BlueLinx
Annual Report 2011

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K(Mark One) xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the fiscal year ended December 31, 2011OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934Commission file number: 1-32383 BLUELINX HOLDINGS INC.(Exact name of registrant as specified in its charter) Delaware 77-0627356(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)4300 Wildwood Parkway, Atlanta, Georgia 30339(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code:770-953-7000Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon stock, par value $0.01 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer ¨Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No xThe aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of July 2, 2011 was $26,336,336, based on theclosing price on the New York Stock Exchange of $2.24 per share on July 1, 2011.As of February 24, 2012, the registrant had 63,726,094 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCEPortions of BlueLinx Holdings Inc.’s Definitive Proxy Statement on Schedule 14A for its Annual Meeting of Stockholders, to be held on May 17, 2012,are incorporated by reference into Part III hereof. Table of ContentsBLUELINX HOLDINGS INC.ANNUAL REPORT ON FORM 10-KFor the Fiscal Year Ended December 31, 2011TABLE OF CONTENTS PART I ITEM 1. Business 4 ITEM 1A. Risk Factors 9 ITEM 1B. Unresolved Staff Comments 16 ITEM 2. Properties 16 ITEM 3. Legal Proceedings 17 ITEM 4. Mine Safety Disclosures 17 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 18 ITEM 6. Selected Financial Data 20 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk 38 ITEM 8. Financial Statements and Supplementary Data 40 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 82 ITEM 9A. Controls and Procedures 82 ITEM 9B. Other Information 82 PART III ITEM 10. Directors, Executive Officers and Corporate Governance 82 ITEM 11. Executive Compensation 83 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 83 ITEM 13. Certain Relationships and Related Transactions, and Director Independence 83 ITEM 14. Principal Accounting Fees and Services 83 PART IV ITEM 15. Exhibits, Financial Statement Schedules 83 2Table of ContentsCAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended,and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, any statement that may predict,forecast, indicate or imply future results, performance or achievements, and may contain the words “anticipate,” “believe,” “could,” “expect,” “estimate,”“intend,” “may,” “project,” “plan,” “should,” “will be,” “will likely continue,” “will likely result” or words or phrases of similar meaning. You should readstatements containing these words carefully, because they discuss our future expectations, contain projections of our future results or state other “forward-looking” information.Forward-looking statements are based on estimates and assumptions made by us that, although believed by us to be reasonable, involve inherent risksand uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause ourbusiness, strategy or actual results to differ materially from the forward-looking statements. We operate in a changing environment in which new risks canemerge 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 offactors, may cause our business, strategy or actual results to differ materially from those contained in forward-looking statements. Factors you shouldconsider that could cause these differences include, among other things: • changes in the prices, supply and/or demand for products which we distribute, especially as a result of conditions in the residentialhousing market; • the acceptance by our customers of our privately branded products; • inventory levels of new and existing homes for sale; • general economic and business conditions in the United States; • the financial condition and credit worthiness of our customers; • the activities of competitors; • changes in significant operating expenses; • fuel costs; • risk of losses associated with accidents; • exposure to product liability claims; • changes in the availability of capital and interest rates; • immigration patterns and job and household formation; • our ability to identify acquisition opportunities and effectively and cost-efficiently integrate acquisitions; • adverse weather patterns or conditions; • acts of war or terrorist activities, including cyber intrusion; • variations in the performance of the financial markets, including the credit markets; and • the risk factors discussed under Item 1A. Risk Factors and elsewhere in this Form 10-K.Forward-looking statements speak only as of the date of this Form 10-K. Except as required under federal securities laws and the rules and regulationsof the SEC, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after thedate of this Form 10-K, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautionednot to place undue reliance on the forward-looking statements included in this Form 10-K or that may be made elsewhere from time to time by or on behalf ofus. All forward-looking statements attributable to us are expressly qualified by these cautionary statements. 3Table of ContentsPART IAs used herein, unless the context otherwise requires, “BlueLinx,” the “Company,” “we,” “us” and “our” refer to BlueLinx Holdings Inc. andits subsidiaries. BlueLinx Corporation is the wholly-owned operating subsidiary of BlueLinx Holdings Inc. and is referred to herein as the “operatingcompany” when necessary. Reference to “fiscal 2011” refers to the 52-week period ended December 31, 2011. Reference to “fiscal 2010” refers to the52-week period ended January 1, 2011. Reference to “fiscal 2009” refers to the 52-week period ended January 2, 2010.ITEM 1. BUSINESS.Company OverviewBlueLinx Holdings Inc., operating through our wholly-owned subsidiary, BlueLinx Corporation, is a leading distributor of building products in theUnited States. We operate in all of the major metropolitan areas in the United States and, as of December 31, 2011, we distributed approximately 10,000products from over 750 suppliers to service more than 11,500 customers nationwide, including dealers, industrial manufacturers, manufactured housingproducers and home improvement retailers. We operate our distribution business from sales centers in Atlanta and Denver, and our network of approximately55 distribution centers.We distribute products in two principal categories: structural products and specialty products. Structural products, which represented approximately39%, 46% and 44% of our fiscal 2011, fiscal 2010, and fiscal 2009 gross sales, respectively, include plywood, oriented strand board (“OSB”), rebar andremesh, lumber and other wood products primarily used for structural support, walls and flooring in construction projects. Specialty products, whichrepresented approximately 61%, 54% and 56% of our fiscal 2011, fiscal 2010, and fiscal 2009 gross sales, respectively, include roofing, insulation,specialty panels, moulding, engineered wood products, vinyl products (used primarily in siding), outdoor living and metal products (excluding rebar andremesh).Our customers include building materials dealers, industrial users of building products, manufactured housing builders and home improvementcenters. We purchase products from over 750 vendors and serve as a national distributor for a number of our suppliers. We distribute products through ourowned and leased fleet of over 550 trucks and over 950 trailers, as well as by common carrier.Our principal executive offices are located at 4300 Wildwood Parkway, Atlanta, Georgia 30339 and our telephone number is (770) 953-7000. Our filingswith the U.S. Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,proxy statements and amendments to those reports, are accessible free of charge at our official website, www.BlueLinxCo.com. We have adopted a Code ofEthics within the meaning of Item 406(b) of Regulation S-K. This Code of Ethics applies to our principal executive officer, principal financial officer andprincipal accounting officer. This Code of Ethics, our board committee charters and our corporate governance guidelines are publicly available without chargeat www.BlueLinxCo.com or without charge upon request by writing to BlueLinx Holdings Inc., Attn: Corporate Secretary, 4300 Wildwood Parkway, Atlanta,Georgia 30339. If we make substantial amendments to our Code of Ethics or grant any waiver, including any implicit waiver, we will disclose the nature ofsuch amendment or waiver on our website or in a report on Form 8-K. The reference to our website does not constitute incorporation by reference of theinformation contained at the site, and our website is not considered part of this filing.HistoryWe were created on March 8, 2004 as a Georgia corporation named ABP Distribution Holdings Inc. (“ABP”). ABP was owned by Cerberus CapitalManagement, L.P. (Cerberus Capital Management, L.P. and its subsidiaries are referred to herein as “Cerberus”), a private, New York-based investment firm,and members of our management team. Prior to May 7, 2004, certain of our assets were owned by the distribution division (the “Division”) of Georgia-PacificCorporation (“Georgia-Pacific” or “G-P”). The Division commenced operations in 1954 with 13 warehouses primarily used as an outlet for G-P’s plywood. OnMay 7, 2004, G-P sold the assets of the Division to ABP. ABP subsequently merged into BlueLinx Holdings Inc. On December 17, 2004, we consummated aninitial public offering of our common stock. 4Table of ContentsProducts and ServicesAs of December 31, 2011, we distributed approximately 10,000 different structural and specialty products to approximately 11,500 customersnationwide. Our structural products are primarily used for structural support, walls, flooring and roofing in construction projects. Additional end-uses of ourstructural products include outdoor decks, sheathing, crates and boxes. Our specialty products include engineered lumber, roofing, insulation, metal products(excluding rebar and remesh), vinyl products (used primarily in siding), moulding, outdoor living and particle board. In some cases, these products arebranded by us.We also provide a wide range of value-added services and solutions to our customers and vendors including: • providing “less-than-truckload” delivery services; • pre-negotiated program pricing plans; • inventory stocking; • automated order processing through an electronic data interchange, or EDI, that provides a direct link between us and our customers; • inter-modal distribution services, including railcar unloading and cargo reloading onto customers’ trucks; and • back-haul services, when otherwise empty trucks are returning from customer deliveries.Distribution ChannelsWe sell products through three main distribution channels:Warehouse SalesWarehouse sales are delivered from our warehouses to dealers, home improvement centers and industrial users. We deliver products primarily using ourfleet of over 550 trucks and over 950 trailers, but also occasionally use common carriers for peak load flexibility. We operate in all of the major metropolitanareas in the United States through our network of approximately 55 distribution centers. Our warehouses have approximately ten million square feet of spaceunder roof plus significant outdoor storage space. Warehouse sales accounted for approximately 66% of our fiscal 2011 and fiscal 2010 gross sales.Reload SalesReload sales are similar to warehouse sales but are shipped from third-party warehouses where we store owned product in order to expand our geographicreach. This channel is employed primarily to service strategic customers that would be uneconomical to service from our warehouses and to distribute largevolumes of imported products such as metal or hardwood plywood from port facilities. Reload sales accounted for approximately 13% and 11% of our grosssales in fiscal 2011 and fiscal 2010, respectively.Direct SalesDirect sales are shipped from the manufacturer to the customer without our taking physical inventory possession. This channel requires the lowestamount of committed capital and fixed costs. Direct sales accounted for approximately 21% and 23% of our fiscal 2011 and fiscal 2010 gross sales,respectively. 5Table of ContentsCustomersAs of December 31, 2011, our customer base included approximately 11,500 customers across multiple market segments and various end-use markets,including the following types of customers: • building materials dealers; • industrial users of building products; • manufactured housing builders; and • home improvement centers.In fiscal 2011, Lowes Companies, Inc. (and its affiliated companies) was our largest customer, accounting for approximately 10.4% of total sales.Although not anticipated in the near term, the loss of this customer could negatively impact our business.Sales and MarketingOur sales efforts are directed primarily through our sales force of 436 sales representatives, of which 237 are primarily located at our two sales centers inDenver and Atlanta. Within these sales centers, our sales representatives interact with our customers over the telephone. The remaining 199 salesrepresentatives are located throughout the country and are responsible for maintaining a local dialogue with our customers, including making frequent, in-person visits.Our sales force is separated between industrial/dealer sales and home improvement center sales. Industrial/dealer sales are managed by regional vice-presidents with sales teams organized by geographical customer regions. The majority of industrial/dealer orders are processed by telephone and are facilitatedby our centralized database of customer preferences and purchasing history. We also have dedicated cross-functional customer support teams focused onstrategic growth with the home improvement centers.SuppliersAs of December 31, 2011, our vendor base included over 750 suppliers of both structural and specialty building products. In some cases, theseproducts are branded. We have supply contracts in place with many of our vendors. Terms for these agreements frequently include prompt paymentdiscounts, freight allowances and occasionally include volume discounts, growth incentives, marketing allowances, and consigned inventory.On April 27, 2009, we entered into a Termination and Modification Agreement (“Modification Agreement”) related to our Master Purchase, Supply andDistribution Agreement (the “Supply Agreement”) with G-P. The Modification Agreement effectively terminated the existing Supply Agreement with respect toour distribution of G-P plywood, OSB and lumber.G-P agreed to pay us $18.8 million in exchange for our agreement to terminate the Supply Agreement one year earlier than May 7, 2010, the terminationdate previously agreed upon. Under the terms of the Modification Agreement, we received four quarterly cash payments of $4.7 million, which began onMay 1, 2009 and ended on February 1, 2010. As a result of the termination, we recognized a net gain of $17.8 million in fiscal 2009 as a reduction tooperating expense. The gain was net of a $1.0 million write-off of an intangible asset associated with the Supply Agreement.On February 12, 2012, our three-year purchase agreement with G-P for engineered lumber expired in accordance with its terms. We continue to distributea variety of G-P building products, but no longer are contractually obligated to make minimum purchases of products from G-P or to purchase certainproducts exclusively from G-P.CompetitionThe U.S. building products distribution market is a highly fragmented market, served by a small number of multi-regional distributors, severalregionally focused distributors and a large number of independent local distributors. Local and regional distributors tend to be closely held and often specializein a limited number of segments, such as the roofing segment, in 6Table of Contentswhich they offer a broader selection of products. Some of our multi-regional competitors are part of larger companies and therefore have access to greaterfinancial and other resources than we do. We compete on the basis of breadth of product offering, consistent availability of product, product price and quality,reputation, service and distribution facility location.Our two largest competitors are Weyerhaeuser Company and Boise Cascade LLC. Most major markets are served by at least one of these distributors.SeasonalityWe are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These seasonal factors are common in the buildingproducts distribution industry. The first and fourth quarters are typically our slowest quarters due to the impact of poor weather on the construction market.Our second and third quarters are typically our strongest quarters, reflecting a substantial increase in construction due to more favorable weather conditions.Our working capital generally peaks in the third quarter, related to the building season. During fiscal year 2011 we experienced significant businessdisruption, in excess of normal seasonal fluctuations, due to the record snow fall in the Northeast in the winter months.TrademarksAs of December 31, 2011, we had 41 U.S. trademark applications and registrations, one issued U.S. patent and one Canadian trademark registration.Depending on the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained and they have not becomegeneric. Registrations of trademarks generally can be renewed indefinitely as long as the trademarks are in use. Our patent expires in September 2013. We donot believe our business is dependent on any one of our trademarks or on our patent.EmployeesAs of December 31, 2011 we employed approximately 1,860 persons on a full-time basis. Approximately 30% of our employees were represented by variouslabor unions. As of December 31, 2011, we had 42 collective bargaining agreements, of which 5, covering approximately 80 total employees, are up forrenewal in fiscal 2012. Of the five collective bargaining agreements expiring in fiscal 2012, one will expire in each of the first three quarters of fiscal 2012 andtwo will expire in the fourth quarter of fiscal 2012. Two additional collective bargaining agreements, which cover approximately 80 total employees will expireon December 31, 2013. Five collective bargaining agreements, covering approximately 50 employees, renewed in 2011. We consider our relationship with ouremployees generally to be good.Executive OfficersThe following table contains the name, age and position with our Company of each of our executive officers as of December 31, 2011. Name Age PositionGeorge R. Judd 50 President and Chief Executive OfficerH. Douglas Goforth 48 Chief Financial Officer andTreasurerDean A. Adelman 46 Chief Administrative OfficerNed M. Bassil 46 Chief Supply Chain OfficerGeorge R. Judd has served as our Chief Executive Officer since November 2008 and as our President since May 2004. Prior to that time, he worked forG-P in a variety of positions managing both inside and outside sales, national accounts and most recently as Vice President of Sales and Eastern Operationsfrom 2002-2004. From 2000 until 2002, Mr. Judd worked as Vice President of the North and Midwest regions of the Distribution Division. He served as VicePresident of the Southeast region from 1999 to 2000. He graduated from Western Connecticut State University in 1984 with a Bachelor’s degree in Marketing.H. Douglas Goforth has served as our Senior Vice President, Chief Financial Officer and Treasurer since February 2008. From November 2006 untilFebruary 2008, Mr. Goforth served as Vice President and Corporate Controller for Armor Holdings Inc. which was acquired by BAE Systems in July 2007.Previously he served as Corporate Controller for BlueLinx from May 2004 until October 2006, where he played a key role in our 2004 IPO. From 2002 until2004 he served as 7Table of ContentsController for the Distribution Division of G-P. Mr. Goforth has 25 years of combined accounting, finance, treasury, acquisition and management experiencewith leading distribution and manufacturing companies including Mitsubishi Wireless Communications, Inc., Yamaha Motor Manufacturing, Inc. andIngersoll-Rand. .Mr. Goforth is a North Carolina State Board Certified Public Accountant and earned a Bachelor of Science in Accounting from Mars HillCollege in North Carolina.Dean A. Adelman has served as our Chief Administrative Officer since May 2008 and as our Vice President, Human Resources since October 2005.Prior to that time, he served as Vice President Human Resources, Staff Development & Training for Corrections Corporation of America. Previously,Mr. Adelman served as Vice President Human Resources for Arby’s Inc. (formerly RTM Restaurant Group) from 1998 to 2002. From 1991 to 1998,Mr. Adelman served as senior counsel for G-P. Mr. Adelman received his Masters of Business Administration from the Kellogg School of Management atNorthwestern University, a Juris Doctor degree from the University of Georgia School of Law, and a Bachelor of Arts degree from the University of Georgia.Ned M. Bassil has served as our Senior Vice President, Chief Supply Chain Officer since December 2011. Prior to that, Mr. Bassil was a SeniorPartner at Bahou Heritage a boutique firm providing large industrial clients with customized advisory services, from 2009 to 2011 and from 2006to 2007. Mr. Bassil held the role of Group CEO at Azadea Holdings from 2008 to 2009, overseeing operations at over 350 retail outlets in 12 countries inEurope, the Middle East, & Africa, in the areas of Fashion, Food & Beverage, and Home Furnishings, in addition to Real Estate development activities. Mr.Bassil also held a number of senior management roles such as VP Global Operations, Senior VP Operations and Director of Operational Excellence, at Black& Decker from 2004 to 2005, Philips Electronics from 1998 to 2004 and Allied Signal (Honeywell) from 1996 to 1998 in the durable consumer goods,consumer electronics and lighting, and automotive industries, respectively. Mr. Bassil received his Masters of Business Administration from the WhartonSchool at the University of Pennsylvania, a Masters in Engineering from Youngstown State University, and a Bachelor of Science in Electrical Engineeringfrom Youngstown State University. He is fluent in 4 languages and his experience has spanned the Americas, Europe, Asia, and the Middle East.Environmental and Other Governmental RegulationsOur operations are subject to various federal, state, provincial and local laws, rules and regulations. We are subject to environmental laws, rules andregulations that limit discharges into the environment, establish standards for the handling, generation, emission, release, discharge, treatment, storage anddisposal of hazardous materials, substances and wastes, and require cleanup of contaminated soil and groundwater. These laws, ordinances and regulationsare complex, change frequently and have tended to become more stringent over time. Many of them provide for substantial fines and penalties, orders(including orders to cease operations) and criminal sanctions for violations. They may also impose liability for property damage and personal injury stemmingfrom the presence of, or exposure to, hazardous substances. In addition, certain of our operations require us to obtain, maintain compliance with, andperiodically renew permits.Certain of these laws, including the Comprehensive Environmental Response, Compensation, and Liability Act, may require the investigation andcleanup of an entity’s or its predecessor’s current or former properties, even if the associated contamination was caused by the operations of a third party.These laws also may require the investigation and cleanup of third-party sites at which an entity or its predecessor sent hazardous wastes for disposal,notwithstanding that the original disposal activity accorded with all applicable requirements. Liability under such laws may be imposed jointly and severally,and regardless of fault.G-P has agreed to indemnify us against any claim arising from environmental conditions that existed prior to May 7, 2004 in connection with theproperties acquired when G-P sold the assets of the Division to us (see “History” above). In addition, we carry environmental insurance. While we do notexpect to incur significant costs to BlueLinx arising from environmental conditions, there can be no assurance that all such costs will be covered byindemnification or insurance.We are also subject to the requirements of the U.S. Department of Labor Occupational Safety and Health Administration, or OSHA. In order to maintaincompliance with applicable OSHA requirements, we have established uniform safety and compliance procedures for our operations and implementedmeasures to prevent workplace injuries. 