Good morning. My name is Heather, and I will be your conference operator today. At this time, I would like to welcome everyone to the BlueLinx Second Quarter 2018 Investor Relations Conference Call. [Operator Instructions] Thank you. Ms. Mary Moore, you can begin your conference.

Thank you, Heather, and good morning, everyone. We appreciate you joining us for our second quarter 2018 earnings conference call. The 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'll also remind you that this presentation includes forward-looking statements, including statements about our future operations and financial performance. These statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those provided, included 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'll turn the call over to Mitch.

Thanks Mary, and good morning. We are pleased to report that we had another very good quarter at BlueLinx. A quarter in which we closed on our transformative acquisition of Cedar Creek, immediately began the integration of the two businesses, enjoyed a pro forma net sales improvement by approximately 12%. And once again, we posted another quarter, our 11th consecutive quarter, in which adjusted EBITDA, this time on a pro forma adjusted basis for the acquisition, improved from the prior year's quarter. We're also pleased to update you today on the progress of our integration. We're now just over 100 days into the merger of the two Companies. And having deeply assessed opportunities afforded by the combination, we're even more convinced that the rationale for bringing these Companies together will be proven in the days ahead. As you may recall, some of the key attributes of combining our businesses include, the breadth of geographic presence with an extended reach and footprint east of the Rockies. Significant sales coverage, with over 700 sales associates calling on customers every day, which is likely the largest sales force among our direct competitors. A comprehensive product portfolio that we can utilize across our expanded geographic platform, providing the opportunity for accelerated growth; a diversified and extensive roster of high quality national and regional customers; significant cost saving opportunities, anticipated to be at least $50 million annually, and improved financial flexibility to support growth and long term deleveraging. Our dedicated integration team has been busy since April, helping to integrate the Companies, as well as identifying and then executing on opportunities to reduce our costs. And I'm pleased to let you know that we made a great deal of progress in a short period of time. As we've indicated, we are generally identifying our cost…

Thanks Mitch, and good morning everyone. It's a pleasure for me to speak with you today, and to review our second quarter business results. With the completion of the Cedar Creek acquisition in April, the second quarter was pivotal for BlueLinx. As Mitch previously touched on, one of our main areas of focus over the past quarter has been integrating our two Companies. We've made great progress with our consolidation initiatives and we are on track to achieve at least $50 million in run rate synergies within our 18 month timeframe. With the annual run rate synergies of at least $50 million, and our second quarter and year-to-date adjusted performance, we expect to remain on track to reduce our leverage profile to 2.5x to 3x by the fourth quarter of 2019, representing significant improvement on preacquisition level of 6.4x. One of the key attributes of combining our businesses is the improved financial flexibility that will support our growth and long term deleveraging. I'm excited to share with you now our combined financial results for the quarter. Net sales were $893 million, up $419 million or 88%. Pro forma net sales, which take into account the acquisition of Cedar Creek, as if it had occurred on January 1, 2017, were $949 million, up $100 million or 12% versus the same period last year. During the quarter we were able to capitalize on increased commodity pricing coupled with volume increases across our structural product categories. Gross profit and margin of $104 million and 11.6% respectively include a one-time acquisition related inventory step of charge of $11 million. Excluding this charge our gross margin rate of 12.8% is equal to the prior year. When we look at the second quarter results, we incurred a net loss of $9 million for the quarter, which…

[Operator Instructions] And your first question comes from the line of Mitchell Scott with Choice Equities.

It looks like a really good work there, getting to work on the synergy case very quickly and in line with what we’re thinking originally, so that’s great to hear and particularly the lack of attrition as well. It was a great to hear that people want to stick around.

Thank you.

I thought I would just kind of start sort of a big picture question that might help sort of frame some of the synergies that you guys are going to work on it. You touch on a little bit on the script. But as we think about some of these deals that we have seen and building products space other distribution companies et cetera. The synergy target look pretty similar on a sort of percentage of sales basis but thinking about the two entities in their relative size and the total synergy capture targeted of 44 million versus 60 million versus the 50 million. They are quite large, so I was wondering if you could just take a minute to sort of describe what it is in particular maybe about BlueLinx or Cedar Creek or the way that the two come together that has allowed for such great synergies to be realizable.

So the first thing I would say is - I think if you compared - if you done a comparison to baseline against other companies, the first obvious thing is if you look the overlap markets that we have. So from a distribution platform we’re sitting at approximately 19 geographic locations where we have large major facilities within a 60 mile radius of each other right. So that creates tremendous opportunities obviously it’s a wholesale distributor perhaps compared to a dealer distributor once step our facility is very large from a scale perspective and that creates opportunity. Similarly the size of the fleets from an overlay perspective creates lot of opportunity. So if you start there - that's clearly a differentiator. The second is which I alluded to which was this whole route optimization. We had - we were competitors obviously very good competitors with each other and we're going to similar customers, trucks were passing all the time. So it’s a tremendous opportunity obviously to fill up the trucks where you get maximum of value for the sale that you have because you have very small incremental variable cost associated with that. So that creates a significant opportunity. Then you have what I would say the general everybody is got major combinations like this where you do have G&A cost that make a lot of sense. One of the things that I think you have to consider is well is the fact that generally the EBITDA margins of both businesses and wholesale distribution because we’re challenged every day by our customers and our suppliers. The level that you have on a percentage basis it's actually enabling more than you would otherwise see for the total EBITDA. So I think you have to consider that as well.

