Good morning, ladies and gentlemen. My name is Tina and I will be your conference operator today. At this time I would like to welcome everyone to the BlueLinx fourth quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question answer period. (Operator Instructions) As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, February 12, 2008. Thank you. I would now like to introduce Mr. Russ Zukowski with Investor Relations. Mr. Zukowski, you may begin your conference. Ladies and gentlemen, please stand by. Today’s conference will resume momentarily.

Thank you, Operator, and welcome everyone to the BlueLinx fourth quarter 2007 conference call. With us this morning are Steve Macadam, Chief Executive Officer, George Judd, President and Chief Operating Officer, and Mike Ryan, Corporate Controller. Our press release was issued earlier this morning. For those of you who do not have a copy, it is available in the Investor Relations section of the company’s website, www.bluelinxco.com. Before starting the call, I need to refer you to our Safe Harbor Statement. I would like to remind everyone that on today’s call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including all statements concerning future or unexpected events or results. Actual results could differ materially from those projected in the company’s forward-looking statements due to known and unknown risks and uncertainties. A discussion of factors that may affect future results is provided in the company’s filings with the Securities and Exchange Commission. BlueLinx undertakes no obligation to publicly update or revise any forward-looking statements contained in these presentations based on new information or otherwise except as required by law. With that requirement completed, I’d like to remind our listeners that we have posted slides on our website. We will be referring to these slides during the call and we encourage you to view them during our remarks. Additionally, the slide package contains an appendix of supplementary tables available for your review. Now, let me turn the call over to our Chief Executive Officer, Steve Macadam.

Thank you, Russ, and thank you everyone for joining us this morning for the BlueLinx fourth quarter earnings conference call. Before we discuss the fourth quarter results, I’d like to take a moment to address our announcement on February 1st regarding Lynn Wentworth’s decision to resign her position as Chief Financial Officer of the company effective Friday, February 15th. This was a decision Lynn made based on her family commitments and desire to be more active in civic organizations in the community. I have an extremely high regard for Lynn as she has made a very positive impact at BlueLinx during her time here and she will be personally missed by our team. I am, however, very excited to announce that Doug Goforth will be joining BlueLinx as Chief Financial Officer and Treasurer effective Monday, February 18th. Doug will lead our accounting, finance, treasury, and Investor Relations functions. He brings over 20 years of broad and deep accounting, finance, treasury, acquisition, and administrative experience in distribution and manufacturing companies. His experience includes a combined four years with Georgia Pacific and BlueLinx as controller and corporate controller so he is very well versed in the cyclical, seasonal nature of our business and will make an immediate contribution to our company. While previously at BlueLinx, Doug played a key role in the company’s 2004 IPO. Most recently Doug was Vice President and Corporate Controller as well as a member of the senior management team of Armor Holdings, a multibillion dollar publicly held company. It was extremely fortuitous that Doug was available as the result f the recent acquisition of his former employer. Doug was well liked and well respected during his prior experience at BlueLinx by both his colleagues and our Board of Directors, which enabled us to move very quickly on…

Thanks, Steve, and good morning, everyone. Let’s start with quarterly sales on slide 7. Overall sales for the quarter ended December 29th and totaled $779 million down 17.2% to $161 million from last year. Specialty sales declined 17% from the same period last year with the majority of the decline coming from decreased unit volume. Structural product sales declined 20%, also largely a result of lower unit volumes. Specialty products comprised 48% of total sales, 1% higher than the prior year period. Turning to slide 8, BlueLinx generated approximately $66 million in gross profit for the quarter which includes the negative impact of approximately $10 million as a result of the SKU rationalization initiative. Despite the deteriorating operating environment, we generated gross margins of 8.5% which we estimate were unfavorably impacted by 130 basis points as a result of the SKU rationalization initiative. Excluding the estimated impact of the SKU rationalization initiative on fourth quarter results, gross margin would have been consistent with the prior year period. During the quarter we remained focused on maintaining gross margin through our ongoing management of structural product pricing and to a lesser extent from channel mix. Specialty gross margin of 10.6% compared with 13.8% a year ago, we estimate the impact of the SKU rationalization program on specialty gross margins was approximately 260 basis points. Structural gross margin of 7.1% is in line with the 7.0% margin generated in the prior year period. As we have previously discussed, more customers are managing their inventories by ordering smaller, [inaudible] quantities through our warehouse rather than full truckloads that often ship to the direct channels. The warehouse channel typically offers higher gross margins and a higher cost to serve. This channel mix analysis is available on pages 28 and 29 of the appendix. As shown…

Thank you, Mike and let me highlight our fourth quarter achievements as outlined on slide 15. We remain focused on gross margin and achieved overall gross margins of 8.5%. Excluding the impact of the SKU rationalization initiative, gross margin would have been consistent with year ago period despite increased competitive pressures. We adjusted our cross structure in the fourth quarter and have adjusted our inventory level that we believe are appropriate in this environment and refined our analytics related to inventory management. We continue to make selective investments in support of our specialty growth strategy. We continue to generate cash from operations in this environment, and finally I want to remind everyone that our flexible bed structure allows us to continue to pursue our business plan even through an extended down turn. Our debt structure consists of a mortgage secured by our company-owned distribution centers and a revolving credit facility secured by inventory and receivables. As noted earlier, we currently have excess availability of $222 million on that facility. Now let me turn the call over to George Judd, our President and Chief Operating Officer.