8Table of ContentsThe U.S. Department of Transportation, or DOT, regulates our operations in domestic interstate commerce. We are subject to safety requirementsgoverning interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also remain subject to both federal and state regulation.We incur and will continue to incur costs to comply with the requirements of environmental, health and safety and transportation laws, ordinances andregulations. We anticipate that these requirements could become more stringent in the future, and we cannot assure you that compliance costs will not bematerial.ITEM 1A. RISK FACTORS.In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating our business.Our business, financial condition, or results of operations could be materially adversely affected by any of these risks. Additional risks not presently knownto us or that we currently deem immaterial may also impair our business and operations.Our industry is highly cyclical, and prolonged periods of weak demand or excess supply may reduce our net sales and/or margins, which mayreduce our net income or cause us to incur losses.The building products distribution industry is subject to cyclical market pressures. Prices of building products are determined by overall supply anddemand in the market for building products. Market prices of building products historically have been volatile and cyclical and we have limited ability tocontrol the timing and amount of pricing changes for building products. Demand for building products is driven mainly by factors outside of our control,such as general economic and political conditions, interest rates, availability of mortgage financing, the construction, repair and remodeling and industrialmarkets, weather and population growth. The supply of building products fluctuates based on available manufacturing capacity, and excess capacity in theindustry can result in significant declines in market prices for those products. To the extent that prices and volumes experience a sustained or sharp decline,our net sales and margins likely would decline as well. Because we have substantial fixed costs, a decrease in sales and margin generally may have asignificant adverse impact on our financial condition, operating results and cash flows. Our results in some periods have been affected by market volatility,including a reduction in gross profits due to a decline in the resale value of our structural products inventory. All of these factors make it difficult to forecastour operating results.Our industry is dependant on the homebuilding industry which is suffering from a prolonged significant downturn, and any furtherdownturn or sustained continuation of the current downturn will continue to materially affect our business, liquidity and operating results.Our sales depend heavily on the strength of national and local new residential construction and home improvement and remodeling markets. Thestrength of these markets depends on new housing starts and residential renovation projects, which are a function of many factors beyond our control. Someof these factors include general economic conditions, employment levels, job and household formation, interest rates, housing prices, tax policy, availability ofmortgage financing, prices of commodity wood and steel products, immigration patterns, regional demographics and consumer confidence. The downturn inthe residential construction market is in its sixth consecutive year and it is one of the most severe housing downturns in United States history. Along with highunemployment, tighter lending standards and general economic uncertainty, there is an oversupply of unsold homes on the market and the pool of qualifiedhome buyers has declined significantly. Moreover, the government’s legislative and administrative measures aimed at restoring liquidity to the credit marketsand providing relief to homeowners facing foreclosure have had limited results. In 2009, the government provided eligible home buyers a tax credit that wasextended until April 30, 2010. As a result of the home buyers’ tax credit, the residential construction market improved during the first and second quarters offiscal 2010, but experienced a decline in the third and fourth quarters of fiscal 2010 following expiration of the credits. While the residential constructionmarket experienced marginal improvement in fiscal 2011, it is unclear if and to what extent the residential construction market will improve during fiscal2012.Our results of operations have been adversely affected by the severe downturn in new housing activity in the United States and we expect the severedownturn in new housing activity to continue to adversely affect our operating results in 2012. A prolonged continuation of the current downturn and anyfuture downturns in the markets that we serve or in the economy generally will have a material adverse effect on our operating results, liquidity and financialcondition. Reduced levels of construction activity may result in continued intense price competition among building materials suppliers, which may adverselyaffect our gross margins. We cannot provide assurance that our responses to the downturn or the government’s attempts to address the difficulties in theeconomy will be successful. 9Table of ContentsA significant portion of our sales are on credit to our customers. Material changes in their credit worthiness or our inability to forecastdeterioration in their credit position could have a material adverse effect on our operating results, cash flow and liquidity.The majority of our sales are on account where we provide credit to our customers. Continued market disruptions could cause additional economicdownturns, which may lead to lower demand for our products and increased incidence of customers’ inability to pay their accounts. Bankruptcies by ourcustomers may cause us to incur bad debt expense at levels higher than historically experienced. In fiscal 2011, approximately 0.1% in bad debt expense tototal net sales was incurred related to credit sales. Our customers are generally susceptible to the same economic business risks as we are. Furthermore, wemay not necessarily be aware of any deterioration in their financial position. If our customers’ financial position becomes impaired, it could have a significantimpact on our bad debt exposure and could have a material adverse effect on our operating results, cash flow and liquidity. In addition, certain of oursuppliers potentially may be impacted as well, causing disruption or delay of product availability. These events would adversely impact our results ofoperations, cash flows and financial position.Our cash flows and capital resources may be insufficient to make required payments on our substantial indebtedness and future indebtednessor to maintain our required level of excess liquidity.We have a substantial amount of debt. As of December 31, 2011, we had outstanding borrowings of $93.4 million and excess availability of $115.7million under the terms of our U.S. revolving credit facility (the “U.S. revolving credit facility”), outstanding borrowing of $1.1 million and excessavailability of $2.6 million under our Canadian revolving credit facility and outstanding letters of credit totaling $2.7 million. We also have a mortgage loan inthe amount of $243.3 million.Our substantial debt could have important consequences to you. For example, it could: • make it difficult for us to satisfy our debt obligations; • make us more vulnerable to general adverse economic and industry conditions; • limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other general corporaterequirements as our excess liquidity likely will decrease while our industry and our Company begins its recovery from the historichousing market downturn; • expose us to interest rate fluctuations because the interest rate on the debt under our U.S. revolving credit facility is variable; • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability ofour cash flow for operations and other purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • place us at a competitive disadvantage compared to competitors that may have proportionately less debt.In addition, our ability to make scheduled payments or refinance our obligations depends on our successful financial and operating performance, cashflows and capital resources, which in turn depend upon prevailing economic conditions and certain financial, business and other factors, many of which arebeyond our control. These factors include, among others: • economic and demand factors affecting the building products distribution industry; • pricing pressures; 10Table of Contents • increased operating costs; • competitive conditions; and • other operating difficulties.If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures,sell material assets or operations, obtain additional capital or restructure our debt. Obtaining additional capital or restructuring our debt could be accomplishedin part through new or additional borrowings or placements of debt or equity securities. There is no assurance that we could obtain additional capital orrestructure our debt on terms acceptable to us or at all. In the event that we are required to dispose of material assets or operations to meet our debt service andother obligations, the value realized on such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such salemay not, among other things, be for a sufficient dollar amount. Our obligations under the revolving credit facilities are secured by a first priority securityinterest in all of our operating company’s inventories, receivables and proceeds from those items. In addition, our mortgage loan is secured by the majority ofour real property. The foregoing encumbrances may limit our ability to dispose of material assets or operations. We also may not be able to restructure ourindebtedness on favorable economic terms, if at all. We may incur substantial additional indebtedness in the future, including under the revolving creditfacilities. Our incurrence of additional indebtedness would intensify the risks described above.The instruments governing our indebtedness contain various covenants limiting the discretion of our management in operating our business,including requiring us to maintain a minimum level of excess liquidity.Our revolving credit facilities and mortgage loan contain various restrictive covenants and restrictions, including financial covenants customary forasset-based loans that limit our management’s discretion in operating our business. In particular, these instruments limit our ability to, among other things: • incur additional debt; • grant liens on assets; • make investments, including capital expenditures; • sell or acquire assets outside the ordinary course of business; • engage in transactions with affiliates; and • make fundamental business changes.Under our U.S. revolving credit facility, we are required to maintain a fixed charge coverage ratio of 1.1 to 1.0 in the event our excess availability fallsbelow the greater of $30 million or the amount equal to 15% of the lesser of the borrowing base or $400 million. If we fail to maintain this minimum excessavailability, the U.S. revolving credit facility requires us to (i) maintain certain financial ratios, which we would not meet with current operating results, and(ii) limit our capital expenditures. If we fail to comply with the restrictions in the U.S. revolving credit facility, the Canadian revolving credit facility, themortgage loan documents or any other current or future financing agreements, a default may allow the creditors under the relevant instruments to accelerate therelated debt and to exercise their remedies under these agreements, which will typically include the right to declare the principal amount of that debt, togetherwith accrued and unpaid interest and other related amounts, immediately due and payable, to exercise any remedies the creditors may have to foreclose onassets that are subject to liens securing that debt and to terminate any commitments they had made to supply further funds. 11Table of ContentsWe are dependent upon a single supplier, G-P, for a significant percentage of our products.Although we have been working to diversify our supplier base, we are still dependent on G-P for a significant percentage of our products. Purchasesfrom G-P accounted for approximately 11% and 12% of our purchases during fiscal 2011 and fiscal 2010, respectively. On February 12, 2012, our three-yearpurchase agreement with G-P for engineered lumber expired in accordance with its terms. As of that date, we operate without a supply agreement for any of theproducts that we purchase from G-P. As a result, our purchases from G-P are subject to greater volatility with respect to sales terms, including volume andpricing, than when we had a long-term supply agreement in place. In addition, if we are unable to agree on supply arrangements for these products or if G-Potherwise discontinues sales of product to us, we could experience a product shortage unless and until we obtain a replacement supplier or suppliers. We maynot be able to obtain replacement products on favorable economic terms. An inability to replace products on favorable economic terms could adversely impactour net sales and our costs, which in turn could impact our gross profit, net income and cash flows.Product shortages, loss of key suppliers, and our dependence on third-party suppliers and manufacturers could affect our financial health.Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from manufacturersand other suppliers. Generally, our products are obtainable from various sources and in sufficient quantities. However, the loss of, or a substantial decrease inthe availability of, products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, operating results, andcash flows.Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. Failureby our suppliers to continue to supply us with products on commercially reasonable terms, or at all, could put pressure on our gross margins or have amaterial adverse effect on our financial condition, operating results, and cash flows.Our industry is highly fragmented and competitive. If we are unable to compete effectively, our net sales and operating results will be reduced.The building products distribution industry is highly fragmented and competitive and the barriers to entry for local competitors are relatively low.Competitive factors in our industry include pricing and availability of product, service and delivery capabilities, ability to assist with problem-solving,customer relationships, geographic coverage and breadth of product offerings. Also, financial stability is important to suppliers and customers in choosingdistributors for their products and affects the favorability of the terms on which we are able to obtain our products from our suppliers and sell our products toour customers.Some of our competitors are part of larger companies and therefore have access to greater financial and other resources than us. In addition, certainproduct manufacturers sell and distribute their products directly to customers. Additional manufacturers of products distributed by us may elect to sell anddistribute directly to end-users in the future or enter into exclusive supply arrangements with other distributors. Finally, we may not be able to maintain ourcosts at a level sufficiently low for us to compete effectively. If we are unable to compete effectively, our net sales and net income will be reduced.Integrating acquisitions may be time-consuming and create costs that could reduce our operating results and cash flows.We may elect to selectively pursue acquisitions. Any integration process may be complex and time consuming, may be disruptive to the business andmay cause an interruption of, or a distraction of management’s attention from, the business as a result of a number of obstacles, including but not limited to: • the loss of key customers of the acquired company; • the incurrence of unexpected expenses and working capital requirements; • a failure of our due diligence process to identify significant issues or contingencies; • difficulties assimilating the operations and personnel of the acquired company; 12Table of Contents • difficulties effectively integrating the acquired technologies with our current technologies; • our inability to retain key personnel of acquired entities; • failure to maintain the quality of customer service; • our inability to achieve the financial and strategic goals for the acquired and combined businesses; and • difficulty in maintaining internal controls, procedures and policies.Any of the foregoing obstacles, or a combination of them, could increase selling, general and administrative expenses in absolute terms and/or as apercentage of net sales, which could in turn negatively impact our operating results and cash flows.We may not be able to consummate acquisitions in the future on terms acceptable to us, or at all. In addition, future acquisitions are accompanied by therisk that the obligations and liabilities of an acquired company may not be adequately reflected in the historical financial statements of that company and therisk that those historical financial statements may be based on assumptions which are incorrect or inconsistent with our assumptions or approach toaccounting policies. Any of these material obligations, liabilities or incorrect or inconsistent assumptions could adversely impact our results of operations.A significant percentage of our employees are unionized. Wage increases or work stoppages by our unionized employees may reduce ourresults of operations.As of December 31, 2011, approximately 30% of our employees were represented by various labor unions. As of December 31, 2011, we had 42collective bargaining agreements, of which 5, covering approximately 80 total employees, are up for renewal in fiscal 2012. Two additional collectivebargaining agreements, which cover approximately 80 total employees, will expire on December 31, 2012. Although we have historically had good relationswith our unionized employees and expect to renew the collective bargaining agreements that will expire in 2012, no assurances can be provided that we will beable to reach a timely agreement as to the renewal of the agreements and their expiration or continued expired status, as applicable, could result in a workstoppage. In addition, we may become subject to material cost increases, or additional work rules imposed by agreements with labor unions. The foregoingcould increase our selling, general and administrative expenses in absolute terms and/or as a percentage of net sales. In addition, work stoppages or other labordisturbances may occur in the future, which could adversely impact our net sales and/or selling, general and administrative expenses. All of these factorscould negatively impact our operating results and cash flows.Increases in the cost of employee benefits, such as pension and other postretirement benefits, could impact our financial results and cash flow.Unfavorable changes in the cost of our pension retirement benefits and current employees’ medical benefits could materially impact our financial resultsand cash flow. We sponsor several defined benefit pension plans covering substantially all of our hourly employees. Our estimates of the amount and timing ofour future funding obligations for our defined benefit pension plans are based upon various assumptions. These assumptions include, but are not limited to,the discount rate, projected return on plan assets, compensation increase rates, mortality rates, retirement patterns, and turnover rates. In addition, the amountand timing of our pension funding obligations can be influenced by funding requirements that are established by the Employee Retirement Income andSecurity Act of 1974 (ERISA), the Pension Protection Act, Congressional Acts, or other governing bodies. During fiscal 2010 and 2011, we met our requiredcontribution to our defined benefit pension plans. As of December 31, 2011, the net unfunded status of our benefit plan was $35.5 million. The Company’srequired cash contribution to the pension plan in 2012 is approximately $4.1 million. This contribution is comprised of approximately $1.2 million relatedto our 2011 minimum required contribution and approximately $2.9 million related to our 2012 minimum required contribution. The Company’s minimumrequired contribution for plan year 2012 is $5.4 million. The Company will fund the $1.2 million related to its 2011 minimum required contribution withcash in 2012. However, in an effort to preserve additional cash for operations, we intend to seek a waiver from the Internal Revenue Service (the “IRS”) for our2012 minimum required contribution. If we are granted the requested waiver, our contributions for 2012 will be deferred and amortized over the following fiveyears, increasing our future minimum required contributions. No assurances can be provided, however, that any such waiver request will be granted. 13Table of ContentsWe participate in various multi-employer pension plans in the United States. The majority of these plans are underfunded. If, in the future, we choose towithdraw from these plans, we likely would need to record a withdrawal liability, which may be material to our financial results.The payment of dividends has been suspended, and resumption is dependant on business conditions, among other factors. Further, theinstruments governing our indebtedness contain various covenants that may limit our ability to pay dividends.We suspended the payment of dividends on our common stock for an indefinite period of time on December 5, 2007. Resumption of the payment ofdividends will depend on, among other things, business conditions in the housing industry, our results of operations, cash requirements, financial condition,contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. Accordingly, we may not be able toresume the payment of dividends at the same quarterly rate in the future, if at all.Federal and state transportation regulations could impose substantial costs on us which would reduce our net income.We use our own fleet of over 550 trucks and over 950 trailers to service customers throughout the United States. The U.S. Department ofTransportation, or DOT, regulates our operations in domestic interstate commerce. We are subject to safety requirements governing interstate operationsprescribed by the DOT. Vehicle dimensions and driver hours of service also remain subject to both federal and state regulation. More restrictive limitations onvehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if we are unable to pass these costincreases on to our customers, will increase our selling, general and administrative expenses and reduce our operating results.Environmental laws impose risks and costs on us.Our operations are subject to federal, state, provincial and local laws, rules and regulations governing the protection of the environment, including, butnot limited to, those regulating discharges into the air and water, the use, handling and disposal of hazardous or toxic substances, the management of wastes,the cleanup of contamination and the control of noise and odors. We have made, and will continue to make, expenditures to comply with these requirements.While we believe, based upon current information, that we are in substantial compliance with all applicable environmental laws, rules and regulations, wecould be subject to potentially significant fines or penalties for any failure to comply. Moreover, under certain environmental laws, a current or previous owneror operator of real property, and parties that generate or transport hazardous substances that are disposed of at that real property, may be held liable for the costto investigate or clean up such real property and for related damages to natural resources. We may be subject to liability, including liability for investigationand cleanup costs, if contamination is discovered at one of our current or former warehouse facilities, or at a landfill or other location where we have disposedof, or arranged for the disposal of, wastes. G-P has agreed to indemnify us against any claim arising from environmental conditions that existed prior toMay 7, 2004 in connection with the properties we acquired when we purchased the assets of the Division from G-P. We also carry environmental insurance.However, any remediation costs either not related to conditions existing prior to May 7, 2004 or on properties acquired after May 7, 2004 may not be coveredby indemnification. In addition, certain remediation costs may not be covered by insurance. We could also be subject to claims brought pursuant to applicablelaws, rules or regulations for property damage or personal injury resulting from the environmental impact of our operations. Increasingly stringentenvironmental requirements, more aggressive enforcement actions, the discovery of unknown conditions or the bringing of future claims may cause ourexpenditures for environmental matters to increase, and we may incur material costs associated with these matters.Failure to comply with governmental laws and regulations could harm our business.Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoringand enforcing employment and labor laws, workplace safety, product safety, environmental laws, consumer protection laws, anti-bribery laws, import/exportcontrols, federal securities laws and tax laws and regulations. Noncompliance with applicable regulations or requirements could subject us to investigations,sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions. If anygovernmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, 14Table of Contentsoperating results and financial condition could be materially adversely affected. In addition, responding to any action will likely result in a significantdiversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business,operating results and financial condition.Affiliates of Cerberus control us and may have conflicts of interest with other stockholders in the future.Cerberus, which we refer to as the controlling stockholder, beneficially owned approximately 54% of our common stock as of December 31, 2011. As aresult, the controlling stockholder will continue to be able to control the election of our directors, determine our corporate and management policies anddetermine, without the consent of our other stockholders, the outcome of any corporate transaction or other matter submitted to our stockholders for approval,including potential mergers or acquisitions, asset sales and other significant corporate transactions. This concentrated ownership position limits otherstockholders’ ability to influence corporate matters and, as a result, we may take actions that some of our stockholders do not view as beneficial.The controlling stockholder is controlled by Cerberus Capital Management. Four of our eight directors are, or recently were, employees of or advisors toCerberus Capital management. The controlling stockholder also has sufficient voting power to amend our organizational documents. The interests of thecontrolling stockholder may not coincide with the interests of other holders of our common stock. Additionally, the controlling stockholder is in the businessof making investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. Thecontrolling stockholder may also pursue, for its own account, acquisition opportunities that may be complementary to our business, and as a result, thoseacquisition opportunities may not be available to us. So long as the controlling stockholder continues to own a significant amount of the outstanding shares ofour common stock, it will continue to be able to strongly influence or effectively control our decisions, including potential mergers or acquisitions, asset salesand other significant corporate transactions. In addition, because we are a controlled company within the meaning of the New York Stock Exchange rules, weare exempt from the NYSE requirements that our board be composed of a majority of independent directors, that our compensation committee be composedentirely of independent directors, and that we maintain a nominating/corporate governance committee composed entirely of independent directors.Even if Cerberus no longer controls us in the future, certain provisions of our charter documents and agreements and Delaware law coulddiscourage, delay or prevent a merger or acquisition at a premium price.Our Amended and Restated Certificate of Incorporation and Bylaws contain provisions that: • permit us to issue, without any further vote or action by the stockholders, up to 30 million shares of preferred stock in one or more seriesand, with respect to each series, to fix the number of shares constituting the series and the designation of the series, the voting powers (ifany) of the shares of such series, and the preferences and other special rights, if any, and any qualifications, limitations or restrictions, ofthe shares of the series; and • limit the stockholders’ ability to call special meetings.These provisions may discourage, delay or prevent a merger or acquisition at a premium price.In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which also imposes certain restrictionson mergers and other business combinations between us and any holder of 15% or more of our common stock. Further, certain of our incentive plans providefor vesting of stock options and/or payments to be made to our employees in connection with a change of control, which could discourage, delay or prevent amerger or acquisition at a premium price.We may incur substantial costs relating to G-P’s product liability related claims.G-P is a defendant in suits brought in various courts around the nation by plaintiffs who allege that they have suffered personal injury as a result ofexposure to products containing asbestos. These suits allege a variety of lung and other diseases based on alleged exposure to products previouslymanufactured by G-P. Although the terms of the asset purchase agreement provide that G-P will indemnify us against all obligations and liabilities arising outof, relating to or otherwise in any way in 15Table of Contentsrespect of any product liability claims (including, without limitation, claims, obligations or liabilities relating to the presence or alleged presence of asbestos-containing materials) with respect to products purchased, sold, marketed, stored, delivered, distributed or transported by G-P and its affiliates, including theDivision prior to the acquisition, it could be possible that circumstances may arise under which asbestos-related claims against G-P could cause us to incursubstantial costs.For example, in the event that G-P is financially unable to respond to an asbestos product liability claim, plaintiffs’ lawyers may, in order to obtainrecovery, attempt to sue us, in our capacity as owner of assets sold by G-P, despite the fact that the assets sold to us did not contain asbestos. Asbestoslitigation has, over the years, proved unpredictable, as the aggressive and well-financed asbestos plaintiffs’ bar has been creative, and often successful, inbringing claims based on novel legal theories and on expansive interpretations of existing legal theories. These claims have included claims against companiesthat did not manufacture asbestos products. As a result of these factors, a number of companies have been held liable for amounts far in excess of theirperceived exposure. Although we believe, based on our understanding of the law as currently interpreted, that we should not be held liable for any of G-P’sasbestos-related claims, and, to the contrary, that we would prevail on summary judgment on any such claims, there is nevertheless a possibility that newtheories could be developed, or that the application of existing theories could be expanded, in a manner that would result in liability for us. Any such liabilityultimately could be borne by us if G-P is unable to fulfill its indemnity obligation under the asset purchase agreement with us.We are subject to cybersecurity risks and may incur increasing costs in an effort to minimize those risks.Our business employs systems and a website that allow for the secure storage and transmission of customers’ proprietary information. Securitybreaches could expose us to a risk of loss or misuse of this information, litigation and potential liability. We may not have the resources or technicalsophistication to anticipate or prevent rapidly evolving types of cyber attacks. Any compromise of our security could result in a violation of applicable privacyand other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm ourbusiness. As cyber attacks become more sophisticated generally, we may be required to incur significant costs to strengthen our systems from outsideintrusions and/or obtain insurance coverage related to the threat of such attacks.ITEM 1B. UNRESOLVED STAFF COMMENTS.None.ITEM 2. PROPERTIES.We own 53 warehouse facilities and lease 2 additional warehouse facilities. The total square footage under roof at our owned and leased warehouses isapproximately 10 million square feet. Our Denver sales center and 52 of our owned warehouse facilities secure our mortgage loan.Our corporate headquarters located at 4300 Wildwood Parkway, Atlanta, Georgia 30339 is approximately 150,000 square feet. During the fourth quarterof fiscal 2007, as part of a restructuring effort, we vacated approximately 100,000 square feet of our corporate headquarters space in the building located at4100 Wildwood Parkway, Atlanta, Georgia 30339. During the third quarter of fiscal 2011, we entered into an amendment to our corporate headquarters lease inAtlanta, Georgia related to the unoccupied 4100 building. This amendment released us from our obligations with respect to this unoccupied space as ofJanuary 31, 2012, in exchange for a $5.0 million space remittance fee. In addition, we are obligated to pay $1.2 million on or before December 31, 2013 to beused for tenant improvements. The provisions relating to the occupied 4300 building remain unchanged. Under the existing provisions, the current term of thelease ends on January 31, 2019. The amendment resulted in a reduction of our restructuring reserve of approximately $2.0 million, with the credit recorded in“Selling, general, and administrative” expenses in the Consolidated Statements of Operations.The following table summarizes our real estate facilities including their inside square footage: Facility Type Number OwnedFacilities (ft(2)) LeasedFacilities (ft(2)) Office Space(1) 3 68,721 251,885 Warehouses 55 9,585,733 320,675 TOTAL 58 9,654,454 572,560 (1)Includes corporate headquarters in Atlanta, the Denver Sales Center and a call center in Vancouver. 16Table of ContentsWe also store materials outdoors, such as lumber and rebar, at all of our warehouse locations, which increases their distribution and storage capacity.We believe that substantially all of our property and equipment is in good condition, subject to normal wear and tear. We believe that our facilities havesufficient capacity to meet current and projected distribution needs.ITEM 3. LEGAL PROCEEDINGS.BlueLinx, its directors, and Cerberus ABP Investor LLC (“CAI”) were named as defendants in the following putative shareholder class actions filed inthe Superior Courts of Fulton and Cobb Counties, Georgia, the United States District Court for the Northern District of Georgia, the Chancery Court for theState of Delaware, and the Supreme Court of the State of New York in connection with the proposed tender offer announced by CAI on July 21, 2010 andcommenced by CAI on August 2, 2010: Habiniak, et al. v. Cohen, et al., Fulton County Superior Court, Georgia, filed July 23, 2010, voluntarily dismissedAugust 11, 2010; Hindermann, et al. v. BlueLinx Holdings Inc., et al., Cobb County Superior Court, Georgia, filed July 27, 2010, dismissedDecember 14, 2010; Markich, et al v. BlueLinx Holdings Inc., et al., Cobb County Superior Court, Georgia, filed July 30, 2010, dismissed December 14,2010; Jerszynski v. BlueLinx Holdings Inc., et al., Cobb County Superior Court, Georgia, filed August 3, 2010, dismissed December 14, 2010; Winter v.Cerberus ABP Investor LLC, Cobb County Superior Court, Georgia, filed August 4, 2010, dismissed December 14, 2010; Stadium Capital QualifiedPartners, LP, et al. v. Cerberus ABP Investor LLC, etc al., Delaware Chancery Court, filed August 10, 2010, voluntarily dismissed October 20, 2010;Habiniak, et al. v. Cohen, et al., Delaware Chancery Court, filed August 13, 2010, voluntarily dismissed February 10, 2011; Lang et al v. Cohen, et al.,Delaware Chancery Court, filed August 13, 2010; Kajaria, et al. v. Cohen, et al., U.S. District Court, Northern District of Georgia, filed September 30,2010, motion for fees filed on June 16, 2011, opposition filed on June 30, 2011; and Centonze, et al. v. Judd, et al., Supreme Court of New York, New YorkCounty, filed on October 4, 2010. Certain of the complaints also named Cerberus Capital Management L.P. as a defendant. The complaints sought to enjointhe proposed tender offer, alleging that the Company’s directors and CAI breached their fiduciary duties by, among other things, failing to make certaindisclosures and maximize the value to be received by our stockholders. The complaints also asserted claims of aiding and abetting breach of fiduciary duty. Inaddition to an order enjoining the transaction, the complaints variously sought, among other things: additional disclosures regarding the proposed transaction;imposition of a constructive trust in favor of plaintiffs for any improper benefits received by defendants; rescission of the transaction, if consummated, or anaward to plaintiffs of rescissory damages; and attorneys’ fees and expenses. As a result of the expiration of the tender offer, all of these matters have beenvoluntarily dismissed and did not have a material effect on our financial statements.We are, and from time to time may be, a party to routine legal proceedings incidental to the operation of our business. The outcome of any pending orthreatened proceedings is not expected to have a material adverse effect on our financial condition, operating results or cash flows, based on our currentunderstanding of the relevant facts. We establish reserves for pending or threatened proceedings when the costs associated with such proceedings becomeprobable and can be reasonably estimated.ITEM 4. MINE SAFETY DISCLOSURES.Not applicable. 17Table of ContentsPART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIES.Our equity securities consist of one class of common stock. The common stock began trading on December 16, 2004. The common stock is traded onthe New York Stock Exchange under the symbol “BXC”. The following table sets forth, for the periods indicated, the range of the high and low sales pricesfor the common stock as quoted on the New York Stock Exchange: High Low Fiscal Year Ended December 31, 2011 First Quarter $3.90 $3.41 Second Quarter $4.35 $2.23 Third Quarter $2.40 $1.39 Fourth Quarter $1.90 $1.25 Fiscal Year Ended January 1, 2011 First Quarter $4.11 $2.51 Second Quarter $6.32 $2.30 Third Quarter $4.10 $2.24 Fourth Quarter $4.00 $2.94 As of February 24, 2012, there were 55 registered stockholders, and, as of that date we estimate there were approximately 2,200 beneficial ownersholding our common stock in nominee or “street” name.In December 2007, we suspended the payment of dividends on our common stock for an indefinite period of time. Resumption of the payment ofdividends will depend on, among other things, business conditions in the housing industry, our results of operations, cash requirements, financial condition,contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. See “Item 8. Financial Statements andSupplementary Data, Note 10. Revolving Credit Facilities” for additional information regarding limitations on the ability of BlueLinx Corporation to transferfunds to its parent, BlueLinx Holdings Inc., which could impact our ability to pay dividends to our stockholders. Accordingly, we may not be able to resumethe payment of dividends at the same quarterly rate in the future, if at all. 18Table of ContentsPerformance GraphThe chart below compares the quarterly percentage change in the cumulative total stockholder return on our common stock with the cumulative totalreturn on the Russell 2000 Index and a peer group index for the period commencing December 30, 2006 and ending December 31, 2011, assuming aninvestment of $100 and the reinvestment of any dividends.Our peer group index was selected by us and is comprised of reporting companies with lines of business and product offerings that are comparable toours and which we believe most accurately represent our business. Our peer group consists of the following companies: Beacon Roofing Supply Inc., BuildersFirstsource, Building Materials HLDG CP (through January 4, 2010), Huttig Building Products Inc., Interline Brands Inc., Universal Forest Products Inc.and Watsco Inc.Comparison of Cumulative Total Return Cumulative Total ReturnYears Ending Base Period Company Name/Index 12/30/06 12/29/07 01/03/09 01/02/10 01/01/11 12/31/11 BlueLinx Holdings Inc. 100 41.52 26.52 29.27 38.67 19.97 Russell 2000 Index 100 99.17 66.50 83.51 105.93 101.51 Peer Group 100 61.69 52.50 70.86 85.76 83.51 19Table of ContentsITEM 6. SELECTED FINANCIAL DATA.The following table sets forth certain historical financial data of our Company. The selected financial data for the fiscal years ended December 31, 2011,January 1, 2011, January 2, 2010, January 3, 2009 and December 29, 2007 have been derived from our audited financial statements included elsewhere inthis Annual Report on Form 10-K or from prior financial statements. The following information should be read in conjunction with our financial statementsand “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Year EndedDecember 31,2011 Year EndedJanuary 1,2011 Year EndedJanuary 2,2010 Year EndedJanuary 3,2009 Year EndedDecember 29,2007 (In thousands, except per share data) Statements of Operations Data: Net sales $1,755,431 $1,804,418 $1,646,108 $2,779,699 $3,833,910 Cost of sales 1,545,282 1,593,745 1,452,947 2,464,766 3,441,964 Gross profit 210,149 210,673 193,161 314,933 391,946 Operating expenses: Selling, general and administrative 207,857 221,185 210,214 303,403 372,754 Net gain from terminating the Georgia-Pacific supplyagreement — — (17,772) — — Depreciation and amortization 10,562 13,365 16,984 20,519 20,924 Total operating expenses 218,419 234,550 209,426 323,922 393,678 Operating loss (8,270) (23,877) (16,265) (8,989) (1,732) Non-operating expenses (income): Interest expense 30,510 33,788 32,456 38,547 43,660 Changes associated with the ineffective interest rate swap (1,676) (4,603) 6,252 — — Write-off of debt issue costs — 183 1,407 — — Other expense (income), net 501 587 519 601 (370) Loss before provision for (benefit from) income taxes (37,605) (53,832) (56,899) (48,137) (45,022) Provision for (benefit from) income taxes 962 (589) 4,564 (16,434) (17,077) Net loss $(38,567) $(53,243) $(61,463) $(31,703) $(27,945) Basic weighted average number of common shares outstanding 43,187 30,688 31,017 31,083 30,848 Basic net loss per share applicable to common stock $(0.89) $(1.73) $(1.98) $(1.02) $(0.91) Diluted weighted average number of common shares outstanding 43,187 30,688 31,017 31,083 30,848 Diluted net loss per share applicable to common stock $(0.89) $(1.73) $(1.98) $(1.02) $(0.91) Dividends declared per share of common stock $— $— $— $— $0.50 Year EndedDecember 31,2011 Year EndedJanuary 1,2011 Year EndedJanuary 2,2010 Year EndedJanuary 3,2009 Year EndedDecember 29,2007 (In thousands, except per share data) Other Financial Data: Capital expenditures $7,222 $4,092 $1,815 $4,919 $13,141 EBITDA(1) 1,790 (11,099) 200 10,929 19,562 Net cash (used in) provided by operating activities (49,643) (29,909) (19,853) 190,390 79,842 Net cash provided by (used in) investing activities 11,133 (3,381) 12,636 985 (9,070) Net cash provided by (used in) financing activities 29,111 18,130 $(113,679) $(56,781) $(82,055) Balance Sheet Data (at end of period): Cash and cash equivalents $4,898 $14,927 $29,457 $150,353 $15,759 Working capital 233,414 236,168 247,722 320,527 448,731 Total assets 503,915 525,019 546,846 729,178 883,436 Total debt(2) 337,741 382,869 341,669 444,870 478,535 Stockholders’ equity 8,374 991 $50,820 $102,852 $154,823 20Table of Contents (1)EBITDA is an amount equal to net (loss) income plus interest expense and all interest expense related items (e.g. changes associated with ineffectiveinterest rate swap, write-off of debt issue costs, charges associated with mortgage refinancing), income taxes, and depreciation and amortization.EBITDA is presented herein because we believe it is a useful supplement to cash flow from operations in understanding cash flows generated fromoperations that are available for debt service (interest and principal payments) and further investment in acquisitions. However, EBITDA is not apresentation made in accordance with U.S. generally accepted accounting principles, (“GAAP”), and is not intended to present a superior measure of thefinancial condition from those determined under GAAP. EBITDA, as used herein, is not necessarily comparable to other similarly titled captions ofother companies due to differences in methods of calculations. (2)Total debt represents long-term debt, including current maturities.A reconciliation of net cash (used in) provided by operating activities, the most directly comparable GAAP measure, to EBITDA for each of therespective periods indicated is as follows (in thousands): Year Ended,December 31,2011 Year Ended,January 1,2011 Year Ended,January 2,2010 Year EndedJanuary 3,2009 Year EndedDecember 29,2007 Net cash (used in) provided by operating activities $(49,643) $(29,909) $(19,853) $190,390 $79,842 Amortization of debt issue costs (2,940) (1,963) (2,459) (2,479) (2,431) Net gain from terminating the Georgia-Pacific supply agreement — — 17,772 — — Payments from terminating the Georgia-Pacific supply agreement — (4,706) (14,118) — — Vacant property changes 291 (53) (1,222) (4,441) (11,037) Deferred income tax benefit (provision) 25 600 (24,220) 2,935 9,526 Prepayment fees associated with sale of property — — (616) (1,868) — Gain on sale of properties 10,604 — 10,397 1,936 — Gain from insurance settlement 1,230 — — — — Gain from modification of lease agreement 1,971 — — — 1,698 Share-based compensation (1,974) (3,978) (2,922) (2,614) (3,500) Excess tax benefits from share-based arrangements — — — 81 20 Changes in assets and liabilities 10,754 (4,289) 421 (195,124) (81,139) Interest expense 30,510 33,788 32,456 38,547 43,660 Provision for (benefit from) income taxes 962 (589) 4,564 (16,434) (17,077) EBITDA $1,790 $(11,099) $200 $10,929 $19,562 ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financialinformation appearing elsewhere in this Form 10-K. In addition to historical information, the following discussion and other parts of this Form 10-Kcontain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by thisforward-looking information due to the factors discussed under “Risk Factors,” “Cautionary Statement Concerning Forward-Looking Statements”and elsewhere in this Form 10-K.OverviewCompany BackgroundBlueLinx is a leading distributor of building products in the United States. As of December 31, 2011, we distributed approximately 10,000 productsfrom over 750 suppliers to service approximately 11,500 customers nationwide, including dealers, industrial manufacturers, manufactured housingproducers and home improvement retailers. We operate our distribution business from sales centers in Atlanta and Denver, and our network of approximately55 distribution centers. We distribute products in two principal categories: structural products and specialty products. Structural products include plywood,OSB, rebar and remesh, lumber and other wood products primarily used for structural support, walls and flooring in construction projects. Structuralproducts represented approximately 39% and 46% of our fiscal 2011 and fiscal 2010 gross sales, respectively. Specialty products include roofing, insulation,moulding, engineered wood, vinyl products (used primarily in siding), outdoor living and metal products (excluding rebar and remesh). Specialty productsaccounted for approximately 61% and 54% of our fiscal 2011 and fiscal 2010 gross sales, respectively. 21Table of ContentsIndustry ConditionsA number of factors cause our results of operations to fluctuate from period to period. Many of these factors are seasonal or cyclical in nature.Conditions in the United States housing market are at historically low levels. Our operating results are closely tied to United States housing starts, andtherefore have declined during the past several years. Additionally, the mortgage markets have experienced substantial disruption due to a rising number ofdefaults and historically high levels of foreclosures. This disruption and the related defaults have increased the inventory of homes for sale and also havecaused lenders to tighten mortgage qualification criteria which further reduces demand for new homes. We expect the downturn in new housing activity willcontinue to negatively impact our operating results for the foreseeable future. We continue to prudently manage our inventories, receivables and spending in thisenvironment. Along with many forecasters, however, we believe United States housing demand will improve in the long term based on populationdemographics and a variety of other factors.Stock Rights OfferingOn July 22, 2011, we concluded an offering of our common stock to our stockholders (the “rights offering”), pursuant to which we distributed to ourcommon stockholders transferable rights to subscribe for and purchase up to $60 million of our common stock. The rights offering was fully subscribed andresulted in gross proceeds of approximately $60 million. The majority of the proceeds from the rights offering of approximately $56 million were used to paydown the U.S. revolving credit facility. We accounted for the rights issued as a component of additional paid in capital as they were indexed to the Company’sequity and there were no net cash settlement provisions. The amendment to our U.S. revolving credit facility, which was a condition to the rights offering,became effective upon the successful completion of the rights offering. In addition, as a condition to the rights offering, we entered into an amendment to ourmortgage.Tender OfferOn July 21, 2010, our Board of Directors (our “Board”) received notice from our largest stockholder, Cerberus ABP Investor LLC (“CAI”) that itintended to make a tender offer for the shares of our stock it did not own for $3.40 in cash per share. Our Board formed a special committee (the “SpecialCommittee”) consisting of our three independent directors, to evaluate the tender offer. The Special Committee was granted full power and authority to evaluatethe proposal to determine our recommendation to our stockholders with respect to any tender offer commenced by CAI and to take any other action itdetermined to be in our best interests and the best interests of our stockholders. Completion of the tender offer was subject to the satisfaction or waiver ofcertain conditions, including that as result of the tender offer, CAI would own 90% of our issued and outstanding shares, which we refer to as the 90%condition.On September 22, 2010, CAI and Cerberus increased the purchase price to be paid in their cash tender offer to $4.00 per share for all our outstandingpublicly held shares not owned by CAI or its affiliates.On September 27, 2010, the Special Committee unanimously determined, by all members participating in the deliberations, that the tender offer wasfair, from a financial point of view, to our stockholders (other than CAI and Cerberus Capital). Additionally, the Special Committee recommended, on behalfof us and the Board, that our stockholders accept the tender offer and tender their shares.On October 19, 2010, CAI announced that the 90% condition had not been satisfied and, as a result, the tender offer expired without CAI purchasingany shares.During fiscal 2010, we incurred charges relating to stock valuation and legal fees of $3.0 million as a result of the tender offer. These charges wereincluded in “Selling, general, and administrative” expenses in our Statements of Operations.Supply Agreement with G-POn April 27, 2009, we entered into a Modification Agreement related to our Supply Agreement with G-P. The Modification Agreement effectivelyterminated the existing Supply Agreement with respect to our distribution of G-P plywood, OSB and lumber. As a result of terminating this agreement, we areno longer contractually obligated to make minimum purchases of products from G-P. We continue to distribute a variety of G-P building products. 