UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark one)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 2, 2010

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-32383

BLUELINX HOLDINGS INC.

Delaware		77-0627356
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
4300 Wildwood Parkway, Atlanta, Georgia		30339
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:
770-953-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of July 4, 2009 was $32,878,698, based on the closing price on the New York Stock Exchange of $2.99 per share on July 4, 2009.

As of March 1, 2010, the registrant had 32,631,562 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of BlueLinx Holdings Inc.’s definitive Proxy Statement for use in connection with its 2009 Annual Meeting of Shareholders, scheduled to be held on May 20, 2010, are incorporated by reference into Part III of this Report.

 

 

BLUELINX HOLDINGS INC.

ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended January 2, 2010

TABLE OF CONTENTS

PART I
ITEM 1. Business			4
ITEM 1A. Risk Factors			9
ITEM 1B. Unresolved Staff Comments			15
ITEM 2. Properties
			16
ITEM 3. Legal Proceedings
ITEM 4. Reserved			16
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities			16
ITEM 6. Selected Financial Data			19
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk			34
ITEM 8. Financial Statements and Supplementary Data			35
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			78
ITEM 9A. Controls and Procedures			78
ITEM 9B. Other Information			78
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance			78
ITEM 11. Executive Compensation			79
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters			79
ITEM 13. Certain Relationships and Related Transactions, and Director Independence			79
ITEM 14. Principal Accounting Fees and Services			79
PART IV
ITEM 15. Exhibits, Financial Statement Schedules			79
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “anticipate,” “believe,” “could,” “expect,” “estimate,” “intend,” “may,” “project,” “plan,” “should,” “will be,” “will likely continue,” “will likely result” or words or phrases of similar meaning. You should read statements containing these words carefully, because they discuss our future expectations, contain projections of our future results or state other “forward-looking” information.

All of these forward-looking statements are based on estimates and assumptions made by us that, although believed by us to be reasonable, are inherently uncertain. However, there are events in the future that we are not able to accurately predict or control. The factors listed under Item 1A, Risk Factors, as well as any cautionary language in this Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially from those in the forward looking statements as a result of various factors, including, but not limited to, those described under Item 1A, Risk Factors and elsewhere in this Form 10-K.

Forward-looking statements speak only as of the date of this Form 10-K. Except as required under federal securities laws and the rules and regulations of the SEC, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Form 10-K, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this Form 10-K or that may be made elsewhere from time to time by or on behalf of us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

PART I

As used herein, unless the context otherwise requires, “BlueLinx,” the “Company,” “we,” “us” and “our” refer to BlueLinx Holdings Inc. and its subsidiaries. BlueLinx Corporation is the wholly-owned operating subsidiary of BlueLinx Holdings Inc. and is referred to herein as the “operating company” when necessary. Reference to “fiscal 2009” refers to the 52-week period ended January 2, 2010. Reference to “fiscal 2008” refers to the 53-week period ended January 3, 2009. Reference to “fiscal 2007” refers to the 52-week period ended December 29, 2007.

ITEM 1. BUSINESS.

Company Overview

BlueLinx Holdings Inc., operating through our wholly-owned subsidiary, BlueLinx Corporation, is a leading distributor of building products in the United States. We operate in all of the major metropolitan areas in the United States and, as of January 2, 2010, we distributed more than 10,000 products to approximately 11,500 customers through our network of more than 70 warehouses and third-party operated warehouses.

We distribute products in two principal categories: structural products and specialty products. Structural products, which represented approximately 44% and 50% of our fiscal 2009 and fiscal 2008 gross sales, include plywood, oriented strand board (“OSB”), rebar and remesh, lumber and other wood products primarily used for structural support, walls and flooring in construction projects. Specialty products, which represented approximately 56% and 50% of our fiscal 2009 and fiscal 2008 gross sales, include roofing, insulation, specialty panels, moulding, engineered wood products, vinyl products (used primarily in siding), composite decking and metal products (excluding rebar and remesh).

Our customers include building materials dealers, industrial users of building products, manufactured housing builders and home improvement centers. We purchase products from over 750 vendors and serve as a national distributor for a number of our suppliers. We distribute products through our owned fleet of over 600 trucks and over 1,100 trailers, as well as by common carrier.

Our principal executive offices are located at 4300 Wildwood Parkway, Atlanta, Georgia 30339 and our telephone number is (770) 953-7000. Our filings with the U.S. Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports, are accessible free of charge at our official website, www.BlueLinxCo.com. We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K. This Code of Ethics applies to our principal executive officer, principal financial officer and principal accounting officer. This Code of Ethics, our board committee charters and our corporate governance guidelines are publicly available without charge at www.BlueLinxCo.com or without charge upon request by writing to BlueLinx Holdings Inc., Attn: Corporate Secretary, 4300 Wildwood Parkway, Atlanta, Georgia 30339. If we make substantial amendments to our Code of Ethics or grant any waiver, including any implicit waiver, we are required to disclose the nature of such amendment or waiver on our website or in a report on Form 8-K of such amendment or waiver. The reference to our website does not constitute incorporation by reference of the information contained at the site.

History

We were created on March 8, 2004 as a Georgia corporation named ABP Distribution Holdings Inc. (“ABP”). ABP was owned by Cerberus Capital Management, L.P. (Cerberus Capital Management, L.P. and its subsidiaries are referred to herein as “Cerberus”), a private, New York-based investment firm, and members of our management team. Prior to May 7, 2004, certain of our assets were owned by the distribution division (the “Division”) of Georgia-Pacific Corporation (“G-P”). The Division commenced operations in 1954 with 13 warehouses primarily used as an outlet for Georgia-Pacific’s plywood. On May 7, 2004, Georgia-Pacific sold the assets of the Division to ABP. ABP subsequently merged into BlueLinx Holdings Inc. On December 17, 2004, we consummated an initial public offering of our common stock.

Products and Services

As of January 2, 2010, we distributed more than 10,000 different structural and specialty products to approximately 11,500 customers nationwide. Our structural products are primarily used for structural support, walls, flooring and roofing in construction projects. Additional end-uses of our structural products include outdoor decks, sheathing, crates and boxes. Our specialty products include engineered lumber, roofing, insulation, metal products (excluding rebar and remesh), vinyl products (used primarily in siding), moulding, composite decking and particleboard. In some cases, these products are branded.

We also provide a wide range of value-added services and solutions to our customers and vendors including:

•

providing “less-than-truckload” delivery services;

•

pre-negotiated program pricing plans;

•

inventory stocking;

•

automated order processing through an electronic data interchange, or EDI, that provides a direct link between us and our customers;

•

inter-modal distribution services, including railcar unloading and cargo reloading onto customers’ trucks; and

•

back-haul services, when otherwise empty trucks are returning from customer deliveries.

Distribution Channels

We sell products through three main distribution channels:

Warehouse Sales

Warehouse sales are delivered from our warehouses to dealers, home improvement centers and industrial users. We deliver products primarily using our fleet of over 600 trucks and over 1,100 trailers, but also occasionally use common carriers for peak load flexibility. We operate in all of the major metropolitan areas in the United States through our network of more than 70 warehouses and third-party operated warehouses. Our warehouses have over ten million square feet of space under roof plus significant outdoor storage space. Warehouse sales accounted for approximately 64% and 59% of our fiscal 2009 and fiscal 2008 gross sales, respectively.

Reload Sales

Reload sales are similar to warehouse sales but are shipped from third-party warehouses where we store owned product in order to expand our geographic reach. This channel is employed primarily to service strategic customers that would be uneconomical to service from our warehouses and to distribute large volumes of imported products such as metal or hardwood plywood from port facilities. Reload sales accounted for approximately 10% and 13% of our gross sales in fiscal 2009 and fiscal 2008, respectively.

Direct Sales

Direct sales are shipped from the manufacturer to the customer without our taking physical inventory possession. This channel requires the lowest amount of committed capital and fixed costs. Direct sales accounted for approximately 26% and 28% of our fiscal 2009 and fiscal 2008 gross sales, respectively.

Customers

As of January 2, 2010, our customer base included approximately 11,500 customers across multiple market segments and various end-use markets, including the following types of customers:

•

building materials dealers;

•

industrial users of building products;

•

manufactured housing builders; and

•

home improvement centers.

Sales and Marketing

Our sales efforts are directed primarily through our sales force of approximately 500 sales representatives. Approximately 300 of our sales representatives are located at our two sales centers in Denver and Atlanta. Within these sales centers, our sales representatives interact with our customers over the telephone. The remaining 200 sales representatives are located throughout the country and are responsible for maintaining a local dialogue with our customers, including making frequent, in-person visits.

Our sales force is separated between industrial/dealer sales and home improvement center sales. Industrial/dealer sales are managed by regional vice-presidents with sales teams organized by customer regions. The majority of industrial/dealer orders are processed by telephone and are facilitated by our centralized database of customer preferences and purchasing history. We also have dedicated cross-functional customer support teams focused on strategic growth with the home improvement centers.

Suppliers

As of January 2, 2010, our vendor base included over 750 suppliers of both structural and specialty building products. In some cases, these products are branded. We have supply contracts in place with many of our vendors. Terms for these agreements frequently include prompt payment discounts, freight allowances and occasionally include volume discounts, growth incentives, marketing allowances, and consigned inventory.

On April 27, 2009, we entered into a Termination and Modification Agreement (“Modification Agreement”) related to our Master Purchase, Supply and Distribution Agreement (the “Supply Agreement”) with Georgia Pacific (“G-P”). The Modification Agreement effectively terminates the existing Supply Agreement with respect to our distribution of G-P plywood, OSB and lumber. We will continue to distribute a variety of G-P building products, including engineered lumber, which is covered under a three-year purchase agreement dated February 12, 2009. As a result of terminating this agreement, we are no longer contractually obligated to make minimum purchases of products from G-P. As of January 3, 2009, prior to entering into the Modification Agreement, our minimum purchases requirement had totaled $31.9 million.

G-P agreed to pay us $18.8 million in exchange for our agreement to terminate the Supply Agreement one year earlier than the originally agreed upon May 7, 2010 termination date. Under the terms of the Modification Agreement, we received four quarterly cash payments of $4.7 million, which began on May 1, 2009 and ended on February 1, 2010. As a result of the termination, we recognized a net gain of $17.8 million in fiscal 2009 as a reduction to operating expense. The gain was net of a $1.0 million write-off of an intangible asset associated with the Supply Agreement. We believe the early termination of the Supply Agreement contributed to the decline in our structural panel sales volume during the second, third, and fourth quarters of fiscal 2009. However, because the majority of these sales are through the direct sales channel, the lower structural panel sales volume had an insignificant impact on our gross profit during for these periods. To the extent we are unable to replace these volumes with structural product from G-P or other suppliers, the early termination of the Supply Agreement may continue to negatively impact our sales of structural products which would impact our net sales and our costs, which in turn could impact our gross profit, net income, and cash flows. For more information on structural unit volume changes, refer to the tables under “Selected Factors Affecting Our Operating Results” in our Management, Discussion and Analysis.

Competition

The U.S. building products distribution market is a highly fragmented market, served by a small number of multi-regional distributors, several regionally focused distributors and a large number of independent local distributors. Local and regional distributors tend to be closely held and often specialize in a limited number of segments, such as the roofing segment, in which they offer a broader selection of products. Some of our multi-regional competitors are part of larger companies and therefore have access to greater financial and other resources than us. We compete on the basis of breadth of product offering, consistent availability of product, product price and quality, reputation, service and distribution facility location.

Our two largest competitors are Weyerhaeuser Company and Boise Cascade LLC. Most major markets are served by at least one of these distributors.