Thanks, Steve. I’ll review our operational performance for the quarter. Our objective remains consistent for our specialty products business over time due to a larger portion of our total business and operate our structural business for profitability. Specialty offers higher margin and less price volatility and is well suited to our centralized distribution platform, our national sales force, and our solutions based value proposition, so our number one strategic objective remains to grow specialty to greater than 60% of total sales. In the fourth quarter we continue to focus on cultivating relationships with new and existing customers based on long term value creation. At the same time, we maintain price discipline even as our business environment slowed further and price competition increased. As we previously stated, our value proposition is based on customer service on timely deliveries of the right products and on partnering with our suppliers and customers to find the best solutions for their supply chain challenges. Industry participants are keeping inventories at low levels throughout the system. In general we have seen our number of orders increase with a corresponding decrease in order size. I believe this difficult environment helps us underscore our value to our customers and our vendors and furthers building long term relationships. BlueLinx will succeed in the long run by continuing to add value to our customers’ and our vendors’ businesses while getting paid for that value. Looking at fourth quarter unit volume performances on slides 17 and 18, our total estimated unit volume contracted 19% in the fourth quarter from a year ago comparative to the end use market decline of 13% based on our current methodology for estimating our end use markets. Our structural unit volume was down 22.7% and specialty unit volume declined by 15.1%. As I’ve noted, we are…

Thanks, George. Before turning the call over to the operator, let me make a few closing remarks. We continue to operate in a challenging environment. We have and will continue to take the necessary steps in order to both focus on our business strategy while keeping tight controls on our cost structure. Our priorities are to aggressively manage costs, defend our core business, provide quality service to our customers and suppliers, and selectively pursue growth opportunities as they present themselves. We continue to generate cash in this downturn and we have a flexible capital structure that provides us the liquidity necessary to continue to execute in an extended cyclical downturn while positioning the company to be the supply chain solution of choice once the housing correction has run its course. Most housing forecasters still point to a strong prolonged rebound of the housing market based on population demographics and other factors and it certainly is our intention to participate in that rebound as the largest specialty building products distributor in the United States. With that, we’ll open the call to your questions. Operator, would you please instruct everyone on questions.

(Operator Instructions) Our first question comes from the line of Keith Hughes with Suntrust.

.. having a difficult year pulling cash out of working capital. Given that 2008 is, at least at this point, it looks like it’s going to be as bad if not worse, are you still going to be able to pull cash from working capital on a same percentage rate that sales decline in the near term.

Keith, I don’t think it’s going to be on the same rate as the sales decline because of the extensive nature of our footprint. Our goal for this year is if it’s as bad as we think it’s going to be and everybody thinks it’s going to be, to try to be in positive cash territory.

Cash from operations territory?

Yes.

Okay and on to the quarter, you talk about in the SG&A line like a $17.1 million related to the headquarters consolidation and outplacement but there’s also an increased reserve for doubtful accounts consulting expenses. Can you give us an idea of kind of what the amounts were for those two and what specifically are the consulting expenses?

The consulting expenses helped us... We did a lot of stuff in the second half of last year, Keith, and everybody on the phone. I mean, we implemented an aggressive SKU rationalization program, we were moving the office, we were getting our plan together for this year. We took a number of salaried positions out, we were downsizing our hourly work force, and we implemented over 150 different specific ideas related to cost savings throughout the quarter, so we used some help in that, and also, quite frankly, wanted to make sure we were focused on the right external growth markets that were not as housing related and so that’s really what we used that for. That ended at the end of the fourth quarter so we don’t have any ongoing consulting expense and we don’t go into specific line items. There will be more clarity when we file the K on changes in the bad debt reserves.

Okay. The reason I ask is that you had started making some progress on SG&A year over year and if I make an assumption for these reserves it seems as though SG&A was not down significantly year-over-year which I find a little --

I think you’ll see that change in Q1.

Was there some timing expenses in the fourth quarter?

No, the increase in reserves --

Reserves? Okay. I hear you then. I guess final question, given that you’re done with the consulting work, is there any strategic change to report as a result of that or is it still the same plan that would have been six months ago?

