BLUELINX HOLDINGS INC.
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2005
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 1-32383
BlueLinx Holdings Inc.
(Exact name of registrant as specified in its charter)
     
Delaware   77-0627356
(State of Incorporation)   (I.R.S. Employer Identification No.)
     
4300 Wildwood Parkway, Atlanta, Georgia   30339
(Address of principal executive offices)   (Zip Code)
(770) 953-7000
(Registrant’s telephone number, including area code)
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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of August 5, 2005 there were 30,195,000 shares of BlueLinx Holdings Inc. common stock, par value $0.01, outstanding.
 
 

 


BLUELINX HOLDINGS INC.
Form 10-Q
For the Quarterly Period Ended July 2, 2005
INDEX
                 
            PAGE
PART I.          
             
Item 1.       3  
             
            3  
             
            5  
             
            6  
             
            7  
Item 2.       20  
Item 3.       30  
Item 4.       30  
PART II.          
Item 1.       31  
Item 4.       31  
Item 6.       32  
            33  
               
 EX-10.1 CONSULTING AGREEMENT WITH CERBERUS CAPITAL MANAGEMENT, L.P.
 EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
 EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
 EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
 EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLUELINX HOLDINGS INC.
(formerly ABP Distribution Holdings Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND BUILDING PRODUCTS DISTRIBUTION DIVISION
OF GEORGIA-PACIFIC CORPORATION
STATEMENT OF REVENUE AND DIRECT EXPENSES
(In thousands, except per share data)
(unaudited)
                           
    Second Quarter  
                      Distribution  
    BlueLinx     BlueLinx       Division  
    Period from     Period from       Period from  
    April 3, 2005     April 4, 2004       April 4,  
    to     to       2004 to  
    July 2, 2005     July 3, 2004       May 7, 2004  
Net sales
  $ 1,486,976     $ 955,612       $ 605,452  
Cost of sales
    1,371,295       866,084         532,339  
 
                   
Gross profit
    115,681       89,528         73,113  
 
                   
Operating expenses:
                         
Selling, general, and administrative
    87,948       61,652         45,106  
Depreciation and amortization
    4,557       2,317         1,744  
 
                   
Total operating expenses
    92,505       63,969         46,850  
 
                   
Operating income
    23,176       25,559         26,263  
Non-operating expenses:
                         
Interest expense
    10,656       6,794          
Other expense (income), net
    224       (173 )       307  
 
                   
Income before provision for income taxes
    12,296       18,938         25,956  
Provision for income taxes
    4,545       7,386         9,837  
 
                   
Net income
    7,751       11,552       $ 16,119  
 
                       
Less: Preferred stock dividends
          1,484            
 
                     
Net income applicable to common shareholders
  $ 7,751     $ 10,068            
 
                     
Basic weighted average number of common shares outstanding
    30,186       18,100            
 
                     
Basic net income per share applicable to common stock
  $ 0.26     $ 0.56            
 
                     
Diluted weighted average number of common shares outstanding
    30,476       19,288            
 
                     
Diluted net income per share applicable to common stock
  $ 0.25     $ 0.52            
 
                     
Dividends declared per share of common stock
  $ 0.125                    
 
                       
See accompanying notes.

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BLUELINX HOLDINGS INC.
(formerly ABP Distribution Holdings Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND BUILDING PRODUCTS DISTRIBUTION DIVISION
OF GEORGIA-PACIFIC CORPORATION
STATEMENT OF REVENUE AND DIRECT EXPENSES
(In thousands, except per share data)
(unaudited)
                           
    Six Months Ended  
                      Distribution  
    BlueLinx     BlueLinx       Division  
    Period from     Period from       Period from  
    January 2, 2005     Inception (March 8,       January 4,  
    to     2004) to       2004 to  
    July 2, 2005     July 3, 2004       May 7, 2004  
Net sales
  $ 2,838,595     $ 955,612       $ 1,885,334  
Cost of sales
    2,603,586       866,084         1,658,123  
 
                   
Gross profit
    235,009       89,528         227,211  
 
                   
Operating expenses:
                         
Selling, general, and administrative
    179,383       62,236         139,203  
Depreciation and amortization
    8,800       2,317         6,175  
 
                   
Total operating expenses
    188,183       64,553         145,378  
 
                   
Operating income
    46,826       24,975         81,833  
Non-operating expenses:
                         
Interest expense
    19,990       6,794          
Other expense (income), net
    353       (173 )       614  
 
                   
Income before provision for income taxes
    26,483       18,354         81,219  
Provision for income taxes
    10,314       7,158         30,782  
 
                   
Net income
    16,169       11,196       $ 50,437  
 
                       
Less: Preferred stock dividends
          1,484            
 
                     
Net income applicable to common shareholders
  $ 16,169     $ 9,712            
 
                     
Basic weighted average number of common shares outstanding
    30,170       18,100            
 
                     
Basic net income per share applicable to common stock
  $ 0.54     $ 0.54            
 
                     
Diluted weighted average number of common shares outstanding
    30,458       19,288            
 
                     
Diluted net income per share applicable to common stock
  $ 0.53     $ 0.50            
 
                     
Dividends declared per share of common stock
  $ 0.25                
 
                     
See accompanying notes.

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BLUELINX HOLDINGS INC.
(formerly ABP Distribution Holdings Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    BlueLinx     BlueLinx  
    July 2, 2005     January 1, 2005  
    (unaudited)          
Assets:
               
Current assets:
               
Cash
  $ 27,197     $ 15,572  
Receivables, net
    509,505       363,688  
Inventories, net
    486,133       500,231  
Deferred income taxes
    7,455       6,122  
Other current assets
    42,615       34,203  
 
           
Total current assets
    1,072,905       919,816  
 
           
Property, plant, and equipment:
               
Land and land improvements
    55,916       55,573  
Buildings
    94,083       93,133  
Machinery and equipment
    50,356       41,063  
Construction in progress
    88       5,089  
 
           
Property, plant, and equipment, at cost
    200,443       194,858  
Accumulated depreciation
    (14,794 )     (7,880 )
 
           
Property, plant, and equipment, net
    185,649       186,978  
Other non-current assets
    27,953       30,268  
 
           
Total assets
  $ 1,286,507     $ 1,137,062  
 
           
Liabilities:
               
Current liabilities:
               
Accounts payable
  $ 335,147     $ 270,271  
Bank overdrafts
    42,493       32,033  
Accrued compensation
    8,541       18,292  
Current maturities of long-term debt
    124,595       94,103  
Other current liabilities
    13,246       13,142  
 
           
Total current liabilities
    524,022       427,841  
 
           
Non-current liabilities
               
Long-term debt
    590,000       558,000  
Deferred income taxes
    762       740  
Other long-term liabilities
    11,798       8,989  
 
           
Total liabilities
    1,126,582       995,570  
 
           
Shareholder’s Equity:
               
Common Stock, $0.01 par value, 100,000,000 shares authorized; 30,195,000 and 29,500,000 shares issued and outstanding at July 2, 2005 and January 1, 2005, respectively
    302       295  
Additional paid-in-capital
    131,301       121,306  
Accumulated other comprehensive income (loss)
    (981 )     (789 )
Retained earnings
    29,303       20,680  
 
           
Total shareholders’ equity
    159,925       141,492  
 
           
Total liabilities and shareholders’ equity
  $ 1,286,507     $ 1,137,062  
 
           
See accompanying notes.

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BLUELINX HOLDINGS INC.
(formerly ABP Distribution Holdings Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND
BUILDING PRODUCTS DISTRIBUTION DIVISION
OF GEORGIA-PACIFIC CORPORATION
STATEMENT OF DIRECT CASH FLOWS
(In thousands)
(unaudited)
                           
    Six Months Ended  
                      Distribution  
            BlueLinx       Division  
    BlueLinx Period     Period from       Period from  
    from January 2,     Inception (March 8,       January 4,  
    2005 to     2004) to       2004 to  
    July 2, 2005     July 3, 2004       May 7, 2004  
Cash flows from operating activities:
                         
Net income
  $ 16,169     $ 11,196       $ 50,437  
Adjustments to reconcile net income to cash (used in) provided by operations:
                         
Depreciation and amortization
    8,800       2,317         6,175  
Amortization of debt issue costs
    1,893       459          
Deferred income tax (benefit) provision
    (1,311 )     (2,255 )       9,183  
Changes in assets and liabilities:
                         
Receivables
    (145,817 )     56,794         (292,350 )
Inventories
    14,098       1,348         (145,689 )
Accounts payable
    64,876       20,938         257,772  
Changes in other working capital
    (17,446 )     (2,267 )       2,464  
Other
    1,992       396         (1,974 )
 
                   
Net cash (used in) provided by operating activities
    (56,746 )     88,926         (113,982 )
 
                   
Cash flows from investing activities:
                         
Acquisition of operating assets of division
          (776,307 )        
Property, plant and equipment investments
    (6,323 )     (141 )       (1,378 )
Proceeds from sale of assets
    650               252  
 
                   
Net cash used in investing activities
    (5,673 )     (776,448 )       (1,126 )
 
                   
Cash flows from financing activities:
                         
Net transactions with Georgia-Pacific Corporation
                  88,352  
Issuance of preferred stock
          95,000          
Issuance of common stock, net
    8,600       5,000          
Proceeds from stock options exercised
    38                
Net increase in revolving credit facility
    62,492       451,769          
Proceeds from issuance of term loan
          100,300          
Proceeds from issuance of mortgage payable
          100,000          
Fees paid to issue debt
          (15,192 )        
Increase (decrease) in bank overdrafts
    10,460       (16,921 )       26,250  
Common dividends paid
    (7,546 )              
 
                   
Net cash provided by financing activities
    74,044       719,956         114,602  
 
                   
Increase (decrease) in cash
    11,625       32,434         (506 )
Balance, beginning of period
    15,572               506  
 
                   
Balance, end of period
  $ 27,197     $ 32,434       $  
 
                   
See accompanying notes.