Seasonality

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These seasonal factors are common in the building products distribution industry. The first and fourth quarters are typically our slowest quarters due to the impact of poor weather on the construction market. Our second and third quarters are typically our strongest quarters, reflecting a substantial increase in construction due to more favorable weather conditions. Our working capital and accounts receivable and payable generally peak in the third quarter, while inventory generally peaks in the second quarter in anticipation of the summer building season. Although, we generally expect these trends to continue for the foreseeable future, we have reduced our inventory as part of our effort to manage to the current weakened demand environment in the housing market. Additionally, our accounts receivable balance has declined due to the weakened demand environment for the products we distribute.

Trademarks

As of February 1, 2010, we had 38 U.S. trademark applications and registrations, one issued U.S. patent and two Canadian trademark registrations. Depending on the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained and they have not become generic. Registrations of trademarks can generally be renewed indefinitely as long as the trademarks are in use. Our patent expires in September 2013. We do not believe our business is dependent on any one of our trademarks or on our patent.

Employees

As of January 2, 2010 we employed approximately 1,900 persons on a full-time basis. Approximately 30% of our employees are represented by labor unions. As of January 2, 2010, we had 46 collective bargaining agreements, of which 8, representing 51 employees, are up for renewal in 2010. We consider our relationship with our employees generally to be good.

Executive Officers

The following table contains the name, age and position with our Company of each of our executive officers as of March 1, 2010.

Name		Age		Position
George R. Judd		48		President and Chief Executive Officer
H. Douglas Goforth		46		Chief Financial Officer and Treasurer
Dean A. Adelman		44		Chief Administrative Officer

George R. Judd has served as our Chief Executive Officer since October 2008 and as our President since May 2004. Prior to that time, he worked for Georgia-Pacific in a variety of positions managing both inside and outside sales, national accounts and most recently as Vice President of Sales and Eastern Operations since 2002. From 2000 until 2002, Mr. Judd worked as Vice President of the North and Midwest regions of the Distribution Division. He served as Vice President of the Southeast region from 1999 to 2000. Mr. Judd serves on the board of the Girl Scouts of Greater Atlanta and leads its design and construction committee. He graduated from Western Connecticut State University in 1984 with a Bachelor’s degree in Marketing.

H. Douglas Goforth has served as our Senior Vice President, Chief Financial Officer and Treasurer since February 2008. From November 2006 until February 2008, Mr. Goforth served as Vice President and Corporate Controller for Armor Holdings, Inc. which was acquired by BAE Systems in July 2007. Previously he served as Corporate Controller for BlueLinx from May 2004 until October 2006, where he played a key role in BlueLinx’ 2004 IPO. From 2002 until 2004 he served as Controller for the Distribution Division of Georgia-Pacific. Mr. Goforth has over 20 years of combined accounting, finance, treasury, acquisition and management experience with leading distribution and manufacturing companies including Mitsubishi Wireless Communications, Inc., Yamaha Motor Manufacturing, Inc. and Ingersoll-Rand. Mr. Goforth is a North Carolina State Board Certified Public Accountant and earned a Bachelor of Science in Accounting from Mars Hill College in North Carolina.

Dean A. Adelman has served as our Chief Administrative Officer since May 2008 and as our Vice President, Human Resources since October 2005. Prior to that time, he served as Vice President Human Resources, Staff Development & Training for Corrections Corporation of America. Previously, Mr. Adelman served as Vice President Human Resources for Arby’s Inc. (formerly RTM Restaurant Group) from 1998 to 2002. From 1991 to 1998, Mr. Adelman served as senior counsel for Georgia-Pacific. Mr. Adelman received his Masters of Business Administration from the Kellogg School of Management at Northwestern University, a Juris Doctor degree from the University of Georgia School of Law, and a Bachelor of Arts degree from the University of Georgia.

Environmental and Other Governmental Regulations

Environmental Regulation and Compliance

Our operations are subject to various federal, state, provincial and local laws, rules and regulations. We are subject to environmental laws, rules and regulations that limit discharges into the environment, establish standards for the handling, generation, emission, release, discharge, treatment, storage and disposal of hazardous materials, substances and wastes, and require cleanup of contaminated soil and groundwater. These laws, ordinances and regulations are complex, change frequently and have tended to become more stringent over time. Many of them provide for substantial fines and penalties, orders (including orders to cease operations) and criminal sanctions for violations. They may also impose liability for property damage and personal injury stemming from the presence of, or exposure to, hazardous substances. In addition, certain of our operations require us to obtain, maintain compliance with, and periodically renew permits.

Certain of these laws, including the Comprehensive Environmental Response, Compensation, and Liability Act, may require the investigation and cleanup of an entity’s or its predecessor’s current or former properties, even if the associated contamination was caused by the operations of a third party. These laws also may require the investigation and cleanup of third-party sites at which an entity or its predecessor sent hazardous wastes for disposal, notwithstanding that the original disposal activity accorded with all applicable requirements. Liability under such laws may be imposed jointly and severally, and regardless of fault.

Georgia-Pacific has agreed to indemnify us against any claim arising from environmental conditions that existed prior to May 7, 2004. In addition, we carry environmental insurance. While we do not expect to incur significant independent costs arising from environmental conditions, there can be no assurance that all such costs will be covered by indemnification or insurance.

We are also subject to the requirements of the U.S. Department of Labor Occupational Safety and Health Administration, or OSHA. In order to maintain compliance with applicable OSHA requirements, we have established uniform safety and compliance procedures for our operations and implemented measures to prevent workplace injuries.

The U.S. Department of Transportation, or DOT, regulates our operations in domestic interstate commerce. We are subject to safety requirements governing interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also remain subject to both federal and state regulation.

We incur and will continue to incur costs to comply with the requirements of environmental, health and safety and transportation laws, ordinances and regulations. We anticipate that these requirements could become more stringent in the future, and we cannot assure you that compliance costs will not be material.

ITEM 1A. RISK FACTORS.

In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

Our industry is highly cyclical, and prolonged periods of weak demand or excess supply may reduce our net sales and/or margins, which may reduce our net income or cause us to incur losses.

The building products distribution industry is subject to cyclical market pressures. Prices of building products are determined by overall supply and demand in the market for building products. Market prices of building products historically have been volatile and cyclical and we have limited ability to control the timing and amount of pricing changes for building products. Demand for building products is driven mainly by factors outside of our control, such as general economic and political conditions, interest rates, availability of mortgage financing, the construction, repair and remodeling and industrial markets, weather and population growth. The supply of building products fluctuates based on available manufacturing capacity, and excess capacity in the industry can result in significant declines in market prices for those products. To the extent that prices and volumes experience a sustained or sharp decline, our net sales and margins would likely decline as well. Our results in some periods have been affected by market volatility, including a reduction in gross profits due to a decline in the resale value of our structural products inventory. All of these factors make it difficult to forecast our operating results.

Further downward changes in demand for housing could negatively impact our business.

The residential homebuilding industry is sensitive to changes in economic conditions, including interest rates, foreclosure rates, and availability of financing. Further adverse changes in these conditions could further decrease demand for new homes. Additional declines in housing demand could result in lower pricing and demand for many of our building products which could have increased negative effects on our revenues and operating results.

Further disruptions in the capital and credit markets may impact the availability of credit and general business conditions.

If the financial institutions which extended credit commitments to us through our revolving credit facility are adversely affected by the conditions of the capital and credit markets, they may become unable to fund borrowings under those credit commitments, which could have an adverse impact on our financial condition and our ability to borrow funds, if needed, for working capital, capital expenditures, acquisitions and other corporate purposes.

Continued market disruptions could cause broader economic downturns, which may lead to lower demand for our products and increased incidence of customers’ inability to pay their accounts. Bankruptcies by our customers may cause us to incur bad debt expense at levels higher than historically experienced. Certain of our suppliers may potentially be impacted as well, causing disruption or delay of product availability. These events would adversely impact our results of operations, cash flows and financial position.

Our cash flows and capital resources may be insufficient to make required payments on our substantial indebtedness and future indebtedness.

We have a substantial amount of debt. As of January 2, 2010, advances outstanding under our revolving credit facility were approximately $56.0 million, borrowing availability was approximately $157.1 million and outstanding letters of credit on the facility were approximately $6.0 million. We also have a mortgage loan in the amount of $285.7 million.

Our substantial debt could have important consequences to you. For example, it could:

•

make it difficult for us to satisfy our debt obligations;

•

make us more vulnerable to general adverse economic and industry conditions;

•

limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other general corporate requirements;

•

expose us to interest rate fluctuations because the interest rate on the debt under our revolving credit facility is variable;

•

require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow for operations and other purposes;

•

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

•

place us at a competitive disadvantage compared to competitors that may have proportionately less debt.

In addition, our ability to make scheduled payments or refinance our obligations depends on our successful financial and operating performance, cash flows and capital resources, which in turn depend upon prevailing economic conditions and certain financial, business and other factors, many of which are beyond our control. These factors include, among others:

•

economic and demand factors affecting the building products distribution industry;

•

pricing pressures;

•

increased operating costs;

•

competitive conditions; and

•

other operating difficulties.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. Obtaining additional capital or restructuring our debt could be accomplished in part through new or additional borrowings or placements of debt or equity securities. There is no assurance that we could obtain additional capital or restructure our debt on terms acceptable to us or at all. In the event that we are required to dispose of material assets or operations to meet our debt service and other obligations, the value realized on such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things, be for a sufficient dollar amount. Our obligations under the revolving credit facility are secured by a first priority security interest in all of our operating company’s inventories, receivables and proceeds from those items. In addition, our mortgage loan is secured by the majority of our real property. The foregoing encumbrances may limit our ability to dispose of material assets or operations. We also may not be able to restructure our indebtedness on favorable economic terms, if at all. We may incur substantial additional indebtedness in the future, including under the revolving credit facility. Our incurrence of additional indebtedness would intensify the risks described above. As of January 2, 2010, we have no indications that the financial institutions included in our revolving credit facility would be unable to fulfill their commitments.

The instruments governing our indebtedness contain various covenants limiting the discretion of our management in operating our business.

Our revolving credit facility and mortgage loan contain various restrictive covenants and restrictions, including financial covenants customary for asset-based loans that limit our management’s discretion in operating our business. In particular, these instruments limit our ability to, among other things:

	•		incur additional debt;
	•		grant liens on assets;
	•		make investments, including capital expenditures;
	•		sell or acquire assets outside the ordinary course of business;
	•		engage in transactions with affiliates; and
	•		make fundamental business changes.

If we fail to maintain minimum excess availability of $40 million under the revolving credit facility, the revolving credit facility requires us to (i) maintain certain financial ratios and (ii) limit our capital expenditures. If we fail to comply with the restrictions in the revolving credit facility, the mortgage loan documents or any other current or future financing agreements, a default may allow the creditors under the relevant instruments to accelerate the related debt and to exercise their remedies under these agreements, which will typically include the right to declare the principal amount of that debt, together with accrued and unpaid interest and other related amounts, immediately due and payable, to exercise any remedies the creditors may have to foreclose on assets that are subject to liens securing that debt and to terminate any commitments they had made to supply further funds.

We depend upon a single supplier, Georgia-Pacific for a significant percentage of our products.