22Table of ContentsG-P agreed to pay us $18.8 million in exchange for our agreement to terminate the Supply Agreement one year earlier than the May 7, 2010 terminationdate previously agreed upon. Under the terms of the Modification Agreement, we received four quarterly cash payments of $4.7 million, which began onMay 1, 2009 and ended on February 1, 2010. As a result of the termination, we recognized a net gain of $17.8 million in 2009, as a reduction to operatingexpense. The gain was net of a $1.0 million write-off of an intangible asset associated with the Supply Agreement. We believe the early termination of theSupply Agreement contributed to the decline in our structural panel sales volume during fiscal 2009, 2010 and 2011. However, because the majority of thesesales are through the direct sales channel, the lower structural panel sales volume had an insignificant impact on our gross profit during these periods. To theextent we are unable to replace these volumes with structural product from G-P or other suppliers, the early termination of the Supply Agreement may continueto negatively impact our sales of structural products which could impact our net sales and our costs, which in turn could impact our gross profit, net income,and cash flows.On February 12, 2012, our three-year purchase agreement with G-P for engineered lumber expired in accordance with its terms. In February of 2012, welaunched our own privately branded engineered product line for all geographic markets other than New England. In addition, on February 13, 2012 we enteredinto a supply agreement with Weyerhaeuser Company for the sale of certain engineered wood products in the New England region. At this time we cannotpredict what impact this product change will have on our gross profit, net income and cash flows.OSB Litigation SettlementUntil the third quarter of fiscal 2010, we were a claimant in a class action lawsuit pending in the United States District Court for the Eastern District ofPennsylvania alleging that the following manufacturers of oriented strand board (“OSB”) conspired in violation of federal antitrust law to restrict the supply ofOSB structural panel products and raise prices: Louisiana-Pacific Corporation, Weyerhaeuser Company, G-P LLC (f/k/a Georgia-Pacific Corporation),Ainsworth Lumber Co. Ltd., Potlatch Corporation, Norbord Industries Inc., Tolko Industries Ltd., Grant Forest Products Inc. and Grant Forest ProductsSales Inc., and J.M. Huber Corporation or Huber Engineered Woods LLC (collectively, the “Defendants”). On September 13, 2010, we received a cashsettlement in the amount of $5.2 million in satisfaction of our claims under the class action lawsuit. This $5.2 million was recognized as a gain in “Selling,general, and administrative” expenses in our Statements of Operations for fiscal year 2010.Defined Benefit Pension PlansWe sponsor several defined benefit pension plans covering substantially all of our hourly employees. Our estimates of the amount and timing of ourfuture funding obligations for our defined benefit pension plans are based upon various assumptions. These assumptions include, but are not limited to, thediscount rate, projected return on plan assets, compensation increase rates, mortality rates, retirement patterns, and turnover rates. In addition, the amount andtiming of our pension funding obligations can be influenced by funding requirements that are established by the Employee Retirement Income and Security Actof 1974 (ERISA), the Pension Protection Act, Congressional Acts, or other governing bodies. During fiscal 2010 and 2011, we met our required contribution toour defined benefit pension plans.We recognize the unfunded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of our pension plan inour Consolidated Balance Sheets, with a corresponding adjustment to accumulated other comprehensive loss, net of tax, offset by a valuation allowance. OnDecember 31, 2011, we measured the fair value of our plan assets and benefit obligations. As of December 31, 2011 and January 1, 2011, the net unfundedstatus of our benefit plan was $35.5 million and $18.8 million, respectively. These amounts were included in “Other non-current liabilities” on ourConsolidated Balance Sheets. The net adjustment to other comprehensive loss for fiscal 2011, fiscal 2010, and fiscal 2009 was $15.0 million loss ($15.0million net of tax offset by a valuation allowance), $1.0 million loss ($0.6 million loss, net of tax), and $1.5 million gain ($0.9 million gain, net of tax),respectively, which represents the net unrecognized actuarial (loss) gain and unrecognized prior service cost.The Company’s required cash contribution to the pension plan in 2012 is approximately $4.1 million. This contribution is comprised of approximately$1.2 million related to our 2011 minimum required contribution and approximately $2.9 million related to our 2012 minimum required contribution. TheCompany’s minimum required contribution for plan 23Table of Contentsyear 2012 is $5.4 million. The Company will fund the $1.2 million related to its 2011 minimum required contribution with cash in 2012. However, in aneffort to preserve additional cash for operations, we intend to seek a waiver from the IRS for our 2012 minimum required contribution. If we are granted therequested waiver, our contributions for 2012 will be deferred and amortized over the following five years, increasing our future minimum requiredcontributions.We used a discount rate of 5.02% to compute 2011 pension expense, which was determined by matching of plan liability cash flows to a portfolio ofbonds. A decrease in the discount rate of 25 basis points, from 5.02% to 4.77%, while holding all other assumptions constant, would have resulted in anincrease in the Company’s pension expense of approximately $0.3 million in 2011.We used a long-term rate of return of 7.85% to compute 2011 pension expense. A decrease in the long-term rate of return of 25 basis points, from 7.85%to 7.60%, while holding all other assumptions constant, would have resulted in an increase in the Company’s pension expense of approximately $0.2 millionin 2011.We used an estimated rate of future compensation increases of 3.00% to compute 2011 pension expense. An increase in the rate of 25 basis points, from3.00% to 3.25%, while holding all other assumptions constant, would have resulted in an increase in the Company’s pension expense of less than $0.1 millionin 2011.Plan assets are managed as a balanced portfolio comprised of two major components: an equity portion and a fixed income portion. The expected role ofplan equity investments will be to maximize the long-term real growth of fund assets, while the role of fixed income investments will be to generate currentincome, provide for more stable periodic returns, and provide some downside protection against the possibility of a prolonged decline in the market value ofequity investments. We review this investment policy statement at least once per year. In addition, the portfolio will be reviewed quarterly with our investmentconsultant to determine whether the current target allocations and/or investments are appropriate for meeting our long term financial objectives. If it isconcluded that changes are needed to either the target allocations or current investments (in order to meet current target allocations), we adjust as needed basedon these discussions. Target allocations for fiscal 2012 are 50% domestic and 15% international equity investments, 30% fixed income investments, and 5%cash. The expected long-term rate of return for the plan’s total assets is based on the expected return of each of the above categories, weighted based on the targetallocation for each class.Restructuring ChargesDuring fiscal 2007, we announced a plan to adjust our cost structure in order to manage our costs more effectively. The plan included the consolidationof our corporate headquarters and sales center to one building from two buildings which resulted in charges of $11.3 million during the fourth quarter of fiscal2007.During the third quarter of fiscal 2011, we entered into an amendment to our corporate headquarters lease in Atlanta, GA related to the unoccupied 4100building. This amendment released us from our obligations with respect to this unoccupied space as of January 31, 2012, in exchange for a $5.0 millionspace remittance fee, due on or before that date. In addition, we are obligated to pay $1.2 million on or before December 31, 2013 to be used for tenantimprovements. The provisions relating to the occupied 4300 building remain unchanged. Under the existing provisions, the current term of the lease ends onJanuary 31, 2019. The amendment resulted in a reduction of our restructuring reserve of approximately $2.0 million, with the credit recorded in “Selling,general, and administrative” expenses in the Consolidated Statements of Operations.Stock-Based CompensationWe recognize compensation expense equal to the grant-date fair value for all share-based payment awards that are expected to vest. This expense isrecorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to market or performance conditions, inwhich case we recognize compensation expense over the requisite service period of each separate vesting tranche to the extent market and performanceconditions are considered probable. The calculation of fair value related to stock compensation is subject to certain assumptions discussed in more detail inNote 7. Management updates such estimates when circumstances warrant. All compensation expense related to our share-based payment awards is recorded in“Selling, general and administrative” expense in the Consolidated Statements of Operations. 24Table of ContentsSelected Factors that Affect our Operating ResultsOur operating results are affected by housing starts, mobile home production, industrial production, repair and remodeling spending and non-residentialconstruction. We believe a substantial percentage of our sales are directly related to new home construction.Our operating results also are impacted by changes in product prices. Structural products prices can vary significantly based on short-term and long-term changes in supply and demand. The prices of specialty products also can vary from time to time, although they generally are significantly less variablethan structural products.The following table sets forth changes in net sales by product category, sales variances due to changes in unit volume and dollar and percentage changesin unit volume and price, in each case for fiscal 2011, fiscal 2010 and fiscal 2009:Sales Revenue Variances by Product Fiscal 2011 Fiscal 2010 Fiscal 2009 (Dollars in millions) Sales by Category Structural Products $708 $838 $738 Specialty Products 1,089 1,005 948 Other(1) (42) (39) (40) Total Sales $1,755 $1,804 $1,646 Sales Variances Unit Volume $ Change $(52) $36 $(1,036) Price/Other(1) 3 122 (98) Total $ Change $(49) $158 $(1,134) Unit Volume % Change (2.8)% 2.2% (36.6)% Price/Other(1) 0.1% 7.4% (4.2)% Total % Change (2.7)% 9.6% (40.8)% (1)“Other” includes unallocated allowances and discounts.The following table sets forth changes in gross margin dollars and percentages by product category, and percentage changes in unit volume growth byproduct, in each case for fiscal 2011, fiscal 2010 and fiscal 2009: Fiscal 2011 Fiscal 2010 Fiscal 2009 (Dollars in millions) Gross Margin $ by Category Structural Products $68 $77 $73 Specialty Products 159 148 132 Other(1) (17) (14) (12) Total Gross Margin $210 $211 $193 Gross Margin % by Category Structural Products 9.6% 9.1% 9.9% Specialty Products 14.6% 14.7% 13.9% Total Gross Margin % 12.0% 11.7% 11.7% Unit Volume Change by Product Structural Products (15.1)% (2.5)% (40.3)% Specialty Products 7.4% 5.7% (32.8)% Total Unit Volume Change % (2.8)% 2.2% (36.6)% (1)“Other” includes unallocated allowances and discounts. 25Table of ContentsThe following table sets forth changes in net sales and gross margin by channel and percentage changes in gross margin by channel, in each case forfiscal 2011, fiscal 2010 and fiscal 2009: Fiscal 2011 Fiscal 2010 Fiscal 2009 (Dollars in millions) Sales by Channel Warehouse/Reload $1,418 $1,429 $1,251 Direct 379 414 435 Other(1) (42) (39) (40) Total $1,755 $1,804 $1,646 Gross Margin by Channel Warehouse/Reload $201 $201 $177 Direct 26 24 28 Other(1) (17) (14) (12) Total $210 $211 $193 Gross Margin % by Channel Warehouse/Reload 14.1% 14.1% 14.1% Direct 6.8% 5.8% 6.4% Total 12.0% 11.7% 11.7% (1)“Other” includes unallocated allowances and discounts.Fiscal YearOur fiscal year is a 52- or 53-week period ending on the Saturday closest to the end of the calendar year. Fiscal year 2011, 2010, and 2009 contained52 weeks.Results of OperationsFiscal 2011 Compared to Fiscal 2010The following table sets forth our results of operations for fiscal 2011 and fiscal 2010. Fiscal 2011 % ofNetSales Fiscal 2010 % ofNetSales (Dollars in thousands) Net sales $1,755,431 100.0% $1,804,418 100.0% Gross profit 210,149 12.0% 210,673 11.7% Selling, general and administrative 207,857 11.8% 221,185 12.3% Depreciation and amortization 10,562 0.6% 13,365 0.7% Operating loss (8,270) (0.5)% (23,877) (1.3)% Interest expense, net 30,510 1.7% 33,788 1.8% Changes associated with the ineffective interest rate swap (1,676) (0.1)% (4,603) (0.3)% Write-off of debt issue costs — 0.0% 183 0.0% Other expense, net 501 0.0% 587 0.0% Loss before provision for (benefit from) income taxes (37,605) (2.1)% (53,832) (2.9)% Provision for (benefit from) income taxes 962 0.1% (589) 0.0% Net loss $(38,567) (2.2)% $(53,243) (2.9)% Net sales. For the fiscal year ended December 31, 2011, net sales decreased by 2.7%, or $49.0 million, to $1.8 billion. Sales during the fiscal year werenegatively impacted by a 9% decrease in single family housing starts. Single family home construction has a significant impact on our sales. Structural sales,including plywood, OSB, lumber and metal rebar, decreased by $129.8 million, or 15.5% from a year ago, as a result of a 0.4% decrease in structuralproduct prices and a 15.1% decrease in unit volume. The decrease in structural sales was partially offset by an increase in specialty sales. Specialty sales,primarily consisting of roofing, specialty panels, insulation, moulding, engineered wood products, vinyl siding, outdoor living and metal products (excludingrebar and remesh) increased by $84.6 million or 8.4% compared to fiscal 2010, due to a 7.4% increase in unit volume and a 1.0% increase in specialtyproduct prices.Gross profit. Gross profit for fiscal 2011 was $210.1 million, or 12.0% of sales, compared to $210.7 million, or 11.7% of sales, in fiscal 2010. Thedecrease in gross profit dollars compared to fiscal 2010 was driven primarily by a decrease in structural product volumes of 15.1% offset by an increase inspecialty product volumes of 7.4%. 26Table of ContentsSelling, general and administrative. Selling, general and administrative expenses for fiscal 2011 were $207.9 million, or 11.8% of net sales, comparedto $221.2 million, or 12.3% of net sales, during fiscal 2010. The decrease in selling, general, and administrative expenses is due to $10.6 million of propertysale gains that were recognized in fiscal 2011, a $2.0 million gain related to the modification of the lease agreement for our headquarters in Atlanta, Georgia,and a $1.4 million gain related to the insurance settlement on the Newtown, CT facility. There were no similar property gains in fiscal 2010. However, infiscal 2010 there were expenses incurred related to the failed tender offer of $3.0 partially offset by a gain related to the settlement received on an OSB classaction lawsuit in which we were a claimant of $5.2 million. In addition, decreases in payroll and payroll related costs of $1.7 million, as well as decreases instock compensation expense of $2.0 million also contributed to the overall decrease in selling, general and administrative expense. These changes were largelyrelated to fiscal 2011 reduction in force activities, as well as the vesting of certain restricted stock grants during the current year. Partially offsetting thesefluctuations were increases to fuel expense and other operating expenses of $2.9 million and $1.4 million, respectively.Depreciation and amortization. Depreciation and amortization expense was $10.6 million for fiscal 2011, compared to $13.4 million for fiscal 2010.The $2.8 million decrease in depreciation and amortization is primarily related to current year sales of certain depreciable properties, a portion of our propertyand equipment becoming fully depreciated during fiscal 2011 and replenishment of fixed assets occurring at a slower rate.Operating loss. Operating loss for fiscal 2011 was $8.3 million, or 0.5% of sales, compared to an operating loss of $23.9 million, or 1.3% of sales,for fiscal 2010, reflecting the $13.3 million decrease in Selling, general and administrative expense and a $2.8 million decrease in Depreciation andamortization offset by a $0.5 million decrease in gross profit.Interest expense, net. Interest expense for fiscal 2011 was $30.5 million compared to $33.8 million for fiscal 2010. The $3.3 million decrease is due tothe $45.1 million decrease in total debt and the related effect on interest expense. In fiscal 2011, interest expense related to our revolving credit facilities(including the Canadian revolving credit facility), and mortgage was $10.3 million and $17.0 million, respectively. In fiscal 2010, interest expense related toour U.S. revolving credit facility and mortgage was $13.3 million and $18.3 million, respectively. In addition, interest expense included $2.9 million and$2.0 million of debt issue cost amortization for fiscal 2011 and for fiscal 2010, respectively.Changes associated with the ineffective interest rate swap. Changes associated with the ineffective interest rate swap recognized for fiscal 2011 wasincome of $1.7 million compared to $4.6 million of income for fiscal 2010. The decrease is primarily related to the change in the swap’s fair value and adecrease in amortization of the accumulated loss in other comprehensive income into interest expense due to the termination of the swap in March 2011.Write-off of debt issue costs. During fiscal 2010, we permanently reduced our revolving loan threshold limit. As a result, we recorded expense of $0.2million, for the write-off of deferred financing costs that had been capitalized associated with the borrowing capacities that were reduced during these periods.No similar activity occurred during fiscal 2011.Provision for (benefit from) income taxes. Our effective tax rate was (2.5)% and 1.1% for fiscal 2011 and fiscal 2010, respectively. The effective taxrate for fiscal 2011 is largely due to a full valuation allowance recorded against our tax benefit related to our 2011 loss. The effect of the valuation allowancewas offset by state income taxes, gross receipts taxes, and foreign income taxes recorded on a separate company basis partially offset by various refundable taxcredits. The effective tax rate for fiscal 2010 is largely due to a full valuation allowance recorded against our tax benefit related to our 2010 loss and anallocation of income tax expense to other comprehensive income resulting in a tax benefit to continuing operations. This tax benefit was partially offset by grossreceipts and other taxes.Net loss. Net loss for fiscal 2011 was $38.6 million, compared to $53.2 million for fiscal 2010 as a result of the factors discussed above.On a per-share basis, basic and diluted loss applicable to common stockholders for fiscal 2011 each was $0.89. For fiscal 2010, basic and diluted lossper share each was $1.73. 27Table of ContentsFiscal 2010 Compared to Fiscal 2009The following table sets forth our results of operations for fiscal 2010 and fiscal 2009. Fiscal 2010 % ofNetSales Fiscal 2009 % ofNetSales (Dollars in thousands) Net sales $1,804,418 100.0% $1,646,108 100.0% Gross profit 210,673 11.7% 193,161 11.7% Selling, general and administrative 221,185 12.3% 210,214 12.8% Net gain from terminating the Georgia-Pacific Supply Agreement — 0% (17,772) (1.1)% Depreciation and amortization 13,365 0.7% 16,984 1.0% Operating loss (23,877) (1.3)% (16,265) (1.0)% Interest expense, net 33,788 1.8% 32,456 2.0% Changes associated with the ineffective interest rate swap (4,603) (0.3)% 6,252 0.4% Write-off of debt issue costs 183 0.0% 1,407 0.1% Other expense, net 587 0.0% 519 0.0% Loss before (benefit from) provision for income taxes (53,832) (2.9)% (56,899) (3.5)% (Benefit from) provision for income taxes (589) 0.0% 4,564 0.3% Net loss $(53,243) (2.9)% $(61,463) (3.7)% Net sales. For the fiscal year ended January 1, 2011, net sales increased by 9.6%, or $0.2 billion, to $1.8 billion. Sales during the fiscal year werepositively impacted by a 5.9% increase in housing starts. New home construction has a significant impact on our sales. Specialty sales, primarily consistingof roofing, specialty panels, insulation, moulding, engineered wood products, vinyl siding, outdoor living and metal products (excluding rebar and remesh)increased by $0.1 billion or 6% compared to fiscal 2009, due to a 5.7% increase in unit volume and a 0.3% increase in specialty product prices. Structuralsales, including plywood, OSB, lumber and metal rebar, increased by $0.1 billion, or 13.6% from a year ago, as a result of a 16.1% increase in structuralproduct prices partially offset by a 2.5% decrease in unit volume.Gross profit. Gross profit for fiscal 2010 was $210.7 million, or 11.7% of sales, compared to $193.2 million, or 11.7% of sales, in fiscal 2009. Theincrease in gross profit dollars compared to fiscal 2009 was driven primarily by an increase in specialty product volumes of 5.7%.Selling, general and administrative. Selling, general and administrative expenses for fiscal 2010 were $221.2 million, or 12.2% of net sales, comparedto $210.2 million, or 12.8% of net sales, during fiscal 2009. The increase in selling, general, and administrative expenses is due to $10.4 million of propertysale gains that were recognized in fiscal 2009, whereas there were no similar gains in fiscal 2010, coupled with increases in fiscal 2010 fuel expense andexpenses incurred related to the failed tender offer of $3.5 million and $3.0 million, respectively. These changes were partially offset by a gain related to thesettlement received on an OSB class action lawsuit in which we were a claimant and a decrease in bad debt expense of $5.2 million and $2.9 million,respectively.Net gain from terminating the G-P Supply Agreement. During fiscal 2009, G-P agreed to pay us $18.8 million in exchange for our agreement to enterinto the Modification Agreement one year earlier than the previously agreed-upon May 7, 2010 termination date of the Supply Agreement. As a result of thetermination, we recognized a net gain of $17.8 million during fiscal 2009 as a reduction to operating expense. The gain was net of a $1.0 million write-off ofan intangible asset associated with the Supply Agreement.Depreciation and amortization. Depreciation and amortization expense was $13.4 million for fiscal 2010, compared to $17.0 million for fiscal 2009.The $3.6 million decrease in depreciation and amortization is primarily related to a portion of our property and equipment becoming fully depreciated duringfiscal 2010 and replenishment of fixed assets occurring at a slower rate.Operating loss. Operating loss for fiscal 2010 was $23.9 million, or 1.3% of sales, compared to an operating loss of $16.3 million, or 1.0% of sales,for fiscal 2009, reflecting the $25.1 million increase in operating expenses offset by a $17.5 million increase in gross profit.Interest expense, net. Interest expense for fiscal 2010 was $33.8 million compared to $32.5 million for fiscal 2009. The $1.3 million increase is due tothe $41.2 million increase in debt under our U.S. revolving credit facility and the related effect on interest expense. In fiscal 2010, interest expense related to ourU.S. revolving credit facility and mortgage was $13.3 million and $18.3 million, respectively. In fiscal 2009, interest expense related to our U.S. revolvingcredit facility and mortgage was $11.6 million and $18.4 million (includes a $0.6 million prepayment penalty), respectively. In addition, interest expenseincluded $2.0 million and $2.5 million of debt issue cost amortization for fiscal 2010 and for fiscal 2009, respectively. 28Table of ContentsChanges associated with the ineffective interest rate swap. Change associated with the ineffective interest rate swap recognized for fiscal 2010 wasincome of $4.6 million and was comprised of $2.1 million of expense related to amortization of the accumulated other comprehensive loss offset by income of$6.7 million related to fair value changes in the ineffective swap liability.Write-off of debt issue costs. During fiscal 2010 and fiscal 2009, we permanently reduced our revolving loan threshold limit. As a result, we recordedexpense of $0.2 million and $1.4 million, respectively, for the write-off of deferred financing costs that had been capitalized associated with the borrowingcapacities that were reduced during these periods.