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BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation and Background
     Basis of Presentation
     BlueLinx Holdings Inc. (“BlueLinx” or the “Company”) has prepared the accompanying Unaudited Condensed Consolidated Financial Statements, including its accounts and the accounts of its wholly-owned subsidiaries, in accordance with the instructions to Form 10-Q and therefore they do not include all of the information and notes required by accounting principles generally accepted in the United States (“GAAP”). These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended January 1, 2005, as filed with the Securities and Exchange Commission (“SEC”). The Company’s fiscal year is a 52- or 53-week period ending on the Saturday closest to the end of the calendar year. Fiscal year 2004 contained 52 weeks.
     The Company believes the accompanying Unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of its financial position, results of operations and cash flows for the periods presented. The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and such differences could be material. In addition, the operating results for interim periods may not be indicative of the results of operations for a full year. The Company is 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 Company was created on March 8, 2004 as a Georgia corporation named ABP Distribution Holdings Inc. On May 7, 2004, the Company and its operating subsidiary, BlueLinx Corporation, acquired the assets of the Building Products Distribution Division (the “Distribution Division”) of Georgia-Pacific Corporation (“Georgia-Pacific”), pursuant to an asset purchase agreement (the “Asset Purchase Agreement”). On August 30, 2004, ABP Distribution Holdings Inc. merged into BlueLinx Holdings Inc., a Delaware corporation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
     On December 17, 2004, the Company consummated an initial public offering of 9,500,000 shares of its common stock, par value $.01 per share, at the initial public offering price of $13.50 per share (the “Equity Offering”). On January 5, 2005, the underwriters for the Equity Offering exercised an option to purchase 685,000 additional shares of common stock to cover the over-allotment of shares in connection with the Equity Offering. The Company received net proceeds from the Equity Offering of $124 million (including net proceeds of $8.6 million from the exercise of the over-allotment option). Net proceeds from the offering and funds from the Company’s revolving credit facility were used (i) to repay the Company’s $100 million term loan plus accrued and unpaid interest thereon, and (ii) to redeem the remainder of the Company’s series A preferred stock, of which approximately $38.5 million was then outstanding, and pay all accrued and unpaid dividends thereon. Unamortized debt issue costs of approximately $3 million were written off upon retirement of the term loan.
     The financial statements of BlueLinx for the period from inception (March 8, 2004) to July 3, 2004 include the Company’s financial results during the period of time from March 8, 2004 until the purchase of the assets of the Distribution Division on May 7, 2004. The financial statements of the Distribution Division reflect the accounts and results of certain operations of the business conducted by the Distribution Division. The accompanying combined financial statements of the Distribution Division have been prepared from Georgia-Pacific’s historical accounting records and are presented on a carve-out basis reflecting these certain assets, liabilities, and operations. The

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Distribution Division was an unincorporated business of Georgia-Pacific and, accordingly, Georgia-Pacific’s net investment in these operations (parent’s net investment) was used in lieu of shareholder’s equity. All significant intradivision transactions have been eliminated. The financial statements are not necessarily indicative of the financial position, results of operations and cash flows that might have occurred had the Distribution Division been an independent entity not integrated into Georgia-Pacific’s other operations. Also, they may not be indicative of the actual financial position that might have otherwise resulted, or of future results of operations or financial position of the Distribution Division. The Company operates as one reportable segment.
2. Summary of Significant Accounting Policies
     Earnings per Common Share
     Basic and diluted earnings per share are computed by dividing net income less dividend requirements on the series A preferred stock, if applicable, by the weighted average number of common shares outstanding for the period. The Company redeemed all of its outstanding series A preferred stock during fiscal 2004.
     Except when the effect would be anti-dilutive, the diluted earnings per share calculation includes the dilutive effect of the assumed exercise of stock options using the treasury stock method.
     Inventory Valuation
     Inventories are valued at the lower of moving average cost or market. Prior to May 7, 2004, during the pre-acquisition period, the last-in, first-out (LIFO) method was used to determine the cost of those inventories purchased from Georgia-Pacific. The impact of the change in the LIFO reserve on cost of sales for the second quarter of fiscal 2004 and for the first six months of fiscal 2004 was $1.5 million and $3.4 million of expense, respectively. Inventories consist primarily of finished goods.
     Common Stock Dividends
     On March 10, 2005 the Company’s Board of Directors declared a quarterly dividend of $0.125 per share on the Company’s common stock. The dividend was paid on March 31, 2005 to shareholders of record as of March 20, 2005. Cerberus received a dividend of approximately $2.3 million as a result of its ownership of 18,100,000 shares of the Company’s common stock as of the record date.
     On May 8, 2005 the Company’s Board of Directors declared a quarterly dividend of $0.125 per share on the Company’s common stock. The dividend was paid on June 30, 2005 to shareholders of record as of June 15, 2005. The Company’s controlling shareholder, Cerberus ABP Investor LLC (“Cerberus”), received a dividend of approximately $2.3 million as a result of its ownership of 18,100,000 shares of the Company’s common stock as of the record date.
3. Comprehensive Income
     The calculation of comprehensive income is as follows (in thousands):
                         
    Second Quarter  
                    Distribution  
    BlueLinx     BlueLinx     Division  
    Period from     Period from     Period from  
    April 3, 2005     April 4, 2004     April 4,  
    to     to     2004 to  
    July 2, 2005     July 3, 2004     May 7, 2004  
Net income
  $ 7,751     $ 11,552     $ 16,119  
Other comprehensive income:
                       
Foreign currency translation, net of taxes
    (137 )     395       (439 )
 
                 
Comprehensive income
  $ 7,614     $ 11,947     $ 15,680  
 
                 

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    Six Months Ended  
                    Distribution  
    BlueLinx     BlueLinx     Division  
    Period from     Period from     Period from  
    January 2, 2005     Inception (March     January 4,  
    to     8, 2004) to     2004 to  
    July 2, 2005     July 3, 2004     May 7, 2004  
Net income
  $ 16,169     $ 11,196     $ 50,437  
Other comprehensive income:
                       
Foreign currency translation, net of taxes
    (192 )     395       (612 )
 
                 
Comprehensive income
  $ 15,977     $ 11,591     $ 49,825  
 
                 
4. Employee Benefits
Defined Benefit Pension Plans
     Most of our hourly employees participate in noncontributory defined benefit pension plans. These include a plan that is administered solely by us (the “hourly pension plan”) and union-administered multiemployer plans. Our funding policy for the hourly pension plan is based on actuarial calculations and the applicable requirements of federal law. The Company does not expect to make any contributions to the hourly pension plan in fiscal 2005. Benefits under the majority of plans for hourly employees (including multiemployer plans) are primarily related to years of service.
     Net periodic pension cost for our pension plans included the following:
                 
    Three Month     Six Month  
    Period from April 3,     Period from January 2,  
    2005 to July 2, 2005     2005 to July 2, 2005  
    (In thousands)  
Service cost
  $ 650     $ 1,300  
Interest cost on projected benefit obligation
    970       1,940  
Expected return on plan assets
    (1,208 )     (2,416 )
 
           
Net periodic pension cost
  $ 412     $ 824  
 
           
5. Revolving Credit Facility
     As of July 2, 2005, the Company had outstanding borrowings of $550 million and availability of $119 million under the terms of its revolving credit facility. Based on borrowing base limitations, the Company classifies the lowest projected balance of the credit facility over the next twelve months of $425 million as long-term debt.
     As of July 2, 2005 the Company had outstanding letters of credit totaling $7.4 million, primarily for the purposes of securing collateral requirements under the casualty insurance programs for the Company and for guaranteeing payment of international purchases based on the fulfillment of certain conditions.
6. Related Party Transactions
     Temporary Staffing Provider
     The Company uses Tandem Staffing Solutions (“Tandem”), an affiliate of Cerberus, as the temporary staffing company for its office located in Atlanta, Georgia. The Company incurred total expenses of $401,315 and $905,029

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for the second quarter of fiscal 2005 and for the first six months of fiscal 2005, respectively. As of July 2, 2005 and January 1, 2005, the Company had accounts payable in the amount of $70,000 and $136,000 to Tandem, respectively.
     For the period from inception (March 8, 2004) to July 3, 2004, the Company incurred total expenses of $303,160 related to Tandem.
     Consulting
     For the second quarter of fiscal 2005 and for the first six months of fiscal 2005, the Company incurred expenses in the amount of $100,600 for consulting services provided by Cerberus to the Company. As of July 2, 2005, the Company had accounts payable in the amount of $58,000 to Cerberus.
     Overhead Expense Reimbursement
     For the second quarter of fiscal 2005 and for the first six months of fiscal 2005, the Company incurred expenses in the amount of $26,891 and $43,675, respectively, related to reimbursements to Cerberus for various overhead expenses directly related to the Company’s business.
     For the period from inception (March 8, 2004) to July 3, 2004, the Company incurred total expenses of $135,742 related to reimbursements to Cerberus.
     Other Selling, General and Administrative
     The Company uses ATC Associates, Inc. (ATC) and SBI Group (SBI), Cerberus affiliates, for real estate surveys and IT consulting. These expenses totaled $44,615 and $72,076 for the second quarter of fiscal 2005 and for the first six months of fiscal 2005, respectively.
     For the period from inception (March 8, 2004) to July 3, 2004, the Company incurred total expenses of $307,729 and $32,851 related to ATC and SBI, respectively.
     Information Systems
     The Company purchased software licenses and a three year maintenance agreement from SSA Global Technologies, Inc., a Cerberus affiliate. These payments were directly related to the transfer of the Company’s existing financial reporting software from Georgia-Pacific. These payments totaled $0 and $242,611 for the second quarter of fiscal 2005 and for the first six months of fiscal 2005, respectively.
     Rental Car
     For the second quarter of fiscal 2005 and for the first six months of fiscal 2005, the Company incurred expenses for car rentals in the amount of $107,283 and $176,869, respectively. These services were provided by Alamo and National Car Rental, Cerberus affiliates.

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7. Commitments and Contingencies
     Operating Leases
     At July 2, 2005, total commitments of the Company under long-term, non-cancelable operating leases were as follows (in thousands):
         
2005
  $ 3,275  
2006
    6,469  
2007
    6,725  
2008
    6,639  
2009
    6,339  
Thereafter
    13,082  
 
     
Total
  $ 42,529  
 
     
     Certain of the Company’s operating leases have extension options.
     Environmental and Legal Matters
     The Company is involved in various legal proceedings incidental to its businesses and is subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which it operates. Management believes that the disposition of these matters will not have a materially adverse effect on the financial condition or results of operations of the Company.
     Collective Bargaining Agreements
     Approximately 35% of the Company’s total work force is covered by collective bargaining agreements. Collective bargaining agreements representing approximately 3% of the Company’s work force will expire within one year.
     Preference Claim
     On November 19, 2004, the Company received a letter from Wickes Lumber, or Wickes, asserting that approximately $16 million in payments received by the Distribution Division during the 90 day period prior to Wickes’ January 20, 2004 Chapter 11 filing were preferential payments under section 547 of the United States Bankruptcy Code. Although the ultimate outcome of this matter cannot be determined with certainty, the Company believes Wickes’ assertion to be without merit and, in any event, subject to one or more complete defenses, including, but not limited to, that the payments were made and received in the ordinary course of business and were in substantially contemporaneous exchange for new value given to Wickes. Accordingly, the Company has no plans to establish a reserve with respect to the asserted claim.
8. Subsequent Events
     On July 21, 2005, the Company’s Board of Directors declared a quarterly dividend of $0.125 per share on the Company’s common stock. The dividend will be paid on September 30, 2005 to shareholders of record as of September 15, 2005.
     On July 15, 2005, the Company completed the acquisition of the assets of California-based hardwood lumber company Lane Stanton Vance (“LSV”), formerly a unit of privately-held Hampton Distribution Companies. For the 12 months ended January 31, 2005, LSV had revenue of approximately $62 million. The Company believes that the acquisition will enhance its offerings for its industrial/manufactured housing customer base as well as its presence in the Western region.
     On July 14, 2005, the Company reached an agreement with Wachovia Bank, National Association, as agent, and the other signatories thereto to amend the terms of its existing revolving credit agreement. The Second Amendment to the Loan and Security Agreement originally dated May 7, 2004, as amended, will, among other things, increase

