Good day, ladies and gentlemen. Welcome to the Quanex Fiscal Year-end 2014 Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] During today's conference call, Company management may make forward-looking statements about the future prospects of Quanex Building Products. Participants should refer to the Company's Form 10-K filed with the SEC for more complete forward-looking statement disclosures. Additionally, the Company may refer to non-GAAP figures throughout today's call. A reconciliation to the most comparable GAAP figure is included in the Company's most recent earnings release, which is available, along with the Company's Form 10-K, at the Company's Web site at www.quanex.com. Last, participants are reminded that today's conference call is being recorded. I’ll now turn the conference call over to Mr. Bill Griffiths, Chairman, President and CEO of Quanex Building Products for opening comments. Please go ahead, sir.

Thank you. Good morning. Thank you for joining us for our 2014 fiscal year-end conference call. On the call with me this morning is Brent Korb, our Chief Financial Officer and Marty Ketelaar, our Vice President of Treasury and Investor Relations. 2014 was the most profitable year for Quanex since the spin-off in 2008, with EBITDA improving 38.7% over 2013 to $48.1 million, on a 7.3% improvement in revenue. This was achieved even with a $20 million EBITDA drag on earnings from our vinyl profile business. As we’ve stated all year long, this was a result of a number of self-inflicted wounds. Firstly, freezing the resin pass-through in a year when CDI, a key resin index increased 14%. Secondly, price concessions granted in 2013 and held through this year, and thirdly excessive repair and maintenance costs as higher volumes caused older equipment to fail at an abnormally high rate. This also caused significant operational inefficiencies, which resulted in higher labor costs. While all are not yet signed, we’re in the final stages of negotiating new or revised contracts with our major vinyl customers for calendar 2015. All of these contracts have resin adjusted clauses and varying levels of price recovery included in them. We will not recover all of the lost profitability as a result of our prior resin and price concessions, but we also do not expect to loose any business in 2015 as a result of adding these clauses back in. We will not be commenting further on this during today’s call due to the sensitivity and timing of these negotiations. We are projecting to invest $35 million of capital in 2015, of which $20 million will go into our vinyl profile business. While we will not see the full benefit of this until the second half of…

Thank you, Bill, and good morning to everyone on today’s call. Consolidated fourth quarter net sales decreased 2% to $164 million, while fourth quarter EBITDA decreased $3.1 million to $13.6 million, compared to the year-ago quarterly results. The lower revenue result was due to lower sales across all products, as customer orders slowed in an effort to reduce their inventory levels as we enter the winter. For the year, revenues increased 7.3% across all product lines. Quanex’s North American fenestration sales for the last 12 months increased 5.4%, consistent with the growth rates reported by Ducker for the period ended September 30th. Fourth quarter 2014 EBITDA was negatively impacted by the 14% increase in resin costs, most of which -- much of which we’re not able to recover, along with higher repair and maintenance expense and labor costs in our vinyl business. For the year 2014, EBITDA was $48.1 million compared to $34.7 million in 2013. Strong performance in IG spacers, screens, and components helped to offset the challenges in our vinyl business that Bill outlined. Corporate costs were also lower due to the cessation of our ERP project towards the end of last year. Corporate expenses were $7.2 million this quarter and for the year came in at $28 million, in line with our previous guidance. With the sale of nickels, we now have a single business segment. So this will be the last quarter that we’ll discuss corporate expenses separately. We ended the year with a cash balance of $120 million and no outstanding borrowings on our revolving credit facility. The $75 million share repurchase program we announced during the fourth quarter is being executed through a combination of open market and privately negotiated transactions subject to market conditions and other requirements. At our fiscal year-end, we had purchased 1.3 million shares at a cost of $24.2 million and nearly 500,000 additional shares subsequent to year-end. As a reminder, the program is not bound by any time restrictions and does not have an expiration date. I’ll now turn the call back to Bill.

Thanks, Brent. Let me close with a few comments on our acquisition strategy. We continue to pursue acquiring vertically integrated assets from our customers and we continue to explore any and all opportunities within the fenestration space. At this time, however, it is unlikely that we will see a transaction within the next several months. As I shared with you earlier, we’re very optimistic about our earnings power as the market recovers and therefore consider that our number one priority is making sure that the existing business is well positioned to fully capitalize on that recovery. And with that, we’d be happy now to take your questions. Operator?

Certainly. [Operator Instructions] Our first question comes from the line of Daniel Moore from CJS Securities. Your question please.