Georgia-Pacific is our largest supplier, accounting for approximately 16% and 21% of our purchases during fiscal 2009 and fiscal 2008, respectively. On May 7, 2004, we entered into a multi-year Master Purchase, Supply and Distribution Agreement (the “Supply Agreement”) with Georgia-Pacific. The Supply Agreement had a five-year initial term expiring on May 7, 2009. On June 6, 2008, Georgia-Pacific notified us of its intent to terminate this Supply Agreement, effective May 7, 2010. On April 27, 2009, we entered into a Termination and Modification Agreement (the “Modification Agreement”) related to our Supply Agreement with Georgia-Pacific. The Modification Agreement effectively terminates the existing Supply Agreement with respect to the distribution of Georgia-Pacific plywood, OSB and lumber by us. Exhibit B of the Supply Agreement, which covers

decorative paneling products, is excluded from the termination and shall remain in force until May 7, 2010. We will continue to distribute a variety of Georgia-Pacific building products, including Engineered Lumber, which is covered under a three-year purchase agreement dated February 12, 2009. If Georgia-Pacific and BlueLinx are unable to agree on supply arrangements for products other than engineered lumber or if Georgia-Pacific otherwise discontinues sales of product to us, we could experience a product shortage unless and until we obtain a replacement supplier or suppliers. We may not be able to obtain replacement products on favorable economic terms. An inability to replace products on favorable economic terms could adversely impact our net sales and our costs, which in turn could impact our gross profit, net income and cash flows.

Our industry is highly fragmented and competitive. If we are unable to compete effectively, our net sales and operating results will be reduced.

The building products distribution industry is highly fragmented and competitive and the barriers to entry for local competitors are relatively low. Some of our competitors are part of larger companies and therefore have access to greater financial and other resources than us. In addition, certain product manufacturers sell and distribute their products directly to customers. Additional manufacturers of products distributed by us may elect to sell and distribute directly to end-users in the future or enter into exclusive supply arrangements with other distributors. Finally, we may not be able to maintain our costs at a level sufficiently low for us to compete effectively. If we are unable to compete effectively, our net sales and net income will be reduced.

Integrating acquisitions may be time-consuming and create costs that could reduce our operating results and cash flows.

We may elect to selectively pursue acquisitions. Any integration process may be complex and time consuming, may be disruptive to the business and may cause an interruption of, or a distraction of management’s attention from, the business as a result of a number of obstacles, including but not limited to:

•

the loss of key customers of the acquired company;

•

the incurrence of unexpected expenses and working capital requirements;

•

a failure of our due diligence process to identify significant issues or contingencies;

•

difficulties assimilating the operations and personnel of the acquired company;

•

difficulties effectively integrating the acquired technologies with our current technologies;

•

our inability to retain key personnel of acquired entities;

•

failure to maintain the quality of customer service;

•

our inability to achieve the financial and strategic goals for the acquired and combined businesses; and

•

difficulty in maintaining internal controls, procedures and policies.

Any of the foregoing obstacles, or a combination of them, could increase selling, general and administrative expenses in absolute terms and/or as a percentage of net sales, which could in turn negatively impact our operating results and cash flows.

We may not be able to consummate acquisitions in the future on terms acceptable to us, or at all. In addition, future acquisitions are accompanied by the risk that the obligations and liabilities of an acquired company may not be adequately reflected in the historical financial statements of that company and the risk that those historical financial statements may be based on assumptions which are incorrect or inconsistent with our assumptions or approach to accounting policies. Any of these material obligations, liabilities or incorrect or inconsistent assumptions could adversely impact our results of operations.

A significant percentage of our employees are unionized. Wage increases or work stoppages by our unionized employees may reduce our results of operations.

As of January 2, 2010, approximately 30% of our employees were represented by various labor unions. As of January 2, 2010, we had 46 collective bargaining agreements, of which 8, covering 51 total employees, are up for renewal in 2010. We may become subject to material cost increases, or additional work rules imposed by agreements with labor unions. The foregoing could increase our selling, general and administrative expenses in absolute terms and/or as a percentage of net sales. In addition, work stoppages or other labor disturbances may occur in the future, which could adversely impact our net sales and/or selling, general and administrative expenses. All of these factors could negatively impact our operating results and cash flows.

Increases in the cost of employee benefits, such as pension and other postretirement benefits, could impact our financial results and cash flow.

Unfavorable changes in the cost of our pension retirement benefits and current employees’ medical benefits could materially impact our financial results and cash flow. We sponsor a number of defined benefit pension plans covering substantially all of our hourly employees. Our estimates of the amount and timing of our future funding obligations for our defined benefit pension plans are based upon various assumptions. These assumptions include, but are not limited to, the discount rate, projected return on plan assets, compensation increase rates, mortality rates, retirement patterns, and turnover rates. In addition, the amount and timing of our pension funding obligations can be influenced by funding requirements that are established by the Employee Retirement Income and Security Act of 1974 (ERISA), the Pension Protection Act, Congressional Acts, or other governing bodies. During 2009, we met our required contribution to our defined benefit pension plans. As of January 2, 2010, the net unfunded status of our benefit plan was $17.9 million. If the status of our defined benefit plan continues to be unfunded it could require future cash contributions.

We participate in various multi-employer pension plans in the U.S. The majority of these plans are underfunded. If, in the future, we choose to withdraw from these plans, we would likely need to record a withdrawal liability, which may be material to our financial results.

The payment of dividends has been suspended, and resumption is dependant on business conditions, among other factors; the instruments governing our indebtedness contain various covenants that may limit our ability to pay dividends.

In the past we have paid dividends on our common stock at the quarterly rate of $0.125 per share. However, on December 5, 2007, we suspended the payment of dividends on our common stock for an indefinite period of time. Resumption of the payment of dividends will depend on, among other things, business conditions in the housing industry, our results of operations, cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. Accordingly, we may not be able to resume the payment of dividends at the same quarterly rate in the future, if at all.

Federal and state transportation regulations could impose substantial costs on us which would reduce our net income.

We use our own fleet of over 600 trucks and over 1,100 trailers to service customers throughout the United States. The U.S. Department of Transportation, or DOT, regulates our operations in domestic interstate commerce. We are subject to safety requirements governing interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also remain subject to both federal and state regulation. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if we are unable to pass these cost increases on to our customers increase our selling, general and administrative expenses and reduce our operating results.

Environmental laws impose risks and costs on us.

Our operations are subject to federal, state, provincial and local laws, rules and regulations governing the protection of the environment, including, but not limited to, those regulating discharges into the air and water, the use, handling and disposal of hazardous or toxic substances, the management of wastes, the cleanup of contamination and the control of noise and odors. We have made, and will continue to make, expenditures to comply with these requirements. While we believe, based upon current information, that we are in substantial compliance with all applicable environmental laws, rules and regulations, we could be subject to potentially significant fines or penalties for any failure to comply. Moreover, under certain environmental laws, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of at that real property, may be held liable for the cost to investigate or clean up such real property and for related damages to natural resources. We may be subject to liability, including liability for investigation and cleanup costs, if contamination is discovered at one of our current or former warehouse facilities, or at a landfill or other location where we have disposed of, or arranged for the disposal of, wastes. Georgia-Pacific has agreed to indemnify us against any claim arising from environmental conditions that existed prior to May 7, 2004. We also carry environmental insurance. However, any remediation costs not related to conditions existing prior to May 7, 2004 may not be covered by indemnification. In addition, certain remediation costs may not be covered by insurance. In addition, we could be subject to claims brought pursuant to applicable laws, rules or regulations for property damage or personal injury resulting from the environmental impact of our operations. Increasingly stringent environmental requirements, more aggressive enforcement actions, the discovery of unknown conditions or the bringing of future claims may cause our expenditures for environmental matters to increase, and we may incur material costs associated with these matters.

Affiliates of Cerberus control us and may have conflicts of interest with other shareholders in the future.

Funds and accounts managed by Cerberus or its affiliated management companies, which are referred to collectively as the controlling shareholder, collectively own approximately 55% of our common stock. As a result, the controlling shareholder will continue to be able to control the election of our directors, determine our corporate and management policies and determine, without the consent of our other shareholders, the outcome of any corporate transaction or other matter submitted to our shareholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions.

Five of our ten directors are employees of or advisors to Cerberus. The controlling shareholder also has sufficient voting power to amend our organizational documents. The interests of the controlling shareholder may not coincide with the interests of other holders of our common stock. Additionally, the controlling shareholder is in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. The controlling shareholder may also pursue, for its own account, acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. So long as the controlling shareholder continues to own a significant amount of the outstanding shares of our common stock, it will continue to be able to strongly influence or effectively control our decisions, including potential mergers or acquisitions, asset sales and other significant corporate transactions. In addition, because we are a controlled company within the meaning of the New York Stock Exchange rules, we are exempt from the NYSE requirements that our board be composed of a majority of independent directors, and that our compensation and nominating/corporate governance committees be composed entirely of independent directors.

Even if Cerberus no longer controls us in the future, certain provisions of our charter documents and agreements and Delaware law could discourage, delay or prevent a merger or acquisition at a premium price.

Our Amended and Restated Certificate of Incorporation and Bylaws contain provisions that:

•

permit us to issue, without any further vote or action by the shareholders, up to 30 million shares of preferred stock in one or more series and, with respect to each series, to fix the number of shares constituting the series and the designation of the series, the voting powers (if any) of the shares of such series, and the preferences and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of the series; and

•

limit the shareholders’ ability to call special meetings.

These provisions may discourage, delay or prevent a merger or acquisition at a premium price.

In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which also imposes certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our common stock. Further, certain of our incentive plans provide for vesting of stock options and/or payments to be made to our employees in connection with a change of control, which could discourage, delay or prevent a merger or acquisition at a premium price.

We may incur substantial costs relating to Georgia-Pacific’s product liability related claims.

Georgia-Pacific is a defendant in suits brought in various courts around the nation by plaintiffs who allege that they have suffered personal injury as a result of exposure to products containing asbestos. These suits allege a variety of lung and other diseases based on alleged exposure to products previously manufactured by Georgia-Pacific. Although the terms of the asset purchase agreement provide that Georgia-Pacific will indemnify us against all obligations and liabilities arising out of, relating to or otherwise in any way in respect of any product liability claims (including, without limitation, claims, obligations or liabilities relating to the presence or alleged presence of asbestos-containing materials) with respect to products purchased, sold, marketed, stored, delivered, distributed or transported by Georgia-Pacific and its affiliates, including the Division prior to the acquisition, it could be possible that circumstances may arise under which asbestos-related claims against Georgia-Pacific could cause us to incur substantial costs.

For example, in the event that Georgia-Pacific is financially unable to respond to an asbestos product liability claim, plaintiffs’ lawyers may, in order to obtain recovery, attempt to sue us, in our capacity as owner of assets sold by Georgia-Pacific, despite the fact that the assets sold to us did not contain asbestos. Asbestos litigation has, over the years, proved unpredictable, as the aggressive and well-financed asbestos plaintiffs’ bar has been creative, and often successful, in bringing claims based on novel legal theories and on expansive interpretations of existing legal theories. These claims have included claims against companies that did not manufacture asbestos products. As a result of these factors, a number of companies have been held liable for amounts far in excess of their perceived exposure. Although we believe, based on our understanding of the law as currently interpreted, that we should not be held liable for any of Georgia-Pacific’s asbestos-related claims, and, to the contrary, that we would prevail on summary judgment on any such claims, there is nevertheless a possibility that new theories could be developed, or that the application of existing theories could be expanded, in a manner that would result in liability for us. Any such liability could ultimately be borne by us if Georgia-Pacific is unable to fulfill its indemnity obligation under the asset purchase agreement with us.

Anti-terrorism measures may harm our business by impeding our ability to deliver products on a timely and cost-effective basis.

In the event of future terrorist attacks or threats on the United States, federal, state and local authorities could implement various security measures, including checkpoints and travel restrictions on large trucks. Our customers typically need quick delivery and rely on our on-time delivery capabilities. If security measures disrupt or impede the timing of our deliveries, we may fail to meet the needs of our customers, or may incur increased expenses to do so.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

We operate warehouse facilities in over 65 markets nationwide. We own 60 warehouse facilities and lease 11 additional warehouse facilities. The total square footage under roof at our owned and leased warehouses is approximately 10 million square feet. Our Denver sales center and 55 of our owned warehouse facilities secure our mortgage loan.