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the revolving loan limit to $800 million from $700 million and expand certain criteria for the Company’s borrowing base. The Company executed the amendment in order to increase its liquidity and provide it with the capacity to support future growth.
9. Unaudited Supplemental Condensed Consolidating/Combined Financial Statements
     The condensed consolidating financial information as of July 2, 2005 and January 1, 2005 and for the periods from April 3, 2005 to July 2, 2005 and January 2, 2005 to July 2, 2005 is provided pursuant to the requirements of Regulation S-X due to restrictions in the Company’s revolving credit facility that limit distributions by BlueLinx Corporation, a wholly-owned subsidiary of the Company, to BlueLinx Holdings Inc. (“Parent”), which, in turn, may limit the Company’s ability to pay dividends to holders of its common stock (see the Company’s Annual Report on Form 10-K for the year ended January 1, 2005, for a more detailed discussion of these restrictions and the terms of the facility). Also included in the supplemental condensed consolidated/combining financial statements are sixty-one single member limited liability companies, which are wholly owned by the Parent (the “LLC subsidiaries”). The LLC subsidiaries own certain warehouse properties that are occupied by BlueLinx Corporation, each under the terms of a master lease agreement. The warehouse properties collateralize a mortgage loan and are not available to satisfy the debts and other obligations of either the Parent or BlueLinx Corporation. The supplemental condensed combining financial statements for the period from April 4, 2004 to May 7, 2004 and January 4, 2004 to May 7, 2004 also present the financial position, results of operations and cash flows for the pre-acquisition period as if the current structure of the Company had been outstanding for each period presented.
     The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the period from April 3, 2005 to July 2, 2005 follows (in thousands):
                                         
    BlueLinx                          
    Holdings     BlueLinx     LLC              
    Inc.     Corporation     Subsidiaries     Eliminations     Consolidated  
Net sales
  $     $ 1,486,976     $ 4,900     $ (4,900 )   $ 1,486,976  
Cost of sales
          1,371,295                   1,371,295  
 
                             
Gross profit
          115,681       4,900       (4,900 )     115,681  
 
                             
Operating expenses:
                                       
Selling, general and administrative
    450       92,283       115       (4,900 )     87,948  
Depreciation and amortization
          3,482       1,075             4,557  
 
                             
Total operating expenses
    450       95,765       1,190       (4,900 )     92,505  
 
                             
Operating income (loss)
    (450 )     19,916       3,710             23,176  
Non-operating expenses:
                                       
Interest expense
          7,993       2,663             10,656  
Other expense, net
          224                   224  
 
                             
Income before (benefit) provision for income taxes
    (450 )     11,699       1,047             12,296  
(Benefit) provision for income taxes
    (175 )     4,313       407             4,545  
Equity in income (loss) of subsidiaries
    8,026                   (8,026 )      
 
                             
Net income (loss)
  $ 7,751     $ 7,386     $ 640     $ (8,026 )   $ 7,751  
 
                             
     The condensed combining statement of operations for BlueLinx Holdings Inc. for the period from April 4, 2004 to July 3, 2004 follows (in thousands):
                                         
    BlueLinx                          
    Holdings     BlueLinx     LLC              
    Inc.     Corporation     Subsidiaries     Eliminations     Consolidated  
Net sales
  $     $ 955,612     $ 2,308     $ (2,308 )   $ 955,612  
Cost of sales
          866,084                   866,084  
 
                             
Gross profit
          89,528       2,308       (2,308 )     89,528  
Operating expenses:
                                       
Selling, general and administrative
    155       63,789       16       (2,308 )     61,652  
Depreciation and amortization
          1,676       641             2,317  
 
                             
Total operating expenses
    155       65,465       657       (2,308 )     63,969  
 
                             
Operating income (loss)
    (155 )     24,063       1,651             25,559  
Other expenses (income):
                                       

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    BlueLinx                          
    Holdings     BlueLinx     LLC              
    Inc.     Corporation     Subsidiaries     Eliminations     Consolidated  
Interest expense
          5,178       1,616             6,794  
Other expense (income), net
          (173 )                 (173 )
 
                             
Income before provision (benefit) for income taxes
    (155 )     19,058       35             18,938  
Provision (benefit) for income taxes
    (60 )     7,432       14             7,386  
Equity in income (loss) of subsidiaries
    11,647                   (11,647 )      
 
                             
Net income (loss)
    11,552     $ 11,626     $ 21     $ (11,647 )     11,552  
 
                                 
Less: Preferred stock dividends
    1,484                         1,484  
 
                             
Net income attributable to common shareholders
  $ 10,068     $     $     $     $ 10,068  
 
                             
     The pre-acquisition condensed combining statement of operations of the Distribution Division for the period from April 4, 2004 to May 7, 2004 follows (in thousands):
                         
    Distribution              
    Division              
    Excluding              
    Warehouse     Warehouse        
    Properties     Properties     Combined  
Net sales
  $ 605,452     $     $ 605,452  
Cost of sales
    532,339             532,339  
 
                 
Gross profit
    73,113             73,113  
Operating expenses:
                       
Selling, general and administrative
    45,106             45,106  
Depreciation and amortization
    1,083       661       1,744  
 
                 
Total operating expenses
    46,189       661       46,850  
 
                 
Operating income (loss)
    26,924       (661 )     26,263  
Other expenses (income):
                       
Interest expense
                 
Other expense (income), net
    307             307  
 
                 
Income before provision (benefit) for income taxes
    26,617       (661 )     25,956  
Provision (benefit) for income taxes
    10,095       (258 )     9,837  
Equity in income (loss) of subsidiaries
                 
 
                 
Net income (loss)
  $ 16,522     $ (403 )   $ 16,119  
 
                 
     The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the period from January 2, 2005 to July 2, 2005 follows (in thousands):
                                         
    BlueLinx                          
    Holdings     BlueLinx     LLC              
    Inc.     Corporation     Subsidiaries     Eliminations     Consolidated  
Net sales
  $     $ 2,838,595     $ 9,800     $ (9,800 )   $ 2,838,595  
Cost of sales
          2,603,586                   2,603,586  
 
                             
Gross profit
          235,009       9,800       (9,800 )     235,009  
 
                             
Operating expenses:
                                       
Selling, general and administrative
    883       188,093       207       (9,800 )     179,383  
Depreciation and amortization
          6,649       2,151             8,800  
 
                             

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    BlueLinx                          
    Holdings     BlueLinx     LLC              
    Inc.     Corporation     Subsidiaries     Eliminations     Consolidated  
Total operating expenses
    883       194,742       2,358       (9,800 )     188,183  
 
                             
Operating income (loss)
    (883 )     40,267       7,442             46,826  
Non-operating expenses:
                                       
Interest expense
          14,954       5,036             19,990  
Other expense, net
          353                   353  
 
                             
Income before provision (benefit) for income taxes
    (883 )     24,960       2,406             26,483  
Provision (benefit) for income taxes
    (344 )     9,720       938             10,314  
Equity in income (loss) of subsidiaries
    16,708                   (16,708 )      
 
                             
Net income (loss)
  $ 16,169     $ 15,240     $ 1,468     $ (16,708 )   $ 16,169  
 
                             
     The condensed combining statement of operations for BlueLinx Holdings Inc. for the period from inception (March 8, 2004) to July 3, 2004 follows (in thousands):
                                         
    BlueLinx Holdings                          
    Inc.     BlueLinx Corporation     LLC Subsidiaries     Eliminations     Consolidated  
Net sales
  $     $ 955,612     $ 2,308     $ (2,308 )   $ 955,612  
Cost of sales
          866,084                   866,084  
 
                             
Gross profit
          89,528       2,308       (2,308 )     89,528  
Operating expenses:
                                       
Selling, general and administrative
    155       64,373       16       (2,308 )     62,236  
Depreciation and amortization
          1,676       641             2,317  
 
                             
Total operating expenses
    155       66,049       657       (2,308 )     64,553  
 
                             
Operating income (loss)
    (155 )     23,479       1,651             24,975  
Other expenses (income):
                                       
Interest expense
          5,178       1,616             6,794  
Other expense (income), net
          (173 )                 (173 )
 
                             
Income before provision (benefit) for income taxes
    (155 )     18,474       35             18,354  
Provision (benefit) for income taxes
    (60 )     7,204       14             7,158  
Equity in income (loss) of subsidiaries
    11,291                   (11,291 )      
 
                             
Net income (loss)
    11,196     $ 11,270     $ 21     $ (11,291 )     11,196  
 
                               
Less: Preferred stock dividends
    1,484                         1,484  
 
                             
Net income attributable to common shareholders
  $ 9,712     $     $     $     $ 9,712  
 
                             
     The pre-acquisition condensed combining statement of operations of the Distribution Division for the period from January 4, 2004 to May 7, 2004 follows (in thousands):
                         
    Distribution              
    Division              
    Excluding              
    Warehouse     Warehouse        
    Properties     Properties     Combined  
Net sales
  $ 1,885,334     $     $ 1,885,334  

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    Distribution              
    Division              
    Excluding              
    Warehouse     Warehouse        
    Properties     Properties     Combined  
Cost of sales
    1,658,123             1,658,123  
 
                 
Gross profit
    227,211             227,211  
Operating expenses:
                       
Selling, general and administrative
    139,203             139,203  
Depreciation and amortization
    3,786       2,389       6,175  
 
                 
Total operating expenses
    142,989       2,389       145,378  
 
                 
Operating income (loss)
    84,222       (2,389 )     81,833  
Other expenses (income):
                       
Interest expense
                 
Other expense (income), net
    614             614  
 
                 
Income before provision (benefit) for income taxes
    83,608       (2,389 )     81,219  
Provision (benefit) for income taxes
    31,687       (905 )     30,782  
Equity in income (loss) of subsidiaries
                 
 
                 
Net income (loss)
  $ 51,921     $ (1,484 )   $ 50,437  
 
                 
     The condensed consolidating balance sheet for BlueLinx Holdings Inc. as of July 2, 2005 follows (in thousands):
                                         
    BlueLinx                          
    Holdings     BlueLinx     LLC              
    Inc.     Corporation     Subsidiaries     Eliminations     Consolidated  
Assets:
                                       
Current assets:
                                       
Cash
  $     $ 27,197     $     $     $ 27,197  
Receivables
          509,505                   509,505  
Inventories
          486,133                   486,133  
Deferred income taxes
          7,455                   7,455  
Other current assets
    585       42,030                   42,615  
Intercompany receivable
    344             803       (1,147 )      
 
                             
Total current assets
    929       1,072,320       803       (1,147 )     1,072,905  
 
                             
Property, plant and equipment:
                                       
Land and land improvements
          1,755       54,161             55,916  
Buildings
          4,041       90,042             94,083  
Machinery and equipment
          50,356                   50,356  
Construction in progress
          88                   88  
 
                             
Property, plant and equipment, at cost
          56,240       144,203             200,443  
Accumulated depreciation
          (9,831 )     (4,963 )           (14,794 )
 
                             
Property, plant and equipment, net
          46,409       139,240             185,649  
Investment in subsidiaries
    158,996                   (158,996 )      
Deferred income taxes
          2,934             (2,934 )      
Other non-current assets
          23,375       4,578             27,953  
 
                             
Total assets
  $ 159,925     $ 1,145,038     $ 144,621     $ (163,077 )   $ 1,286,507  
 
                             
Liabilities:
                                       
Current liabilities :
                                       
Accounts payable
  $     $ 335,147     $     $     $ 335,147  
Bank overdrafts
          42,493                   42,493  
Accrued compensation
          8,541                   8,541  
Current maturities of long-term debt
          124,595                   124,595  
Other current liabilities
          11,032       2,214             13,246  
Intercompany payable
          803       344       (1,147 )      
 
                             
Total current liabilities
          522,611       2,558       (1,147 )     524,022  
 
                             
Non-current liabilities:
                                       
Long-term debt
          425,000       165,000             590,000  
Deferred income taxes
                3,696       (2,934 )     762  
Other long-term liabilities
          10,973       825             11,798  
 
                             
Total liabilities
          958,584       172,079       (4,081 )     1,126,582  
 
                             
Shareholders’ Equity/Parent’s Investment
    159,925       186,454       (27,458 )     (158,996 )     159,925  
 