(Benefit from) provision for income taxes. Our effective tax rate was 1.1% and (8.0)% for fiscal 2010 and fiscal 2009, respectively. The change in oureffective tax rate for fiscal 2010 is largely due to a full valuation allowance recorded against our tax benefit related to our 2010 loss and an allocation of incometax expense to other comprehensive income resulting in a tax benefit to continuing operations. This tax benefit was partially offset by gross receipts and othertaxes. In fiscal 2009, we recorded a $29.3 million valuation allowance charge and other income tax expense items partially offset by a $20.4 million tax benefitrelated to 2009 losses that were carried back to offset fiscal 2004 and 2005 income and a $5.6 million allocation of tax expense to other comprehensive incomeresulting in a current period tax benefit to continuing operations.Net loss. Net loss for fiscal 2010 was $53.2 million, compared to $61.5 million for fiscal 2009 as a result of the factors discussed above.On a per-share basis, basic and diluted loss applicable to common stockholders for fiscal 2010 each was $1.73. For fiscal 2009, basic and diluted lossper share each was $1.98.SeasonalityWe are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These seasonal factors are common in the buildingproducts distribution industry. The first and fourth quarters are typically our slowest quarters due to the impact of poor weather on the construction market.Our second and third quarters are typically our strongest quarters, reflecting a substantial increase in construction due to more favorable weather conditions.Our working capital generally peaks in the third quarter, related to the building season. During fiscal year 2011 we experienced significant businessdisruption, in excess of normal seasonal fluctuations, due to the record snow fall in the Northeast in the winter months.Liquidity and Capital ResourcesWe depend on cash flow from operations and funds available under our revolving credit facilities to finance working capital needs and capitalexpenditures. We had approximately $115.7 million of excess availability under our U.S. revolving credit facility (the “U.S. revolving credit facility”) and$2.6 million under our Canadian revolving credit facility, described further below, as of December 31, 2011. As of the period ended December 31, 2011,under our amended U.S. revolving credit facility, we were required to maintain a fixed charge coverage ratio of 1.1 to 1.0 in the event our excess availabilityfalls below the greater of $30 million or the amount equal to 15% of the lesser of the borrowing base or $400 million. If we fail to maintain this minimumexcess availability, the amended U.S. revolving credit facility requires us to (i) maintain certain financial ratios, which we would not meet with currentoperating results, and (ii) limit our capital expenditures, which would have a negative impact on our ability to finance working capital needs and capitalexpenditures. As of December 31, 2011, we had excess availability above the minimum required under the U.S. revolving credit facility. For additionalinformation regarding our financial covenants under our revolving credit facilities, see the Risk Factors “The instruments governing our indebtednesscontain various covenants limiting the discretion of our management in operating our business” set forth under Item 1.A. Risk Factors.In an effort to improve our liquidity, on July 22, 2011, we concluded an offering of our common stock to our stockholders, pursuant to which wedistributed to our common stockholders transferable rights to subscribe for and purchase up to $60 million of our common stock. The rights offering wasfully subscribed and resulted in gross proceeds of approximately $60 million. The majority of the gross proceeds from the rights offering of approximately$56 million were used to pay down the U.S. revolving credit facility. We accounted for the rights issued as a component of additional paid in 29Table of Contentscapital as they were indexed to the Company’s equity and there were no net cash settlement provisions. The amendment to our U.S. revolving credit facility,which was a condition to the rights offering, and is described in more detail below, became effective upon the successful completion of the rights offering. Inaddition, as a condition to the rights offering, we entered into an amendment to our mortgage, as described in the Debt and Credit Sources section ofManagement’s Discussion And Analysis of Financial Condition and Results of Operations.Excess liquidity likely will continue to decrease while our industry and our company begins its recovery from this historic housing market downturn.However, we believe that the amounts available from our revolving credit facilities and other sources will be sufficient to fund our routine operations andcapital requirements for the next 12 months. In addition, we continue to take steps to reduce expenses and preserve cash for working capital. Notwithstandingthese activities, if economic conditions, especially those related to the housing market, do not improve, we will need to seek additional sources of capital tosupport our operations.The credit markets have experienced adverse conditions for the past few years, which may adversely affect our lenders’ ability to fulfill theircommitment under our revolving credit facilities. Based on information available to us as of the filing date of this Annual Report on Form 10-K, we have noindications that the financial institutions included in our revolving credit facilities would be unable to fulfill their commitments.We may elect to selectively pursue acquisitions. Accordingly, depending on the nature of the acquisition, we may use cash or stock, or a combination ofboth, as acquisition currency. Our cash requirements may significantly increase and incremental cash expenditures will be required in connection with theintegration of the acquired company’s business and to pay fees and expenses in connection with any acquisitions. To the extent that significant amounts ofcash are expended in connection with acquisitions, our liquidity position may be adversely impacted. In addition, there can be no assurance that we will besuccessful in completing acquisitions in the future. For a discussion of the risks associated with our acquisition strategy, see the risk factor “Integratingacquisitions may be time-consuming and create costs that could reduce our net income and cash flows” set forth under Item 1A — Risk Factors.The following tables indicate our working capital and cash flows for the periods indicated. December 31,2011 January 1,2011 (Dollars in thousands) Working capital $233,414 $236,168 Year EndedDecember 31,2011 Year EndedJanuary 1,2011 Year EndedJanuary 2,2010 (Dollars inthousands) Cash flows used in operating activities $(49,643) $(29,909) $(19,853) Cash flows provided by (used in) investing activities 11,133 (3,381) 12,636 Cash flows provided by (used in) financing activities 29,111 18,130 (113,679) Working CapitalWorking capital decreased by $2.8 million to $233.4 million at December 31, 2011 from $236.2 million at January 1, 2011. The reduction in workingcapital reflects a $6.7 million increase in accounts payable and bank overdrafts due to the timing of payments, a decrease in inventory of $2.7 million, anincrease in the current maturities of long-term debt of $7.9 million, and a decrease in cash of $9.4 million. The change in inventory is attributable to ourcontinued focus on managing our inventory levels. The increase in the current maturities of our long-term debt relates primarily to upcoming principlepayments on the mortgage. We did not begin making principal payments on the mortgage until July of fiscal 2011. The decrease in cash is due to themovement discussed above coupled with our operating loss adjusted for non-cash items. These reductions were offset by an increase in other current assets of$4.4 million primarily related to an increase in restricted cash from the sales of properties in the fourth quarter of fiscal 2011 and an increase in accountsreceivable of $19.7 million related to increased revenue in the fourth quarter of fiscal 2011 compared to fiscal 2010 as well as changes in customer mixaffecting overall payment terms. In an effort to preserve working capital, we intend to seek a waiver from the IRS for one or more of our required contributionsin 2012 with respect to our defined benefit plans. Our 2012 contribution is comprised of approximately $1.2 million related to our 2011 minimum requiredcontribution and approximately $2.9 million related to our 2012 minimum 30Table of Contentsrequired contribution. The Company’s minimum required contribution for plan year 2012 is $5.4 million.Operating ActivitiesDuring fiscal 2011, cash flows used in operating activities totaled $49.6 million. The primary driver of cash flow used in operations was a net loss, asadjusted for non-cash charges of $38.9 million, an increase in accounts receivable of $19.7 million, partially offset by the decrease in inventory of $2.7 andan increase in accounts payable and bank overdrafts of $6.7 million. Refer to the Working Capital section above for further discussion of these items.During fiscal 2010, cash flows used in operating activities totaled $29.9 million. The primary driver of cash flow used in operations was a net loss, asadjusted for non-cash charges of $38.9 million, an increase in inventory of $15.1 million due to the addition of a new outdoor living product line, partiallyoffset by the receipt of our $20.4 million tax refund in fiscal 2010.During fiscal 2009, cash flows used in operating activities totaled $19.9 million. The primary driver of cash flow used in operations was a net loss, asadjusted for non-cash charges of $33.6 million and a decrease in accounts payable of $13.7 million due to a reduction in purchase volume associated withdecreased demand resulting from market conditions. These cash outflows were offset by a decrease in inventories of $16.3 million to meet existing demandand a decrease in accounts receivable of $11.3 million due to an overall decline in the housing market related to sales volume.Investing ActivitiesDuring fiscal 2011, cash flows provided by investing activities totaled $11.1 million, compared to cash flows used by investing activities of$3.4 million in 2010.During fiscal 2011, fiscal 2010 and fiscal 2009, our expenditures for property and equipment were $7.2 million, $4.1 million and $1.8 million,respectively. These expenditures were used primarily to purchase replacement property for Nashville, TN, information technology, leasehold improvements,and certain machinery and equipment. We estimate that capital expenditures for fiscal 2012 will be approximately $4 million. Our 2012 capital expendituresare anticipated to be paid with borrowings from our revolving credit facilities and proceeds from the sale of certain properties.Proceeds from the disposition of property and equipment were $18.4 million, $0.7 million and $14.5 million during fiscal 2011, fiscal 2010 and fiscal2009, respectively. During fiscal 2011, the proceeds of $18.4 million included $9.2 million related to the sale of certain real properties classified as held forsale assets included in “Other current assets” on our Consolidated Balance Sheets. Comparable sales of real properties did not occur during fiscal 2010.During fiscal 2009, the proceeds of $14.5 million included $12.4 million related to the sale of certain real properties classified as held for sale assets includedin “Other current assets” on our Consolidated Balance Sheets.Financing ActivitiesNet cash provided by financing activities was $29.1 million during fiscal 2011, compared to net cash provided of $18.1 million during fiscal 2010.The net cash provided by financing activities in fiscal 2011 primarily reflected the receipt of proceeds from the current year stock rights offering, netted withexpenses related to that offering, of $58.5 million and cash provided by changes in restricted cash related to our mortgage of $20.6 million. These cashinflows were offset by additional repayments on our revolving credit facilities of $2.7 million (net of borrowings) and payments of principal on our mortgageof $42.4 million.During fiscal 2010, net cash provided by financing activities primarily reflected additional borrowings on our U.S. revolving credit facility of$41.2 million (net of payments made), offset by an increase in restricted cash related to our mortgage of $11.2 million.During fiscal 2009, the net cash used in financing activities primarily reflected payments on our U.S. revolving credit facility of $100.0 million (net ofpayments made) principal payments on our mortgage of $3.2 million, and an increase in restricted cash related to our mortgage of $10.3 million. 31Table of ContentsDebt and Credit SourcesAs of December 31, 2011, we had outstanding borrowings of $93.4 million and excess availability of $115.7 million under the terms of our U.S.revolving credit facility. The interest rate on the U.S. revolving credit facility was 4.2% at December 31, 2011. As of December 31, 2011 and January 1, 2011,we had outstanding letters of credit totaling $2.7 million and $5.9 million, respectively, for the purposes of securing collateral requirements under the interestrate swap (which was terminated in March of 2011), casualty insurance programs and for guaranteeing lease and certain other obligations.On July 7, 2010, we reached an agreement with Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, NationalAssociation, and the other signatories to our existing U.S. revolving credit facility, dated August 4, 2006, as amended, to amend the terms thereof. Thisamendment extended the date of final maturity of the facility to January 7, 2014 and decreased the maximum availability under the agreement from$500 million to $400 million. This amendment also includes an additional $100 million uncommitted accordion credit facility, which will permit us toincrease the maximum borrowing capacity up to $500 million. As a result of reducing our maximum borrowing capacity from $500 million to $400 million,we recorded expense of $0.2 million in fiscal 2010 for the write-off of debt issuance costs associated with the reduction in borrowing capacity. We also incurred$6.5 million in new debt issuance costs, which we capitalized and will continue to amortize to interest expense over the renewed debt term.On May 10, 2011, we entered into an amendment to our U.S. revolving credit facility, which became effective on July 29, 2011, following thesuccessful completion of the rights offering described below. Certain components of the borrowing base calculation and excess liquidity calculation wereadjusted as part of this amendment. The most significant of the changes included in the amendment are described in the discussion of the terms and covenantsof the U.S. revolving credit facility below.As of December 31, 2011, under the amended agreement, our U.S. revolving credit facility contains customary negative covenants and restrictions forasset based loans. Our most significant covenant is a requirement that we maintain a fixed charge coverage ratio of 1.1 to 1.0 in the event our excessavailability falls below the greater of $30 million or the amount equal to 15% of the lesser of the borrowing base or $400 million (the “Excess AvailabilityThreshold”). We are required to maintain the Excess Availability Threshold in order to avoid being required to meet certain financial ratios and triggeringadditional limits on capital expenditures. The amount of our eligible accounts receivable included in the calculation of the borrowing base is 87.5%. Under theamended U.S. revolving credit facility agreement, the applicable percentage of the net liquidation value of our eligible inventory included in the calculation ofthe borrowing base is 90% for the periods January to March 2012 and January to March 2013, subject to specified EBITDA targets. The percentage of the netliquidation value of our eligible inventory included in the borrowing remains the same as under the original agreement outside of the time period just specified.Also included in the calculation of our excess availability is certain cash on the balance sheet, which is subject to a deposit account control agreement. Thefixed charge coverage ratio is calculated as EBITDA divided by the sum of cash payments for income taxes, interest expense, cash dividends, principalpayments on debt, and capital expenditures. EBITDA is defined as BlueLinx Corporation’s net income before interest and tax expense, depreciation andamortization expense, and other non-cash charges. The fixed charge coverage ratio requirement only applies to us when excess availability under our amendedU.S. revolving credit facility is less than the Excess Availability Threshold on any date. As of December 31, 2011 and through the time of the filing of thisForm 10-K, we were in compliance with all covenants. We had $115.7 million and $103.4 million of availability as of December 31, 2011 and January 1,2011, respectively. Our lowest level of fiscal month end availability in the last three years as of December 31, 2011 was $94.0 million. We do not anticipateour excess availability in fiscal 2012 will drop below the Excess Availability Threshold. Should our excess availability fall below the Excess AvailabilityThreshold on any date, however, we would not meet the required fixed charge coverage ratio covenant with our current operating results. In addition, we mustmaintain a springing lock-box arrangement where customer remittances go directly to a lock-box maintained by our lenders and then are forwarded to ourgeneral bank accounts. Our outstanding borrowings are not reduced by these payments unless our excess availability falls below the greater of $35 million orthe amount equal to 15% of the lesser of the borrowing base or $400 million on any date or in the event of default. Our amended U.S. revolving credit facilitydoes not contain a subjective acceleration clause which would allow our lenders to accelerate the scheduled maturities of our debt or to cancel our agreement. 32Table of ContentsOn July 22, 2011, we concluded an offering of our common stock to our stockholders, pursuant to which we distributed to our common stockholderstransferable rights to subscribe for and purchase up to $60 million of our common stock. The rights offering was fully subscribed and resulted in grossproceeds of approximately $60 million. The majority of the proceeds from the rights offering of approximately $56 million were used to pay down the U.S.revolving credit facility. A payment on the U.S. revolving credit facility of $50.0 million was made on July 29, 2011 and an additional payment of $6.0million was made on August 1, 2011.On August 12, 2011, our subsidiary BlueLinx Building Products Canada Ltd. (“BlueLinx Canada”) entered into a revolving credit agreement (the“Canadian revolving credit facility”) with CIBC Asset-Based Lending Inc., as lender, administrative agent and collateral agent (the “Agent”). The maturitydate of this agreement is August 12, 2014. The Canadian revolving credit facility provides for an asset-based revolving credit facility with an aggregate lendercommitment of up to $10 million at any time outstanding, subject to borrowing base availability. In addition, the Canadian revolving credit facility providesfor an additional $5 million uncommitted accordion credit facility. Revolving loan (and letter of credit) availability under the facility is subject to a borrowingbase. The amount of our eligible Canadian accounts receivable included in the calculation of the borrowing base is 85%. The amount of our eligible inventoryincluded in the calculation of the borrowing base is 65%. The sum of items included in the borrowing base is reduced by $0.5 million (the “availabilityblock”) and other availability reserves. In addition to paying interest on outstanding principal under the facility, we are required to pay a fee in respect ofcommitted but unutilized commitments equal to 0.25% per annum. As of December 31, 2011, we had outstanding borrowings of $1.1 million and excessavailability of $2.6 million under the terms of our Canadian revolving credit facility. The interest rate on the Canadian revolving credit facility was 4.0% atDecember 31, 2011. The Canadian revolving credit facility contains customary covenants and events of default for asset-based credit agreements of this type,including the requirement for BlueLinx Canada to maintain a minimum adjusted tangible net worth of $3.9 million and for that entity’s capital expendituresnot to exceed 120% of the amount budgeted in a given year. As of December 31, 2011 and through the time of the filing of this Form 10-K, we were incompliance with all covenants.On July 14, 2011, we entered into an amendment to the mortgage which (i) eliminated the requirement to obtain lender approval for any transfer of equityinterests that would reduce Cerberus ABP Investor LLC’s ownership in the Company and certain of our subsidiaries, directly or indirectly, to less than 51%,(ii) provided for the immediate prepayment of $38.3 million of the indebtedness under the mortgage without incurring a prepayment premium from fundscurrently held as collateral under the mortgage and, if certain conditions are met, will allow for an additional prepayment on or after July 30, 2014 from fundsheld as collateral without incurrence of a prepayment premium, (iii) allow us, at the lenders’ reasonable discretion, to use a portion of the cash held ascollateral under the mortgage for specified alterations, repairs, replacements and other improvements to the mortgaged properties, and (iv) in the event certainfinancial conditions are met and the Company extends the Amended and Restated Master Lease by and among certain of our subsidiaries with respect toproperties covered by the mortgage for an additional five years, we may request the lenders to disburse to the Company a portion of the cash held as collateralunder the mortgage. In conjunction with the modification of our mortgage agreement we incurred approximately $2.9 million in debt fees that were capitalizedand are being amortized over the remaining term of the mortgage. Under the terms of our mortgage, we are required to transfer funds to be held as collateral(“the cash trap”). We expect to transfer $10.8 million in 2012 related to the “cash trap”.On June 12, 2006, we entered into an interest rate swap agreement with Goldman Sachs Capital Markets, to hedge against interest rate risks related toour variable rate U.S. revolving credit facility. The interest rate swap was terminated in March of 2011. The interest rate swap had a notional amount of $150million and the terms called for us to receive interest monthly at a variable rate equal to 30-day LIBOR and to pay interest monthly at a fixed rate of 5.4%. Thisinterest rate swap was designated as a cash flow hedge. During fiscal 2009, our debt levels decreased below the interest rate swap notional, at which point thehedge became ineffective in offsetting future changes in expected cash flows during the remaining term of the interest rate swap.Changes associated with the ineffective interest rate swap recognized in the Consolidated Statements of Operations for fiscal 2011 was approximately$1.7 million of income and are comprised of amortization of the remaining accumulated other comprehensive loss of the ineffective swap of $0.5 million offsetby income of $2.2 million related to reducing the fair value of the ineffective interest rate swap liability to zero. Due to the termination of the swap in the firstquarter of 2011, there was no activity subsequent to the quarter ended April 2, 2011. Changes associated with the ineffective interest rate swap recognized inthe Consolidated Statements of Operations for fiscal 2010 were approximately $4.6 million of income and are comprised of amortization of the remainingaccumulated other comprehensive loss over the life of the ineffective swap of $2.1 million offset by income of $6.7 million related to current year changes inthe fair value of the ineffective interest rate swap liability. The fair value of our swap liability at January 1, 2011 was $2.2 million. 33Table of ContentsThe following table presents a reconciliation of the unrealized losses related to our interest rate swap measured at fair value in accumulated othercomprehensive loss as of December 31, 2011 (in thousands): Balance at January 1, 2011 $519 Amortization of accumulated other comprehensive loss recorded to interest expense (519) Balance at December 31, 2011 $— Contractual Commitments. The following table represents our contractual commitments associated with our debt and other obligations disclosed aboveas of December 31 of each year set forth below (in thousands). 