption that as demand increases suppliers including really have an opportunity to expand margins then that would be accurate.

All right. Okay, great. Thank you very much.

Thank you, Alan.

Thank you, Alan.

[Operator Instructions] And we have no other questions in queue at this time.

Okay. Thank you, Jennifer. And thanks for your time today and of course your continued interest in BlueLinx. And we look forward to sharing our progress with you in the months ahead.

Thank you.

Thank you.