Good morning. My name is Mary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter 2018 Investor Relations Call. All lines have been placed on mute to avoid any background noise. After the speakers’ remarks, there will be a question-and answer-session. [Operator Instructions] Thank you. I will now turn the call over to Mary Moll, Director of Investor Relations, Ms. Moll, you may begin.

Thank you, Mary, and good morning, everyone. We appreciate you joining us for the fourth quarter 2018 earnings conference call. The earnings release and presentation slides for this call can be found in the Investors 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 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 certain 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'll turn the call over to Mitch.

Thanks, Mary, and good morning. We would like to update you today on our fourth quarter's performance, our continued efforts on integration, the recent amendment to our term loan, and what we are seeing in our markets in the first two months of the year. Before I dive into our business performance, I’d like to let you know that D. Wayne Trousdale will be leaving his fulltime role with BlueLinx in April. D. Wayne has agreed to continue collaborating with BlueLinx on a part-time basis for the next three years. As many of you know, D. was one of the founders of Cedar Creek and he has been instrumental in bringing our two companies together culturally, while also helping to realize the synergies we have achieved. D. Wayne has decided to spend more time with his family and an alternative business interest and I want to personally thank him on behalf of the entire BlueLinx organization for not only his contributions in the past, but also the value we know he will bring to our team in the years ahead. We are rapidly approaching the one-year anniversary of the Cedar Creek acquisition and are pleased with the progress of the integration. The initial enthusiasm we felt at the time of the announcement of the transaction has only increased, as we have seen firsthand the likely commercial benefits to the combined entity. We remain confident that we will exceed the promise, $50 million in synergies as we exit 2019, and we are pleased to once again reduce our estimate of the cost to achieve these synergies. Our new estimate of the cost associated with achieving our synergies is between $25 million and $30 million, well below our initial $40 million to $55 million range. In addition, we are firmly ahead of…

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 2018 business results. As Mitch discussed, last year was a transformative year for BlueLinx with the acquisition of Cedar Creek in April 2018. We are excited about the great progress we have made to date with our integration efforts. We are ahead of schedule and exceeded our 2018 exit run rate synergy objective obtaining over $30 million in cost savings that we expect to realize in 2019. This is double our original 2018 end-of-year run rate estimate of $15 million. The integration results that we achieved in 2018 give us continued confidence that we will achieve at least $50 million in annual run rate synergies by the end of 2019. And now that we are further along in our integration actions, we also continue to refine our cost to achieve objectives. We now estimate the cost to achieve these synergies to be $25 million to $30 million, a range that is $15 million to $20 million lower than what we shared with you right after the acquisition, and an even tighter range than we shared with you in our third quarter call. As we've discussed on previous calls, one of the key attributes of combining our two legacy businesses is the improved financial flexibility that will support our growth and long-term deleveraging. Real estate remains a key strength of our business, a hidden asset on our balance sheet. We have 33 properties owned with an estimated market value of a $150 million to $160 million, and approximately four times the book value. That's why we are so pleased with our recent term loan amendment. In addition to our ability to sell certain specified properties, the amended…

[Operator Instructions] Your first question is from the line of Alan Weber from Robotti Advisors. Your line is open.

Mitch, can you talk about -- you talked a little about I guess the issues with suppliers. Could you just kind of explain kind of where you are today regarding that?

Yes. So, we have -- from a synergy integration perspective, we had used third-party consultant group to help us strategically approach our supply base and our product categories. And we have gone through the first round of that. But it's an iterative process. So, as you would expect, particularly when we started the process which was in May and June of 2018, the commodity markets were very hot, it was difficult getting products and it was a difficult time also, as you would expect to negotiate potential opportunities. So, what we're doing now is we are going back through, on a product category basis, our supply chain, to look at opportunities to rationalize that. The other point I was alluding to was that in connection with some of the rationalizations and discussions that we've had, we definitely have had some disruption from a supply perspective. And so, we're realigning to a certain extent some of the brands that we have in the product categories that we have which is natural. You may recall from the outset when we talked about the acquisition, we intentionally did not include any sales synergies from bringing the companies together and that was because of the concern that in the process we may have supplier disruption as well as share disruption to local markets as we consolidate facilities, integrate the business and so forth. The confidence that we have as a leadership team as it relates to bringing the companies together and the long-term opportunity that -- the scale of this business and the breadth that we have and the sales effort that we have for the industry remains unbeatable. We feel very confident and that over the long-term what we're doing now will bode well for this company from a sales perspective.