Yes, good morning.

Good morning, Dan.

Good morning.

For the first three quarters of the year, obviously your growth significantly outpaced the overall fenestration market. That trend appeared to have reversed in the quarter. How much of it was just inventory rationalization as you mentioned Brent and was there any other share shift or any other factors that might have driven that change?

It was -- Dan, it was effectively all due to the cyclical pattern of the year. If you recall, I think at the first quarter when we announced surprisingly high growth rates. We said that the curve would cross as we went through the year and it did. We see no evidence at all of any change in share and I think the key number to focus on is our trailing 12 month fenestration sales were 5.4% Ducker’s trailing 12 months and they were offset by one month with 5.3%. So I consider we’re right on top of the market.

And your guidance assumes sort of similar trends, no major changes in market share in ’15?

Exactly. It's -- we think next year is going to look a lot like this year. The cyclical pattern, we think will be quite different. We’ve certainly seen as we close out our fiscal year, customers are adjusting their inventory levels downwards and we’ve been put on notice by most of our customers that the magnitude of the winter inventory build is going to be significantly lower this year, hence our guidance, it will be a slow start to the year.

Okay. And guidance for next year implies $10 million to $15 million, uplifting EBITDA roughly. By our estimates, there was $10 million or more of labor inefficiencies and kind of nonrecurring maintenance expense etcetera in this year’s numbers. Is that too high or is there -- some of those inefficiencies will continue in the first couple of quarters or is there other expenses that are likely to come online? Just trying to understand some of the guidance and where there might be some conservatism?

Yes, we're not going to get too granular as to how much was resin, how much was price recovery or lack thereof and how much was purely operations. We believe, we will get some recovery not all of the $20 million that we lost last year and we will certainly get better operational recovery than we did in the fourth quarter. We were too optimistic about the rate that we’d be out to reap those benefits. But that is built into the guidance next year and into the mid cycle guidance.

Yes and I’ll just add to that Dan, the expectation is that those improvements would be more garnered in the second half of the year, because as we make these investments in these lines, we don’t anticipate seeing a savings from that until the second -- from latter part of the year.

Yes, if we’ve proved anything to ourselves the process, it was slower than we had anticipated and predicted as witnessed in the fourth quarter.

Okay. And then lastly, I know you’re not talking about individual contracts and don’t expect you to, but is it safe to assume that if resin prices continue to decline they have pulled back, obviously oil prices have plunged with contracts that you have in place you won't necessarily get the benefit, is it everything mostly on a -- an adjusted basis in terms of the contracts for ’15?

So first of all, let me clarify a point. First of all, resin prices have not reduced. They increased again in the fourth quarter. There is some question as to whether there may be a slight reduction in the early part of the year, but there is also a talk that they will go back up again. And they're not directly tied to oil prices. It is really the price of ethylene and the shortage of ethylene that's keeping the price high. Having said all that, the way you should think about it is assuming we get these contracts signed with these clauses intact, which I believe will be the case, then where the resin goes up or down next year, it should not affect our profitability one way or the other.

Got it. I appreciate the clarification. I’ll jump back in queue.

Thank you. Our next question comes from the line of Nicholas Coppola from Thompson Research Group. Your question please.

Hey, good morning.

Good morning, Nick.

Just wanted to hear a little bit more about the pricing environment and extrusions and so, are your competitors acting more rationally, what's your view about -- what kind of success you will have putting price through in the industry?

Generally speaking, the whole industry is more receptive to pricing, but at limited levels. As you know, I think the window and door manufacturers as a general rule are getting price. Glass looks as though, it’s going up. We have had some success at the backend of the year with some price increases. So I think the environment continues to favor getting price on an annual basis going forward here, but I think you should think about it at low single-digit levels.

Okay. That’s helpful. And then, a long-term type of question, what kind of runway is there to improve efficiencies and improve operations -- and clearly upgrading equipment -- we’re all to see opportunities and what do they look like?

We feel very good about the other product lines and where those businesses are positioned. Clearly, we’ve had issues this year in our vinyl profile business. We’re well down the path of implementing the recovery plan that really does revolve around a significant upgrade to the infrastructure and the equipment in that business. As I said, we’re going to put a significant amount of capital in that business and that’s because we believe in the long-term future of the vinyl profile business. We think this has good growth opportunities for the future. It’s been a good business historically. We’ve had a big bump in the road here, but that bump is temporary and this program will give us the opportunity to get it back to where this business has been from a profitability standpoint historically.