2012 2013 2014 2015 2016 Thereafter Total Revolving credit facilities(1) $— $— $94,488 $— $— $— $94,488 Mortgage indebtedness 9,046 2,768 2,952 3,147 225,340 — 243,253 Interest payments on ourrevolving creditfacilities(2) 3,972 3,972 119 28 — — 8,091 Interest payments on ourmortgage(3) 15,246 14,997 14,814 14,618 8,436 — 68,111 Subtotal 28,264 21,737 112,373 17,793 233,776 — 413,943 Operating leases(4) 10,256 3,998 3,525 2,923 2,959 5,308 28,969 Capital leases(5) 643 657 676 686 588 26 3,276 Interest payments on ourcapital leases(6) 152 121 76 52 13 — 414 Letters of credit(7) 2,742 — — — — — 2,742 Total $42,057 $26,513 $116,650 $21,454 $237,336 $5,334 $449,344 (1)Payments for both the U.S. and Canadian revolving credit facilities are included. (2)Interest on the revolving credit facilities is variable, based on Libor or prime plus the applicable margin. The interest rate on the U.S. revolving creditfacility and the Canadian revolving credit facility was 4.2% and 4.0%, respectively, at December 31, 2011. The final maturity date on our U.S.revolving credit facility and Canadian revolving credit facility is January 7, 2014 and August 12, 2014, respectively. (3)Interest payments on the mortgage are based on a fixed rate of 6.35%. (4)We lease various facilities and vehicles under non-cancelable operating leases. (5)We lease certain other fixed assets under non cancelable leases that we have determined to be capital leases. (6)Includes imputed interest based on individual capital lease agreements. (7)Letters of credit not included above under the credit facilities.Purchase orders entered into in the ordinary course of business are excluded from the above table. Amounts for which we are liable under purchaseorders are reflected on our Consolidated Balance Sheets (to the extent entered into prior to the end of the applicable period) as accounts payable and accruedliabilities.Off-Balance Sheet Arrangements. As of December 31, 2011, we did not have any material off-balance sheet arrangements.Critical Accounting PoliciesThe preparation of our consolidated financial statements and related disclosures in conformity with United States generally accepted accountingprinciples requires our management to make judgments and estimates that affect the amounts reported in our consolidated financial statements andaccompanying notes. Our management believes that we consistently apply these judgments and estimates and the consolidated financial statements andaccompanying notes fairly represent all periods presented. However, any differences between these judgments and estimates and actual results could have amaterial impact on our Consolidated Statements of Operations and financial position. Critical accounting estimates, as defined by the Securities and ExchangeCommission (“SEC”), are those that are most important to the portrayal of our financial condition and results of operations and require our management’smost difficult and subjective judgments and estimates of matters that 34Table of Contentsare inherently uncertain. Our critical accounting estimates include those regarding (1) revenue recognition; (2) allowance for doubtful accounts and relatedreserves; (3) inventory valuation; (4) fair value measurements; (5) impairment of long-lived assets; and (6) income taxes. Our significant accounting policiesare more fully described in the Notes to the Consolidated Financial Statements.Revenue RecognitionWe recognize revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have beenrendered, our price to the buyer is fixed and determinable and collectibility is reasonably assured. Delivery is not considered to have occurred until thecustomer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. Revenue isrecorded at the time of shipment for terms designated as FOB (free on board) shipping point. For sales transactions designated FOB destination, revenue isrecorded when the product is delivered to the customer’s delivery site.All revenues are recorded at gross. The key indicators used to determine when and how revenue is recorded are as follows: •We are the primary obligor responsible for fulfillment and all other aspects of the customer relationship. •Title passes to BlueLinx, and we carry all risk of loss related to warehouse, reload inventory and inventory shipped directly from vendors to ourcustomers. •We are responsible for all product returns. •We control the selling price for all channels. •We select the supplier. •We bear all credit risk.In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis. Customer consigned inventory ismaintained and stored by certain customers; however, ownership and risk of loss remains with us. When the inventory is sold by the customer, we recognizerevenue on a gross basis.All revenues recognized are net of trade allowances, cash discounts and sales returns. Cash discounts and sales returns are estimated using historicalexperience. Trade allowances are based on the estimated obligations and historical experience. Adjustments to earnings resulting from revisions to estimates ondiscounts and returns have been insignificant for each of the reported periods.Allowance for Doubtful Accounts and Related ReservesWe evaluate the collectability of accounts receivable based on numerous factors, including past transaction history with customers and theircreditworthiness. We maintain an allowance for doubtful accounts for each aging category on our aged trial balance based on our historical loss experience.This estimate is periodically adjusted when we become aware of specific customers’ inability to meet their financial obligations (e.g., bankruptcy filing orother evidence of liquidity problems). As we determine that specific balances will ultimately be uncollectible, we remove them from our aged trial balance.Additionally, we maintain reserves for cash discounts that we expect customers to earn as well as expected returns.Inventory ValuationInventories are carried at the lower of cost or market. The cost of all inventories is determined by the moving average cost method. We include all chargesdirectly or indirectly incurred in bringing inventory to its existing condition and location. We evaluate our inventory value at the end of each quarter to ensurethat first quality, actively moving inventory, when viewed by category, is carried at the lower of cost or market.Additionally, we maintain a reserve for the estimated value impairment associated with damaged, excess and obsolete inventory. The damaged, excessand obsolete reserve generally includes discontinued items or inventory that has turn days in excess of 270 days, excluding new items during their productlaunch. 35Table of ContentsFair Value MeasurementsWe are exposed to market risks from changes in interest rates, which may affect our operating results and financial position. When deemed appropriate,we minimize our risks from interest rate fluctuations through the use of an interest rate swap. This derivative financial instrument is used to manage risk andis not used for trading or speculative purposes. The interest rate swap, which terminated in March of 2011, was valued using a valuation model that hadinputs other than quoted market prices that were both observable and unobservable.We endeavored to utilize the best available information in measuring the fair value of the interest rate swap. The interest rate swap was classified in itsentirety based on the lowest level of input that was significant to the fair value measurement. To determine fair value of the interest rate swap we used thediscounted estimated future cash flows methodology. Assumptions critical to our fair value were: (i) the present value factors used in determining fair value(ii) projected LIBOR, and (iii) the risk of counterparty non-performance risk. These and other assumptions were impacted by economic conditions andexpectations of management. We determined that the fair value of our interest rate swap was a level 3 measurement in the fair value hierarchy as defined inNote 13 of the Consolidated Financial Statements included in this Annual Report on Form 10-K. The level 3 measurement is the risk of counterparty non-performance on the interest rate swap liability that is not secured by cash collateral. The affect of counterparty non-performance was immaterial during fiscal2011 and 2010.Impairment of Long-Lived AssetsLong-lived assets, including property and equipment and intangible assets with definite useful lives, are reviewed for possible impairment wheneverevents or circumstances indicate that the carrying amount of an asset may not be recoverable.We consider whether there were indicators of potential impairment on a quarterly basis. Indicators of impairment include current period losses combinedwith a history of losses, management’s decision to exit a facility, reductions in the fair market value of real properties and changes in other circumstances thatindicate the carrying amount of an asset may not be recoverable.Our evaluation of long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual distribution facility. Inthe event of indicators of impairment, the assets of the distribution facility are evaluated by comparing the facility’s undiscounted cash flows over theestimated useful life of the asset, which ranges between 5-40 years, to its carrying value. If the carrying value is greater than the undiscounted cash flows, animpairment loss is recognized for the difference between the carrying value of the asset and the estimated fair market value. Impairment losses are recorded as acomponent of “Selling, general and administrative” expense in the Consolidated Statements of Operations.Our estimate of undiscounted cash flows is subject to assumptions that affect estimated operating income at a distribution facility level. Theseassumptions are related to future sales, margin growth rates, economic conditions, market competition and inflation. In the event that undiscounted cash flowsdo not exceed the carrying value of a facility, our estimates of fair market value are generally based on market appraisals and our experience with relatedmarket transactions. We use a two year average of cash flows based on 2011 EBITDA and 2012 projected EBITDA, which includes a small growth factorassumption, to estimate undiscounted cash flows. These assumptions used to determine impairment are considered to be level 3 measurements in the fair valuehierarchy as defined in Note 13 of the Consolidated Financial Statements included in this Annual Report on Form 10-K.Our operating results continue to be negatively impacted by the ongoing downturn in the housing market. To the extent that reductions in volume andoperating income have resulted in impairment indicators, in all cases our carrying values continue to be less than our projected undiscounted cash flows. Assuch, we have not identified significant known trends impacting the fair value of long-lived assets to an extent that would indicate impairment.During the first quarter of fiscal 2011 our Newtown, CT facility was damaged due to severe winter weather. As a result of the damage to the facility andits contents we have received approximately $5.8 million in proceeds from the insurance company comprised of $2.2 million related to the damaged building,$2.4 million related to damaged and destroyed inventory and $1.2 million related to the recovery of additional expenses incurred as a result of the damage.Cash received related to the damaged building was classified as an investing cash inflow in our Consolidated Statement of Cash Flows and used to reduce theprincipal of our mortgage. All other cash inflows related to the insurance settlement were classified as operating cash flows in our Consolidated Statement ofCash Flows. The majority of the remaining cash inflows were used to fund costs incurred related to the Newtown loss. We recognized a $1.4 million gain infiscal 2011 of which $1.2 million related to the damaged building and $0.2 million related to the recovery of gross margin on the inventory. We recorded thegain at the time that the recovery of the minimum expected proceeds under our insurance policy became probable and was estimable. This gain was recorded in“Selling, general and administrative expenses” in our Consolidated Statement of Operations. 36Table of ContentsIncome TaxesThe federal statutory income tax rate was 35%. Our provision for (benefit from) income taxes is reconciled to the federal statutory amount as follows: Fiscal YearEndedDecember 31,2011 Fiscal YearEndedJanuary 1,2011 Fiscal YearEndedJanuary 2,2010 (In thousands) Benefit from income taxes computed at the federal statutory tax rate $(13,162) $(18,841) $(19,912) Benefit from state income taxes, net of federal benefit (1,296) (2,153) (2,276) Valuation allowance change 14,498 18,433 25,864 Other 922 1,972 888 Provision for (benefit from) income taxes $962 $(589) $4,564 Our income before provision for income taxes for our Canadian operations was $0.9 million, $1.6 million and $1.2 million for fiscal 2011, fiscal2010, and fiscal 2009, respectively.For fiscal 2011, we recognized tax expense of $1.0 million. The expense recognized for the year is primarily comprised of $0.7 million for current stateincome tax expense related to earnings generated on a separate company basis and $0.3 million of current income tax expense resulting from foreign incometaxes.For fiscal 2010, we recognized tax benefit of $0.6 million. The benefit recognized for the year is primarily comprised of $0.6 million of deferred incometax benefit resulting from the allocation of income tax expense to other comprehensive income, $0.7 million of current income tax benefit resulting from a netoperating loss carryback and $0.8 million of current income tax expense resulting from foreign income taxes.In accordance with the intraperiod tax allocation provisions of U.S. GAAP, we are required to consider all items (including items recorded in othercomprehensive income) in determining the amount of tax benefit that results from a loss from continuing operations that should be allocated to continuingoperations. In fiscal 2011, there was no intraperiod tax allocation due to the fact that there was a loss in other comprehensive income for the period. In fiscal2010, in addition to our federal income tax benefit, we recorded a non-cash tax benefit on the loss from continuing operations of $0.6 million, which was offsetin full by income tax expense recorded in other comprehensive income. While the income tax benefit from continuing operations is reported in our ConsolidatedStatements of Operations, the income tax expense on other comprehensive income is recorded directly to accumulated other comprehensive loss, which is acomponent of stockholders’ equity.As of December 31, 2011, our deferred income tax assets were $69.0 million, which are offset by a full valuation allowance. Deferred income tax assetsand income tax liabilities are recognized for temporary differences between amounts recorded for financial reporting and income tax purposes. Our financialstatements contain certain deferred tax assets which have arisen primarily as a result of tax benefits associated with the loss before income taxes incurredduring fiscal 2011 and fiscal 2010, as well as net deferred income tax assets resulting from other temporary differences related to certain reserves, pensionobligations and differences between book and tax depreciation and amortization. We record a valuation allowance against our net deferred tax assets when wedetermine that based on the weight of available evidence, it is more likely than not our net deferred tax assets will not be realized. We considered the foursources of taxable income that should be considered when determining whether a valuation allowance is required including (from least to most subjective): •taxable income in prior carryback years, if carryback is permitted under the tax law; •future reversals of existing taxable temporary differences (i.e., offset gross deferred tax assets against gross deferred tax liabilities); •tax planning strategies; and •future taxable income exclusive of reversing temporary differences and carryforwards. 37Table of ContentsIn estimating future taxable income, we develop assumptions including the amount of future state and federal pretax operating and non-operating income,the reversal of temporary differences and the implementation of feasible prudent tax planning strategies. These assumptions require significant judgment aboutthe forecasts of future taxable income. Substantial changes in these assumptions could result in changes in our judgments around our ability to realize futuretax benefit.Recently Issued Accounting PronouncementsIn January 2010, the FASB amended fair value measurement guidance to require a number of additional disclosures regarding fair value measurement,including the amount of transfers between Levels 1 and 2 of the fair value hierarchy, the reasons for transfers in or out of Level 3 of the fair value hierarchyand activity for recurring Level 3 measures. In addition the amendments clarify certain existing disclosure requirements related to the level at which fair valuedisclosures should be disaggregated, and the requirement to provide disclosures about valuation techniques and inputs used in determining the fair value ofassets or liabilities classified as Levels 2 or 3. This guidance is effective for periods beginning after December 15, 2009, except for the disclosures aboutpurchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements. These disclosures are effective for fiscal yearsbeginning after December 15, 2010, including interim periods within those fiscal years. This guidance did not have a significant impact on our financialstatements and disclosures.In May 2011, the FASB issued guidance which amends existing US GAAP fair value measurement and disclosure guidance to converge US GAAP andInternational Financial Reporting Standards (“IFRS”) requirements for measuring amounts at fair value as well as disclosures about these measurements. Thisguidance is effective during interim and annual periods beginning after December 15, 2011. We do not anticipate this guidance having a significant impact onour financial statements and disclosures.In June 2011, the FASB issued guidance which eliminates the option to present the components of other comprehensive income as part of the statement ofchanges in stockholders’ equity. The update also requires the presentation of a single statement of comprehensive income or consecutive presentation of thestatement of income and the statement of comprehensive income, if a company elects to present two separate statements. Finally, reclassification adjustmentsfrom other comprehensive income to net income are required to be presented on the face of the financial statements. There has been an amendment which defersthe section of the new guidance related to the reclassification of items out of accumulated other comprehensive income. The new guidance and subsequentamendment are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Formal adoption of this guidance willnot significantly impact our presentation of these items as we have historically presented the total of comprehensive loss, the components of net loss and thecomponents of other comprehensive loss in a single continuous statement on the face of the Consolidated Statements of Operations and Comprehensive Loss.In September 2011, the FASB issued guidance which provides the option of first assessing the qualitative factors to determine whether it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. If we had goodwill recorded and were completing an impairment analysis, this wouldallow us to skip the two step impairment test if it’s determined not to be more likely than not that the fair value is less than the carrying value. We do not havegoodwill recorded on the balance sheet and therefore this guidance does not currently impact us.In September 2011, the FASB issued guidance which requires quantitative and qualitative disclosures for multiemployer pension plans and current and futurecommitments. These disclosures include providing additional information regarding the nature of the plan, level of participation in the multiemployer pensionplan, the financial health of the plan, and the nature of commitments to the plan. These disclosures are effective for annual periods for fiscal years ending afterDecember 15, 2011. This guidance did not have a significant impact on our financial statements and disclosures. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.General. We are exposed to risks such as changes in interest rates, commodity prices and foreign currency exchange rates. We employ a variety ofpractices to manage these risks including the use of derivative instruments. Derivative instruments are used only for risk management purposes and not forspeculation or trading, and are not used to address risks related to foreign currency exchange rates. We record derivative instruments as assets or liabilities onthe balance sheet at fair value. The following discussion provides additional information regarding our market risk exposure. 38Table of ContentsInterest Rates. Our revolving credit facilities accrue interest based on a floating benchmark rate (the prime rate or LIBOR rate), plus an applicablemargin. A change in interest rates under the revolving credit facility would have an impact on our results of operations. However, a change of 100 basis pointsin the market rate of interest would have an immaterial impact based on borrowings outstanding at December 31, 2011. Additionally, to the extent changes ininterest rates impact the housing market, we would be impacted by such changes.We have a $295 million mortgage loan with the German American Capital Corporation. The mortgage has a term of ten years and a fixed interest rate of6.35%. By entering into this fixed rate mortgage, we insulated ourselves from changes in market interest rates on a portion of our indebtedness. This mortgagereplaced our previously existing $165 million floating rate mortgage, which had a 7.4% interest rate when it was terminated.Foreign Exchange Rates. Less than 3.0% of our net sales are denominated in currencies other than the U.S. dollar, and we do not believe our totalexposure to currency fluctuations to be significant.Commodity Prices. We believe that general inflation did not significantly affect our operating results or markets in fiscal 2011, fiscal 2010 or fiscal2009. As discussed above, our results of operations were both favorably and unfavorably impacted by increases and decreases in the pricing of certaincommodity-based products. Commodity price fluctuations have from time to time created cyclicality in our financial performance and may do so in the future. 39Table of ContentsITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.Index to Financial Statements and Supplemental Data Page Management’s Report on Internal Control Over Financial Reporting 41 Reports of Independent Registered Public Accounting Firm 42 Consolidated Balance Sheets 44 Consolidated Statements of Operations and Comprehensive Loss 45 Consolidated Statements of Cash Flows 46 Consolidated Statements of Stockholders’ Equity 47 Notes to Consolidated Financial Statements 48 40Table of ContentsBLUELINX HOLDINGS INC. AND SUBSIDIARIESMANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGTo the Stockholders of BlueLinx Holdings Inc.:Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under theSecurities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance to our management andboard of directors regarding the preparation and fair presentation of published financial statements.Our management, including our chief executive officer and our chief financial officer, does not expect that our internal controls over financial reportingwill prevent all errors and all fraud. Internal controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that theobjectives of the internal controls are met. Given the inherent limitations of internal controls, internal controls over financial reporting may not prevent or detectall misstatements or fraud. Therefore, no evaluation of internal control can provide absolute assurance that all control issues or instances of fraud will beprevented or detected.Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment,management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission set forth in Internal Control —Integrated Framework. Based on our assessment, our management concluded that, as of December 31, 2011, our internal control over financial reportingwas effective.Ernst & Young LLP, an independent registered public accounting firm that audited our consolidated financial statements as of and for the year endedDecember 31, 2011 included in this Annual Report on Form 10-K, has issued an attestation report on our internal control over financial reporting as ofDecember 31, 2011, dated February 27, 2012.February 27, 2012 41Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNALCONTROL OVER FINANCIAL REPORTINGThe Board of Directors and Stockholders of BlueLinx Holdings Inc. and subsidiariesWe have audited BlueLinx Holdings Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2011, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSOcriteria). BlueLinx Holdings Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control OverFinancial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, BlueLinx Holdings Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2011, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2011 ConsolidatedFinancial Statements of BlueLinx Holdings Inc. and subsidiaries and our report dated February 27, 2012 expressed an unqualified opinion thereon./s/ Ernst & Young LLPAtlanta, GeorgiaFebruary 27, 2012 42Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON THECONSOLIDATED FINANCIAL STATEMENTSThe Board of Directors and Stockholders of BlueLinx Holdings Inc. and subsidiariesWe have audited the accompanying consolidated balance sheets of BlueLinx Holdings Inc. and subsidiaries as of December 31, 2011 and January 1,2011, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the fiscal years endedDecember 31, 2011, January 1, 2011, and January 2, 2010. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BlueLinx HoldingsInc. and subsidiaries at December 31, 2011 and January 1, 2011, and the consolidated results of their operations and their cash flows for the fiscal yearsended December 31, 2011, January 1, 2011, and January 2, 2010, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), BlueLinx Holdings Inc.and subsidiaries’ internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012 expressed an unqualified opinionthereon. /s/ Ernst & Young LLPAtlanta, GeorgiaFebruary 27, 2012 43Table of ContentsBLUELINX HOLDINGS INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS December 31,2011 January 1,2011 (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents $4,898 $14,297 Receivables, less allowances of $5,135 in fiscal 2011 and $5,715 in fiscal 2010 138,872 119,202 Inventories, net 185,577 188,250 Deferred income tax assets, net — 143 Other current assets 27,141 22,768 Total current assets 356,488 344,660 Property and equipment: Land and improvements 49,562 52,540 Buildings 95,652 96,720 Machinery and equipment 75,508 70,860 Construction in progress 741 2,028 Property and equipment, at cost 221,463 222,148 Accumulated depreciation (98,335) (92,517) Property and equipment, net 123,128 129,631 Non-current deferred income tax assets, net 358 — Other non-current assets 23,941 50,728 Total assets $503,915 $525,019 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $70,228 $62,827 Bank overdrafts 22,364 23,089 Accrued compensation 4,496 4,594 Current maturities of long-term debt 9,046 1,190 Deferred income taxes, net 382 — Other current liabilities 16,558 16,792 Total current liabilities 123,074 108,492 Non-current liabilities: Long-term debt 328,695 381,679 Deferred income taxes, net — 192 Other non-current liabilities 43,772 33,665 Total liabilities 495,541 524,028 STOCKHOLDERS’ EQUITY Common Stock, $0.01 par value, 100,000,000 shares authorized; 62,012,962 and 32,667,504 shares issued andoutstanding at December 31, 2011 and January 1, 2011, respectively 620 327 Additional paid-in-capital 207,626 147,427 Accumulated other comprehensive loss (21,900) (7,358) Accumulated deficit (177,972) (139,405) Total stockholders’ equity 8,374 991 Total liabilities and stockholders’ equity $503,915 $525,019 44Table of ContentsBLUELINX HOLDINGS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE LOSS Fiscal YearEndedDecember 31,2011 Fiscal YearEndedJanuary 1,2011 Fiscal YearEndedJanuary 2,2010 (In thousands, except per share data) Net sales $1,755,431 $1,804,418 $1,646,108 Cost of sales 1,545,282 1,593,745 1,452,947 Gross profit 210,149 210,673 193,161 Operating expenses: Selling, general, and administrative 207,857 221,185 210,214 Net gain from terminating the Georgia-Pacific supply agreement — — (17,772) Depreciation and amortization 10,562 13,365 16,984 Total operating expenses 218,419 234,550 209,426 Operating loss (8,270) (23,877) (16,265) Non-operating expenses (income): Interest expense 30,510 33,788 32,456 Changes associated with the ineffective interest rate swap (1,676) (4,603) 6,252 Write-off of debt issue costs — 183 1,407 Other expense, net 501 587 519 Loss before provision for (benefit from) income taxes (37,605) (53,832) (56,899) Provision for (benefit from) income taxes 962 (589) 4,564 Net loss $(38,567) $(53,243) $(61,463) Basic and diluted weighted average number of common shares outstanding 43,187 30,688 31,017 Basic and diluted net loss per share applicable to common shares outstanding $(0.89) $(1.73) $(1.98) Comprehensive loss: Net loss $(38,567) $(53,243) $(61,463) Other comprehensive loss: Foreign currency translation, net of taxes (92) 336 1,173 Unrealized (loss) gain from pension plan, net of taxes (14,969) (616) 941 Unrealized gain from ineffective interest rate swap, net of taxes 519 1,297 6,431 Comprehensive loss $(53,109) $(52,226) $(52,918) 45Table of ContentsBLUELINX HOLDINGS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal YearEndedDecember 31,2011 Fiscal YearEndedJanuary 1,2011 Fiscal YearEndedJanuary 2,2010 (In thousands) Cash flows from operating activities: Net loss $(38,567) $(53,243) $(61,463) Adjustments to reconcile net loss to cash used in operations: Depreciation and amortization 10,562 13,365 16,984 Amortization of debt issue costs 2,940 1,963 2,459 Net gain from terminating the Georgia-Pacific Supply Agreement — — (17,772) Payments from terminating the Georgia-Pacific Supply Agreement — 4,706 14,118 Gain from sale of properties (10,604) — (10,397) Gain from property insurance settlements (1,230) — — Prepayment fees associated with principal payments on mortgage — — 616 Changes associated with the ineffective interest rate swap (1,676) (4,603) 6,252 Write-off of debt issue costs — 183 1,407 Vacant property changes (291) 53 1,222 Gain on modification of lease agreement (1,971) — — Deferred income tax (benefit) provision (25) (600) 24,220 Share-based compensation 1,974 3,978 2,922 Decrease (increase) in restricted cash related to the ineffective interest rate swap, insurance, and other 987 6,556 (2,511) Changes in assets and liabilities: Receivables (19,670) 145 11,306 Inventories 2,673 (15,065) 16,297 Accounts payable 5,973 (1,791) (13,749) Changes in other working capital (375) 15,452 (13,583) Other (343) (1,008) 1,819 Net cash used in operating activities (49,643) (29,909) (19,853) Cash flows from investing activities: Property and equipment investments (7,222) (4,092) (1,815) Proceeds from disposition of assets 18,355 711 14,451 Net cash provided by (used in) investing activities 11,133 (3,381) 12,636 Cash flows from financing activities: Repurchase of common stock — (583) (2,042) Repayments on revolving credit facilities (478,630) (466,219) (116,682) Borrowings from revolving credit facilities 475,918 507,419 16,682 Principal payments on mortgage (42,416) — (3,201) Payments on capital lease obligations (1,440) (629) — Prepayment fees associated with principal payments on mortgage — — (616) (Decrease) increase in bank overdrafts (725) (4,143) 2,517 Decrease (increase) in restricted cash related to the mortgage 20,604 (11,201) (10,296) Debt financing costs (2,721) (6,521) — Proceeds from stock offering less expenses paid 58,521 — — Other — 7 (41) Net cash provided by (used in) financing activities 29,111 18,130 (113,679) Decrease in cash (9,399) (15,160) (120,896) Cash and cash equivalents balance, beginning of period 14,297 29,457 150,353 Cash and cash equivalents balance, end of period $4,898 $14,297 $29,457 Supplemental Cash Flow Information Net income tax (payments) refunds during the period $(22) $19,983 $10,299 Interest paid during the period $28,098 $31,675 $28,288 Noncash transactions: Capital leases $3,131 $1,889 $— 46Table of ContentsBLUELINX HOLDINGS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock AdditionalPaid-In- AccumulatedOtherComprehensive Accumulated Stockholders’Equity Shares Amount Capital Income (Loss) Deficit Total (In thousands) Balance, January 3, 2009 32,362 $323 $144,148 $(16,920) $(24,699) $102,852 Net loss — — — — (61,463) (61,463) Foreign currency translation adjustment, net of tax — — — 1,173 — 1,173 Unrealized gain from pension plan, net of tax — — — 941 — 941 Unrealized gain from cash flow hedge, net of tax — — — 6,431 — 6,431 Issuance of restricted stock, net of forfeitures 589 6 — — — 6 Repurchase of common stock (772) (7) (2,035) — — (2,042) Compensation related to share-based grants — — 2,922 — — 2,922 Balance, January 2, 2010 32,179 322 145,035 (8,375) (86,162) 50,820 Net loss — — — — (53,243) (53,243) Foreign currency translation adjustment, net of tax — — — 336 — 336 Unrealized loss from pension plan, net of tax — — — (616) — (616) Unrealized gain from cash flow hedge, net of tax — — — 1,297 — 1,297 Issuance of restricted stock, net of forfeitures 688 7 — — — 7 Repurchase of common stock (199) (2) (581) — — (583) Compensation related to share-based grants — — 3,876 — — 3,876 Reclassification of equity awards to liability — — (903) — — (903) Balance, January 1, 2011 32,668 327 147,427 (7,358) (139,405) 991 Net loss — — — — (38,567) (38,567) Foreign currency translation adjustment, net of tax — — — (92) — (92) Unrealized loss from pension plan, net of tax — — — (14,969) — (14,969) Unrealized gain from cash flow hedge, net of tax — — — 519 — 519 Issuance of restricted stock, net of forfeitures 774 7 — — — 7 Issuance of stock related to the rights offering, net ofexpenses 28,571 286 58,235 — — 58,521 Compensation related to share-based grants — — 2,158 — — 2,158 Impact of net settled shares for vested grants — — (194) — — (194) Balance, December 31, 2011 62,013 $620 $207,626 $(21,900) $(177,972) $8,374 47Table of ContentsBLUELINX HOLDINGS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Basis of Presentation and BackgroundBasis of PresentationBlueLinx Holdings Inc., operating through our wholly-owned subsidiary, BlueLinx Corporation (BlueLinx Holdings Inc. and its subsidiaries arecollectively referred to as “BlueLinx” or the “Company”), is a leading distributor of building products in the United States. We operate in all of the majormetropolitan areas in the United States and, as of December 31, 2011, we distributed more than 10,000 products to approximately 11,500 customers throughour network of approximately 55 distribution centers. The Consolidated Financial Statements include our accounts and those of our wholly-ownedsubsidiaries. All significant intercompany accounts and transactions have been eliminated. Our fiscal year is a 52 or 53-week period ending on the Saturdayclosest to the end of the calendar year. Fiscal 2011, fiscal 2010, and fiscal 2009 each contained 52 weeks.Nature of OperationsWe are a wholesale supplier of building products in North America. We distribute products in two principal categories: structural products and specialtyproducts. Structural products include plywood, oriented strand board (“OSB”), rebar and remesh, lumber and other wood products primarily used forstructural support, walls and flooring in construction projects. Specialty products include roofing, insulation, moulding, engineered wood, vinyl products(used primarily in siding), outdoor living and metal products (excluding rebar and remesh). These products are sold to a diversified customer base, includingindependent building materials dealers, industrial and manufactured housing builders and home improvement centers. Net sales by product category aresummarized below: Fiscal YearEndedDecember 31,2011 Fiscal YearEndedJanuary 1,2011 Fiscal YearEndedJanuary 2,2010 (Dollars in millions) Sales by category Structural products $708 $838 $738 Specialty products 1,089 1,005 948 Unallocated allowances and adjustments (42) (39) (40) Total sales $1,755 $1,804 $1,646 SuppliersAs of December 31, 2011, our vendor base included over 750 suppliers of both structural and specialty building products. In some cases, theseproducts are branded. We have supply contracts in place with many of our vendors. Terms for these agreements frequently include prompt payment discountsand freight allowances and occasionally include volume discounts, growth incentives, marketing allowances, consigned inventory and extended paymentterms.On April 27, 2009, we entered into a Termination and Modification Agreement (“Modification Agreement”) related to our Master Purchases, Supply, andDistribution Agreement (the “Supply Agreement”) with G-P. The Modification Agreement effectively terminated the existing Supply Agreement with respect toour distribution of G-P plywood, OSB and lumber. As a result of terminating this agreement, we are no longer contractually obligated to make minimumpurchases of products from G-P.G-P agreed to pay us $18.8 million in exchange for our agreement to terminate the Supply Agreement one year earlier than May 7, 2010, the terminationdate previously agreed upon. Under the terms of the Modification Agreement, we received four quarterly cash payments of $4.7 million, which began onMay 1, 2009 and ended on February 1, 2010. As a result of the termination, we recognized a net gain of $17.8 million in 2009, as a reduction to operatingexpense. The gain was net of a $1.0 million write-off of an intangible asset associated with the Supply Agreement. 48Table of ContentsOn February 12, 2012, our three-year purchase agreement with G-P for engineered lumber expired in accordance with its terms. We continue to distributea variety of G-P building products, but no longer are contractually obligated to make minimum purchases of products from G-P or to purchase certainproducts exclusively from G-P.2. Summary of Significant Accounting PoliciesRevenue RecognitionWe recognize revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have beenrendered, our price to the buyer is fixed and determinable and collectibility is reasonably assured. Delivery is not considered to have occurred until thecustomer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. Revenue isrecorded at the time of shipment for terms designated as FOB (free on board) shipping point. For sales transactions designated FOB destination, revenue isrecorded when the product is delivered to the customer’s delivery site.All revenues are recorded at gross. The key indicators used to determine when and how revenue is recorded are as follows: • We are the primary obligor responsible for fulfillment and all other aspects of the customer relationship. • Title passes to BlueLinx and we carry all risk of loss related to warehouse, reload inventory and inventory shipped directly from vendors to ourcustomers. • We are responsible for all product returns. • We control the selling price for all channels. • We select the supplier. • We bear all credit risk.In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis. Customer consigned inventory ismaintained and stored by certain customers; however, ownership and risk of loss remains with us. When the inventory is sold by the customer, we recognizerevenue on a gross basis.All revenues recognized are net of trade allowances, cash discounts and sales returns. Cash discounts and sales returns are estimated using historicalexperience. Trade allowances are based on the estimated obligations and historical experience. Adjustments to revenue and earnings resulting from revisions toestimates on discounts and returns have been immaterial for each of the reported periods.Cash and Cash EquivalentsCash and cash equivalents include all highly-liquid investments with maturity dates of less than three months when purchased. 49Table of ContentsRestricted CashWe had restricted cash of $20.6 million and $42.2 million at December 31, 2011 and January 1, 2011, respectively. Restricted cash primarily includesamounts held in escrow related to our mortgage and insurance for workers’ compensation, auto liability, and general liability. Restricted cash is included in“Other current assets” and “Other non-current assets” on the accompanying Consolidated Balance Sheets.The table below provides the balances of each individual component in restricted cash as of December 31, 2011 and January 1, 2011 (in thousands): At December 31,2011 At January 1,2011 Cash in escrow: Mortgage $10,011 $30,616 Insurance 8,786 9,430 Other 1,779 2,124 Total $20,576 $42,170 During fiscal 2011, 2010 and 2009, changes in restricted cash required under our mortgage were classified in the financing section of our ConsolidatedStatement of Cash Flows.Concentrations of Credit RiskOur accounts receivable are principally from customers in the building products industry located in the United States and Canada. In fiscal 2011,Lowes Companies, Inc. (and its affiliated companies) was our largest customer, accounting for approximately 10.4% of total sales. Although we do notanticipate events in the near term leading to the loss of this customer, were these events to occur, our business could be negatively impacted. We believeconcentration of credit risk with respect to accounts receivable is limited due to the large number of customers comprising our customer base.Allowance for Doubtful Accounts and Related ReservesWe evaluate the collectibility of accounts receivable based on numerous factors, including past transaction history with customers and theircreditworthiness. We maintain an allowance for doubtful accounts for each aging category on our aged trial balance, which is aged utilizing contractual terms,based on our historical loss experience. This estimate is periodically adjusted when we become aware of specific customers’ inability to meet their financialobligations (e.g., bankruptcy filing or other evidence of liquidity problems). As we determine that specific balances ultimately will be uncollectible, we removethem from our aged trial balance. Additionally, we maintain reserves for cash discounts that we expect customers to earn as well as expected returns. AtDecember 31, 2011 and January 1, 2011, these reserves totaled $5.1 million and $5.7 million, respectively. Adjustments to earnings resulting from revisionsto estimates on discounts and uncollectible accounts have been insignificant.Inventory ValuationInventories are carried at the lower of cost or market. The cost of all inventories is determined by the moving average cost method. We have included allmaterial charges directly or indirectly incurred in bringing inventory to its existing condition and location. We evaluate our inventory value at the end of eachquarter to ensure that first quality, actively moving inventory, when viewed by category, is carried at the lower of cost or market. At December 31, 2011 andJanuary 1, 2011, the market value of our inventory exceeded its cost. Adjustments to earnings resulting from revisions to lower of cost or market estimateshave been insignificant.Additionally, we maintain a reserve for the estimated value impairment associated with damaged, excess and obsolete inventory. The damaged, excessand obsolete reserve generally includes discontinued items or inventory that has turn days in excess of 270 days, excluding new items during their productlaunch. At December 31, 2011 and January 1, 2011, our damaged, excess and obsolete inventory reserves were $1.5 million and $1.7 million, respectively.Adjustments to earnings resulting from revisions to damaged, excess and obsolete estimates have been insignificant. 50Table of ContentsConsignment InventoryWe enter into consignment inventory agreements with vendors. This vendor consignment inventory relationship allows us to obtain and store vendorinventory at our warehouses and third-party (“reload”) facilities; however, ownership and risk of loss generally remains with the vendor. When the inventoryis sold, we are required to pay the vendor and we simultaneously take and transfer ownership from the vendor to the customer.Consideration Received from Vendors and Paid to CustomersEach year, we enter into agreements with many of our vendors providing for inventory purchase rebates, generally based on achievement of specifiedvolume purchasing levels and various marketing allowances that are common industry practice. We accrue for the receipt of vendor rebates based onpurchases, and also reduce inventory to reflect the net acquisition cost (purchase price less expected purchase rebates). At December 31, 2011 and January 1,2011, the vendor rebate receivable totaled $9.0 million and $9.5 million, respectively. Adjustments to earnings resulting from revisions to rebate estimateshave been insignificant.In addition, we enter into agreements with many of our customers to offer customer rebates, generally based on achievement of specified volume saleslevels and various marketing allowances that are common industry practice. We accrue for the payment of customer rebates based on sales to the customer,and also reduce sales to reflect the net sales (sales price less expected customer rebates). At December 31, 2011 and January 1, 2011, the customer rebatepayable totaled $7.0 million and $6.4 million, respectively. Adjustments to earnings resulting from revisions to rebate estimates have been insignificant.Shipping and HandlingAmounts billed to customers in sales transactions related to shipping and handling are classified as revenue. Shipping and handling costs included in“Selling, general, and administrative” expenses were $87.9 million, $85.5 million, and $84.4 million for fiscal 2011, fiscal 2010, and fiscal 2009,respectively.Advertising CostsAdvertising costs are expensed as incurred. Advertising expenses of $1.9 million, $1.8 million, and $1.8 million were included in “Selling, general andadministrative” expenses for fiscal 2011, fiscal 2010, fiscal 2009, respectively.Loss per Common ShareWe calculate our basic loss per share by dividing net loss by the weighted average number of common shares and participating securities outstanding forthe period. Restricted stock granted by us to certain management employees and non-employee directors participate in dividends on the same basis as commonshares and are non-forfeitable by the holder. The unvested restricted stock contains non-forfeitable rights to dividends or dividend equivalents. As a result,these share-based awards meet the definition of a participating security and are included in the weighted average number of common shares outstanding,pursuant to the two-class method, for the periods that present net income. The two-class method is an earnings allocation formula that treats a participatingsecurity as having rights to earnings that would otherwise have been available to common stockholders. Given that the restricted stockholders do not have acontractual obligation to participate in the losses, we have not included these amounts in our weighted average number of common shares outstanding forperiods in which we report a net loss. In addition, because the inclusion of such unvested restricted shares in our basic and dilutive per share calculationswould be anti-dilutive, we have not included 2,361,423, 1,914,288, and 1,539,129 of unvested restricted shares that had the right to participate individends in our basic and dilutive calculations for fiscal 2011, fiscal 2010, and fiscal 2009, respectively, because all periods reflected net losses.Except when the effect would be anti-dilutive, the diluted earnings per share calculation includes the dilutive effect of the assumed exercise of stockoptions using the treasury stock method. During fiscal 2008, we granted 834,071 performance shares under our 2006 Long-Term Incentive Plan, under whichshares are issuable upon satisfaction of certain performance criteria. On December 14, 2010, the Compensation Committee of our Board decided to settle theseawards in cash, and we classified them as liability awards at the time of the modification. Our restricted stock units are also settled in cash upon vesting andare considered liability awards. Therefore, these performance shares and restricted stock units are not included in the computation of the basic and dilutedearnings per share.As we experienced losses in all periods, basic and diluted loss per share are computed by dividing net loss by the weighted average number of commonshares outstanding for the period. For fiscal 2011, fiscal 2010, and fiscal 2009, we excluded 3,266,739, 2,839,103, and 2,648,049 unvested share-basedawards, respectively, from the diluted earnings per share calculation because they were anti-dilutive. 51Table of ContentsCommon Stock DividendsIn the past we have paid dividends on our common stock at the quarterly rate of $0.125 per share. However, on December 5, 2007, our Board ofDirectors suspended the payment of dividends on our common stock for an indefinite period of time. Resumption of the payment of dividends will depend on,among other things, business conditions in the housing industry, our results of operations, cash requirements, financial condition, contractual restrictions,provisions of applicable law and other factors that our Board of Directors may deem relevant. Accordingly, we may not be able to resume the payment ofdividends at the same quarterly rate in the future, if at all.Property and EquipmentProperty and equipment are recorded at cost. Lease obligations for which we assume or retain substantially all the property rights and risks ofownership are capitalized. Replacements of major units of property are capitalized and the replaced properties are retired. Replacements of minor components ofproperty and repair and maintenance costs are charged to expense as incurred.Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Useful lives are 2 to 18 years for landimprovements, 5 to 40 years for buildings, and 3 to 7 years for machinery and equipment, which includes mobile equipment. Upon retirement or dispositionof assets, cost and accumulated depreciation are removed from the related accounts and any gain or loss is included in income. Depreciation expense totaled$10.4 million for fiscal 2011, $12.8 million for fiscal 2010 and $15.3 million for fiscal 2009.During fiscal 2011, we sold certain properties with carrying values of $4.8 million, which resulted in gains totaling $10.6 million. These gains arerecorded in “Selling, general and administrative” expense in the Consolidated Statements of Operations. All but one of these properties, which had a carryingvalue of $0.8 million and for which a gain of $5.4 million was recorded, were classified as held for sale. See Note 4 for discussion of the held for saleproperties sold during the year.Impairment of Long-Lived AssetsLong-lived assets, including property and equipment and intangible assets with definite useful lives, are reviewed for possible impairment wheneverevents or circumstances indicate that the carrying amount of an asset may not be recoverable.We consider whether there were indicators of potential impairment on a quarterly basis. Indicators of impairment include current period losses combinedwith a history of losses, management’s decision to exit a facility, reductions in the fair market value of real properties and changes in other circumstances thatindicate the carrying amount of an asset may not be recoverable.Our evaluation of long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual distribution facility. Inthe event of indicators of impairment, the assets of the distribution facility are evaluated by comparing the facility’s undiscounted cash flows over theestimated useful life of the asset, which ranges between 5-40 years, to its carrying value. If the carrying value is greater than the undiscounted cash flows, animpairment loss is recognized for the difference between the carrying value of the asset and the estimated fair market value. Impairment losses are recorded as acomponent of “Selling, general and administrative” expenses in the Consolidated Statements of Operations.Our estimate of undiscounted cash flows is subject to assumptions that affect estimated operating income at a distribution facility level. Theseassumptions are related to future sales, margin growth rates, economic conditions, market competition and inflation. In the event that undiscounted cash flowsdo not exceed the carrying value of a facility, our estimates of fair market value are generally based on market appraisals and our experience with relatedmarket transactions. We use a two year average of cash flows based on 2011 EBITDA and 2012 projected EBITDA, which includes a small growth factorassumption, to estimate undiscounted cash flows. These assumptions used to determine impairment are considered to be level 3 measurements in the fair valuehierarchy as defined in Note 13. 