Our corporate headquarters located at 4300 Wildwood Parkway, Atlanta, Georgia 30339 is approximately 250,000 square feet. During the fourth quarter of fiscal 2007, as part of a restructuring effort, we vacated approximately 100,000 square feet of our corporate headquarters space which we are actively seeking to sublease.

The following table summarizes our real estate facilities including their inside square footage:

Facility Type		Number				Owned Facilities (ft2)				Leased Facilities (ft2)
Office Space(1)			3				68,721				251,900
Warehouses			71				10,115,551				636,101
TOTAL			74				10,184,272				888,001

We also store materials outdoors, such as lumber and rebar, at all of our warehouse locations, which increases their distribution and storage capacity. We believe that substantially all of our property and equipment is in good condition, subject to normal wear and tear. We believe that our facilities have sufficient capacity to meet current and projected distribution needs.

ITEM 3. LEGAL PROCEEDINGS.

We are, and from time to time may be, a party to routine legal proceedings incidental to the operation of our business. The outcome of any pending or threatened proceedings is not expected to have a material adverse effect on our financial condition, operating results or cash flows, based on our current understanding of the relevant facts. We establish reserves for pending or threatened proceedings when the costs associated with such proceedings become probable and can be reasonably estimated.

ITEM 4. RESERVED.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our equity securities consist of one class of common stock. The common stock began trading on December 16, 2004. The common stock is traded on the New York Stock Exchange under the symbol “BXC”. The following table sets forth, for the periods indicated, the range of the high and low sales prices for the common stock as quoted on the New York Stock Exchange:

		High				Low
Fiscal Year Ended January 2, 2010
First Quarter		$	3.30			$	1.20
Second Quarter		$	4.60			$	2.25
Third Quarter		$	5.93			$	2.96
Fourth Quarter		$	4.12			$	2.60
Fiscal Year Ended January 3, 2009
First Quarter		$	5.97			$	2.96
Second Quarter		$	6.00			$	3.57
Third Quarter		$	7.54			$	2.91
Fourth Quarter		$	5.60			$	1.02

As of March 1, 2010, there were 46 registered shareholders, and, as of that date we estimate there were approximately 2,500 beneficial owners holding our common stock in nominee or “street” name.

We paid a cash dividend of $0.125 per share for each of our fiscal quarters beginning in March 2005 and continuing through the fourth quarter of 2007. However, on December 5, 2007, we suspended the payment of dividends on our common stock for an indefinite period of time. Resumption of the payment of dividends will depend on, among other things, business conditions in the housing industry, our results of operations, cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. See “Item 8. Financial Statements and Supplementary Data, Note 10. Revolving Credit Facility” for additional information regarding limitations on the ability of BlueLinx Corporation to transfer funds to its parent, BlueLinx Holdings Inc., which could impact our ability to pay dividends to our shareholders. Accordingly, we may not be able to resume the payment of dividends at the same quarterly rate in the future, if at all.

Equity Compensation Plan Information

The following table provides information about the shares of our common stock that may be issued upon the exercise of options and other awards under our existing equity compensation plans as of January 2, 2010. Our shareholder-approved equity compensation plans are the 2004 Equity Incentive Plan and the 2006 Long-Term Equity Incentive Plan. We do not have any non-shareholder approved equity compensation plans.

(a)

(b)

(c)

Number of Securities

Weighted-Average

Number of Securities Remaining

to be Issued Upon

Exercise Price of

Available for Future Issuance Under

Exercise of

Outstanding

Equity Compensation Plans

Outstanding Options,

Options, Warrants

(Excluding Securities Reflected in

Plan Category

Warrants and Rights

and Rights

Column (a))

Equity compensation plans approved by security holders

928,315

$

6.34

1,947,245

Equity compensation plans not approved by security holders

—

n/a

—

Total

928,315

$

6.34

1,947,245

Performance Graph

The chart below compares the quarterly percentage change in the cumulative total shareholder return on our common stock with the cumulative total return on the Russell 2000 Index and a peer group index for the period commencing January 1, 2005 and ending January 2, 2010, assuming an investment of $100 and the reinvestment of any dividends.

Our peer group index was selected by us and is comprised of reporting companies with lines of business and product offerings that are comparable to ours and which we believe most accurately represent our business. Our peer group consists of the following companies: Beacon Roofing Supply Inc., Builders Firstsource, Building Materials Holding Corporation, Huttig Building Products Inc., Interline Brands Inc., Universal Forest Products Inc. and Watsco Inc.

Cumulative Total Return
Years Ending

		Base Period
Company Name / Index		01/01/05				12/31/05				12/30/06				12/29/07				01/03/09				01/02/10
BlueLinx Holdings Inc.			100				81.02				78.14				32.44				20.72				22.87
Russell 2000 Index			100				104.55				123.76				122.73				82.30				103.34
Peer Group			100				147.29				124.39				76.73				65.30				88.15

Issuer Purchases of Equity Securities

On December 22, 2008, our Board approved a stock repurchase program to acquire up to $10,000,000 of our outstanding common stock through December 22, 2010. The share repurchases will be made from time to time at our discretion in the open market or privately negotiated transactions as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. The Board may modify, suspend, extend or terminate the program at any time.

														Approximate Dollar
										Total Number of				Value of Shares
		Total				Average				Shares Purchased as				that May Yet Be
		Number of				Price Paid				Part of Publicly				Purchased Under the
Period		Shares				Per Share				Announced Program				Program
October 4- November 3			—				—				711,852			$	8,136,649
November 4- December 3			8,532			$	2.73				720,384			$	8,113,357
December 4- January 2			51,664			$	2.95				772,048			$	7,960,948
Total			60,196			$	2.92				772,048			$	7,960,948

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth certain historical financial data of our Company. The selected financial data for the fiscal year ended January 2, 2010, the fiscal year ended January 3, 2009, the fiscal year ended December 29, 2007, the fiscal year ended December 30, 2006, and the fiscal year ended December 31, 2005 have been derived from our audited financial statements included elsewhere in this Annual Report on Form 10-K or from prior financial statements. The following information should be read in conjunction with our financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

		Year Ended				Year Ended				Year Ended				Year Ended				Year Ended
		January 2,				January 3,				December 29,				December 30,				December 31,
		2010				2009				2007				2006				2005
										(In thousands, except
										per share data)
Statement of Operations Data:
Net sales		$	1,646,108			$	2,779,699			$	3,833,910			$	4,899,383			$	5,622,071
Cost of sales			1,452,947				2,464,766				3,441,964				4,419,576				5,109,632
Gross profit			193,161				314,933				391,946				479,807				512,439
Operating expenses:
Selling, general and administrative			210,214				303,403				372,754				381,554				378,008
Net gain from terminating the Georgia-Pacific supply agreement			(17,772	)			—				—				—				—
Depreciation and amortization			16,984				20,519				20,924				20,724				18,770
Total operating expenses			209,426				323,922				393,678				402,278				396,778
Operating (loss) income			(16,265	)			(8,989	)			(1,732	)			77,529				115,661
Non-operating expenses (income):
Interest expense			32,456				38,547				43,660				46,164				42,311
Charges associated with the ineffective interest rate swap, net			6,252				—				—				—				—
Write-off of debt issue costs			1,407				—				—				4,864				—
Other expense (income), net			519				601				(370	)			320				186
(Loss) income before provision for (benefit from) income taxes			(56,899	)			(48,137	)			(45,022	)			26,181				73,164
Provision for (benefit from) income taxes			4,564				(16,434	)			(17,077	)			10,349				28,561
Net (loss) income		$	(61,463	)		$	(31,703	)		$	(27,945	)		$	15,832			$	44,603
Basic weighted average number of common shares outstanding			31,017				31,083				30,848				30,618				30,195
Basic net (loss) income per share applicable to common stock		$	(1.98	)		$	(1.02	)		$	(0.91	)		$	0.52			$	1.48
Diluted weighted average number of common shares outstanding			31,017				31,083				30,848				30,779				30,494
Diluted net (loss) income per share applicable to common stock		$	(1.98	)		$	(1.02	)		$	(0.91	)		$	0.51			$	1.46
Dividends declared per share of common stock		$	—			$	—			$	0.50			$	0.50			$	0.50

		Year Ended				Year Ended				Year Ended				Year Ended				Year Ended
		January 2,				January 3,				December 29,				December 30,				December 31,
		2010				2009				2007				2006				2005
										(In thousands, except
										per share data)
Other Financial Data:
Capital expenditures		$	1,815			$	4,919			$	13,141			$	9,601			$	12,744
EBITDA(1)			200				10,929				19,562				97,933				134,245
Net cash (used in) provided by operating activities			(19,853	)			190,390				79,842				63,204				124,937
Net cash provided by (used in) investing activities			12,636				985				(9,070	)			(18,170	)			(28,499	)
Net cash used in financing activities		$	(113,679	)		$	(56,781	)		$	(82,055	)		$	(42,312	)		$	(87,690	)
Balance Sheet Data (at end of period):
Cash and cash equivalents		$	29,457			$	150,353			$	15,759			$	27,042			$	24,320
Working capital			247,722				320,527				448,731				520,237				529,983
Total assets			546,846				729,178				883,436				1,004,362				1,157,640
Total debt(2)			341,669				444,870				478,535				532,462				540,850
Shareholders’ equity		$	50,820			$	102,852			$	154,823			$	189,399			$	183,852

A reconciliation of net cash (used in) provided by operating activities, the most directly comparable GAAP measure, to EBITDA for each of the respective periods indicated is as follows:

		Year Ended,				Year Ended				Year Ended				Year Ended				Year Ended
		January 2,				January 3,				December 29,				December 30,				December 31,
		2010				2009				2007				2006				2005
Net cash (used in) provided by operating activities		$	(19,853	)		$	190,390			$	79,842			$	63,204			$	124,937
Amortization of debt issue costs			(2,459	)			(2,479	)			(2,431	)			(2,628	)			(3,629	)
Net gain from terminating the Georgia-Pacific supply agreement			17,772				—				—				—				—
Payments from terminating the Georgia-Pacific supply agreement			(14,118	)			—				—				—				—
Vacant property charges, net			(1,222	)			(4,441	)			(11,037	)			—				—
Deferred income tax (provision) benefit			(24,220	)			2,935				9,526				3,700				368
Prepayment fees associated with sale of property			(616	)			(1,868	)			—				—				—
Gain on sale of properties			10,397				1,936				—				—				—
Gain from insurance settlement			—				—				1,698				—				—
Share-based compensation			(2,922	)			(2,614	)			(3,500	)			(3,137	)			(2,170	)
Excess tax benefits from share-based arrangements			—				81				20				891				71
Changes in assets and liabilities			421				(195,124	)			(81,139	)			(20,610	)			(56,204	)
Interest expense			32,456				38,547				43,660				46,164				42,311
Provision for (benefit from) income taxes			4,564				(16,434	)			(17,077	)			10,349				28,561
EBITDA		$	200			$	10,929			$	19,562			$	97,933			$	134,245

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Form 10-K. In addition to historical information, the following discussion and other parts of this Form 10-K contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by this forward-looking information due to the factors discussed under “Risk Factors,” “Cautionary Statement Concerning Forward-Looking Statements” and elsewhere in this Form 10-K.

Overview

Company Background

BlueLinx is a leading distributor of building products in the United States. As of January 2, 2010, we distributed more than 10,000 products to approximately 11,500 customers through our network of more than 70 warehouses and third-party operated warehouses which serve all major metropolitan markets in the United States. We distribute products in two principal categories: structural products and specialty products. Structural products include plywood, OSB, rebar and remesh, lumber and other wood products primarily used for structural support, walls and flooring in construction projects. Structural products represented approximately 44% and 50% of our fiscal 2009 and fiscal 2008 gross sales, respectively. Specialty products include roofing, insulation, moulding, engineered wood, vinyl products (used primarily in siding) and metal products (excluding rebar and remesh). Specialty products accounted for approximately 56% and 50% of our fiscal 2009 and fiscal 2008 gross sales, respectively.