                             
Total liabilities and equity
  $ 159,925     $ 1,145,038     $ 144,621     $ (163,077 )   $ 1,286,507  
 
                             

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     The condensed consolidating balance sheet for BlueLinx Holdings Inc. as of January 1, 2005 follows (in thousands):
                                         
    BlueLinx                          
    Holdings     BlueLinx     LLC              
    Inc.     Corporation     Subsidiaries     Eliminations     Consolidated  
Assets:
                                       
Current assets:
                                       
Cash
  $ 3     $ 15,569     $     $     $ 15,572  
Receivables, net
          363,688                   363,688  
Inventories, net
          500,231                   500,231  
Deferred income tax assets
          6,122                   6,122  
Other current assets
    1,258       32,945                   34,203  
Intercompany receivable
    167       4,012       2,251       (6,430 )      
 
                             
Total current assets
    1,428       922,567       2,251       (6,430 )     919,816  
 
                             
Property, plant and equipment:
                                       
Land and land improvements
          1,412       54,161             55,573  
Buildings
          3,091       90,042             93,133  
Machinery and equipment
          41,063                   41,063  
Construction in progress
          5,089                   5,089  
 
                             
Property, plant and equipment, at cost
          50,655       144,203             194,858  
Accumulated depreciation
          (5,068 )     (2,812 )           (7,880 )
 
                             
Property, plant and equipment, net
          45,587       141,391             186,978  
Investment in subsidiaries
    145,146                   (145,146 )      
Deferred income taxes
          3,456             (3,456 )      
Other non-current assets
          25,715       4,553             30,268  
 
                             
Total assets
  $ 146,574     $ 997,325     $ 148,195     $ (155,032 )   $ 1,137,062  
 
                             
Liabilities:
                                       
Current liabilities:
                                       
Accounts payable
  $ 1,070     $ 269,201     $     $     $ 270,271  
Bank overdrafts
          32,033                   32,033  
Accrued compensation
          18,292                   18,292  
Current maturities of long-term debt
          94,103                   94,103  
Other current liabilities
          11,897       1,245             13,142  
Intercompany payable
    4,012       2,251       167       (6,430 )      
 
                             
Total current liabilities
    5,082       427,777       1,412       (6,430 )     427,841  
 
                             
Non-current liabilities:
                                       
Long-term debt
          393,000       165,000             558,000  
Deferred income taxes
                4,196       (3,456 )     740  
Other long-term liabilities
          8,989                   8,989  
 
                             
Total liabilities
    5,082       829,766       170,608       (9,886 )     995,570  
 
                             
Shareholders’ Equity/Parent’s Investment
    141,492       167,559       (22,413 )     (145,146 )     141,492  
 
                             
Total liabilities and equity
  $ 146,574     $ 997,325     $ 148,195     $ (155,032 )   $ 1,137,062  
 
                             

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     The condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the period from January 2, 2005 to July 2, 2005 follows (in thousands):
                                         
    BlueLinx                          
    Holdings     BlueLinx     LLC              
    Inc.     Corporation     Subsidiaries     Eliminations     Consolidated  
Cash flows from operating activities:                                        
Net income
  $ 16,169     $ 15,240     $ 1,468     $ (16,708 )   $ 16,169  
Adjustments to reconcile net income (loss) to cash provided by (used in) operations:
                                       
Depreciation and amortization
          6,649       2,151             8,800  
Amortization of debt issue costs
          1,322       571             1,893  
Deferred income tax provision (benefit)
          (811 )     (500 )           (1,311 )
Equity in earnings of subsidiaries
    (16,708 )                 16,708        
Changes in assets and liabilities:
                                       
Receivables
          (145,817 )                 (145,817 )
Inventories
          14,098                   14,098  
Accounts payable
    (1,070 )     65,946                   64,876  
Changes in other working capital
    673       (19,088 )     969             (17,446 )
Intercompany receivable
    (177 )     4,012       1,448       (5,283 )      
Intercompany payable
    (4,012 )     (1,448 )     177       5,283        
Other
          1,763       229             1,992  
 
                             
Net cash provided by (used in) operating activities
    (5,125 )     (58,134 )     6,513             (56,746 )
 
                             
Cash flows from investing activities:
                                       
Investment in subsidiaries
    4,030                   (4,030 )      
Property, plant and equipment investments.
          (6,323 )                 (6,323 )
Proceeds from sale of assets
          650                   650  
 
                             
Net cash provided by (used in) investing activities
    4,030       (5,673 )           (4,030 )     (5,673 )
 
                             
Cash flows from financing activities:
                                       
Net transactions with Parent
          2,483       (6,513 )     4,030        
Issuance of common stock, net
    8,600                         8,600  
Proceeds from stock options exercised
    38                         38  
Net increase in revolving credit facility.
          62,492                   62,492  
Increase (decrease) in bank overdrafts
          10,460                   10,460  
Common dividends paid
    (7,546 )                       (7,546 )
 
                             
Net cash provided by (used in) financing activities
    1,092       75,435       (6,513 )     4,030       74,044  
 
                             
Increase (decrease) in cash
    (3 )     11,628                   11,625  
Balance, beginning of period
    3       15,569                   15,572  
 
                             
Balance, end of period
  $     $ 27,197     $     $     $ 27,197  
 
                             

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     The condensed combining statement of cash flows for BlueLinx Holdings Inc. for the period from inception (March 8, 2004) to July 3, 2004 follows (in thousands):
                                         
    BlueLinx Holdings                          
    Inc.     BlueLinx Corporation     LLCs     Elimination     Consolidated  
Cash flows from operating activities:                                        
Net income
  $ 11,196     $ 11,270     $ 21     $ (11,291 )   $ 11,196  
Adjustments to reconcile net income (loss) to cash provided by (used in) operations:
                                       
Depreciation and amortization
          1,676       641             2,317  
Amortization of debt issue costs
          459                   459  
Deferred income tax provision (benefit)
          (16,535 )     14,280             (2,255 )
Equity in earnings of subsidiaries
    (11,291 )                 11,291        
Changes in assets and liabilities:
                                       
Receivables
          56,794                   56,794  
Inventories
          1,348                   1,348  
Accounts payable
          20,938                   20,938  
Changes in other working capital
    (223 )     (2,866 )     822             (2,267 )
Intercompany receivable
    (60 )     (1,264 )           1,324        
Intercompany payable
    699       60       565       (1,324 )      
Other
          396                   396  
 
                             
Net cash provided by operating activities
    321       72,276       16,329             88,926  
 
                             
Cash flows from investing activities:
                                       
Contributed capital to subsidiaries
    (100,489 )                 100,489        
Acquisition of operating assets of division
          (636,578 )     (139,729 )           (776,307 )
Property, plant and equipment investments
          (141 )                 (141 )
Proceeds from sale of assets
                             
 
                             
Net cash used in investing activities
    (100,489 )     (636,719 )     (139,729 )     100,489       (776,448 )
 
                             
Cash flows from financing activities:
                                       
Net transactions with Georgia-Pacific
          77,089       23,400       (100,489 )      
Issuance of preferred stock
    95,000                         95,000  
Issuance of common stock, net
    5,000                         5,000  
Net increase in revolving credit facility
          451,769                   451,769  
Proceeds from term loan
    300       100,000                   100,300  
Proceeds from mortgage payable
                100,000             100,000  
Fees paid to issue debt
          (15,192 )                 (15,192 )
Decrease in bank overdrafts
          (16,921 )                 (16,921 )
 
                             
Net cash provided by (used in) financing activities
    100,300       596,745       123,400       (100,489 )     719,956  
 
                             
Increase in cash
    132       32,302                   32,434  
Balance, beginning of period
                             
 
                             
Balance, end of period
  $ 132     $ 32,302     $     $     $ 32,434  
 
                             

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     The pre-acquisition condensed combining statement of cash flows for the Distribution Division for the period from January 4, 2004 to May 7, 2004 follows (in thousands):
                         
    Distribution              
    Division              
    Excluding              
    Warehouse     Warehouse        
    Properties     Properties     Combined  
Cash flows from operating activities:                        
Net income
  $ 51,921     $ (1,484 )   $ 50,437  
Adjustments to reconcile net income (loss) to cash provided by (used in) operations:
                       
Depreciation and amortization
    3,786       2,389       6,175  
Amortization of debt issue costs
                 
Deferred income tax provision
    9,183             9,183  
Equity in earnings of subsidiaries
                 
Changes in assets and liabilities:
                     
Receivables
    (292,350 )           (292,350 )
Inventories
    (145,689 )           (145,689 )
Accounts payable
    257,772             257,772  
Changes in other working capital
    2,464             2,464  
Intercompany receivable
                 
Intercompany payable
                 
Other
    (1,974 )           (1,974 )
 
                 
Net cash provided by (used in) operating activities
    (114,887 )     905       (113,982 )
 
                 
Cash flows from investing activities:
                       
Contributed capital to subsidiaries
                 
Acquisition of operating assets of division
                 
Property, plant and equipment investments
    (1,378 )           (1,378 )
Proceeds from sale of assets
    252             252  
 
                 
Net cash used in investing activities
    (1,126 )           (1,126 )
 
                 
Cash flows from financing activities:
                       
Net transactions with Georgia-Pacific
    89,257       (905 )     88,352  
Issuance of preferred stock
                 
Issuance of common stock, net
                 
Net increase in revolving credit facility
                 
Proceeds from term loan
                 
Proceeds from mortgage payable
                 
Fees paid to issue debt
                 
Increase in bank overdrafts
    26,250             26,250  
 
                 
Net cash provided by financing activities
    115,507       (905 )     114,602  
 
                 
Decrease in cash
    (506 )           (506 )
Balance, beginning of period
    506             506  
 
                 
Balance, end of period
  $     $     $  
 
                 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) has been derived from our historical financial statements and is intended to provide information to assist you in better understanding and evaluating our financial condition and results of operations. We recommend that you read this MD&A section in conjunction with our condensed financial statements and notes to those statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended January 1, 2005 as filed with the SEC. This MD&A section is not a comprehensive discussion and analysis of our financial condition and results of operations, but rather updates disclosures made in the aforementioned filing. The discussion below contains 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. These 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 “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” “will be,” “will likely continue,” “will likely result” or words or phrases of similar meaning. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include those discussed under the heading “Factors Affecting Future Results” in our Annual Report on Form 10-K for the year ended January 1, 2005 as filed with the U.S. Securities and Exchange Commission and other factors, some of which may not be known to us. We operate in a changing environment in which new risks can emerge from time to time. It is not possible for management to predict all of these risks, nor can it assess the extent to which any factor, or a combination of factors, may cause our business, strategy or actual results to differ materially from those contained in forward-looking statements. Factors you should consider that could cause these differences include, among other things:
    changes in the prices, supply and/or demand for products which we distribute;
 
    the activities of competitors;
 
    changes in significant operating expenses;
 
    changes in the availability of capital;
 
    our ability to identify acquisition opportunities and effectively and cost-efficiently integrate acquisitions;
 
    general economic and business conditions in the United States;
 
    acts of war or terrorist activities;
 
    variations in the performance of the financial markets; and
 
    the other factors described herein under “Factors Affecting Future Results” in our Annual Report on Form 10-K for the year ended January 1, 2005 as filed with the U.S. Securities and Exchange Commission.
     Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.
Overview
     Company Background

