Good morning. My name is Rochelle and I will be your conference operator today. At this time, I would like to welcome everyone to the 2017 year-end investor relations 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. I would now like to turn the call over to Ms. Poulos. Please go ahead.

Thank you Rochelle and good morning everyone. We appreciate you joining us for our fourth quarter 2017 earnings conference call. Our earnings release and presentation slides for this call can be found in the Investor Relations section of the company's website at www.bluelinxco.com. Joining us on the call today are Mitch Lewis, Chief Executive Officer and Susan O'Farrell, Chief Financial Officer. I will also 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 also includes references to non-GAAP financial measures. With that, I will turn the call over to Mitch.

Thanks Natalie. Good morning. We are pleased to report that the fourth quarter was another good quarter for the company as we logged our ninth consecutive quarter in which we enjoyed year-over-year improvement in our adjusted EBITDA. More importantly, our fourth quarter represented perhaps the most active three months in the history of BlueLinx. We entered into a new five-year $410 million ABL, completed a successful secondary offering in which Cerberus sold its share position in the company and negotiated $110 million in sale leaseback transactions that closed in early January. It was truly a transformer quarter for BlueLinx and continues our multiyear progression as a company. Our emphasis on improving our EBITDA while deleveraging the company was demonstrated again in the fourth quarter as our adjusted EBITDA improved to $9.8 million. We ended the year with $43.9 million in adjusted EBITDA which was our best performance since 2006. Susan will go into the financial details. But I do want to emphasize the great work our team has done focusing on margin enhancement. Our gross margins were up another 40 basis points in the fourth quarter compared to Q4 2016, even as the sales mix of our lower gross margin structural segment increased by 5% from Q4 2016 levels. Our full-year gross margin of 12.7% was up 60 basis points and again reflects the emphasis in investment we have made on margins of BlueLinx. Our third party bank debt was also materially down in the fourth quarter compared to last year. The consolidated debt on our ABL mortgage was down by $22.5 million compared to December 2016. As you know, we subsequently paid off the remaining principal on our mortgage in connection with the sale four properties in January further strengthening our balance sheet. Our sales revenue for the quarter…

Thanks Mitch and good morning everyone. It's a pleasure for me to speak with you today and to review our fourth quarter and full-year business result. Before we get into the more detailed review of our financial results, let's first review some of our highlights. Our primary focus over the past two years has been our strategic initiative to delever the business. In 2016, we rationalized our local inventory assortment, closed underperforming facilities and began monetizing select real estate properties which collectively we referred to as our operational efficiency initiative. We are pleased with the successful completion of these initiatives which is evident in the financial results we are sharing with you today. Since announcing our deleveraging plan in April 2016, we have both closed facilities as well as entered into three sale leaseback transactions in 2017. As a result of these efforts, we reduced our mortgage principal balance by $61.6 million in that timeframe till the end of fiscal 2017. Additionally, we kept the momentum going in January 2018. As Mitch just mentioned, the four additional sale leasebacks have now paid off the entire remaining $98 million mortgage, well ahead the scheduled maturity dates. After the January sale, we still have $150 million to $160 million in remaining real estate value and that value is approximately four times the net book value. This demonstrates the meaningful value and potential of the real estates still on our balance sheet. Starting on slide nine. Net sales were $433.6 million for the quarter, up $12 million compared to last year. When excluding the effects of our operational efficiency initiative, our adjusted same center net sales grew $14.7 million or 3.5% from prior year period. This was largely led by our structural products which continue to benefit from strong commodity markets. We continue…

[Operator Instructions]. Your first question is from the line of Mitchell Scott with Choice Equities.

Hi. Good morning. Mitch and Susan. How are you all doing?

Doing great. Good morning.

Good morning Mitchell.

Good. Congrats on the continued progress with the operational efficiency initiatives. It looks like the margin performance, the EBITDA margin in particular, has been really fantastic since you guys began this. My question, I guess, will be, how far along are we in those initiatives? And what sort of levers will you look to pull going forward to continue to drive further margin expansion?

I think of us in the third innings and I can give you examples of opportunities. So from an operational improvement, again as you know, we have embraced it from an organizational standpoint. But for example, we haven't even really begun the lean journey which is very common in manufacturing companies and distribution companies. We just started those initiatives. We started talking and educating our teams, really in the last three to four months as it relates to that. Just two days ago, I sat in on an hour meeting with roughly 15 cross functional associates across the organization who had dived into opportunities that they view, we have from a logistics perspective after analyzing opportunities where we are selling products that below appropriate margins that we can make some changes to and immediately enhance profitability. So I think it's early days. Everywhere we look, again the scale matters, as you know and while we have made a lot of progress, I truly believe there's just a lot more work to be done here and what's really great is that the associates have embraced a culture of continuous improvement. So everybody is looking for ways to enhance this business.

Sure. Would it involve any more adjustment in the real estate footprint? What is your latest thinking there?

Yes. As we look at it, we think we have done the heavy lifting. Again as you would expect, we will always be looking at opportunities we have to operate more efficiently. But where we are today, we are pretty comfortable with the sales footprint that we have in the markets that we are selling into which, as you know, is generally east of the Rockies. And so if there were opportunities, for example, from an efficiency standpoint between facilities that are close to each other, we would certainly look at that. But that is not a major emphasis from a company perspective of where we view there is tremendous opportunity.

Okay. Last one for me. Just as we think about, the mortgages has gone, just thinking sort of high level, what the interest expense might be for this upcoming year. Can you remind us? I assume it's appropriate to use about $220 million for the revolver balance. Can you remind us about what you guys are paying on that today?