So thinking about the synergy case it sounds like things are perhaps even made a little better than expected with a lower cost to achieve. And I guess there was a comment on the second slide about perhaps incremental opportunities, but I wondered if you could just kind of walk through sort of time to achieve across the various buckets think about it a little bit more granularly from that perspective?

So I think generally what we’ve laid out, I mean there is something that are very quick for example in each of the buckets and some that take time in each of the buckets. So just an example, a G&A cost but a wonderful CFO for Cedar Creek who elected to retire. He is now left the organization so that’s quick. However we talked - as we talked we won't be integrating ERP system until the end of 2019 so that's our work. So everywhere you look it for example in the G&A bucket you would have from a timing perspective different time similarly when you look at the supply chain opportunities. The ability to move faster on let’s say the route optimization where you can layout where your shift two points are across the company might be a faster activity, then to the extent you have as we talked about 10 major facilities and locations that are going to be consolidated together that takes time. So while like to give you much more color it's kind of all over the place. And that’s why what we wanted to do was really focus on the run rate of 15 million by the end of the year. And focus on the full 50 million we said we would have in 18 months and just keep you focused on those numbers. Rest assured, as always, I mean, Mitchell, you know us, we work really hard to do what we say we’re going to do.

That has been consistent with my experience thus far. So great to hear that continues to be the cast. Then just sort of housekeeping items, then I’ll hop off. But can you help us out - thinking about some of the runaway and the business going forward from an interest expense and capital lease perspective maybe you kind of annualized kind high-level?

Yes. So if we think about interests we think about our revolver, as well as our term loan and then of course our leases and the interest that goes in there. So from a tax point of view, I think you can see we've got some nice sales there but the interest come through. So in the term loan with $880 million, we have minimal payments that we’re making as we go on to principal. But that runs at LIBOR plus an added that we have filed previously. So think I'm approximately 9% at this point in time. And then our revolver runs anywhere from 380 million to 450 million depending on the time of the year. And so that runs right at 4%, could have some fluctuation in that as we think about interest rates coming up, but it’s certainly a favorable interest rate. And then capital leases as we look back over the course of year about $20 million, and I think gives thing to contemplate is we are low CapEx business. Overall so our capital investments and our facilities don’t require a lot because there are key sheds on large and optic land. So CapEx could be 5 million or less up to depending on the years we would make investments and additional facilities could be up [$10] million. So it's still fairly low CapEx for the size of the business that we have overall.

[Operator Instructions] Your next question comes from the line of [indiscernible].

[indiscernible]?

Unfortunately we could not hear or understand your call. I don’t know may be you could dial one from a different like or try again?

All we heard is there is question about gross margin number we had a little background noise on the line I think.

Sorry, can you hear now.

Yes, now we can hear you.

So I guess the question was regarding pro forma sales at 12% how much of that was from price inflation if it’s possible to answer that?

Yes, I mean overall price inflation certainly on the structural side was very favorable you’ve seen the stories in the market about the run we're able to pass on the price inflation that’s our every effort every day. So we had that more so in the structural space of price increases and the commodity prices, as well as volume increases. On the specialty side we also saw price increases too.

Is it possible to quantify it at all percentage wise?

The challenges that we have where we can quantify a specific areas of - for example a structural product, because it is easy from a unit basis where we get kind of tied up is from a specialty standpoint that you have lots of different products that are being sold in different units. You may have a piece of vinyl siding and you have a carton, you may have a unit, so we can really have struggle to give exact volume versus price numbers on the consolidated that basis.

And specifically as we bring the businesses together we are adding together a different product mixes, which makes the volume analysis a little bit more complicated. So as we get into it and have a more consistent run rate, we should have better inflation there overtime, but for now it's challenging as we bring together a variety of different products that might wait into that unit volume calculation.

And so maybe just to give you an illustration we generally don't go into details, but for example, perhaps those highly correlated product categories that we have of family housing starts is kind of commodity lumber grouping that we have and that volume for example is in about 10% range gain relative to 8.5% single family housing start gains. So again, there is a lot of noise in there, but that helps a little bit.

[Operator Instructions] There are no further questions at this time.

Okay. Thank you, Heather. We certainly appreciate your continued interest and support to BlueLinx and we look forward to sharing our third quarter results with you later in the year. Have a terrific day.