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     The Company is a leading distributor of building products in the United States. The Company distributes over 10,000 products to more than 11,700 customers through its network of more than 60 warehouses and third-party operated warehouses which serve all major metropolitan markets in the United States. The Company distributes products in two principal categories: structural products and specialty products. Structural products include plywood, oriented strand board (OSB), lumber and other wood products primarily used for structural support, walls and flooring in construction projects. Structural products represented approximately 56% of the Company’s second quarter of fiscal 2005 gross sales. Specialty products include roofing, insulation, moulding, engineered wood, vinyl products (used primarily in siding) and metal products. Specialty products accounted for approximately 44% of the Company’s second quarter of fiscal 2005 gross sales.
     Recent Developments
     On July 21, 2005, the Company’s Board of Directors declared a quarterly dividend of $0.125 per share on the Company’s common stock. The dividend will be paid on September 30, 2005 to shareholders of record as of September 15, 2005.
     On July 15, 2005, the Company completed the acquisition of the assets of California-based hardwood lumber company Lane Stanton Vance (“LSV”), formerly a unit of privately-held Hampton Distribution Companies. For the 12 months ended January 31, 2005, LSV had revenue of approximately $62 million. The Company believes that the acquisition will enhance its offerings for its industrial/manufactured housing customer base as well as its presence in the Western region.
     On July 14, 2005, the Company reached an agreement with Wachovia Bank, National Association and the other signatories thereto to amend the terms of its existing revolving credit agreement. The Second Amendment to the Loan and Security Agreement originally dated May 7, 2004, as amended, will, among other things, increase the revolving loan limit to $800 million from $700 million and expand certain criteria for the Company’s borrowing base. The Company executed the amendment in order to increase its liquidity and provide it with the capacity to support future growth.
     Acquisition of Building Products Distribution Division’s Assets from Georgia-Pacific
     On March 12, 2004, the Company and its operating company, BlueLinx Corporation, entered into two separate definitive agreements to acquire the real estate and operating assets, respectively, of the distribution division of Georgia-Pacific Corporation. The transactions were consummated on May 7, 2004. The Company refers to the period on or prior to May 7, 2004 as the “pre-acquisition period.” The Distribution Division’s financial data for the pre-acquisition period generally will not be comparable to the Company’s financial data for the period after the acquisition. The principal factors affecting comparability are incremental costs that the Company will incur as a separate company, discussed in greater detail below; interest costs attributable to debt the Company incurred in connection with the acquisition transactions and mortgage refinancing transactions; and the effects of the purchase method of accounting applied to the acquisition transactions. The acquisition of the assets of the Distribution Division was accounted for using the purchase method of accounting, and the assets acquired and liabilities assumed were accounted for at their fair market values at the date of consummation.
     Initial Public Offering
     On December 17, 2004, the Company consummated an initial public offering of 9,500,000 shares of its common stock, par value $.01 per share, at the initial public offering price of $13.50 per share (the “Equity Offering”). On January 5, 2005, the underwriters for the Equity Offering exercised an option to purchase 685,000 additional shares of common stock to cover over-allotment of shares in connection with the Equity Offering. BlueLinx received net proceeds from the Equity Offering of $124 million (including net proceeds of $8.6 million from the exercise of the over-allotment option). Net proceeds from the offering and funds from the Company’s revolving credit facility were used (i) to repay the Company’s $100 million term loan plus accrued and unpaid interest thereon, and (ii) to redeem the remainder of the Company’s outstanding series A preferred stock, of which approximately $38.5 million was outstanding, and pay all accrued and unpaid dividends thereon. Unamortized debt issue costs of approximately $3 million were written off upon retirement of the term loan.

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     Agreements with Georgia-Pacific
     Supply Agreement. On May 7, 2004, the Company entered into a multi-year supply agreement with Georgia-Pacific. Under the agreement, the Company has exclusive distribution rights on certain products and certain customer segments. Georgia-Pacific is the Company’s largest vendor, with Georgia-Pacific products representing approximately 27% of purchases during fiscal 2004.
     Transition Agreements. During the pre-acquisition period, Georgia-Pacific charged the Distribution Division for the estimated cost of certain functions that were managed by Georgia-Pacific and could reasonably be directly attributed to the operations of the Distribution Division. These costs included dedicated human resources, legal, accounting and information systems support. The charges to the Distribution Division were based on Georgia-Pacific management’s estimate of the services specifically used by the Distribution Division. Where determinations based on specific usage alone were impracticable, other methods and criteria were used that management believes are equitable and provide a reasonable estimate of the cost attributable to the Distribution Division. The total of the allocations was $1.4 million and $5.8 million for the second quarter of fiscal 2004 and for the first six months of fiscal 2004, respectively. Certain general corporate expenses were not allocated to the Distribution Division. These expenses included portions of property and casualty insurance premiums, health and welfare administration costs, human resources administration costs, finance administration costs and legal costs. The Company estimates that these incremental costs would have been approximately $1.4 million and $4.7 million for the second quarter of fiscal 2004 and for the first six months of fiscal 2004, respectively.
     The Company believes the assumptions underlying the Distribution Division’s financial statements are reasonable. However, the Distribution Division’s financial statements do not necessarily reflect what the Company’s future results of operations, financial position and cash flows will be, nor do they reflect what the Company’s results of operations, financial position and cash flows would have been had the Company been a separate, independent company during the periods presented.
Sales Revenue Variances
     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 versus comparable prior periods, in each case for the second quarter of fiscal 2005, the second quarter of fiscal 2004, the first six months of fiscal 2005, the first six months of fiscal 2004, fiscal 2004 and fiscal 2003 (the 2004 financial results reflect the combined results of BlueLinx and the Distribution Division for the applicable period).
                                                 
    Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal  
    Q2 2005     Q2 2004     2005 YTD     2004 YTD     2004     2003  
    (Dollars in millions)  
    (Unaudited)  
Sales by Category
                                               
Structural Products
  $ 849     $ 929     $ 1,617     $ 1,668     $ 3,225     $ 2,401  
Specialty Products
    654       641       1,249       1,181       2,391       1,924  
Unallocated Allowances and Adjustments
    (16 )     (9 )     (27 )     (8 )     (58 )     (53 )
 
                                   
Total Sales
  $ 1,487     $ 1,561     $ 2,839     $ 2,841     $ 5,558     $ 4,272  
 
                                   
Sales Variances
                                               
Unit Volume $ Change
  $ 69     $ 94     $ 111     $ 169     $ 351     $ 94  
Price/Other*
    (143 )     433       (113 )     761       935       444  
 
                                   
Total $ Change
  $ (74 )   $ 527     $ (2 )   $ 930     $ 1,286     $ 538  
 
                                   
Unit Volume % Change
    4.4 %     9.0 %     3.9 %     8.7 %     8.2 %     2.5 %
Price/Other*
    (9.1 )%     41.9 %     (4.0 %)     40.0 %     21.9 %     11.9 %
 
                                   
Total % Change
    (4.7 )%     50.9 %     (0.1 %)     48.7 %     30.1 %     14.4 %
 
                                   
 
*   Other includes unallocated allowances and discounts and the impact of the 53rd week in fiscal 2003.
     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 the second quarter of fiscal 2005, the second quarter of fiscal 2004, the first six

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months of fiscal 2005, the first six months of fiscal 2004, fiscal 2004 and fiscal 2003 (the 2004 financial results reflect the combined results of BlueLinx and the Distribution Division for the applicable period) .
                                                 
    Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal  
    Q2 2005     Q2 2004     2005 YTD     2004 YTD     2004     2003  
    (Dollars in millions)  
    (Unaudited)  
Sales by Channel
                                               
Warehouse/Reload
  $ 980     $ 1,050     $ 1,857     $ 1,904     $ 3,819     $ 2,935  
Direct
    523       520       1,009       945       1,797       1,390  
Unallocated Allowances and Adjustments
    (16 )     (9 )     (27 )     (8 )     (58 )     (53 )
 
                                   
Total
  $ 1,487     $ 1,561     $ 2,839     $ 2,841     $ 5,558     $ 4,272  
 
                                   
Gross Margin by Channel
                                               
Warehouse/Reload
  $ 87     $ 133     $ 189     $ 265     $ 459     $ 380  
Direct
    22       22       39       44       84       74  
Unallocated Allowances and Adjustments
    7       8       7       7       18       3  
 
                                   
Total
  $ 116     $ 163     $ 235     $ 316     $ 561     $ 457  
 
                                   
Gross Margin % by Channel
                                               
Warehouse/Reload
    8.9 %     12.7 %     10.2 %     13.9 %     12.0 %     12.9 %
Direct
    4.2 %     4.2 %     3.9 %     4.7 %     4.7 %     5.3 %
Unallocated Allowances and Adjustments
    0.5 %     0.5 %     0.2 %     0.2 %     0.3 %     0.1 %
 
                                   
Total
    7.8 %     10.4 %     8.3 %     11.1 %     10.1 %     10.7 %
 
                                   
Fiscal Year
     The Company’s fiscal year is a 52- or 53-week period ending on the Saturday closest to the end of the calendar year. Fiscal year 2004 contained 52 weeks and fiscal year 2003 contained 53 weeks. The additional week in fiscal year 2003 was included in the fourth quarter of that year.
Results of Operations
     Second Quarter of Fiscal 2005 Compared to Second Quarter of Fiscal 2004
     The following table sets forth the Company’s and the Distribution Division’s results of operations for the second quarter of fiscal 2005 and second quarter of fiscal 2004. The results of operations for the second quarter of fiscal 2004 combine the pre-acquisition period from April 4, 2004 to May 7, 2004 of the Distribution Division and the period from April 4, 2004 to July 3, 2004 of the Company.
                                                                 
    BlueLinx                             Pre-Acquisition                      
    Period             BlueLinx             Period             Combined        
    from             Period from             from             Period from        
    April 3, 2005     % of     April 4,     % of     April 4, 2004     % of     April 4, 2004     % of  
    to     Net     2004 to     Net     to     Net     to     Net  
    July 2, 2005     Sales     July 3, 2004     Sales     May 7, 2004     Sales     July 3, 2004     Sales  
    (Unaudited)             (Unaudited)             (Unaudited)             (Unaudited)          
    (Dollars in thousands)  
Net sales
  $ 1,486,976       100.0 %   $ 955,612       100.0 %   $ 605,452       100.0 %   $ 1,561,064       100.0 %
Gross profit
    115,681       7.8 %     89,528       9.4 %     73,113       12.1 %     162,641       10.4 %
Selling, general & administrative
    87,948       5.9 %     61,652       6.5 %     45,106       7.4 %     106,758       6.8 %
Depreciation and amortization
    4,557       0.3 %     2,317       0.2 %     1,744       0.3 %     4,061       0.3 %
 
                                                       

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    BlueLinx                             Pre-Acquisition                      
    Period             BlueLinx             Period             Combined        
    from             Period from             from             Period from        
    April 3, 2005     % of     April 4,     % of     April 4, 2004     % of     April 4, 2004     % of  
    to     Net     2004 to     Net     to     Net     to     Net  
    July 2, 2005     Sales     July 3, 2004     Sales     May 7, 2004     Sales     July 3, 2004     Sales  
    (Unaudited)             (Unaudited)             (Unaudited)             (Unaudited)          
    (Dollars in thousands)  
Operating income
    23,176       1.6 %     25,559       2.7 %     26,263       4.3 %     51,822       3.3 %
Interest expense
    10,656       0.7 %     6,794       0.7 %           0.0 %     6,794       0.4 %
Other expense (income), net
    224       0.0 %     (173 )     0.0 %     307       0.1 %     134       0.0 %
 