No, I think it’s the same plan, I think it’s just more aggressive on growth as George mentioned in the non-new housing related markets that had been a focus for us but really the key so what coming out of that was really diverting more of our resources into that arena with several different growth initiatives so we’re not going to be funding it with any more SG&A, we’re going to be reallocating some of it just because the deal in business is just so weak because there’s nothing happening in new housing.

All right. Thank you.

Your next question will come from the line of Steve Chercover with D. A. Davidson. Steven Chercover - D. A. Davidson & Co. : Good morning. First question, could you go through any covenants that you might have on your revolver or on your debt? Because I didn’t see any specifics. I’m sure they exist though.

Do you want to address that Mike or do you want me to address it? Steve, we’re all kind of hesitating because the covenants are, number one, very, very light, and the only one that really... the first one that we kick in, the only one that’s really relevant, is if we drop below, we can’t drop below $70 million of excess availability on our revolving credit line and as I mentioned we’re over $220 million now. So really we’re not encumbered by any significant covenants. Steven Chercover - D. A. Davidson & Co. : It seems like the availability, if my memory serves, went from around $270 million to $222 million. So what was the difference there?

Well as inventory and AR falls, what we can draw falls as well. Steven Chercover - D. A. Davidson & Co. : Okay, so they’re kind of viewed as collateral against what you can borrow?

Absolutely. It is the collateral. So we have an advance rate of 60% on inventory and something like 80% on AR. It varies because it depends on a bunch of different factors but roughly that’s what it is and so as we take inventory down, that generates cash, but it also reduces the top end of that availability. Likewise, when we get into a growth mode and we need to add inventory, it really expands that facility for us as well. So that’s kind of what we mean when we call flexible debt structure. It’s designed intentionally and was put in place for our company to kind of flex up and down as the working capital needs of the company change based on the environment both throughout the year and then over time. Steven Chercover - D. A. Davidson & Co. : Okay, that makes sense, and that’s actually a good segue into my second question, which is you still have growth objectives and presumably this market will turn at some stage. Do you still think that you’ve got the flexibility financially and perhaps in terms of management, presume an aggressive growth strategy and I guess the ultimate objective is to be a consolidator in a very fragmented market.

Yeah, I think we do. I don’t know, I mean, we could argue about the word aggressive and how aggressive that would be, but I think we’re trying to be very, very prudent in this time. My view is that it will very quickly become known as the worst housing correction that we’ve had since World War II. Anybody who studies the industry will tell you that it is already tied for one of the worst 2 or 3 and the facts are when you look at the numbers we’re already the worst, so it’s the worst correction. Our business is built to be a high throughput and we have a national platform, we have the centralized platform, so our system is designed to have very accretive operational leverage for incremental volume and growth which is very hard to come by in today’s market which is why we can’t match reductions in gross margin dollar generations by cost on a dollar for dollar basis. That’s why our profitability goes down in these time periods. That’s pretty straightforward. So we can’t ignore those economics and start going out in any kind of crazy way investing in growth because this could be an extended downturn That said, we don’t want to change our long term focus or change our business strategy so that’s just making us very, very selective in deals that we look at and growth initiatives that we invest in. So I would say we’re continuing to do it, in some cases it’s just not as much resource applied to it as we have had in the past. We’re trying to look for the right opportunities, not just any opportunity. Steven Chercover - D. A. Davidson & Co. : Thank you; and just a final question, to reaffirm the response to Keith. You don’t think you’ll be able to extract substantially more cash from inventory and working capital in ’08 given kind of another year of really weak demand but you think you’ll be cash flow positive from operations?

That’s right. Look, we ended the year with $336 million in total inventory, and that’s down from where we ended Q4 which was $410 million so we are, what is that, $90 million of inventory reduction in the system and on hand so first of all, we feel like that has been really, really good performance in terms of the cash that we’ve taken out of working capital. That’s number one. Number two, you have to remember that most of our inventory supports our warehouse business. I mean, we do have some in transit and we do have some inventory reloads but the vast, vast majority of our inventory supports our warehouse business. That business, that portion of our channel when you look at the appendix numbers is not down nearly to the same percentage of our total business because our customers have stopped buying direct full trucks and reload full trucks because they don’t want to hold the inventory. So when you look at the percentage reduction in our warehouse business, it’s not off as much as our overall business and so we need the inventory to support that. Third, we’ve introduced a number of new specialty products over the past year and a half as you guys know, we talk about them every call, we’ve just entered a very exciting relationship with Owens Corning to do roofing across the country. It’s off to a great start but to participate in that business it requires an investment in inventory, so when you look at... If you were to net out all the new specialty programs with new vendors that we’ve put in place, you would see an even more drastic apples to apples difference in inventory, so that’s why with where we are now and also you have to remember, we got the inventory down to the end of the fourth quarter, that’s obviously Q4, a weak time during the year, and Q4 was already at 1 million starts which is kind of where we built our plan in thinking going forward in 2008, so we’re kind of already... we feel like we’re already at or close to the bottom in terms of what the pace will be if you average the year in total. Probably weaker in the first half and not quite as weak in the second half but we’re certainly not expecting any kind of recovery of the business in the second half of the year. Steven Chercover - D. A. Davidson & Co. : Understood. Thanks. I’ll get back in the queue.