Yes. So on the revolver, you are right. So last year, our trailing 12-months was about $220 million on the revolver. And of course, as we grow sales, you would might expect that to grow commensurately as we continue work on our working capital. So on that revolver at the current availability, it's LIBOR plus 225 bips. So you can think about it that way. And then of course as we enter into the sale leasebacks, what you might want to think about is, last quarter we told you, our cap rates that certainly we have met or exceeded and so we share that with you to be at 9%. So I think as you look at the sale leasebacks that we enter into, that's a number that you can work from.

Okay. Great. Thank you.

Okay. Thank you.

Thank you Mitchell.

[Operator Instructions]. And your next question is from the line of Alan Weber with Robotti Advisors.

Good morning. How are you?

Good. Good morning Alan.

Good morning.

When you talk about, Mitch, the initiatives to grow, can you talk about, are they kind of geared towards the markets where the big dealers are, the larger dealers or more towards where you have smaller dealers? Is it across? Is there any difference in terms of the market that you are really looking to grow in?

So what we did, just to remind you, is we had a solid week of strategic initiatives, where each of the general managers who have responsibility for local P&Ls came in and presented ideas to the executive management team and we just talked through ideas, obviously this is an iterative process and then came up with ideas. Now there were some national, I want to say, initiatives as it relates to both national dealers and home centers, for example, especially national specialty distributors. But really the emphasis was more local. And so each general manager and again it is very consistent with the strategy we embarked on pretty soon after I got here, was to push decision making out to the local markets because they would widely disparate. And so we have a list of 50-plus initiatives, if not double that, by the general managers and some national programs that was opportunities that they had. So in one market, it might be enhancing relationships with national accounts and in another market it might be really take advantage of dislocation in the industrial market, for example and other might bringing in particular product category that they feel is underserved or strategically taking products to markets a little differently. So a long-winded answer to your question, but basically it's all over the place and it's local, generally local in nature.

Okay. Great. Thank you. And then Susan, I may be missed this. Can you talk about, when you did the sale-leaseback, what are the rent payments going to be versus what the interest payments were on the debt?

Yes. So the sale-leasebacks that we have entered into to-date and certainly the ones in January, may it's a better way to think about that one, are in essence capital leases under the GAAP accounting guidelines there. So while there are some rent payments, it's actually less than the amount we had modeled in November because that was on a blended portfolio that could include a combined amount of capital leases as well as operating leases. So under capital accounting treatment, there is actually very little that goes to rent and the majority of it goes to interest expense. So you will see that as most of the interest expense on the January transactions that we just completed.

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

Okay. Thank you Alan.

[Operator Instructions]. Your next question is from the line of James Lu with [indiscernible] Capital.

Hi Susan. Hi Mitch. Congratulations on a great quarter.

Thank you.

Thank you.

I wanted to understand what your expectations are for 2018 with regards to SG&A, including nonrecurring items that you would adjust out? And just probably thinking about that going forward as start to shift to growth mode?

Yes. So while we don't give forward guidance, certainly it's our initiative to keep focusing on lean processes that Mitch shared with you. So we will continue to look at route optimization and those type of things. So as go into incremental volumes, not all of that means incremental routes. Sometimes there is opportunities to make a particular load that's running a heavier load and run more efficiently on that particular load. So there is some ways that we can be more efficient through growing sales with our existing routes and expenses. So of course as we continue to focus on growing the topline, you will expect some of that expenses to grow proportionately.

And I guess, more specifically, although obviously you have to take this in context of the aggregated company. As I talked about the specific strategic initiatives that we have, as you kind of layer up all of the people cost, associated with that, I think you can think of a number of $3 million or less of investment on an aggregate basis on the people to help drive those initiatives.

Got it. That makes sense. Should we expect some sort of less, fewer sort of nonrecurring as a number of the big real estate initiatives and refi work have been completed as we look at 2018?

I am sorry. So did you say nonrecurring?

Yes. The things that you would adjust out to get to your EBITDA.

Yes. I guess I would answer it this way. If there were opportunities to do things that are nonrecurring that add a lot of value to the company, we want to do that. I am sorry. I am not sure exactly how to answer that. I think from what we have done from a legacy standpoint, Susan maybe can talk to this, but I can't. From a legacy standpoint, what we have done historically, I don't think there is a lot of nonrecurring that we would think of that would roll in.

There is not a lot of noise there that would be going forward. And now that we have completed our operational efficiency initiatives, you won't see any of that at all rolling into 2018. But as Mitch said, if we saw other opportunities in the future, we would assess those at that time, but the operational efficiency initiatives that we announced in April 2016 are now fully through the P&L.

Got it. Terrific. And then just one last question. You mentioned, I think in response to one of the prior questions that the real estate consolidation was primarily done. Is there any thought as to further sale-leaseback work, further work on the ABL or just other efforts or other work on working capital reduction or are those also predominantly finished?

So on the real estate, Shyam Reddy, who is our CAO, has continued to have dialogue with folks who could potentially transact sale leaseback transactions. And so we will continue to look at that. As we do look at that, the question is, what's the cost of capital, what's the strategic value of the property that we have there, how do we view the local real estate market? So we are going to be, you would expect us to utilize that real estate opportunistically for the best value for the company. From a working capital standpoint, yes, I think it goes back to the question I was asked where I kind of alluded to, it's the third inning. And we have a lot of work to do and opportunity in my view from a working capital standpoint to continue to enhance our sophistication and work, particularly on the inventory to make sure that we have the right products we need for our markets, but do it in an increasing sophisticated and efficient manner. So that emphasis is not going to be diminished.

Terrific. Thank you.

Sure. Thank you.

[Operator Instructions]. And there no other questions at this time.

Well, thank you, Rochelle. We certainly appreciate your continued interest in BlueLinx and we look forward to talking to you soon. Have a great day.