Maryon Davis - Investor Relations Mitch Lewis - Chief Executive Officer Doug Goforth - Chief Financial Officer.

Mark Kaufman - MLK Investment Management.

Good morning. My name is Tonie, and I will be your conference operator today. At this time, I would like to welcome everyone to the BlueLinx's First Quarter Earnings Release 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 period. (Operator Instructions).

As a reminder, ladies and gentlemen, this conference is being recorded today, May 8, 2014. Thank you. I would now like to introduce Maryon Davis with BlueLinx. You may begin your conference..

Thank you, Tonie. Good morning. Thank you for joining us for the BlueLinx first quarter 2014 earnings conference call. This call is being webcast on the company's website at bluelinxco.com. The earnings release and presentation slides for this call can be found in the Investor Relations section of the company's website.

This presentation includes statements about our expectations for future operational and financial performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are subject to a number of risks, uncertainties and assumptions that could cause our actual results to differ materially from those provided, including, but not limited to risks and uncertainties with respect to economic, governmental and technological factors outside of our control, and changes in the supply and/or demand for products we distribute particularly as a result of conditions in the residential housing market.

These and other factors that could cause actual results to differ materially from forward-looking statements are discussed in greater detail in our filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date of this presentation. We undertake no obligation to revise them in light of new information.

Finally, we undertake no obligation to review or confirm analyst's expectations or estimates that might be derived from this presentation. This presentation includes references to adjusted net loss and adjusted EBITDA, which are non-GAAP financial measures within the meaning of the Securities and Exchange Commission's Regulation G.

Reconciliations of GAAP net loss to adjusted net loss and GAAP net loss to adjusted EBITDA are included as an appendix and are posted on our website at bluelinxco.com. Our speakers this morning are Mitch Lewis, Chief Executive Officer; and Doug Goforth, Chief Financial Officer.

Doug will begin the call this morning with a review of the financial statements. Then, Mitch will comment will comment on the current results and add a final perspective before opening the call to your questions. Now, let me turn the call over to our Chief Financial Officer, Doug Goforth..

Thank you, Maryon. Good morning, everyone. It's a pleasure to speak to you again about our business and our first quarter results. For those of you following along slides posted on the Investor Relations section of the BlueLinx’s website I’ll begin with slide 5.

Revenues for the first fiscal quarter ended April 5, 2014 decreased 11.8% to $443.9 million from $503.2 million for the fiscal first quarter ended March 30, 2013. On a same center basis, 2014 first quarter revenue decreased $29.8 million or 6.3% compared to the fiscal first quarter of 2013.

The sales decline mainly was due to weather impact on structural unit volumes as well as certain product price declines relative to year ago levels. Gross profit for the fiscal first quarter ended April 5, 2014 totaled $52.7 million, down 6.7% from $56.5 million in year ago period.

Gross profit on a same center basis for 2014 fiscal first quarter decreased $0.4 million or 0.7% compared to the fiscal first quarter of 2013. Gross margins for the 2014 fiscal first quarter improved to 11.9% compared to 11.2% for the same period a year ago.

Overall, 2014 fiscal first quarter gross margins were impacted by lower structural wood-based product prices compared to last year’s first quarter elevated structural wood-based product prices and a customs rebate of $1.4 million related to the prior year which was recorded in the fiscal first quarter of 2014.

Total operating expenses were $54.3 million compared to $61.6 million for the same period a year ago. Significant special items included in operating expenses for the 2014 fiscal first quarter included $0.2 million gain from the sale of property.

Significant special items included in operating expenses in the year ago quarter included $0.2 million gain from the sale of property and $0.09 million in restructuring and severance cost. Operating expenses in the year ago period also included $3.6 million in expenses related to closed distribution centers.

Reported operating loss for 2014 fiscal first quarter improved $1.7 million compared to an operating loss $5.1 million a year ago and reflects a reduction in expenses that more than offset the decline in revenue and the significant special items.

Adjusted EBITDA for the 2014 fiscal first quarter improved to $1 million from an adjusted EBITDA loss of $1.4 million for the same period a year ago.