                                                       
Income before provision for income taxes
    12,296       0.8 %     18,938       2.0 %     25,956       4.3 %     44,894       2.9 %
Income tax provision (benefit)
    4,545       0.3 %     7,386       0.8 %     9,837       1.6 %     17,223       1.1 %
 
                                                       
Net income
  $ 7,751       0.5 %   $ 11,552       1.2 %   $ 16,119       2.7 %   $ 27,671       1.8 %
 
                                                       
     Net Sales. For the second quarter of fiscal 2005, net sales decreased by 4.7%, or $74 million, to $1.5 billion. The decrease of $74 million was caused primarily by price decreases of $143 million, as a result of lower structural product pricing. This decrease was partially offset by unit volume increases of $69 million. Structural product sales fell 8.5% during the quarter to $849 million, while sales for specialty products increased 2.0%, to nearly $654 million.
     Gross Profit. Gross profit for the second quarter of fiscal 2005 was $116 million compared to $163 million in the prior year period. The decline in gross profit is primarily due to the decrease in margins for structural products and certain specialty products. Additionally, margins in the second quarter of fiscal 2004 were favorably impacted by strong steel markets.
     Operating Expenses. Selling, general and administrative expenses for second quarter of fiscal 2005 were $87.9 million, or 5.9% of net sales, compared to $107 million, or 6.8% of net sales, during the second quarter of fiscal 2004. The reduction in operating expenses was primarily the result of lower incentive compensation and reduced sales commissions.
     Depreciation and Amortization. Depreciation and amortization expense totaled $4.6 million for the second quarter of fiscal 2005, while depreciation and amortization expense totaled $4.1 million for second quarter fiscal 2004.
     Operating Income. Operating income for the second quarter of fiscal 2005 was $23.2 million, or 1.6% of sales, versus $51.8 million, or 3.3% of sales, in the second quarter of fiscal 2004, reflecting the decline in gross profit, partially offset by lower variable operating expenses, primarily lower incentive compensation and reduced sales commissions.
     Interest Expense. Interest expense totaled $10.7 million for the second quarter of fiscal 2005, which includes $1.0 million of debt issue cost amortization. Interest expense related to the Company’s revolving credit facility and mortgage was $7.5 million and $2.2 million, respectively, during this period. Interest expense totaled $6.8 for the second quarter of fiscal 2004, which includes $0.5 million of debt issue cost amortization. Interest expense related to the Company’s term loan, revolving credit facility and mortgage was $1.6 million, $2.8 million and $1.6 million, respectively, for this period. The Company did not incur interest expense prior to May 7, 2004. Lower borrowing rates associated with the new mortgage and the reduction in interest expense resulting from the repayment of the term loan in 2004 were offset by increases in borrowings under the revolving credit facility and a increase in the effective interest rate for the credit facility.
     Provision for Income Taxes. The effective tax rate was 37.0% and 38.4% for the second quarter of fiscal 2005 and the second quarter of fiscal 2004, respectively. The decrease in the effective tax rate is principally due to the fact that during the second quarter of fiscal 2005 the State of Georgia approved BlueLinx for a tax credit of $515,000 related to the 2004 tax year. Without this credit, the effective tax rate would have been 41.2%. This higher effective tax rate that the Company would normally be subject to is principally due to the fact that BlueLinx is now a stand-alone company. As part of Georgia-Pacific, the Distribution Division was combined with the other divisions of Georgia-Pacific for state tax purposes. As a stand-alone company, we are projecting a state tax rate approximately 2% higher than Georgia-Pacific’s carve-out rate. The remaining differences resulted from higher non-deductible expenses and deemed repatriation of Canadian earnings.

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     Net Income. Net income for the second quarter of fiscal 2005 was $7.8 million compared to net income of $27.7 million for the second quarter of fiscal 2004.
     On a per-share basis, basic and diluted income applicable to common stockholders for the second quarter of fiscal 2005 were $0.26 and $0.25, respectively. Basic and diluted earnings per share for the period from April 4, 2004 to July 3, 2004 were $0.56 and $0.52, respectively. For the period prior to May 7, 2004, there were no earnings per share as a result of the business operating for much of that period as a division of Georgia-Pacific.
     Year to Date Fiscal 2005 Compared to Year to Date Fiscal 2004
     The following table sets forth the Company’s and the Distribution Division’s results of operations for the first six months of fiscal 2005 and the first six months of fiscal 2004. The results of operations for the first six months of fiscal 2004 combine the pre-acquisition period from January 4, 2004 to May 7, 2004 of the Distribution Division and the period from inception (March 8, 2004) to July 3, 2004 of the Company.
                                                                 
    BlueLinx             BlueLinx             Pre-Acquisition                      
    Period             Period from             Period             Combined        
    from             Inception             from             Period from        
    January 2, 2005     % of     (March 8,     % of     January 4, 2004     % of     January 4, 2004     % of  
    to     Net     2004 to     Net     to     Net     to     Net  
    July 2, 2005     Sales     July 3, 2004     Sales     May 7, 2004     Sales     July 3, 2004     Sales  
    (Unaudited)             (Unaudited)             (Unaudited)             (Unaudited)          
    (Dollars in thousands)                  
Net sales
  $ 2,838,595       100.0 %   $ 955,612       100.0 %   $ 1,885,334       100.0 %   $ 2,840,946       100.0 %
Gross profit
    235,009       8.3 %     89,528       9.4 %     227,211       12.1 %     316,739       11.1 %
Selling, general & administrative
    179,383       6.3 %     62,236       6.5 %     139,203       7.4 %     201,439       7.1 %
Depreciation and amortization
    8,800       0.3 %     2,317       0.2 %     6,175       0.3 %     8,492       0.3 %
 
                                                       
Operating income
    46,826       1.6 %     24,975       2.6 %     81,833       4.3 %     106,808       3.8 %
Interest expense
    19,990       0.7 %     6,794       0.7 %           0.0 %     6,794       0.2 %
Other expense (income), net
    353       0.0 %     (173 )     0.0 %     614       0.0 %     441       0.0 %
 
                                                       
Income before provision for income taxes
    26,483       0.9 %     18,354       1.9 %     81,219       4.3 %     99,573       3.5 %
Income tax provision (benefit)
    10,314       0.4 %     7,158       0.7 %     30,782       1.6 %     37,940       1.3 %
 
                                                       
Net income
  $ 16,169       0.6 %   $ 11,196       1.2 %   $ 50,437       2.7 %   $ 61,633       2.2 %
 
                                                       
     Net Sales. For the first six months of fiscal 2005, net sales decreased by 0.1%, or $2 million, to $2.8 billion. The decrease of $2 million was caused primarily by price decreases amounting to $113 million, as a result of lower structural product pricing, offset by unit volume increases of $111 million. Structural product sales fell 3.1% during the six months, to $1.6 billion, while sales for specialty products increased 5.7%, to $1.2 billion.
     Gross Profit. Gross profit for the first six months of fiscal 2005 was $235 million compared to $317 million in the prior year period. The decline in gross profit is primarily due to the decrease in margins for structural products.
     Operating Expenses. Selling, general and administrative expenses for first six months of fiscal 2005 were $179 million, or 6.3% of net sales, compared to $201 million, or 7.1% of net sales, during the first six months of fiscal 2004. The reduction in operating expenses was primarily the result of lower incentive compensation and reduced sales commissions.
     Depreciation and Amortization. Depreciation and amortization expense totaled $8.8 million for the first six months of fiscal 2005, while depreciation and amortization expense totaled $8.5 million for first six months of fiscal 2004.
     Operating Income. Operating income for the first six months of fiscal 2005 was $46.8 million, or 1.6% of sales, versus $107 million, or 3.8% of sales, in the first six months of fiscal 2004, reflecting the decline in gross profit, partially offset by lower variable operating expenses.

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     Interest Expense. Interest expense totaled $19.9 million for the first six months of fiscal 2005. Interest expense related to the Company’s revolving credit facility and mortgage was $13.8 million and $4.2 million, respectively. Interest expense includes $1.9 million of debt issue cost amortization. Interest expense totaled $6.8 million for the first six months of fiscal 2004. The Company did not incur interest expense prior to the May 7, 2004 acquisition.
     Provision for Income Taxes. The effective tax rate was 38.9% and 38.1% for the first six months of fiscal 2005 and the first six months of fiscal 2004, respectively. During the second quarter of fiscal 2005, the State of Georgia approved BlueLinx for a tax credit of $515,000 related to the 2004 tax year. Without this credit, the effective tax rate would have been 40.9%. This higher effective tax rate that the Company would normally be subject to is principally due to the fact that BlueLinx is now a stand-alone company. As part of Georgia-Pacific, the Distribution Division was combined with the other divisions of Georgia-Pacific for state tax purposes. As a stand-alone company, we are projecting a state tax rate approximately 2% higher than Georgia-Pacific’s carve-out rate. The other differences resulted from higher non-deductible expenses and deemed repatriation of Canadian earnings.
     Net Income. Net income for the first six months of fiscal 2005 was $16.2 million compared to net income of $61.6 million for the first six months of fiscal 2004. The Company’s net income for the period from January 4, 2004 to May 7, 2004 was achieved as a division of Georgia-Pacific and did not include interest expense and certain corporate overhead expenses that are included in the results for the same period in fiscal 2005.
     On a per-share basis, basic and diluted income applicable to common stockholders for the first six months of fiscal 2005 were $0.54 and $0.53, respectively. Basic and diluted earnings per share for the period from inception (March 8, 2004) to July 3, 2004 were $0.54 and $0.50, respectively. For the period prior to May 7, 2004, there were no earnings per share as a result of the business operating for much of that period as a division of Georgia-Pacific.
Seasonality
     The Company is 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 quarter is historically the Company’s slowest quarter due to the impact of poor weather on the construction market. The Company’s second quarter typically improves from its first quarter as the weather begins to improve and held-over construction demand from the winter season is released. The Company’s third quarter is typically its strongest quarter, reflecting a substantial increase in construction due to more favorable weather conditions. The Company’s 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 third quarter season. The fourth quarter is typically the Company’s second slowest quarter due to the decline in construction with the onset of the winter season. The Company expects these trends to continue for the foreseeable future.
Liquidity and Capital Resources
     The Distribution Division’s principal source of liquidity historically had been the consolidated resources of Georgia-Pacific. The Company intends to fund future capital needs through its operating cash flows and its revolving credit facility. The Company believes that the amounts available from this and other sources will be sufficient to fund operations and capital requirements for the foreseeable future.
     The Company’s capital expenditures for the first six months of fiscal 2005 were approximately $6.3 million, and were incurred primarily in connection with mobile equipment. The Company’s capital expenditures were paid for from cash flows provided by operating activities or borrowings under its revolving credit facility. The Company estimates that capital expenditures, excluding any capital expenditures related to acquisitions, for the remainder of fiscal 2005 will be approximately $6 million, primarily for mobile equipment consisting of trucks, trailers, forklifts and automobiles. The Company’s 2005 capital expenditures are anticipated to be paid from its current cash, cash provided from operating activities or borrowings under its revolving credit facility. Part of the Company’s growth strategy is to selectively pursue acquisitions. The Company may use cash or stock, or a combination of both, as acquisition currency. The Company’s 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 acquisitions. To the extent that significant amounts of cash are expended in connection with acquisitions, the Company’s liquidity position may be adversely impacted. In addition, there can be

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no assurance that the Company will be successful in implementing its acquisition strategy. For a discussion of the risks associated with the Company’s acquisition strategy, see risk factor on integrating acquisitions in the Company’s Annual Report on Form 10-K.
     The following tables indicate the Company’s working capital and cash flows for the periods indicated.
                 