And just a follow-up on that. Can you talk about the kind of the positive on sales synergies, when that could happen? And I guess, you can't really quantify, but just kind of talk about that.

We're starting to see some of that now. So, one of the things we were able to do was take existing product categories or brands that we had in either one of the legacy markets and push those to facilities or -- geographic territories that didn't have the opportunity to sell those products. So, that's happening now. We're getting some very good positive response in some of that product that's coming out. And that will, we believe, continue to propel relationships we have with key suppliers, the ability to continue to sell and grow both territories and volume for them. As far as a clear-cut timeframe, it's difficult to say exactly how long that takes. Any time you are trying to move new products into particular location and displace existing market share, it's an effort and typically takes some time.

Okay. And I guess, my last question is, basically, I mean -- when you look at the results in the last half of the year, what really -- I mean, obviously, the pro forma numbers are down, and you talk about volume and pricing. Is there any part of that that kind of surprised you? In other words, given those declines, which you obviously didn't know six months before the quarter began, anything in that actually surprised you or disappointed you?

Well, obviously, the way that the market moved was very disappointing. And one of the things, Alan, it's an interesting exercise to do, to look at our structural product sales in the back half of the year and then imply a typical, however you want to use, a two or three-year margin compared to what the margin was we saw there. And I think if you did that exercise, you would see clearly $20-plus-million of gross profit. Now, obviously, it's the past and the future may be different. But, I think from a true understanding of what happened, the commodity decline was very important and significant to us. I would say, in all candor, we clearly didn't hit a homerun in every one of the consolidations. And so, we had a long-term strategy, as we talked about as it related to some of the multi-employer plans from a pension perspective, which made us move pretty quickly in some locations that was challenging. So, I would say, I think, that long-term strategy was terrific, underappreciated probably some of the short-term implications of that. But, generally, it really feels like more of a story about what was going on in the market as about anything we've done. And I really feel good and the team should be proud of the way we put together an integration team that was fully dedicated, the speed in which we've integrated, which as you know is critical for the long-term benefits of an integration. So, generally, we feel really good about it. And I think the market has just created some headwinds for us that we did not anticipate.

Our next question is from the line of Tim Dougherty [ph] from [indiscernible]. The line is open.

Hey. Just wondering, since we've seen lumber bottom here kind of in November, December time period, can we sort of assume that this $13 million, $14 million a quarter of gross margin headwinds is kind of behind us, as we enter this year?

I think, the short answer is yes. From a gross margin standpoint, as we talk about it, it certainly was an anomaly that we hadn’t experienced since the last six months in two decades. So, we would expect that. And we're starting to see that [Technical Difficulty]

And then, do you have an investor presentation here, $13 million to $14 million kind of quarterly headwind on the commodity side? Is there any headwinds we've seen from commodity prices in the structural side of the business?

Yes, not especially. No, I mean, as we look at the specialty markets, we feel good about where they were in, they were not certainly no nowhere near the impact that [technical difficulty] standpoint. So, we're not seeing really much bleed over from the pure commodities into our specialty products.

[Operator Instructions] There are no further questions at this time. Speakers, I turn the call back over to you.

Okay. Well, thank you, Mary. We certainly appreciate your time and everyone's continued interest in BlueLinx. And we look forward to sharing our progress with you during our next call.

This concludes today's conference call. Thank you everyone for joining. You may now disconnect.