The company incurred a net loss of $8.6 million or $0.10 per diluted share for the fiscal first quarter of 2014 compared with a net loss of $12.6 million or $0.19 per diluted for the fiscal first quarter of 2013.

Fiscal first quarter results for 2014 included net pre-tax gains from significant special items of $2 million and resulted in no impact on diluted earnings per share. Fiscal first quarter results for 2013 included net pre-tax charges from special items $0.9 million or $0.01 per diluted share.

Fiscal 2014 first quarter adjusted net loss was $5.8 million or $0.07 per diluted share compared to an adjusted net loss of $7.2 million or $0.11 per diluted share for the same period a year ago. The reported net loss for the period is after interest expense of $6.5 compared to interest expense of $7.2 million in the prior year period.

The current year net loss is after a tax provision of approximately $0.3 million compared to a tax provision of approximately $0.2 million in the year ago period.

Turning to cash flow on slide six, during the quarter we used approximately $46 million in cash from operating activities mainly reflecting increases in primary working capital components compares with the net cash used by operations of approximately $96 million in the first quarter of 2013. As we've discussed on prior earnings calls.

We'll continue to tightly manage our working capital items on an ongoing basis, but as always, we expect to consume cash through the first half of the year as our working capital increases to support the normal seasonal increases in our business.

Moving to slide 7, we had approximately $89 million of excess availability under our revolving credit facilities as of quarter-end. That is approximately $46 million above our minimum availability requirement on our U.S. revolving credit facility as of April 5, 2014.

The combined debt balance on our mortgage and revolving credit agreements was $447.4 million. Net debt, at the fiscal first quarter ended April 5, 2014 was approximately $439 million and was flat compared to the first quarter ended March 30, 2013. During this fiscal first quarter 2014, company entered into an amendment to its U.S.

revolving credit agreement with the syndicated banks led by Wells Fargo who improve liquidity and provide up to an additional $20 million in availability for strategic growth plan. The amendment credit facility provides for up to an additional $20 million in borrowing capacity for a period up to 180 days from the effective day.

The initial funds drawn at closing of $20 million we used to pay down the existing asset-based revolving credit facility. Turning to slide 8, cash cycle days for the first quarter ended April 5, 2014, totaled 65 that compares to 60 days sequentially and 61 days for the same period a year ago.

The year-over-year increase in cash cycle days is the result of investments and inventory for both anticipated seasonal demand for our ongoing specialty product approach. Finally, I’d like to take a minute to talk about my departure.

I first joined the company in 2002 and was here when BlueLinx was formed 10 year ago on May 7, 2004, the anniversary that we’ve been celebrating all week.

It’s been a privilege to work with so many dedicated people and I want to thank everyone at BlueLinx including the Board of Directors for the support they had given me over the past six years that I have served as CFO. I will miss working with everyone a great deal.

Leaving is not a decision I make lightly rather believe BlueLinx is now on the right path and it’s the right time for me to do something new.

I also believe that Susan is going to be a great addition to the team, while there remains much to accomplish, I feel fortunate that we had such a dedicated team of tigers eager to support the new CFO as she steps into the role. That concludes my remarks. And let me turn the call over to Mitch..

Thanks Doug and good morning. I’ll address Doug’s departure and our new CFO in a few minutes, but I’d like to begin by discussing what we are seeing in our end markets.

I think it’s important to remember that while total residential housing starts to drive a significant portion of our business, we are much more reliant on single family housing starts where we estimate we drive approximately 40% of our revenues.

Multi-family starts only represent 4% of our sales volume, so we’ll keep the emphasis on single family housing starts to assess our performance against the residential new construction markets.

Single family housing starts for the first quarter were down 1.7% from 2013 levels, while our same center sales were down 6.3% and this disparity certainly wants an explanation. Slide 11 indicates the primary culprit.

Our two largest markets are in the Midwest and Northeast and these markets were significantly down in the first quarter due to the extreme winter, these areas of the country endured. On a consolidated basis, BlueLinx lost about three full shipping days among our facilities when compared to 2013 in the first quarter, due to this inclement weather.