(Operator Instructions) Next we will hear from the line of Bob Trout with Goldman Sachs.

Good morning, guys. First question, just on the quarter, would it be possible for you to break out that $10 million impact of the SKU rationalization by segment?

It was almost all specialty products.

It was almost all specialty.

Yes. In the prepared remarks we had noted that. We thought it was about 260 basis points on just specialty and it was 99% specialty products.

Okay, gotcha, thank you. Then about your cost structure, I’m wondering if you could either remind us or give us either a percentage of your costs or an absolute dollar level that’s kind of fixed, where if things were to get a whole lot worse, you probably couldn’t squeeze a whole lot more out of.

We’ve never talked about that in terms of what those percentages are. I think I have to leave that up to you to be specific on because we’ve obviously... a big portion of our cost structure is personnel and personnel falls into two big buckets, one is our material handling and driver labor, which is hourly labor out in the field, and that does kind of move up and down because we hold our branches accountable for hitting specific productivity targets that have to do with the volume that they move per man hour, and so that flexes. It doesn’t flex perfectly, but it flexes pretty good over time because we’re holding them accountable to those productivity targets, and then there’s salary and it’s a good 60% of our workforce is salespeople of which we pay commission so the commission portion is somewhat variable but again we’re not going to chase all our good people away just because housing has dropped 60%. They’ve still got to be able to live. So commission doesn’t even flex directly. It flexes generally over time and so to take costs out, we have to downsize those folks. Then you’ve got all the indirect costs of the office and what not. That’s pretty easy to separate. So you’d have to go through and kind of just say, “Okay, this hourly workforce, we can make this assumption” and what not. But we’d rather not just put a number out there because we don’t want to be chasing and explaining against that number in all future calls.

Okay, fair enough. On the demand side, if you could maybe give us any color as to what you might be seeing or hearing from your customers on the spring building fees, and I understand it’s going to be challenging, but can we at least expect to see [inaudible] or are you hearing that we may at lease see a similar magnitude of seasonal improvement?

Let me let George address that.

Bob, we’re not expecting a strong seasonal rebound in the markets that we’ve relied on in the past for a large number of housing starts. So California, Arizona, Denver, Florida, those housing markets are still very, very, very overbuilt. In some of the other markets, our customers are planned activity for engineered lumber business which is the first thing that happens. It’s pretty consistent. It’s starting to show a little uptick and a little seasonal uptick, certainly not any robust activity, but don’t read too much into it. But certainly there are some housing starts that are happening but those are in traditional lower housing start markets. As I mentioned in my prepared comments, our out of warehouse activities are pretty solid and we expect that to continue. Our customers are relying on distribution to help them manage their costs through this very, very difficult market and that’s a good thing for building products distributors. Unfortunately, our average order size falls and our costs to process those orders, to load those orders and deliver those orders, doesn’t fall. So that’s one of the tie-ins to the previous question with how much flexes if warehouse business remains where it is then our hourly workforce isn’t going to go down substantially and we have to balance our margin, our margin strategy, which we’ve been very, very focused on through 2006 and 2007 and we’ve executed well against, taking care of our core customers, and moving our core suppliers’ products into market. So we’re not expecting a huge rebound but certainly we’re expecting to get better than December which is seasonally a slow month.

Okay and did you say that you think that 1 million is at least where you’re expecting kind of the bottom at, at least that’s where you’re building your own forecast around?

That’s what we’ve built our forecast on for the year and quite frankly, we did that in the October, November time frame, and that was the average for the year. If you ask our view today, we would say that in the first half of the year on a seasonally adjusted basis we’ll probably be trending under 1 million but again you have to look at the bottom of the previous cycles. The monthly number in terms of seasonally adjusted actually historically in the bottom across the trough moved quite a bit from month to month. Obviously with low numbers, when they do the seasonal adjustment, it has a pretty big impact on the overall numbers, so I would expect in the first half of the year to see numbers on a seasonally adjusted basis south of 1 million starts.

Okay. Thanks very much, guys.

And we have no further questions at this time.

Okay. With that, thank you everyone for attending and we’ll talk to you again next quarter.

Ladies and gentlemen, this does conclude today's teleconference. You may all disconnect.