    BlueLinx at     BlueLinx at  
    July 2,     January 1,  
    2005     2005  
    (Unaudited)          
    (Dollars in thousands)  
Working capital
  $ 548,883     $ 491,975  
                                 
    BlueLinx     BlueLinx     Distribution        
    Period from     Period from     Division        
    January 2,     Inception (March 8,     Period from        
    2005 to     2004) to     January 4, 2004     Combined  
    July 2,     July 3,     to     Six Months Ended  
    2005     2004     May 7, 2004     July 3, 2004  
    (Dollars in thousands)  
            (Unaudited)          
Cash flows provided by (used for) operating activities
  $ (56,746 )   $ 88,926     $ (113,982 )   $ (25,056 )
Cash flows used for investing activities
    (5,673 )     (776,448 )     (1,126 )     (777,574 )
Cash flows provided by financing activities
  $ 74,044     $ 719,956     $ 114,602     $ 834,558  
     Working Capital
     Working capital increased by $57 million to $549 million at July 2, 2005, from $492 million at January 2, 2005. The increase was primarily driven by a seasonal increase in accounts receivable in the amount of $146 million, partially offset by a corresponding increase in accounts payable of $64.9 million and a decline in inventories of $14.1 million. Additionally, cash increased from $15.6 million on January 2, 2005 to $27.2 million at July 2, 2005. The $27.2 million of cash on the Company’s balance sheet at July 2, 2005 primarily reflects customer remittances received in the Company’s lock boxes on Friday and Saturday that are not available until the next Monday, which is part of the following fiscal period.
     Operating Activities
     During the first six months of fiscal 2005 and fiscal 2004, cash flows used in operating activities totaled $56.7 million and $25.1 million, respectively. The increase of $31.7 million in cash flows used in operating activities was the result of an increase in trade payables of $214 million, an increase in prepaid taxes of $8.1 million, and a $45.5 million decline in earnings. Partially offsetting these cash flow uses were changes in inventory of $158 million and accounts receivable of $89.7 million. The increase in accounts payable for the first six months of fiscal 2004 included $99 million in payables to Georgia-Pacific at January 3, 2004, when amounts due Georgia-Pacific were classified as parent’s investment.
     Investing Activities
     During the first six months of fiscal 2005 and fiscal 2004, cash flows used in investing activities totaled $5.7 million and $778 million, respectively.
     On May 7, 2004, we and our operating company acquired the real estate and operating assets of the Distribution Division, respectively. On that date we paid purchase consideration of approximately $776 million to Georgia-Pacific.

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     During the first six months of fiscal 2005 and fiscal 2004, the Company’s expenditures for property and equipment were $6.3 million and $1.5 million, respectively. These expenditures were primarily for mobile equipment consisting of trucks, trailers, forklifts and sales force automobiles.
     Proceeds from the sale of property and equipment totaled $0.7 million and $0.3 million during the first six months of fiscal 2005 and fiscal 2004, respectively.
     Financing Activities
     Net cash provided by financing activities was $74 million during the first six months of fiscal 2005 compared to $835 million during the first six months of fiscal 2004. The difference in cash provided by financing activities during the first six months of 2004 primarily resulted from net proceeds from the Company’s (i) revolving credit facility of $452 million, (ii) former term loan of $100 million, (iii) old mortgage payable to ABPMC LLC, an affiliate of Cerberus, of $100 million, (iv) issuance of preferred stock in the amount of $95 million and (v) issuance of common stock in the amount of $5 million, all of which relate to our acquisition of the assets of the Distribution Division. Fees paid to issue the revolving credit facility and former term loan totaled $15.2 million.
     The Company paid dividends to its common stockholders in the aggregate amount of $7.5 million in the first six months of fiscal 2005.
     During the pre-acquisition period, the Distribution Division was financed by Georgia-Pacific and the use of bank overdrafts.
     Debt and Credit Sources
     On May 7, 2004, the Company’s operating company entered into a revolving credit facility. As of July 2, 2005, advances outstanding under the revolving credit facility were approximately $550 million. Borrowing availability was approximately $119 million and outstanding letters of credit on this facility were approximately $7.4 million. As of July 2, 2005, the interest rate on outstanding balances under the revolving credit facility was 5.37%. For the second quarter and first six months of fiscal 2005, interest expense related to the revolving credit facility was $7.5 million and $13.8 million, respectively. The revolving credit facility was amended on July 14, 2005 to among other things, increase the revolving loan limit to $800 million from $700 million and expand certain criteria for the Company’s borrowing base in order to increase the Company’s liquidity.
     On October 27, 2004, the existing mortgage was refinanced by a new mortgage loan in the amount of $165 million, which was provided by Column Financial, Inc., a wholly-owned subsidiary of Credit Suisse First Boston LLC. The interest rate on the new mortgage loan is equal to LIBOR (subject to a 2% floor and a 6% cap), plus a 2.25% spread. On July 2, 2005, the interest rate was 5.47%. For the second quarter and first six months of fiscal 2005, interest expense related to the mortgage was $2.2 million and $4.2 million, respectively.
Critical Accounting Policies
     The Company’s significant accounting policies are more fully described in the notes to the consolidated financial statements. Certain of the Company’s accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. As with all judgments, they are subject to an inherent degree of uncertainty. These judgments are based on the Company’s historical experience, current economic trends in the industry, information provided by customers, vendors and other outside sources and management’s estimates, as appropriate.
     The following are accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective or complex judgment.
     Revenue Recognition

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     The Company recognizes revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have been rendered, the Company’s 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. Discounts and allowances are comprised 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
     The Company evaluates the collectibility of accounts receivable based on numerous factors, including past transaction history with customers and their creditworthiness. The Company maintains an allowance for doubtful accounts for each aging category on the Company’s aged trial balance based on the Company’s historical loss experience. This estimate is periodically adjusted when the Company becomes aware of specific customers’ inability to meet their financial obligations (e.g., bankruptcy filing or other evidence of liquidity problems). As the Company determines that specific balances will be ultimately uncollectible, the Company removes them from its aged trial balance. Additionally, the Company maintains reserves for cash discounts that it expects customers to earn as well as expected returns. Adjustments to earnings resulting from revisions to estimates on discounts and uncollectible accounts have been insignificant for each of the reported periods. At July 2, 2005 and January 1, 2005 these allowances totaled $12.5 million and $13.4 million, respectively.
     Inventories
     Inventories are carried at the lower of cost or market. The cost of substantially all inventories is determined by the moving average cost method. The Company evaluates its 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. At July 2, 2005, and January 1, 2005, the lower of cost or market reserve totaled $0.1 million and $1 million, respectively.
     Additionally, the Company maintains a reserve for the estimated value of impairment associated with damaged and inactive inventory. The inactive reserve includes inventory that has had no sales in the past twelve months or has turn days in excess of 360 days. At July 2, 2005 and January 1, 2005, the Company’s damaged and inactive inventory reserves totaled $3.7 million and $3.0 million, respectively.
     Consideration Received from Vendors
     At the beginning of each calendar year, the Company enters into agreements with many of its vendors providing for purchase rebates, generally based on achievement of specified volume purchasing levels and various marketing allowances that are common industry practice. The Company accrues for the receipt of vendor rebates based on purchases, and also reduces inventory value to reflect the net acquisition cost (purchase price less expected purchase rebates). Adjustments to earnings resulting from revisions to rebate estimates have been insignificant for each of the reported periods.
     Impairment of Long-Lived Assets
     Long-lived assets, including property and equipment, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. The Company uses internal cash flow estimates, quoted market prices when available and independent appraisals as appropriate to determine fair value. The Company derives the required cash flow estimates from its historical experience and its internal business plans and applies an

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appropriate discount rate. If these projected cash flows are less than the carrying amount, an impairment loss is recognized based on the fair value of the asset less any costs of disposition. The Company’s judgment regarding the existence of impairment indicators is based on market and operational performance. There have been no adjustments to earnings resulting from the impairment of long-lived assets.
     Recently Issued Accounting Pronouncements
     In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”) which is a revision of SFAS No. 123. SFAS No. 123R supersedes APB No. 25 and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123R is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure will no longer be an alternative. SFAS No. 123R is effective for fiscal year 2006.
     SFAS No. 123R permits public companies to adopt its requirements using one of two methods:
          1. A “modified prospective method” in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and (b) based on SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date.
          2. A “modified retrospective method” which includes the requirements of the modified prospective method described above, but also permits entities to restate the amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures either for (a) all prior periods presented or (b) prior interim periods in the year of adoption.
     The Company plans to adopt SFAS No. 123R using the modified prospective method. The Company does not expect the adoption of SFAS No. 123R to have a material impact on its results of operations.
     In November 2004, the FASB issued SFAS No. 151, Inventory Costs — an Amendment of ARB No. 43, Chapter 4 (“SFAS No. 151”), which is the result of the FASB’s efforts to converge U.S. accounting standards for inventory with International Accounting Standards. SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs, and wasted material to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently evaluating the impact of SFAS No. 151 on its results of operations.
     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     There have been no material changes in market risk from the information provided in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2005, other than those discussed below.
     The Company’s 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 could have an impact on results of operations. A change of 100 basis points in the market rate of interest would impact interest expense by approximately $5.5 million on an annual basis based on borrowings outstanding at July 2, 2005.
     ITEM 4. CONTROLS AND PROCEDURES
     An evaluation was performed, as of the end of the period covered by this report on Form 10-Q, under the supervision of the Chief Executive Officer and the Chief Financial Officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to rules 13a-14 and 15d-14 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.

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     There were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
     ITEM 1. LEGAL PROCEEDINGS
     During the quarter ended July 2, 2005, there were no material changes to the Company’s previously disclosed legal proceedings. Additionally, the Company is, and from time to time may be, a party to routine legal proceedings incidental to the operation of its business. The outcome of any pending or threatened proceedings is not expected to have a material adverse effect on the financial condition, operating results or cash flows of the Company, based on its current understanding of the relevant facts. Legal expenses incurred related to these contingencies are generally expensed as incurred.
     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     On May 11, 2005 we held our annual meeting of stockholders, at which time the Company’s stockholders voted on (1) the election of ten directors to serve on the Company’s board of directors for a one-year term that will expire at the annual meeting of shareholders in 2006 or until their successors are duly elected and qualified and (2) ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm. Proxies were solicited for the annual meeting pursuant to Regulation 14A of the Exchange Act. A total of 26,939,897 shares of the Company’s common stock were represented by proxy at the meeting, representing 89.2% of the shares eligible to vote. The results of the voting are set forth below.
     1. Election of directors to serve on the Company’s board of directors:
                             
    NAME   VOTES FOR   VOTES WITHHELD        
 
  Joel A. Asen     25,263,562       1,676,435          
 
  Jeffrey J. Fenton     25,187,762       1,752,235          
 
  Stephen E. Macadam     26,243,152       696,845          
 
  Richard B. Marchese     26,319,062       620,935          
 
  Steven F. Mayer     25,260,152       1,679,845          
 
  Charles H. McElrea     25,184,562       1,755,435          
 
  Alan H. Schumacher     26,317,362       622,635          
 
  Mark A. Suwyn     24,330,132       2,609,865          
 
  Lenard B. Tessler     25,258,552       1,681,445          
 
  Robert G. Warden     25,258,652       1,681,345          
     2. Ratification of appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm:
                                 
    VOTES FOR   VOTES AGAINST   ABSTAIN        
 
    26,938,038       1,559       400          

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ITEM 6. EXHIBITS
Exhibits:
     
Exhibit    
Number   Description
10.1
  Consulting Agreement with Cerberus Capital Management, L.P.
 