Second major issue we had that impacted our topline was market pricing degradation with some of our structural based product categories. This resulted from a drop in the underlying cost of these products, which we estimate reduced our net sales in the quarter by approximately $12.8 million.

Today our markets appear to be rebounding, while the beginning of the second quarter was a bit choppy, we've begun to enjoy a seasonal uptick in our business particularly in the last couple of weeks. And our customers remain relatively optimistic and believe that the back half of 2014 will be strong.

You can see on slide 12, the good news is that even with a sales decline, our EBITDA improved from last year's levels. And while adjusted EBITDA of $1 million is certainly not a level that the BlueLinx's team is proud of, and was $3.4 million improvement from last year.

In addition, it's the first positive EBITDA that we've had in our seasonally challenging first quarter since 2007. I think most importantly, we believe the fact that we were able to generate positive adjusted EBITDA on a relatively low volume bodes very well for 2014 as the seasonality of our business improves.

There were couple of main factors which drove our improvement in the first quarter. Our overall gross margins rose as our mix of specialty products improve.

We also continue to realize the benefit from the significant fixed costs, we took out of the business last year and as we discussed last quarter, we anticipated that fixed cost we eliminated in 2013 would have a material positive impact on our performance and this certainly was the case.

Same-center cost for the first quarter associated with big sales procurement and administrative expenses declined by about $3.6 million compared to the first quarter in 2013 and this follows in line with our expectations of an approximate incremental $6.5 million savings in 2014 compared to 2013 from our SG&A cost cutting measures.

Slide 13, indicates the gross margin improvement in our two major categories structural and specialty products.

As Doug indicated our mix shifted more to specialty products in the first quarter which helped to consolidated gross margin performance and while we continue to emphasize growth in our specialty markets the mix change in the first quarter was more a function of the declining commodity prices I alluded to previously.

And certainly our intent to continue to emphasize sales in both our structural and specialty product categories. Slide 4, addresses several of the key activities that are ongoing at BlueLinx. We have been very focused on the liquidity of the organization and are pleased that we ended the quarter with availability of approximately $89 million.

And this represents about $44 million increase from year-end. As Doug discussed historically we used cash in the first two quarters of the year and generate cash in the back half of the year and we expect this trend to continue in 2014.

Well you should be aware that we are in discussions regarding financing alternatives as a mechanism to lay a foundation for the growth at BlueLinx that we anticipate in the years ahead.

We’re investing and improving our inventory process and management at BlueLinx, we need to insure that we operated inventory levels with maximum efficiency that provides sufficient inventory to continue to provide great service to our customers, while reducing our working capital investment.

And we will continue to keep our eye on the ball on the expense side of the business and rest assured that we will not be complacent after the disruptive cost cut that we underwent in 2013.

We also clearly understand the solid vendor relationships that are critical to our long term success, we have engaged in meaningful strategic discussions with several key suppliers to help us mutually grow our businesses and strengthen our product offering into the industry.

We have now changed our operational structure and are bringing in some talented associates with strong logistics and material handling expertise and drive improvements and efficiencies in the way we interact and provide service to our customers.

And we will continue to look for opportunities to enhance our margins through product innovation cross selling and market driven initiatives. So before we open up the call for questions. I would like to discuss the announcement we made today that Doug is leaving BlueLinx and being replaced by Susan O'Farrell.

Doug has been in the CFO roll now for six years and he had the unique challenge of being the CFO during a (inaudible) period in our company’s history. So build a terrific accounting, finance and IT team, which insured strong continuity for these functions going forward for BlueLinx.

And on behalf of entire BlueLinx’s team I want to thank Doug for all his contributions to our organization. I am very pleased to be able to inform you that Susan O'Farrell will begin as our new CFO on May 19th. Susan has been in the building products industry for the past 15 years holding senior finance and accounting roles at Home Depot.

Until a couple of weeks ago she was responsible for the finance function of the Home Depot At Home Services group. And she began her tenure at Home Depot in 1999 leaving several finance accounting and strategic teams and that supported the retain organization.