Okay. Thanks for taking my questions.

Thank you. Our next question comes from the line of Al Kaschalk from Wedbush Securities. Your question please.

Good morning, guys.

Good morning, Al.

Two questions. First an easy one. It looks like inventory levels from at the end of this year have increased substantially versus last year. I don’t know if there is components to that you can discuss or maybe with that may be caused from?

Yes, I’d say it’s across the board and differing reasons for the various product lines. But we have brought on some new product lines in a couple of the businesses that have required us to take on some additional inventory here late in the year. And I’d say that’s probably the single largest factor.

But does that account for -- I did my math, that’s about $15 million, $16 million or up from the year-ago period?

Well, yes, the challenge is -- yes, I’d say about half of that’s going to relate to the new product lines, then we also get right with the resin increase. The price of the resin is going to drive a big chunk of that from our vinyl business, just the increase in resin prices are going to drive a 14% increase in inventory just that alone at constant volume.

Right, okay.

So those are going to be the two biggest factors that drive that $15 million.

Okay. And then, should that work -- obviously that will work down with the flow of product sold, but given the push out, your ability to improve the working capital situation on that will take a couple of quarters, is that fair?

Yes, that is our focus. Clearly, the ability to take the working capital down generally is in our third and fourth quarter.

Right.

Not a huge amount of movement and we do tend to build a bit of inventory in the winter just to balance load facilities where we can.

Sure. You talked about the resin relationship and appreciate that because there certainly is some confusion out there. Are you seeing any other places where costs maybe elevated or beyond at a level beyond on your expectation that maybe struggling, whether that’s wages or anything you could share on that will be helpful?

Well, first of all, on the material side, I think as we’ve said before, we’re well protected with pass-throughs on basic materials in the rest of the business. So that is an issue for us. We’re not seeing excessive wage inflation. But I think like everybody else now in the U.S., we’re definitely finding it more and more difficult to find quality workers -- not going to be an issue through the winter, because of our seasonality typically, we’re not in a hiring mode. But this summer was in a struggle as employment levels dropped and we anticipate a similar situation next year and we’re being forced in some areas, to compete with people that are paying higher than we typically would pay. But generally, I think the answer is we’re not seeing significant cost inflation anywhere. We continue to watch very carefully freight costs, although they’ve stopped their escalation as a result of drop in fuel costs recently, but that’s being an issue for some time now.

Thanks for bringing that up. So it’s just to maybe refresh -- I apologize if this is obvious, but what percentage -- are you able to pass-through on transportation and the fuel costs or so differently what percentage of your product do you have responsibility for distribution costs?

You know what, we obviously have those numbers, we will have Marty put something together on that, off the top of my head, I don’t want to mislead you. I just don’t have those numbers.

Fair enough.

Off the top of my head, but we can get them to you.

No problem. And then finally and please take this in the way it’s meant to be constructive. With the lack of OEMs maybe not having the volume that they want, therefore you’re not able to maybe have the M&A opportunity that you’re looking for, do you stay contained or complacent with the strategy that vertical integration is the way for growth and for the benefit of the operation or do you look for tangencies outside of that to perhaps maybe areas where there could be equal or better capital returns?

Yes, I understand the question. We’re still looking at adjacencies. It is clearly a lower priority than it was earlier last year. And the reason it's a lower priority, it is we clearly see that this is a great business just as it is, even if we were not even able to do another vertical integration acquisition. The fact that we think as we go through the cycle here that we can get this in the mid $800 million revenue range and maybe around $120 million of EBITDA, we don’t consider that to be a bad business nor does it necessitate having to do something strategic. We clearly recognize that we’ve the opportunity to accelerate the rate of profitability here by focusing a lot more attention on our internal operation, which we will do through the course of 2015. We’re still in active negotiations within our space, but nothing that's going to be imminent. So I think the strategy of being cautious about stepping out too far into an adjacency when we have work to do at home and still some fenestration opportunities that may yet come to us through the course of next year.

Very good. Thank you, Bill.

Thank you. Our next question comes from the line of Scott Levine from Imperial Capital. Your question please.

Hey, good morning guys.

Good morning, Scott.

Good morning.