A number of factors cause our results of operations to fluctuate from period to period. Many of these factors are seasonal or cyclical in nature. Conditions in the United States housing market are at historically low levels and continued to deteriorate throughout fiscal 2009. Our operating results have declined during the past three years as they are closely tied to U.S. housing starts. Additionally, the mortgage markets have experienced substantial disruption due to a rising number of defaults in the “subprime” market. This disruption and the related defaults have increased the inventory of homes for sale and also have caused lenders to tighten mortgage qualification criteria which further reduces demand for new homes. Forecasters continue to have a bearish outlook for the housing market, and we expect the downturn in new housing activity will continue to negatively impact our operating results for the foreseeable future. We continue to prudently manage our inventories, receivables and spending in this environment. However, along with many forecasters, we believe U.S. housing demand will improve in the long term based on population demographics and a variety of other factors.

Selected Factors that Affect our Operating Results

Our operating results are affected by housing starts, mobile home production, industrial production, repair and remodeling spending and non-residential construction. We believe a substantial percentage of our sales are directly related to new home construction.

Our operating results are also impacted by changes in product prices. Structural products prices can vary significantly based on short-term and long-term changes in supply and demand. The prices of specialty products also can vary from time to time, although they generally are significantly less variable than structural products.

The following table sets forth changes in net sales by product category, sales variances due to changes in unit volume and dollar and percentage changes in unit volume and price, in each case for fiscal 2009, fiscal 2008 and fiscal 2007:

Sales Revenue Variances by Product

		Fiscal 2009				Fiscal 2008				Fiscal 2007
		(Dollars in millions)
Sales by Category
Structural Products		$	738			$	1,422			$	2,098
Specialty Products			948				1,412				1,802
Other(1)			(40	)			(54	)			(66	)
Total Sales		$	1,646			$	2,780			$	3,834
Sales Variances
Unit Volume $ Change		$	(1,036	)		$	(1,161	)		$	(896	)
Price/Other(1)			(98	)			107				(169	)
Total $ Change		$	(1,134	)		$	(1,054	)		$	(1,065	)
Unit Volume % Change			(36.6	)%			(29.7	)%			(18.0	)%
Price/Other(1)			(4.2	)%			2.2	%			(3.7	)%
Total % Change			(40.8	)%			(27.5	)%			(21.7	)%

The following table sets forth changes in gross margin dollars and percentages by product category, and percentage changes in unit volume growth by product, in each case for fiscal 2009, fiscal 2008 and fiscal 2007:

		Fiscal 2009				Fiscal 2008				Fiscal 2007
		(Dollars in millions)
Gross Margin $ by Category
Structural Products		$	73			$	134			$	173
Specialty Products			132				200				238
Other(1)			(12	)			(19	)			(19	)
Total Gross Margin $		$	193			$	315			$	392
Gross Margin % by Category
Structural Products			9.9	%			9.4	%			8.2	%
Specialty Products			13.9	%			14.2	%			13.2	%
Total Gross Margin %			11.7	%			11.3	%			10.2	%
Unit Volume Change by Product
Structural Products			(40.3	)%			(34.6	)%			(19.2	)%
Specialty Products			(32.8	)%			(24.0	)%			(16.4	)%
Total Unit Volume Change %			(36.6	)%			(29.7	)%			(18.0	)%

The following table sets forth changes in net sales and gross margin by channel and percentage changes in gross margin by channel, in each case for fiscal 2009, fiscal 2008 and fiscal 2007:

		Fiscal 2009				Fiscal 2008				Fiscal 2007
		(Dollars in millions)
Sales by Channel
Warehouse/Reload		$	1,251			$	2,044			$	2,763
Direct			435				790				1,137
Other(1)			(40	)			(54	)			(66	)
Total		$	1,646			$	2,780			$	3,834
Gross Margin by Channel
Warehouse/Reload		$	177			$	284			$	344
Direct			28				50				67
Other(1)			(12	)			(19	)			(19	)
Total		$	193			$	315			$	392
Gross Margin % by Channel
Warehouse/Reload			14.1	%			13.9	%			12.5	%
Direct			6.4	%			6.3	%			5.9	%
Total			11.7	%			11.3	%			10.2	%

Fiscal Year

Our fiscal year is a 52- or 53-week period ending on the Saturday closest to the end of the calendar year. Fiscal year 2009 contained 52 weeks. Fiscal years 2008 and 2007 contained 53 weeks and 52 weeks, respectively.

Results of Operations

Fiscal 2009 Compared to Fiscal 2008

The following table sets forth our results of operations for fiscal 2009 and fiscal 2008.

						% of								% of
						Net								Net
		Fiscal 2009				sales				Fiscal 2008				sales
		(Dollars in thousands)
Net sales		$	1,646,108				100.0	%		$	2,779,699				100.0	%
Gross profit			193,161				11.7	%			314,933				11.3	%
Selling, general and administrative			210,214				12.8	%			303,403				10.9	%
Net gain from terminating the Georgia-Pacific Supply Agreement			(17,772	)			(1.1	)%			—				0.0	%
Depreciation and amortization			16,984				1.0	%			20,519				0.7	%
Operating loss			(16,265	)			(1.0	)%			(8,989	)			(0.3	)%
Interest expense, net			32,456				2.0	%			38,547				1.4	%
Changes associated with the ineffective interest rate swap, net			6,252				0.4	%			—				0.0	%
Write-off of debt issue costs			1,407				0.1	%			—				0.0	%
Other expense, net			519				0.0	%			601				0.0	%
Loss before benefit from income taxes			(56,899	)			(3.5	)%			(48,137	)			(1.7	)%
Provision for (benefit from) income taxes			4,564				0.3	%			(16,434	)			(0.6	)%
Net loss		$	(61,463	)			(3.7	)%		$	(31,703	)			(1.1	)%

Net sales. For the fiscal year ended January 2, 2010, net sales decreased by 40.8%, or $1.1 billion, to $1.6 billion. Sales during the fiscal year were negatively impacted by a 38.8% decline in housing starts. New home construction has a significant impact on our sales. Specialty sales, primarily consisting of roofing, specialty panels, insulation, moulding, engineered wood products, vinyl siding, composite decking and metal products (excluding rebar and remesh) decreased by $0.4 billion or 32.9% compared to fiscal 2008, due to a 32.8% decrease in unit volume and a 0.1% decrease in specialty product prices. Structural sales, including plywood, OSB, lumber and metal rebar, decreased by $0.7 billion, or 48.1% from a year ago, as a result of a 40.3% decrease in unit volume and 7.8% decrease in structural product prices.

Gross profit. Gross profit for fiscal 2009 was $193.2 million, or 11.7% of sales, compared to $314.9 million, or 11.3% of sales, in fiscal 2008. The decrease in gross profit dollars compared to fiscal 2008 was driven primarily by a decrease in specialty and structural product volumes of 32.9% and 40.3%, respectively, due to the ongoing slowdown in the housing market. Gross margin percentage increased by 40 basis points to 11.7% primarily due to an increase in specialty sales as a proportion of our total sales, a shift in channel mix, and continued price discipline.

Selling, general and administrative. Selling, general and administrative expenses for fiscal 2009 were $210.2 million, or 12.8% of net sales, compared to $303.4 million, or 10.9% of net sales, during fiscal 2008. The decline in selling, general, and administrative expenses included a $51.8 million decrease in payroll and payroll related cost due to a decrease in headcount; a $9.6 million decrease in fuel expense due to a decline in sales volume and fuel prices; a $10.4 million gain associated with the sale of certain real properties; and a $21.2 million decrease in other operating expenses as a result of the sales volume reduction that resulted in a corresponding reduction in variable costs.

Net gain from terminating the Georgia-Pacific Supply Agreement. During fiscal 2009, G-P agreed to pay us $18.8 million in exchange for our agreement to enter into the Modification Agreement one year earlier than the originally agreed upon May 7, 2010 termination date of the Supply Agreement. As a result of the termination, we recognized a net gain of $17.8 million during fiscal 2009 as a reduction to operating expense. The gain was net of a $1.0 million write-off of an intangible asset associated with the Supply Agreement.

Depreciation and amortization. Depreciation and amortization expense was $17.0 million for fiscal 2009, compared to $20.5 million for fiscal 2008. The $3.5 million decrease in depreciation and amortization is primarily related to a decrease in capital expenditures as a result of decreased demand coupled with a portion of our property and equipment becoming fully depreciated during fiscal 2009.

Operating loss. Operating loss for fiscal 2009 was $16.3 million, or 1.0% of sales, compared to an operating loss of $9.0 million, or 0.3% of sales, for fiscal 2008, reflecting the $121.8 million decline in gross profit that was offset by a $114.5 million decrease in operating expenses.

Interest expense, net. Interest expense for fiscal 2009 was $32.5 million compared to $38.5 million for fiscal 2008. The $6.1 million decline is due to the $103.2 million decrease in debt. In fiscal 2009, interest expense related to our revolving credit facility and mortgage was $11.0 million and $19.0 million (includes a $0.6 million prepayment penalty), respectively. In fiscal 2008, interest expense related to our revolving credit facility and mortgage was $14.8 million and $21.2 million (includes a $1.9 million prepayment penalty), respectively. In addition, interest expense included $2.5 million of debt issue cost amortization for fiscal 2009 and for fiscal 2008, respectively.

Changes associated with the ineffective interest rate swap, net. Changes associated with the ineffective interest rate swap recognized for fiscal 2009 were $6.3 million and were comprised of a $9.0 million charge related to the reduction of our borrowings outstanding under the revolving credit facility below the interest rate swap’s notional amount; $2.9 million of amortization of accumulated other comprehensive loss offset by income of $5.7 million related to fair value changes since the date of the reduction at which time we were no longer in a position to use hedge accounting.

Write-off of debt issue costs. During fiscal 2009, we permanently reduced our revolving loan threshold limit from $800.0 million to $500.0 million effective March 30, 2009. As a result, we recorded expense of $1.4 million for the write-off of deferred financing costs that had been capitalized associated with the portion of the revolver that was reduced in the first quarter of fiscal 2009.

Provision for (benefit from) income taxes. Our effective tax rate was (8.0)% and 34.1% for fiscal 2009 and fiscal 2008, respectively. The change in our effective tax rate for fiscal 2009 is largely due to a $29.3 million valuation allowance charge and other income tax expense items partially offset by a $20.4 million tax benefit related to current year losses that will be carried back to offset fiscal 2004 and 2005 income and a $5.6 million allocation of tax expense to other comprehensive income resulting in a current period tax benefit.

Net loss. Net loss for fiscal 2009 was $61.5 million, compared to $31.7 million for fiscal 2008 as a result of the previous factors.

On a per-share basis, basic and diluted loss applicable to common shareholders for fiscal 2009 were each $1.98. For fiscal 2008, basic and diluted loss per share were each $1.02.

Fiscal 2008 Compared to Fiscal 2007

The following table sets forth our results of operations for fiscal 2008 and fiscal 2007.