Prior to Home Depot Susan held a strategic information systems role at AGL Resources and she was an associate partner in Anderson Consulting before that. I know Susan will be a great leader for BlueLinx’s in a fantastic strategic and innovative partner to help our team assess and drive improvement in the organization.

I truly believe we are fortunate to have [commensurate] to join BlueLinx family, and I really look forward to you getting to know her in the months and years ahead.

And in inclusion, I have been on the job now for almost four months and while I do think we’ve made solid progress in many areas, there is a lot of work and a lot of tremendous opportunity that remains here. We are questioning everything we do at BlueLinx.

And we certainly expect to continue to improve our organization and our results in the months ahead. So with that said Tonie, we would like to open up the lines to any questions we might have..

(Operator Instructions). Your first question comes from the line of [Tristan Thomas] with Sidoti & Company..

Hey guys, good morning..

Good morning, [Tristan]..

One really quick question about the same center cost savings; what was that number again year-over-year?.

Operating expenses $3.6 million..

Okay, and that’s in line with what you expected or…?.

Yes, the answer is yes. So, we anticipated annual savings in the $13 million range, a little more to that. From all the efforts that we had in 2013, we realized about half of that. So obviously, we started realizing more of that as the year progressed..

Okay, got it. And then so do you expect more cost cuttings in 2014 or do you think….

No. It’s not a key part of what we are focused on right now. I mean we’re trying to stabilize the organization. Ultimately this business has tremendous opportunity from an efficiency standpoint of what we are doing and we are looking to grow this business long-term..

Okay, got you. Another quick question just regarding some of the structural wood-based pricing.

What do you expect for the rest of the year, do you think it's going to continue to downward or is it going to stabilize at some point?.

That's great question. I’m chuckling because we have a lot of dialogue about this internally and I can tell you generally, because 10 people in the room, you get a widely [group]. I will say over last few weeks, the view is that it's stabilized and the short-term view is that we should see some upside on the underlying prices..

Okay. And then just coming back around some of the [structural] revenue and how it affected gross margin.

So I’ll look at it moving forward that as that increases value, so gross margin is going to be decrease, even [pursue] but unsustainable just based on the product mix?.

Yes. So, I’d answer that a couple of ways. One is we put a lot of emphasis, in fact elevated the role of an individual in the organization and are having a lot of dialogue about improving and enhancing margins in all of our product categories.

So we are attacking the ability to improve margins across the company and we're trying to look at leverage and opportunities that we have of our customers to move higher margin products in there.

But from a mathematical standpoint, if the percentage of structural sales increases relatively to specialty sales that would drive down the overall gross margins of the business..

Okay..

In the first quarter obviously the specialty mix actually grew, and we had slight growth in specialty; in terms of gross margin we continue to see improvement. If you take out the custom rebate, we were still at approximately 11.6% gross margin, which again so we continue to increase that up on a quarter-over-quarter sequential basis.

So we continue to go in the right direction..

Okay, sounds good.

And then obviously weather really impacted January and February and it seems to pick up in the second half of March, I mean should I look for an even better second quarter than usual just because of some pent-up demand getting pushed back or you think up -- I’m just curious what you’re hearing from mass home builders?.

Yes, I think over the last -- so consistently and surprisingly consistently, what we're hearing from our customer basis has been very optimistic. Even in February they felt really good about the full year. And we continue to hear that.

And as I mentioned the first couple of weeks of the second quarter felt a little choppy and we started to scratch our heads, trying to ascertain whether or not their optimism would be realized, but in the last two weeks or so we’ve really seen significant seasonal improvement in business and we're starting to get pretty busy.

How that ultimately will compare topline to the last year from a volume standpoint, it’s a little too early to tell..

Okay..

It certainly looks like spring is here..

Finally..

Yes, absolutely..

And then on just one final question, just could you maybe comment a little bit on what you are doing with some of your IT initiatives, where that stands?.

I’m sorry, could you repeat the question?.

Could you just comment a little bit on where maybe new IT initiative stands, I mean I know you’re starting that trial of Home Depot for contract supply, right?.