So, really just trying to get a sense of confidence level around the guidance for this year and sensitivity, just some of these changes with the profile business, if we were to assume call it flat year-over-year in the second quarter, you’ve given guidance of breakeven for EBITDA in the first quarter, it implies by math somewhere between 6 and 10 [ph] year-over-year increase in EBITDA in each of the last two quarters. I’m just trying to get a sense; I guess of it, it sounds like some of these measures you're implementing are late stage, but maybe so subject to some market and customer receptivity. I mean, what’s your confidence level in the -- achievability of guidance, is it realistic, is it aggressive or how dependent is it on some of these factors other than market conditions for you to -- your numbers that you’ve laid out for 2015?

That’s a very fair question. I mean, clearly I just got badly burned by being optimistic. So I do not believe that the guidance for next year is optimistic and I certainly don't think it is optimistic through the cycle. I believe it's realistic, I believe it’s achievable. The one unknown in all fairness is it does as you point out, it does include a pretty reasonable revenue growth rate in the construction season, which is our second half of the fiscal year. And look the truth in a matter who knows right now. Last year the expectation was that single-family housing starts we’re going to go up 20%. They’re now in the mid single-digits or high single-digits. There is a 19% forecast out there again for next year, which we think is way too optimistic. So we tempered that somewhat, but if it’s a poor construction season, then we could see lower growth and that could put some stress on those numbers. We’re very confident in the recovery of the vinyl business. We know what has to be done there and our fault was that when we started that program, we expected to get much faster rates of return and it wasn’t, because it was executed and the returns weren’t there. We just couldn’t execute it as fast as we thought which is why we’re now saying it's going to take as most of next year to get that done. So that confidence level there is very high, but the market is still a bit of an unknown at this point.

Got it. Now that’s helpful. Thank you. And as my follow-up, I guess, on the capital deployment side, I know the buyback is open-ended, you’ve kind of suggested here that M&A is more likely to focus on your core market than adjacencies, but is it a situation you still have no leverage on the balance sheet? Is it a situation where maybe by the middle of next year, if you exhausted the buyback, some assumptions to my question, where you might think about -- I think you’ve suggested you would consider levering up for an acquisition of size, but not a buyback, its only update your thought process on that side?

No, I think all I will say is once this buyback has been completed and we look at the M&A picture at that point in time and look at where we are in the year, you recall typically we don't -- because of the uncertainty through the winter, we typically don't give too granular of guidance. We’ve done more than we normally have this year, but I think as we go into the mid year point of our fiscal year, this buyback will be over, we’ll have a clearer picture of what the year looks like. At that point, we’ll certainly reevaluate whether we'll do another buyback or not. No certainty we’ll do one, but we'll certainly have it front and center at our Board meetings at that time.

Got it. Thanks, Bill.

Thank you. [Operator Instructions] Our next question comes from the line of John Hellier from Oppenheimer. Your question please.

Good morning. It’s Oppenheimer & Co. So how are you guys doing this morning?

Good how about you?

Well, thanks. Quick question on capacity utilization for the year, I know it's going to vary by product, but if you could just give me a rough estimate that will be helpful.

Overall, total company in the 60%, 70% range, I think it's probably fair to say. I think other than perhaps one or two individual factor is, having to expand capacity isn’t going to be an issue for a while.

Okay, great. And then, I know the K [ph] will be out shortly, but I was wondering what the inventory position look like as far as resin goes and how much you were carrying maybe months of supply or something along those lines?

If we’re carrying more than our normal month of supply resin, is that the question?

Right.

No, I’d say we’ve -- we're at a normal level supply. In the past, we’ve taken on higher amounts of resin as we felt the resin price was going to increase just to save some cash down the road, but with resin prices like -- likely more likely they’re not to decrease, we’re not in that position right now.

Okay, great. And then, to clarify $25 million of the $35 million was going to be spend on equipment for …

$20 million -- now $20 …

$20 million?

… of the $35 million approximately will go into the vinyl business.

Okay, great. And then, just to clarify your earlier comment that ethylene was remaining high, that was a year-over-year figure not like a sequential figure? Is that …

Well, I guess, I was talking more generically that the reason that resin prices continue to be inflated is because of the shortage of and therefore the price of ethylene. I think there is a misconception that the price of resin is directly related to the price of oil and therefore everybody had expectation it would plummet, that is not the case.

Okay, great. Thanks a lot.

Thank you. This does include the question-and-answer session of today’s program. I’d like to hand the program back to management for any further remarks.

Well, thank you everyone for joining us. I realize it was a short notice call this time and we look forward to seeing you at the New Year’s conferences and a further update in early March when we release our first quarter. Thank you.

Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.