						% of								% of
						Net								Net
		Fiscal 2008				sales				Fiscal 2007				sales
		(Dollars in thousands)
Net sales		$	2,779,699				100.0	%		$	3,833,910				100.0	%
Gross profit			314,933				11.3	%			391,946				10.2	%
Selling, general and administrative			303,403				10.9	%			372,754				9.7	%
Depreciation and amortization			20,519				0.7	%			20,924				0.5	%
Operating loss			(8,989	)			(0.3	)%			(1,732	)			0.0	%
Interest expense			38,547				1.4	%			43,660				1.1	%
Other expense (income), net			601				0.0	%			(370	)			0.0	%
Loss before benefit from income taxes			(48,137	)			(1.7	)%			(45,022	)			(1.2	)%
Benefit from income taxes			(16,434	)			(0.6	)%			(17,077	)			(0.4	)%
Net loss		$	(31,703	)			(1.1	)%		$	(27,945	)			(0.7	)%

Net sales. For the fiscal year ended January 3, 2009, net sales decreased by 27.5%, or $1.1 billion, to $2.8 billion. Sales during the fiscal year were negatively impacted by a 33.3% decline in housing starts. New home construction has a significant impact on our sales. Specialty sales, primarily consisting of roofing, specialty panels, insulation, moulding, engineered wood products, vinyl siding, composite decking and metal products (excluding rebar and remesh) decreased by $0.4 billion or 21.6% compared to fiscal 2007, primarily due to a 24.0% decrease in unit volume offset by an increase in price of 2.4%. Structural sales, including plywood, OSB, lumber and metal rebar, decreased by $0.7 billion, or 32.2% from a year ago, primarily as a result of a decrease in unit volume of 34.6% offset by an increase in price of 2.4%.

Gross profit. Gross profit for fiscal 2008 was $314.9 million, or 11.3% of sales, compared to $391.9 million, or 10.2% of sales, in fiscal 2007. The decrease in gross profit dollars compared to fiscal 2007 was primarily driven by a decrease in specialty and structural product volumes of 24.0% and 34.6%, respectively, due to the continued decline in the housing market and a lower of cost or market reserve charge of $3.4 million during fiscal 2008 related to a decline in prices for our structural metal inventory. The increase in gross margin percentage is primarily attributable to an increase in certain structural metal prices earlier in the year and a shift in product mix from structural to higher margin specialty products. Additionally, we estimate that the stock keeping unit (“SKU”) rationalization program, which was a program focused on the sale of slower moving inventory items, negatively impacted gross margin by approximately 30 basis points in fiscal 2007. Structural gross margin increased to 9.4% in fiscal 2008 from 8.2% in fiscal 2007. Specialty gross margin increased to 14.2% in fiscal 2008 from 13.2% a year ago.

Selling, general and administrative. Selling, general and administrative expenses for fiscal 2008 were $303.4 million, or 10.9% of net sales, compared to $372.8 million, or 9.7% of net sales, during fiscal 2007. The decline in selling, general, and administrative expenses included a $37.2 million net decrease in payroll and payroll related cost due to a decrease in headcount; a $8.7 million net decrease in rent expense due to facility consolidation charges of $11.5 million in fiscal 2007 offset by facility consolidation charges of $4.4 million in fiscal 2008; a $5.4 million decrease in general maintenance expenses due to a decline in sales volume; and a $18.0 million net decrease in other operating expenses as a result of our cost reduction initiatives.

Depreciation and amortization. Depreciation and amortization expense totaled $20.5 million for fiscal 2008, compared with $20.9 million for fiscal 2007. The decrease in depreciation and amortization is primarily due to a decrease in capital expenditures for mobile equipment consisting of trucks, trailers, forklifts and automobiles.

Operating loss. Operating loss for fiscal 2008 was $9.0 million versus an operating loss of $1.7 million for fiscal 2007 due to the above factors.

Interest expense. Interest expense for fiscal 2008 totaled $38.5 million, down $5.1 million from fiscal 2007, reflecting lower debt levels and lower interest rates. Interest expense related to our revolving credit facility, mortgage, and debt issue cost amortization was $14.8 million, $21.2 million (includes a $1.9 million prepayment penalty) and $2.5 million, respectively, for fiscal 2008 Interest expense totaled $43.7 million for fiscal 2007, which includes interest expense related to our revolving credit facility, mortgage, and related debt issue cost amortization of $22.3 million, $19.0 million, and $2.4 million, respectively.

Benefit from income taxes. Our effective tax rate was 34.1% and 37.9% for fiscal 2008 and fiscal 2007, respectively. The decrease in the effective tax rate was primarily due to a valuation allowance of $1.2 million recorded in fiscal 2008 primarily related to state income deferred tax assets, higher non-deductible amounts and provisions for U.S. taxes on unremitted earnings in foreign jurisdictions.

Net loss. Net loss for fiscal 2008 was $31.7 million, compared to net loss of $27.9 million for fiscal 2007.

On a per-share basis, basic and diluted loss applicable to common shareholders for fiscal 2008 were each $1.02. Basic and diluted loss per share for fiscal 2007 were each $0.91.

Seasonality

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These seasonal factors are common in the building products distribution industry. The first and fourth quarters are typically our slowest quarters due to the impact of poor weather on the construction market. Our second and third quarters are typically our strongest quarters, reflecting a substantial increase in construction due to more favorable weather conditions. Our working capital and accounts receivable and payable generally peak in the third quarter, while inventory generally peaks in the second quarter in anticipation of the summer building season. Although, we generally expect these trends to continue for the foreseeable future, we have reduced our inventory as part of our effort to manage to the current weakened demand environment in the housing market. Additionally, our accounts receivable balance has declined due to the weakened demand environment for the products we distribute.

Liquidity and Capital Resources

We depend on cash flow from operations and funds available under our revolving credit facility to finance working capital needs, capital expenditures, dividends and acquisitions. We believe that the amounts available from this and other sources will be sufficient to fund our routine operations and capital requirements for the foreseeable future.

The credit markets have recently experienced adverse conditions, which may adversely affect our lenders ability to fulfill their commitment under our revolving credit facility. Based on information available to us as of the filing date of this Form 10-K, we have no indications that the financial institutions included in our revolving credit facility would be unable to fulfill their commitments.

We may elect to selectively pursue acquisitions. Accordingly, depending on the nature of the acquisition, we may use cash or stock, or a combination of both, as acquisition currency. Our cash requirements may significantly increase and incremental cash expenditures will be required in connection with the integration of the acquired company’s business and to pay fees and expenses in connection with any acquisitions. To the extent that significant amounts of cash are expended in connection with acquisitions, our liquidity position may be adversely impacted. In addition, there can be no assurance that we will be successful in completing acquisitions in the future. For a discussion of the risks associated with our acquisition strategy, see the risk factor “Integrating acquisitions may be time-consuming and create costs that could reduce our net income and cash flows” set forth under Item 1A — Risk Factors.

The following tables indicate our working capital and cash flows for the periods indicated.

		January 2,				January 3,
		2010				2009
		(Dollars in thousands)
Working capital		$	247,722			$	320,527

		Year Ended				Year Ended				Year Ended
		January 2,				January 3,				December 29,
		2010				2009				2007
Cash flows (used in) provided by operating activities		$	(19,853	)		$	190,390			$	79,842
Cash flows provided by (used in) investing activities			12,636				985				(9,070	)
Cash flows used in financing activities			(113,679	)			(56,781	)			(82,055	)

Working Capital

Working capital decreased by $72.8 million to $247.7 million at January 2, 2010 from $320.5 million at January 3, 2009. The reduction in working capital reflects an $11.3 million and $16.3 million reduction in inventory and receivables, respectively, and a usage of cash of $103.2 million to reduce debt. We have reduced inventory levels to meet existing demand, and the reduction in our accounts receivable balance is due to an overall decline in the housing market related to sales volume. The current asset reductions were offset by a reduction in the current portion of long-term debt of $60.0 million due to current year payments.

Operating Activities

During fiscal 2009, cash flows used in operating activities totaled $19.9 million. The primary driver of cash flow used in operations was a net loss, as adjusted for non-cash charges of $33.6 million and a decrease in accounts payable of $13.7 million due to a reduction in purchase volume associated with decreased demand resulting from market conditions. These cash outflows were offset by a decrease in inventories of $16.3 million to meet existing demand and a decrease in accounts receivable of $11.3 million due to an overall decline in the housing market related to sales volume.

During fiscal 2008, cash flows provided by operating activities totaled $190.4 million. The primary driver of cash flow from operations was a decrease in inventories of $146.4 million to meet existing demand and a decrease in accounts receivable of $132.5 million due to an overall decline in the housing market related to sales volume. These cash inflows were offset by a decrease in accounts payable of $86.4 million due to a reduction in purchase volume associated with decreased demand.

During fiscal 2007, cash flows provided by operating activities totaled $79.8 million. The primary driver of cash flow from operations was a decrease in inventories of $74.8 million to meet existing demand and a decrease in receivables of $44.4 million due to an overall decline in the housing market related to sales volume. These cash inflows were offset by a decrease in accounts payable of $31.1 million due to a decline in purchase volume associated with a decrease in demand.

Investing Activities

During fiscal 2009 and fiscal 2008, cash flows provided by investing activities totaled $12.6 million and $1.0 million, respectively.

During fiscal 2009 and fiscal 2008, our expenditures for property and equipment were $1.8 million and $4.9 million, respectively. These expenditures were used primarily to purchase computer equipment, leasehold improvements, and underground storage tanks. We estimate that capital expenditures for fiscal 2010 will be approximately $8 million. Of this amount, approximately $2 million is related to capital leases for new trucks. Our 2010 capital expenditures are anticipated to be paid from our operating cash.

Proceeds from the disposition of property and equipment were $14.5 million and $5.9 million during fiscal 2009 and fiscal 2008, respectively. During fiscal 2009, the proceeds of $14.5 million included $12.4 million related to the sale of certain real properties classified as held for sale assets included in “Other current assets” on our Consolidated Balance Sheets. For fiscal 2008, the proceeds of $5.9 million included $4.7 million of proceeds related to the sale of certain real properties classified as held for sale assets included in “Other current assets” on our Consolidated Balance Sheets.

During fiscal 2007, cash flows used in investing activities totaled $9.1 million. The primary driver of cash flows used for investing activities in fiscal 2007 was expenditures for property and equipment of $13.1 million. The expenditures for property and equipment were primarily for mobile equipment. Proceeds from the disposition of property totaled $4.1 million in fiscal 2007. The proceeds of $4.1 million included $2.6 million from an insurance settlement related to property damage from Hurricane Katrina.

Financing Activities

Net cash used in financing activities was $113.7 million during fiscal 2009 and $56.8 million during fiscal 2008. The net cash used in financing activities in fiscal 2009 primarily reflected payments on our revolving credit facility of $100.0 million, principal payments on our mortgage of $3.2 million, and an increase in restricted cash related to our mortgage of $10.3 million.

During fiscal 2008, the net cash used in financing activities primarily reflected payments on our revolving credit facility of $27.5 million, principal payments on our mortgage of $6.1 million, prepayment fees associated with principal payments on our mortgage of $1.9 million, and a decrease in bank overdrafts of $12.4 million

Net cash used in financing activities was $82.1 million during fiscal 2007. Net cash used in financing activities primarily reflected a net decrease in our revolving credit facility of $53.9 million, a decrease in bank overdrafts of $13.1 million, and common dividend payments of $15.6 million.