Right. There is actually a couple of things going on in the IT front, some of which has been driven by Mitch and internal; we're working enhancing and improving our contribution margin tool and that’s ready to go live.

He talked about the elevation [of person] working on improving our overall margin performance and that’s something that we're -- we’ve been able to leverage our systems as well. I mean we talked about our systems a lot in the past and we still continue to believe that they are among the best within our industry.

On the e-commerce side that continue to roll forward and we're actually now working with some of the dealer customers to roll that out with them. We are operational on the home center side of the business, frankly not necessarily seeing the traction that we had hope for there, but the dealers are very excited about the opportunity..

The one thing I would add to Doug's comment also is we're also and we're piloting as we speak and we're going to elevate a pilot looking at let's say our outside sales reps with customer facing opportunities to both enhanced marketing and sophistication of the company, but also to make it more efficient for our team to service our customer better, whether it's pricing, quick pricing information in the field or whether it's quick orders at the field and really strong sales tools information that's another project that we have that’s a high priority for the organization..

Okay.

And then do you have any timeframe on the completed -- or is it a little too early to talk?.

Yes, I mean we haven't lot -- also as Doug alluded to the contribution margin tool which is of course very important is now up and running. And so we've got that going. We've -- as I mentioned the pilot projects are moving, we're upgrading the phone system that will give us some grade analytics.

All of this will be done, should all be completed by the end of the year. But a lot of that is going out as we speak..

Okay, great. Thanks..

Your next question comes from the line of Mark Kaufman with MLK Investment Management..

Good morning. I just had a couple of questions; one, what are you seeing in the home remodeling channels.

Is there anything different from last year or last quarter? And also talking about financing, it seems like there is probably an opportunity here to refinance the mortgage debt and what your thoughts are there relative to today's value to June 2006 appraised value of $329 million and balance right now the $186 million on those properties?.

Okay. This is Mitch; I’ll answer questions in reverse order. As far as the financing I think I alluded to the fact that we’re out there talking to folks. And obviously our real estate is a significant asset on our balance sheet that is under lever.

So, depending on financing alternatives and as you know there were several and I think whoever would potentially be lending us money would look to the real estate as an opportunity to -- if lever the company if you want to utilizing that asset. So, the valuation from 2006, Doug, correct me if I am wrong here is in the 330 range..

329..

329. And so we have not done a recent appraisal on those properties, but we have had transactions with some of those properties and the vast majority of them have sold for in excess of being appraisal. So we feel like that appraised value without knowing for sure we feel pretty good about that appraised value.

On the home improvement market we’re making progress as you can in the repair modeling piece. We’re making good progress as we talked about on the specialty mix for our business which goes into that segment about 40% of what we do.

Generally we felt like there were some softness in the first quarter and similarly to what we’re seeing across the company in the last two to three weeks, it really feels like things are starting to pop..

And Mark, this is Doug. I would just add on the real estate side. Of the dozen properties that we’ve sold, all but one have been at or above that original 2006 appraised value and we are actually under contract on the one of the facilities out West that we closed in the third quarter of last year.

We expect that to close in the second quarter and again that’s above those original appraised value. So I think it is important to note that we feel confident, feeling the 2006 values, obviously it will be reappraised with any new financing that we do.

So it’s important to note that those properties on our books are because of the bargain purchase that we got in 2004 from joint specific that met book value of just under $85 million. So a lot of people missed when they are looking at the company and just as Mitch talked about the value of that real estate and the leverage possibilities there..

All right, I can guarantee I haven’t missed that fact, that’s the value in real estate. And when I look at this company it’s almost at this price on the stock it’s a [Graham Dodd] basically analysis is we liquidated this company tomorrow it’s worth more than where the stock is trading based on appraisal values.

But I thank you for elucidating on that..

Sure..

And good luck, Doug..

Thank you, Mark..

And there seem to be no further questions at this time. I would now like to turn the call back over to Mr. Lewis for closing remark..

Well, thank you. We certainly appreciate your interest and your continued support. And we look forward to continuing to have positive communications in the future. Thanks. Have a great day..

Thank you for your participation. This does conclude today’s conference call. You may now disconnect..