   
31.1
  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
  Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2
  Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
             
 
          BlueLinx Holdings Inc.
 
           
 
          (Registrant)
 
           
 
  Date: August 8, 2005       /s/ David J. Morris
 
           
 
          David J. Morris
 
          Chief Financial Officer and Treasurer
 
          (Principal Accounting and Financial Officer)

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EXHIBIT INDEX
     
Exhibit    
Number   Description
 
   
10.1
  Consulting Agreement with Cerberus Capital Management, L.P.
 
   
31.1
  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
  Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
32.2
  Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

EX-10.1 CONSULTING AGREEMENT WITH CERBERUS CAPITAL
 

EXHIBIT 10.1
CONSULTING AGREEMENT
     This Consulting Agreement (“Agreement”), effective August 8, 2005, is made by and between BlueLinx Corporation (“Company”) and Cerberus Capital Management, L.P. (“Cerberus”).
     WHEREAS, Company is engaged in the business of building products distribution (“Company’s Business Field”);
     WHEREAS, Cerberus has under retainer consultants that specialize in operations management and support, and who provide Cerberus with consulting advice concerning portfolio companies in which funds and accounts for which Cerberus has investment discretion have invested;
     WHEREAS, the Company, with the approval of its Audit Committee, desires to retain the services of certain of these consultants;
     WHEREAS, Cerberus is willing and desires to make available certain of its consultants’ services to the Company under the terms and conditions set forth herein;
     NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, the parties hereby agree as follows:
     1. Availability and Services of Consultants. Company, with the approval of its Audit Committee, hereby requests and Cerberus hereby agrees to make available to the Company the consultants listed on Exhibit A hereto and such other consultants as may be requested by Company during the term of this Agreement, at rates not to exceed those listed on Exhibit A (hereinafter referenced as “Consultants”). Each Consultant shall be responsible for his work product and agrees to use his best efforts to perform all consulting work on behalf of Company in a timely, competent, diligent, professional manner to the best of Consultants’ ability and will carry out such duties in a manner consistent with his fiduciary duties to Company notwithstanding any other obligation Consultant may have to Cerberus. Cerberus and the Consultants agree that the Consultants’ fiduciary duties shall run solely to the Company with respect to any work performed on the Company’s behalf.
     2. Compensation. The remuneration to be paid by Company to Cerberus for the performance of the Consultants shall be identical to the rates paid by Cerberus to the Consultants. Cerberus shall invoice the Company on a monthly basis (or for any ratable portion of a month actually worked). The monthly rates for each of the Consultants are set forth in Exhibit A. Company shall pay only that portion of Consultant’s monthly rate as the Consultant actually works on Company matters at Company’s request and direction.
     3. Expenses. Consultants will be entitled to reimbursement for reasonable travel expenses incurred by the Consultants at the request of Company and for other incidental, reasonable and verifiable out-of-pocket expenses incurred by Consultants in and necessary for the performance of Consultants’ services hereunder including Consultants’ attendance at meetings on Company’s behalf, consistent with Company’s travel policies and upon the submission by Consultant of appropriate receipts or other documentation of such expenses as

 


 

required thereby. Notwithstanding the foregoing, reimbursement of out-of- pocket expenses shall not exceed dollar thresholds established from time to time by the Audit Committee.
     4. Confidentiality. Cerberus and Consultants recognize and acknowledge that as part of Consultants engagement hereunder, Consultants will be afforded access to the Company’s confidential information and that said confidentiality must be maintained for the protection of Company’s business and proprietary rights. Accordingly, Cerberus and each Consultant agrees that it will keep in strict confidence, will exercise reasonable efforts to assure safekeeping, and will not, at any time during the Term of this Agreement or thereafter, except as pre-approved in writing by an authorized officer of the Company, directly or indirectly, disclose, furnish, disseminate, distribute, make available, use, copy, duplicate, transfer or remove any: (i) confidential information of Company and its subsidiaries, parent(s) or other non-Cerberus affiliate(s) or (ii) confidential information of their customers, vendors, licensors, licensees or suppliers or other information that has not been the subject of public disclosure or which Company is obligated to keep confidential. Disclosure of Confidential Information as required by law or court order to any state, local or federal government or agency thereof shall not be deemed a breach of the Agreement, provided that Consultant uses reasonable efforts to minimize the disclosure and reasonably cooperates with Company in obtaining a protective order for the Confidential Information.
     5. Return of Property. Within ten (10) days after termination of this Agreement, Cerberus and Consultants shall deliver to the Company all Documentation (as defined in Paragraph 7 below), confidential information, records and reports under Paragraph 4 and property, information, data or other materials of the Company either developed by or supplied to Consultants under this Agreement, including the originals and all copies thereof in whatever and all forms stored, except those materials made generally available to the public by Company without contractual obligation and this Agreement.
     6. Term and Termination. This Agreement shall become effective as of the date first written above and shall continue until the earlier of December 31, 2005 or written notice from the Company or the Audit Committee that the services provided by the Consultants are no longer required. The Audit Committee shall also have the right to terminate one or more of the Consultants during the Term of the Agreement. Cerberus may terminate the Agreement upon thirty (30) days written notice.
     7. No License. This Agreement shall not be construed to grant and does not grant to Cerberus or Consultants any right or license with respect to any invention, patent, trade secret, know-how, trademark, copyright, confidential information, or confidential information of Company (apart from the right to make necessary use of the same in rendering Consultants’ services hereunder).
     8. Independent Contractor. The Consultants’ relationship to Company during the Term of this Agreement shall be that of an independent consultant and contractor, and not as an employee or agent. Neither Cerberus nor Consultants shall make any commitments, or bind or purport to bind or represent Company or any of its affiliates in any manner either as its agent or in any other capacity. Cerberus and the Consultants shall be responsible for the payment of any

2


 

and all taxes or contributions or other sums payable for Workers or Unemployment Compensation or benefits, as well as all other federal, state or local taxes payable by reason of Cerberus’ receipt of compensation in return for Consultants’ consulting services hereunder and for the preparation and filing of all related tax returns.
     9. Assignment of Agreement. This Agreement is personal to the Consultants, and neither this Agreement nor any of Consultants’ obligations hereunder to perform consulting services may be assigned or delegated by Cerberus or Consultants to anyone else without the written permission of the Audit Committee.
     10. No Waiver. The failure of either party to object to or take action with regard to any breach or noncompliance with any provision of this Agreement shall not be construed as a waiver or modification of that or any other provision, or a waiver of any remedy for the breach or noncompliance.
     11. Severability. If any provision of this Agreement should be determined by any court of competent jurisdiction to be invalid, illegal or unenforceable in whole or in part, and such determination should become final, such provision or portion thereof shall be deemed to be severed or limited to the extent required to render the remaining provisions and portions of this Agreement enforceable, and the Agreement shall be enforced to give effect to the intention of the parties insofar as possible.
     12. Applicable Law. This Agreement is made under and shall be construed and interpreted in accordance with and governed by the internal laws of the State of Georgia applicable to contracts made and to be wholly performed within the State of Georgia.
     13. Entire Agreement. This Agreement including its Exhibits contains the entire understanding of the parties with respect to its subject matter, and supercedes and replaces any prior agreements, understandings or promises relating to the subject matter hereof. This Agreement may be supplemented or amended only upon mutual agreement of the parties in writing.
     14. Headings. The Paragraph headings contained in this Agreement are for reference purposes only and shall not affect in anyway the meaning or interpretation of this Agreement.

3


 

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have executed and delivered this Agreement intending it to be effective as of the date and year first above written.
             
BLUELINX CORPORATION   CERBERUS CAPITAL
        MANAGEMENT, L.P.
 
           
 
           
By:
  /s/ Charles H. McElrea   By:   /s/ Mark Neporent
 
           
 
           
Name:
  Charles H. McElrea   Name:   Mark Neporent
 
           
 
           
Title:
  Chief Executive Officer   Title:   Managing Director
 
           
 
           
Date:
  August 8, 2005   Date:   August 8, 2005
 
           
 
           
 
           
ACKNOWLEDGED AND AGREED TO BY:        
 
           
 
           
By:
      By:    
 
           
 
  Duane Goodwin       Marc Bourhis
 
           
By:
      By:    
 
           
 
  Peter Kirchof       Matthew Prevost
 
           
By:
           
 
           
 
  Varun Bedi        

4


 

EXHIBIT A
COMPENSATION SCHEDULE
         
Name   Focus Area   Monthly Rate*
 
       
Duane Goodwin
  Specialty Procurement   $25,000
Peter Kirchof
  Sales and Pricing   $20,000
Varun Bedi
  Strategy   $17,000
Marc Bourhis
  Treasury   $25,000
Matthew Prevost
  Procurement   $20,000
*Company will be billed based on the percentage of each consultant’s time spent working on Company related matters. For example, if a consultant with a monthly rate of $20,000 spends 60% of their time, in a given month, working on Company matters, Cerberus will bill the Company $12,000 that month for such service.

5

EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
 

Exhibit 31.1
CERTIFICATION
I, Charles H. McElrea, the Chief Executive Officer of BlueLinx Holdings Inc. (the “Registrant”), certify that:
  (1)   I have reviewed this quarterly report on Form 10-Q of the Registrant;
 
  (2)   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
  (3)   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
 
  (4)   The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
  (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  (b)   Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  (c)   Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
  (5)   The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
  (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
 
  (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
August 8, 2005
         
     
  /s/ Charles H. McElrea    
  Charles H. McElrea   
  BlueLinx Holdings Inc.
Chief Executive Officer 
 
 

 

EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
 

Exhibit 31.2
CERTIFICATION
I, David J. Morris, the Chief Financial Officer and Treasurer of BlueLinx Holdings Inc. (the “Registrant”), certify that:
  (1)   I have reviewed this quarterly report on Form 10-Q of the Registrant;
 
  (2)   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
  (3)   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
 
  (4)   The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
  (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  (b)   Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  (c)   Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
  (5)   The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
  (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
 
  (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
August 8, 2005
         
     
  /s/ David J. Morris    
  David J. Morris   
  BlueLinx Holdings Inc.
Chief Financial Officer and Treasurer 
 
 

 

EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
 

Exhibit 32.1
BLUELINX HOLDINGS INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of BlueLinx Holdings Inc. (the “Company”) on Form 10-Q for the quarter ending July 2, 2005, as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), I, Charles H. McElrea, Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
  (1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
 
  (2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
     
August 8, 2005  By:   /s/ Charles H. McElrea    
    Charles H. McElrea   
    Chief Executive Officer   
 

 

EX-32.2 SECTION 906 CERTIFICATION OF THE CFO
 

Exhibit 32.2
BLUELINX HOLDINGS INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of BlueLinx Holdings Inc. (the “Company”) on Form 10-Q for the quarter ending July 2, 2005, as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Morris, Chief Financial Officer and Treasurer of the Company, do hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
  (1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
 
  (2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
     
August 8, 2005  By:   /s/ David J. Morris    
    David J. Morris   
    Chief Financial Officer and Treasurer