Debt and Credit Sources

As of January 2, 2010, we had outstanding borrowings of $56.0 million and excess availability of $157.1 million under the terms of our revolving credit facility. We classify the lowest projected balance of the credit facility over the next twelve months of $56.0 million as long-term debt. As of January 2, 2010 and January 3, 2009, we had outstanding letters of credit totaling $6.0 million and $12.9 million, respectively, for the purposes of securing collateral requirements under our interest rate swap, insurance programs and for guaranteeing payment of international purchases based on the fulfillment of certain conditions. Our revolving credit facility contains customary negative covenants and restrictions for asset based loans. The only covenant we deem material is a requirement that we maintain a fixed charge ratio of 1.1 to 1.0 in the event our excess availability falls below $40.0 million. The fixed charge ratio is calculated as EBITDA over the sum of cash payments for income taxes, interest expense, cash dividends, principal payments on debt, and capital expenditures. EBITDA is defined in our credit agreement as BlueLinx Corporation’s net income before interest and tax expense, depreciation and amortization expense, and other non-cash charges. The fixed charge ratio requirement only applies to us when excess availability under our revolving credit facility is less than $40.0 million for three consecutive business days. We had $157.1 million and $192.4 million of availability as January 2, 2010 and January 3, 2009, respectively. Our lowest level of availability in the last three years is $157.1 million as of January 2, 2010. We do not anticipate our excess availability will drop below $40.0 million in the foreseeable future.

Under our revolving credit facility agreement, we are required to maintain a springing lock-box arrangement where customer remittances go directly to a lock-box maintained by our lenders and then are forwarded to our general bank accounts. Our outstanding borrowings are not reduced by these payments unless our excess availability is less than $40.0 million for three consecutive business days or in the event of default. Due to this objective criteria established in our agreement, our revolving credit facility does not contain a subjective acceleration clause which would allow our lenders to accelerate the scheduled maturities of our debt or to cancel our agreement.

Effective March 30, 2009, we elected to permanently reduce our revolving loan threshold limit from $800 million to $500 million. This reduction does not impact our available borrowing capacity under our revolving credit facility as our current eligible accounts receivable and inventory (our “borrowing base”) do not support up to $800.0 million in borrowings. We do not anticipate our borrowing base will support borrowings in excess of $500.0 million at any point during the remaining life of the credit facility. This cost-saving initiative will allow us to reduce our interest expense by $0.8 million annually by lowering our unused line fees. As a result of this action, we recorded expense of $1.4 million for the write-off of deferred financing costs that had been capitalized.

On June 12, 2006, we entered into an interest rate swap agreement with Goldman Sachs Capital Markets, to hedge against interest rate risks related to our variable rate revolving credit facility. The interest rate swap has a notional amount of $150.0 million and the terms call for us to receive interest monthly at a variable rate equal to the 30-day LIBOR and to pay interest monthly at a fixed rate of 5.4%. This interest rate swap was designated as a cash flow hedge.

Through January 9, 2009, the hedge was highly effective in offsetting changes in expected cash flows. Fluctuations in the fair value of the ineffective portion, if any, of the cash flow hedge were reflected in earnings. During fiscal 2009, we reduced our borrowings under the revolving credit facility by $100.0 million, which reduced outstanding debt below the interest rate swap’s notional amount of $150.0 million, at which point the hedge became ineffective in offsetting future changes in expected cash flows during the remaining term of the interest rate swap. We used cash on hand to pay down this portion of our revolving credit debt during the first, second, and third quarters of fiscal 2009. As a result, changes in the fair value of the instrument were recorded through earnings from the point in time that the revolving credit facility balance was reduced below the interest rate swap’s notional amount of $150.0 million, which was during the first quarter of fiscal 2009. Charges associated with the ineffective interest rate swap recognized in the Consolidated Statement of Operations for fiscal 2009 were approximately $6.3 million and are comprised of a non-cash $9.0 million pro-rata reduction to accumulated other comprehensive loss with an offsetting charge to earnings related to reducing our borrowings outstanding by $100.0 million, amortization of the remaining accumulated other comprehensive loss over the life of the ineffective swap of $2.9 million, and income of $5.7 million related to fair value changes since the date of the reduction. The remaining $2.7 million of accumulated other comprehensive loss will be amortized over the remaining 16 month term of the interest rate swap and recorded as interest expense, of which $2.1 million will be amortized over the next 12 months. Any further reductions in borrowings under our revolving credit facility will result in a pro-rata reduction in accumulated other comprehensive loss at the payment date with a corresponding charge recorded to interest expense.

The following table presents a reconciliation of the unrealized losses related to our interest rate swap measured at fair value in accumulated other comprehensive loss as of January 2, 2010 (in thousands):

Balance at January 3, 2009		$	13,229
Unrealized losses in accumulated other comprehensive loss			1,429
Charges associated with ineffective interest rate swap recorded to interest expense			(11,983	)
Balance at January 2, 2010		$	2,675

The fair value of our swap liability at January 2, 2010 and January 3, 2009 was $8.9 million and $13.2 million, respectively.

Contractual Commitments. The following table represents our contractual commitments associated with our debt and other obligations disclosed above as of January 2, 2010.

		2010				2011				2012				2013				2014				Thereafter				Total
Revolving credit facility		$	—			$	50,000			$	—			$	—			$	—			$	—			$	50,000
Term loan facility(1)			—				6,000				—				—				—				—				6,000
Mortgage indebtedness			—				1,190				3,054				3,309				3,529				274,587				285,669
Interest payments on our revolving credit facility (2)			9,668				2,778				—				—				—				—				12,446
Interest payments on our mortgage (3)			18,392				18,380				18,276				18,021				17,802				27,707				118,578
Subtotal			28,060				78,348				21,330				21,330				21,331				302,294				472,693
Operating leases(4)			6,382				5,324				4,709				4,532				4,511				18,158				43,616
Letters of credit(5)			6,039				—				—				—				—				—				6,039
Total		$	40,481			$	83,672			$	26,039			$	25,862			$	25,842			$	320,452			$	522,348

Purchase orders entered into in the ordinary course of business are excluded from the above table. Amounts for which we are liable under purchase orders are reflected on our Consolidated Balance Sheets (to the extent entered into prior to the end of the applicable period) as accounts payable and accrued liabilities.

Critical Accounting Policies

The preparation of our consolidated financial statements and related disclosures in conformity U.S. generally accepted accounting principles requires our management to make judgments and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our management believes that we consistently apply these judgments and estimates and the consolidated financial statements and accompanying notes fairly represent all periods presented. However, any differences between these judgments and estimates and actual results could have a material impact on our Consolidated Statements of Operations and financial position. Critical accounting estimates, as defined by the Securities and Exchange Commission (“SEC”), are those that are most important to the portrayal of our financial condition and results of operations and require our management’s most difficult and subjective judgments and estimates of matters that are inherently uncertain. Our critical accounting estimates include those regarding (1) revenue recognition; (2) allowance for doubtful accounts and related reserves; (3) inventory valuation; (4) fair value measurements; (5) impairment of long-lived assets; and (6) income taxes. Our significant accounting policies are more fully described in the Notes to the Consolidated Financial Statements.

Revenue Recognition

We recognize revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have been rendered, our price to the buyer is fixed and determinable and collectibility is reasonably assured. Delivery is not considered to have occurred until the customer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. Revenue is recorded at the time of shipment for terms designated as FOB (free on board) shipping point. For sales transactions designated FOB destination, revenue is recorded when the product is delivered to the customer’s delivery site.

All revenues are recorded at gross. The key indicators used to determine when and how revenue is recorded are as follows:

	•		We are the primary obligor responsible for fulfillment and all other aspects of the customer relationship.
	•		Title passes to BlueLinx, and we carry all risk of loss related to warehouse and reload inventory and inventory shipped directly from vendors to our customers.
	•		We are responsible for all product returns.
	•		We control the selling price for all channels.
	•		We select the supplier.
	•		We bear all credit risk.

In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis. Customer consigned inventory is maintained and stored by certain customers; however, ownership and risk of loss remains with us. When the inventory is sold by the customer, we recognize revenue on a gross basis.

All revenues recognized are net of trade allowances, cash discounts and sales returns. Cash discounts and sales returns are estimated using historical experience. Trade allowances are based on the estimated obligations and historical experience. Adjustments to earnings resulting from revisions to estimates on discounts and returns have been insignificant for each of the reported periods.

Allowance for Doubtful Accounts and Related Reserves

We evaluate the collectibility of accounts receivable based on numerous factors, including past transaction history with customers and their creditworthiness. We maintain an allowance for doubtful accounts for each aging category on our aged trial balance based on our historical loss experience. This estimate is periodically adjusted when we become aware of specific customers’ inability to meet their financial obligations (e.g., bankruptcy filing or other evidence of liquidity problems). As we determine that specific balances will ultimately be uncollectible, we remove them from our aged trial balance. Additionally, we maintain reserves for cash discounts that we expect customers to earn as well as expected returns.

Inventory Valuation

Inventories are carried at the lower of cost or market. The cost of all inventories is determined by the moving average cost method. We include all charges directly or indirectly incurred in bringing inventory to its existing condition and location. We evaluate our inventory value at the end of each quarter to ensure that first quality, actively moving inventory, when viewed by category, is carried at the lower of cost or market.

Additionally, we maintain a reserve for the estimated value impairment associated with damaged, excess and obsolete inventory. The damaged, excess and obsolete reserve generally includes discontinued items or inventory that has turn days in excess of 270 days, excluding new items during their product launch.

Fair Value Measurements

We are exposed to market risks from changes in interest rates, which may affect our operating results and financial position. When deemed appropriate, we minimize our risks from interest rate fluctuations through the use of an interest rate swap. This derivative financial instrument is used to manage risk and is not used for trading or speculative purposes. The swap is valued using a valuation model that has inputs other than quoted market prices that are both observable and unobservable.

We endeavor to utilize the best available information in measuring the fair value of the interest rate swap. The interest rate swap is classified in its entirety based on the lowest level of input that is significant to the fair value measurement. To determine fair value of the interest rate swap we used the discounted estimated future cash flows methodology. Assumptions critical to our fair value in the period were: (i) the present value factors used in determining fair value (ii) projected LIBOR, and (iii) the risk of counterparty non-performance risk. These and other assumptions are impacted by economic conditions and expectations of management. We have determined that the fair value of our interest rate swap is a level 3 measurement in the fair value hierarchy as defined in Note 13 of this Annual Report on Form 10-K. The level 3 measurement is the risk of counterparty non-performance on the interest rate swap liability that is not secured by cash collateral. The affect of counterparty non-performance is immaterial due to the fact that 75% of the swap was covered by cash collateral.

Impairment of Long-Lived Assets

Long-lived assets, including property and equipment and intangible assets with definite useful lives, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.

We evaluate our long-lived assets each quarter for indicators of potential impairment. Indicators of impairment include current period losses combined with a history of losses, management’s decision to exit a facility, reductions in the fair market value of real properties and changes in other circumstances that indicate the carrying amount of an asset may not be recoverable.

Our evaluation of long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual distribution facility. In the event of indicators of impairment, the assets of the distribution facility are evaluated by comparing the facility’s undiscounted cash flows over the estimated useful life of the asset, which ranges between 5-20 years, to its carrying value. If the carrying value is greater than the undiscounted cash flows, an impairment loss is recognized for the difference between the carrying value of the asset and the estimated fair market value. Impairment losses are recorded as a component of “Selling, general and administrative” expense in the Consolidated Statements of Operations.

Our estimate of undiscounted cash flows is subject to assumptions that affect estimated operating income at a distribution facility level. These assumptions are related to future sales, margin growth rates, economic conditions, market competition and inflation. Our estimates of fair market value are generally based on market appraisals and our experience with related market transactions. We use a historical average of income, with no growth factor assumption, to estimate undiscounted cash flows. These assumptions used to determine impairment are considered to be level 3 measurements in the fair value hierarchy as defined in Note 13 of this Annual Report on Form 10-K.

Currently, we are experiencing a reduction in operating income at the distribution facility level due to the ongoing downturn in the housing market. To the extent that reductions in volume and operating income have resulted in impairment indicators, in most cases our carrying values continue to be less than our projected undiscounted cash flows. We had approximately $36 million, out of the $137.2 million in net book value as of January 2, 2010, in fixed assets for which the undiscounted cash flows were less than the carrying values of the assets. The fair value of these assets, primarily real estate, exceeded the carrying value by approximately $30 million. As such, we have not identified significant known trends impacting the fair value of long-lived assets to an extent that would indicate impairment.

Income Taxes

As of January 2, 2010, our deferred income tax assets were $27.2 million with a full valuation allowance. Deferred income tax assets and income tax benefits are recognized for temporary differences between amounts recorded for financial reporting and income tax purposes. In evaluating our ability to recover our deferred income tax assets, we considered the four sources of taxable income that should be considered when determining whether a valuation allowance is required including (from least to most subjective):

•

taxable income in prior carryback years, if carryback is permitted under the tax law;

•

future reversals of existing taxable temporary differences (i.e., offset gross deferred tax assets against gross deferred tax liabilities);

•

tax planning strategies; and

•

future taxable income exclusive of reversing temporary differences and carryforwards.

In estimating future taxable income, we develop assumptions including the amount of future state and federal pretax operating and non-operating income, the reversal of temporary differences and the implementation of feasible prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income. Substantial changes in these assumptions could result in changes in our judgments around our ability to realize future tax benefit.

Recently Issued Accounting Pronouncements

In July 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. This Form 10-K for the year ending January 2, 2010 and all subsequent public filings will reference the Codification as the sole source of authoritative literature.

In May 2009, the FASB issued guidance on subsequent events that establishes authoritative accounting and disclosure guidance for recognized and non-recognized subsequent events that occur after the balance sheet date but before financial statements are issued. The guidance also requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. This guidance was effective for us beginning with our Quarterly Report on Form 10-Q for the second quarter and first six months of fiscal 2009, and will be applied prospectively.

In April 2009, the FASB issued guidance which will require that the fair value disclosures required for all financial instruments be included in interim financial statements. This guidance also requires entities to disclose the method and significant assumptions used to estimate the fair value of financial instruments on an interim and annual basis and to highlight any changes from prior periods. This guidance was effective for us during the third quarter of fiscal 2009. The adoption of this guidance did not have a material impact on our Consolidated Financial Statements.

In December 2008, the FASB issued new guidance on retirement benefits. This guidance requires enhanced disclosures about the plan assets of our defined benefit pension and other postretirement plans. The enhanced disclosures are intended to provide users of financial statements with a greater understanding of: (1) how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies; (2) the major categories of plan assets; (3) the inputs and valuation techniques used to measure the fair value of plan assets; (4) the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and (5) significant concentrations of risk within plan assets. This new guidance is applicable to employers that are subject to the disclosure requirements and is effective for fiscal years ending after December 15, 2009. For additional information, refer to Note 8 in our Notes to the Consolidated Financial Statements.

In June 2008, the FASB issued new guidance on earnings per share. Under this new guidance, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of earnings per share under the two-class method. This guidance was effective for us on January 4, 2009 and requires all presented prior-period earnings per share data to be adjusted retrospectively. For additional information, refer to Note 2 of the Notes to Consolidated Financial Statements.

In April 2008, the FASB issued new guidance on intangible assets other than goodwill. This guidance amends the factors to be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. We adopted this guidance on January 4, 2009. The adoption of this guidance could have a material impact on our Consolidated Financial Statements in the future if acquisitions are made.

In March 2008, the FASB issued new guidance on derivatives and hedging. This guidance seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, this guidance requires (1) the disclosure of the fair value of derivative instruments and gains and losses in a tabular format; (2) the disclosure of derivative features that are credit risk-related; and (3) cross-referencing within the footnotes. This guidance was effective for us, on a prospective basis, on January 4, 2009. For additional information, refer to Note 12 of the Notes to Consolidated Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

General. We are exposed to risks such as changes in interest rates, commodity prices and foreign currency exchange rates. We employ a variety of practices to manage these risks including the use of derivative instruments. Derivative instruments are used only for risk management purposes and not for speculation or trading, and are not used to address risks related to foreign currency exchange rates. We record derivative instruments as assets or liabilities on the balance sheet at fair value. The following discussion provides additional information regarding our market risk exposure.

Interest Rates. Our revolving credit facility accrues interest based on a floating benchmark rate (the prime rate or LIBOR rate), plus an applicable margin. A change in interest rates under the revolving credit facility would have an impact on our results of operations. A change of 100 basis points in the market rate of interest would have an immaterial impact based on borrowings outstanding at January 2, 2010. Additionally, to the extent changes in interest rates impact the housing market, we would be impacted by such changes.

On June 9, 2006, certain special purpose entities that are wholly-owned subsidiaries of ours entered into a $295 million mortgage loan with the German American Capital Corporation. The mortgage has a term of ten years and a fixed interest rate of 6.35%. By entering into this mortgage, we insulated ourselves from changes in market interest rates on a portion of our indebtedness. This mortgage replaced our previously existing $165 million floating rate mortgage, which had a 7.4% interest rate when it was terminated.

Foreign Exchange Rates. Less than 1.0% of our net sales are denominated in currencies other than the U.S. dollar, and we do not believe our total exposure to currency fluctuations to be significant.

Commodity Prices. We believe that general inflation did not significantly affect our operating results or markets in fiscal 2009, fiscal 2008 or fiscal 2007. As discussed above, our results of operations were both favorably and unfavorably impacted by increases and decreases in the pricing of certain commodity-based products. Commodity price fluctuations have from time to time created cyclicality in our financial performance and may do so in the future.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Financial Statements and Supplemental Data

		Page
Management’s Report on Internal Control Over Financial Reporting			36
Reports of Independent Registered Public Accounting Firm to the Board of Directors and Shareholders of BlueLinx Holdings Inc.			37
Consolidated Balance Sheets			39
Consolidated Statements of Operations and Comprehensive Loss			40
Consolidated Statements of Cash Flows			41
Consolidated Statements of Shareholders’ Equity			42
Notes to Consolidated Financial Statements			43

BLUELINX HOLDINGS INC. AND SUBSIDIARIES

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders of BlueLinx Holdings Inc.:

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.

Our management, including our chief executive officer and our chief financial officer, does not expect that our internal controls over financial reporting will prevent all errors and all fraud. Internal controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal controls are met. Given the inherent limitations of internal controls, internal controls over financial reporting may not prevent or detect all misstatements or fraud. Therefore, no evaluation of internal control can provide absolute assurance that all control issues or instances of fraud will be prevented or detected.

Management assessed the effectiveness of our internal control over financial reporting as of January 2, 2010. In making this assessment, management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission set forth in Internal Control — Integrated Framework. Based on our assessment, our management concluded that, as of January 2, 2010, our internal control over financial reporting was effective.

Ernst & Young LLP, an independent registered public accounting firm that audited our consolidated financial statements as of and for the year ended January 2, 2010 included in this annual report on Form 10-K, has issued an attestation report on our internal control over financial reporting as of January 2, 2010, dated March 2,2010.

March 2, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Shareholders of BlueLinx Holdings Inc. and subsidiaries

We have audited BlueLinx Holdings Inc. and subsidiaries’ internal control over financial reporting as of January 2, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). BlueLinx Holdings Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, BlueLinx Holdings Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of January 2, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2009 Consolidated Financial Statements of BlueLinx Holdings Inc. and subsidiaries and our report dated March 2, 2010 expressed an unqualified opinion thereon.

		/s/ Ernst & Young LLP

 
March 2, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON THE CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors and Shareholders of BlueLinx Holdings Inc. and subsidiaries

We have audited the accompanying consolidated balance sheets of BlueLinx Holdings Inc. and subsidiaries as of January 2, 2010 and January 3, 2009, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the years ended January 2, 2010, January 3, 2009, and December 29, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BlueLinx Holdings Inc. and subsidiaries at January 2, 2010 and January 3, 2009, and the consolidated results of their operations and their cash flows for the years ended January 2, 2010, January 3, 2009, and December 29, 2007, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), BlueLinx Holdings Inc. and subsidiaries’ internal control over financial reporting as of January 2, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2010 expressed an unqualified opinion thereon.

		/s/ Ernst & Young LLP

 
March 2, 2010

BLUELINX HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		January 2,				January 3,
		2010				2009
		(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents		$	29,457			$	150,353
Receivables, less allowances of $8,387 in fiscal 2009 and $10,114 in fiscal 2008			119,347				130,653
Inventories, net			173,185				189,482
Deferred income tax assets, net			—				11,868
Other current assets			44,970				34,122
Total current assets			366,959				516,478
Property and equipment:
Land and improvements			52,621				53,426
Buildings			96,145				96,159
Machinery and equipment			69,767				70,491
Construction in progress			791				2,035
Property and equipment, at cost			219,324				222,111
Accumulated depreciation			(82,141	)			(69,336	)
Property and equipment, net			137,183				152,775
Non-current deferred income tax assets, net			—				17,468
Other non-current assets			42,704				42,457
Total assets		$	546,846			$	729,178
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	64,618			$	78,367
Bank overdrafts			27,232				24,715
Accrued compensation			4,879				11,552
Current maturities of long-term debt			—				60,000
Other current liabilities			22,508				21,317
Total current liabilities			119,237				195,951
Non-current liabilities:
Long-term debt			341,669				384,870
Other non-current liabilities			35,120				45,505
Total liabilities			496,026				626,326
SHAREHOLDERS’ EQUITY
Common Stock, $0.01 par value, 100,000,000 shares authorized; 32,179,253 and 32,362,330 shares issued and outstanding at January 2, 2010 and January 3, 2009, respectively			322				323
Additional paid-in-capital			145,035				144,148
Accumulated other comprehensive loss			(8,375	)			(16,920	)
Accumulated deficit			(86,162	)			(24,699	)
Total shareholders’ equity			50,820				102,852
Total liabilities and shareholders’ equity		$	546,846			$	729,178

BLUELINX HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS

		Fiscal Year				Fiscal Year				Fiscal Year
		Ended				Ended				Ended
		January 2,				January 3,				December 29,
		2010				2009				2007
		(In thousands, except per share data)
Net sales		$	1,646,108			$	2,779,699			$	3,833,910
Cost of sales			1,452,947				2,464,766				3,441,964
Gross profit			193,161				314,933				391,946
Operating expenses:
Selling, general, and administrative			210,214				303,403				372,754
Net gain from terminating the Georgia-Pacific supply agreement			(17,772	)			—				—
Depreciation and amortization			16,984				20,519				20,924
Total operating expenses			209,426				323,922				393,678
Operating loss			(16,265	)			(8,989	)			(1,732	)
Non-operating expenses (income):
Interest expense			32,456				38,547				43,660
Changes associated with the ineffective interest rate swap, net			6,252				—				—
Write-off of debt issue costs			1,407				—				—
Other expense (income), net			519				601				(370	)
Loss before provision for (benefit from) income taxes			(56,899	)			(48,137	)			(45,022	)
Provision for (benefit from) from income taxes			4,564				(16,434	)			(17,077	)
Net loss		$	(61,463	)		$	(31,703	)		$	(27,945	)
Basic and diluted weighted average number of common shares outstanding			31,017				31,083				30,848
Basic and diluted net loss per share applicable to common shares outstanding		$	(1.98	)		$	(1.02	)		$	(0.91	)
Dividends declared per common share		$	—			$	—			$	0.50
Comprehensive loss:
Net loss		$	(61,463	)		$	(31,703	)		$	(27,945	)
Other comprehensive income (loss):
Foreign currency translation, net of taxes			1,173				(2,598	)			1,912
Unrealized net gain (loss) from pension plan, net of taxes			941				(15,997	)			5,856
Unrealized gain (loss) from ineffective interest rate swap, net of taxes			6,431				(3,751	)			(2,754	)
Comprehensive loss		$	(52,918	)		$	(54,049	)		$	(22,931	)