52Table of ContentsOur operating results continue to be negatively impacted by the ongoing downturn in the housing market. To the extent that reductions in volume andoperating income have resulted in impairment indicators, in all cases our carrying values continue to be less than our projected undiscounted cash flows. Assuch, we have not identified significant known trends impacting the fair value of long-lived assets to an extent that would indicate impairment.During the first quarter of fiscal 2011 our Newtown, CT facility was damaged due to severe winter weather. As a result of the damage to the facility andits contents we have received approximately $5.8 million in proceeds from the insurance company comprised of $2.2 million related to the damaged building,$2.4 million related to damaged and destroyed inventory and $1.2 million related to the recovery of additional expenses incurred as a result of the damage.Cash received related to the damaged building was classified as an investing cash inflow in our Consolidated Statement of Cash Flows and used to reduce theprincipal of our mortgage. All other cash inflows related to the insurance settlement were classified as operating cash flows in our Consolidated Statement ofCash Flows. The majority of the remaining cash inflows were used to fund costs incurred related to the Newtown loss. We recognized a $1.4 million gain infiscal 2011 of which $1.2 million related to the damaged building and $0.2 million related to the recovery of gross margin on the inventory. We recorded thegain at the time that the recovery of the minimum expected proceeds under our insurance policy became probable and was estimable. This gain was recorded in“Selling, general and administrative expenses” in our Consolidated Statement of Operations.Stock-Based CompensationWe recognize compensation expense equal to the grant-date fair value for all share-based payment awards that are expected to vest. This expense isrecorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to market or performance conditions, inwhich case we recognize compensation expense over the requisite service period of each separate vesting tranche to the extent market and performanceconditions are considered probable. The calculation of fair value related to stock compensation is subject to certain assumptions discussed in more detail inNote 7. Management updates such estimates when circumstances warrant. All compensation expense related to our share-based payment awards is recorded in“Selling, general and administrative” expense in the Consolidated Statements of Operations.Income TaxesDeferred income taxes are provided using the liability method. Accordingly, deferred income taxes are recognized for differences between the income taxand financial reporting bases of our assets and liabilities based on enacted tax laws and tax rates applicable to the periods in which the differences are expectedto affect taxable income. We recognize a valuation allowance, when based on the weight of all available evidence, we believe it is more likely than not that someor all of our deferred tax assets will not be realized. Such amounts are disclosed in Note 5.We generally believe that the positions taken on previously filed tax returns are more likely than not to be sustained by the taxing authorities. We haverecorded income tax and related interest liabilities where we believe our position may not be sustained. Such amounts are disclosed in Note 5.Foreign Currency TranslationThe functional currency for our Canadian operations is the Canadian dollar. The translation of the applicable currencies into United States dollars isperformed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weightedaverage exchange rate during the period. Any related translation adjustments are recorded directly in stockholders’ equity. Foreign currency transaction gainsand losses are reflected in the Consolidated Statements of Operations. Accumulated other comprehensive loss at December 31, 2011 and January 1, 2011included the accumulated gain from foreign currency translation (net of tax) of $1.7 million and $1.8 million, respectively.DerivativesWe are exposed to risks such as changes in interest rates, commodity prices and foreign currency exchange rates. We employ a variety of practices tomanage these risks including the use of derivative instruments. Derivative instruments are used only for risk management purposes and not for speculation ortrading, and are not used to address risks related to foreign currency exchange rates. We record derivative instruments as assets or liabilities on the balancesheet at fair value. 53Table of ContentsCompensated AbsencesWe accrue for the costs of compensated absences to the extent that the employee’s right to receive payment relates to service already rendered, theobligation vests or accumulates, payment is probable and the amount can be reasonably estimated.Use of EstimatesThe preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to makecertain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. Actual results coulddiffer from these estimates and such differences could be material.New Accounting StandardsIn January 2010, the FASB amended fair value measurement guidance to require a number of additional disclosures regarding fair value measurement,including the amount of transfers between Levels 1 and 2 of the fair value hierarchy, the reasons for transfers in or out of Level 3 of the fair value hierarchyand activity for recurring Level 3 measures. In addition the amendments clarify certain existing disclosure requirements related to the level at which fair valuedisclosures should be disaggregated, and the requirement to provide disclosures about valuation techniques and inputs used in determining the fair value ofassets or liabilities classified as Levels 2 or 3. This guidance is effective for periods beginning after December 15, 2009, except for the disclosures aboutpurchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements. These disclosures are effective for fiscal yearsbeginning after December 15, 2010, including interim periods within those fiscal years. This guidance did not have a significant impact on our financialstatements and disclosures.In May 2011, the FASB issued guidance which amends existing US GAAP fair value measurement and disclosure guidance to converge US GAAP andInternational Financial Reporting Standards (“IFRS”) requirements for measuring amounts at fair value as well as disclosures about these measurements. Thisguidance is effective during interim and annual periods beginning after December 15, 2011. We do not anticipate this guidance having a significant impact onour financial statements and disclosures.In June 2011, the FASB issued guidance which eliminates the option to present the components of other comprehensive income as part of the statement ofchanges in stockholders’ equity. The update also requires the presentation of a single statement of comprehensive income or consecutive presentation of thestatement of income and the statement of comprehensive income, if a company elects to present two separate statements. Finally, reclassification adjustmentsfrom other comprehensive income to net income are required to be presented on the face of the financial statements. There has been an amendment which defersthe section of the new guidance related to the reclassification of items out of accumulated other comprehensive income. The new guidance and subsequentamendment are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Formal adoption of this guidance willnot significantly impact our presentation of these items as we have historically presented the total of comprehensive loss, the components of net loss and thecomponents of other comprehensive loss in a single continuous statement on the face of the Consolidated Statements of Operations and Comprehensive Loss.In September 2011, the FASB issued guidance which provides the option of first assessing the qualitative factors to determine whether it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. If we had goodwill recorded and were completing an impairment analysis, this wouldallow us to skip the two step impairment test if it’s determine not to be more likely than not that the fair value is less than the carrying value. We do not havegoodwill recorded on the balance sheet and therefore this guidance does not currently impact us.In September 2011, the FASB issued guidance which requires quantitative and qualitative disclosures for multiemployer pension plans and current and futurecommitments. These disclosures include providing additional information regarding the nature of the plan, level of participation in the multiemployer pensionplan, the financial health of the plan, and the nature of commitments to the plan. These disclosures are effective for annual periods for fiscal years ending afterDecember 15, 2011. This guidance did not have a significant impact on our financial statements and disclosures. 54Table of Contents3. Restructuring ChargesWe account for exit and disposal costs by recognizing a liability for costs associated with an exit or disposal activity at fair value in the period in whichit is incurred or when the entity ceases using the right conveyed by a contract (i.e. the right to use a leased property). Our restructuring charges includedaccruals for estimated losses on facility costs based on our contractual obligations. We reassess this liability periodically based on current market conditions.Revisions to our estimates of this liability could materially impact our operating results and financial position in future periods if anticipated events and keyassumptions, such as the timing and amounts related to the $1.2 million tenant improvement allowance, either do not materialize or change. These costs areincluded in “Selling, general, and administrative” expenses in the Consolidated Statements of Operations and “Other current liabilities” and “Other non-current liabilities” on the Consolidated Balance Sheets for the fiscal years ended and at December 31, 2011 and January 1, 2011.We account for severance and outplacement costs by recognizing a liability for employees’ rights to post-employment benefits. These costs are includedin “Selling, general, and administrative” expenses in the Consolidated Statements of Operations and in “Accrued compensation” on the Consolidated BalanceSheets for the fiscal years ended and at December 31, 2011 and January 1, 2011.2007 Facility Consolidation and Severance CostsDuring fiscal 2007, we announced a plan to adjust our cost structure in order to manage our costs more effectively. The plan included the consolidationof our corporate headquarters and sales center to one building from two buildings and reduction in force initiatives, which resulted in charges of $17.1 millionduring the fourth quarter of fiscal 2007.As of December 31, 2011 and January 1, 2011, there was no remaining accrued severance related to reduction in force initiatives completed in fiscal2007.During the third quarter of fiscal 2011, we entered into an amendment to our corporate headquarters lease in Atlanta, GA related to the unoccupied 4100building. This amendment released us from our obligations with respect to this unoccupied space as of January 31, 2012, in exchange for a $5.0 millionspace remittance fee, due on or before that date. In addition, we are obligated to pay $1.2 million on or before December 31, 2013 to be used for tenantimprovements. The provisions relating to the occupied 4300 building remain unchanged. Under the existing provisions, the current term of the lease ends onJanuary 31, 2019. The amendment resulted in a reduction of our restructuring reserve of approximately $2.0 million, with the credit recorded in “Selling,general, and administrative” expenses in the Consolidated Statements of Operations.The table below summarizes the balance of accrued facility consolidation reserve and the changes in the accrual for fiscal 2011 (in thousands): Balance at January 1, 2011 $ 10,227 Payments (2,137) Amendment to lease and other assumption changes (2,227) Accretion of liability 474 Balance at December 31, 2011 $6,337 2010 Severance CostsDuring fiscal 2010, we had certain reduction in force activities, which resulted in severance charges of $1.1 million.The table below summarizes the balances of the accrued severance reserves and the changes in the accruals for fiscal 2011 (in thousands): Balance at January 1, 2011 $777 Assumption Changes (316) Payments (449) Balance at December 31, 2011 $12 55Table of Contents2011 Severance CostsDuring fiscal 2011, we had certain reduction in force activities, which resulted in severance charges of $1.9 million.The table below summarizes the balances of the accrued severance reserves and the changes in the accruals for fiscal 2011 (in thousands): Balance at January 1, 2011 $— Assumption Changes (177) Charges 1,878 Payments (1,445) Balance at December 31, 2011 $256 4. Assets Held for Sale and Net Gain on DispositionAs part of our restructuring efforts to improve our cost structure and cash flow, we closed certain facilities and designated them as assets held for sale.At the time of designation, we ceased recognizing depreciation expense on these assets. As of December 31, 2011 and January 1, 2011, total assets held for salewere $2.3 million and $1.6 million, respectively, and were included in “Other current assets” in our Consolidated Balance Sheets. During fiscal 2011, wesold certain real properties held for sale, which had a total carrying value of $4.0 million, that resulted in a $5.2 million gain recorded in “Selling, general,and administrative” expenses in the Consolidated Statements of Operations. We continue to actively market the remaining properties that are held for sale. Dueto the fact that as of December 31, 2011 the remaining properties are all land, depreciation expense is not impacted.5. Income TaxesOur provision for (benefit from) income taxes consists of the following: Fiscal YearEndedDecember 31,2011 Fiscal YearEndedJanuary 1,2011 Fiscal YearEndedJanuary 2,2010 (In thousands) Federal income taxes: Current $(89) $(637) $(19,800) Deferred — (556) 18,475 State income taxes: Current 759 (145) (263) Deferred — (100) 5,745 Foreign income taxes: Current 317 793 407 Deferred (25) 56 — Provision for (benefit from) income taxes $962 $(589) $4,564 The federal statutory income tax rate was 35%. Our provision for (benefit from) income taxes is reconciled to the federal statutory amount as follows: Fiscal YearEndedDecember 31,2011 Fiscal YearEndedJanuary 1,2011 Fiscal YearEndedJanuary 2,2010 (In thousands) Benefit from income taxes computed at the federal statutory tax rate $(13,162) $(18,841) $(19,912) Benefit from state income taxes, net of federal benefit (1,296) (2,153) (2,276) Valuation allowance change 14,498 18,433 25,864 Other 922 1,972 888 Provision for (benefit from) income taxes $962 $(589) $4,564 56Table of ContentsOur income before provision for income taxes for our Canadian operations was $0.9 million, $1.6 million and $1.2 million for fiscal 2011, fiscal2010, and fiscal 2009, respectively.For fiscal 2011, we recognized tax expense of $1.0 million. The expense recognized for the year is primarily comprised of $0.7 million for current stateincome tax expense related to earnings generated on a separate company basis and $0.3 million of current income tax expense resulting from foreign incometaxes.For fiscal 2010, we recognized tax benefit of $0.6 million. The benefit recognized for the year was primarily comprised of $0.6 million of deferredincome tax benefit resulting from the allocation of income tax expense to other comprehensive income, $0.7 million of current income tax benefit resulting froma net operating loss carryback and $0.8 million of current income tax expense resulting from foreign income taxes.In accordance with the intraperiod tax allocation provisions of U.S. GAAP, we are required to consider all items (including items recorded in othercomprehensive income) in determining the amount of tax benefit that results from a loss from continuing operations that should be allocated to continuingoperations. In fiscal 2011, there was no intraperiod tax allocation due to the fact that there was a loss in other comprehensive income for the period. In fiscal2010, in addition to our federal income tax benefit, we recorded a non-cash tax benefit on the loss from continuing operations of $0.6 million, which was offsetin full by income tax expense recorded in other comprehensive income. While the income tax benefit from continuing operations is reported in our ConsolidatedStatements of Operations, the income tax expense on other comprehensive income is recorded directly to accumulated other comprehensive loss, which is acomponent of stockholders’ equity.Our financial statements contain certain deferred tax assets which have arisen primarily as a result of tax benefits associated with the loss before incometaxes incurred, as well as net deferred income tax assets resulting from other temporary differences related to certain reserves, pension obligations anddifferences between book and tax depreciation and amortization. We record a valuation allowance against our net deferred tax assets when we determine thatbased on the weight of available evidence, it is more likely than not our net deferred tax assets will not be realized.In our evaluation of the weight of available evidence, we considered recent reported losses as negative evidence which carried substantial weight.Therefore, we considered evidence related to the four sources of taxable income, to determine whether such positive evidence outweighed the negative evidenceassociated with the losses incurred. The positive evidence considered included: •taxable income in prior carryback years, if carryback is permitted under the tax law; •future reversals of existing taxable temporary differences •tax planning strategies; and •future taxable income exclusive of reversing temporary differences and carryforwards.During the first quarter of fiscal 2009, we evaluated the weight of available positive and negative evidence relative to changes in the environment duringthe first quarter of 2009. In late March and April, subsequent to the filing of the fiscal 2008 10-K, we experienced a substantial drop in revenue compared toexpectations. As such, these changes in our internal assumptions and the revised external expectations of 2009 housing starts resulted in a change in ourprojections from cumulative pretax income to cumulative pretax loss for the three year period ended 2010, causing us to conclude that, as of April 4, 2009, theweight of the positive evidence was no longer sufficient to overcome the weight of the negative evidence of a three year cumulative loss, therefore, a fullvaluation allowance for all deferred income tax assets was necessary at the end of the first quarter of fiscal 2009.During fiscal 2010 and 2011, we weighed all available positive and negative evidence and concluded the weight of the negative evidence of a three yearcumulative loss continued to outweigh the positive evidence. Based on the conclusions reached, we continued to maintain a full valuation allowance during2011 and 2010. 57Table of ContentsThe components of our net deferred income tax assets (liabilities) are as follows: December 31,2011 January 1,2011 (In thousands) Deferred income tax assets: Inventory reserves $3,012 $3,341 Compensation-related accruals 5,979 6,441 Accruals and reserves 176 356 Accounts receivable 1,169 1,341 Restructuring costs 2,540 4,212 Derivatives — 814 Pension 13,713 7,332 Benefit from NOL carryovers(1) 41,770 24,867 Other 646 558 Total gross deferred income tax assets 69,005 49,262 Less: Valuation allowances (66,793) (46,528) Total net deferred income tax assets $2,212 $2,734 Deferred income tax liabilities: Intangible assets (176) (230) Property and equipment (1,211) (1,695) Pension — — Other (849) (858) Total deferred income tax liabilities (2,236) (2,783) Deferred income tax assets (liabilities), net $(24) $(49) (1)Our federal and state NOL carryovers will expire over 1 to 20 years.Activity in our deferred tax asset valuation allowance for fiscal 2011 and fiscal 2010 was as follows (in thousands): Fiscal YearEndedDecember 31,2011 Fiscal YearEndedJanuary 1,2011 Balance at beginning of the year $46,528 $27,226 Valuation allowance removed for taxes related to: Income before income taxes — — Valuation allowance provided for taxes related to: Loss before income taxes 20,265 19,302 Effect of a change in judgment — — Balance at end of the year $66,793 $46,528 We have recorded income tax and related interest liabilities where we believe certain of our tax positions are not more likely than not to be sustained ifchallenged. The following table summarizes the activity related to our unrecognized tax benefits: (In thousands) Balance at January 3, 2009 $261 Increases related to current year tax positions 526 Additions for tax positions in prior years — Reductions for tax positions in prior years (25) Settlements (23) Balance at January 2, 2010 $739 Increases related to current year tax positions — Additions for tax positions in prior years — Reductions for tax positions in prior years (62) Settlements — Balance at January 1, 2011 $677 Increases related to current year tax positions — Additions for tax positions in prior years 196 Reductions for tax positions in prior years — Settlements — Balance at December 31, 2011 $873 58Table of ContentsIncluded in the unrecognized tax benefits at December 31, 2011 and January 1, 2011 were $0.9 million and $0.7 million, respectively, of tax benefitsthat, if recognized, would reduce our annual effective tax rate. We also accrued a nominal amount of interest related to these unrecognized tax benefits during2011 and 2010, and this amount is reported in “Interest expense” in our Consolidated Statements of Operations. We do not expect our unrecognized tax benefitsto change significantly over the next 12 months.We file U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2008 through 2011 tax years generallyremain subject to examination by federal and most state and foreign tax authorities.6. ReceivablesWe have a diversified customer base concentrated in the building products business. Credit risk is monitored and provisions for expected losses areprovided as determined necessary by management. We generally do not require collateral.The following reflects our activity in receivables related reserve accounts: BeginningBalance Expense/(Income) Write offs andOther, Net EndingBalance (In thousands) Fiscal 2009 Allowance for doubtful accounts and related reserves $10,114 $3,879 $(5,606) $8,387 Fiscal 2010 Allowance for doubtful accounts and related reserves $8,387 $2,222 $(4,894) $5,715 Fiscal 2011 Allowance for doubtful accounts and related reserves $5,715 $2,576 $(3,156) $5,135 7. Stock-Based CompensationWe have two stock-based compensation plans covering officers, directors and certain employees and consultants: the 2004 Equity Incentive Plan (the“2004 Plan”) and the 2006 Long Term Equity Incentive Plan (the “2006 Plan”). The plans are designed to motivate and retain individuals who are responsiblefor the attainment of our primary long-term performance goals. The plans provide a means whereby our employees and directors develop a sense ofproprietorship and personal involvement in our development and financial success and encourage them to devote their best efforts to our business. Although wedo not have a formal policy on the matter, we issue new shares of our common stock to participants, upon the exercise of options or vesting of restricted stock,out of the total amount of common shares authorized for issuance under the 2004 Plan and the 2006 Plan.The 2004 Plan provides for the grant of nonqualified stock options, incentive stock options and restricted shares of our common stock to participants ofthe plan selected by our Board of Directors or a committee of the Board that administers the 2004 Plan. We reserved 2,222,222 shares of our common stockfor issuance under the 2004 Plan. The terms and conditions of awards under the 2004 Plan are determined by the administrator for each grant.The 2006 Plan permits the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stockunits, performance shares, performance units, cash-based awards, and other stock-based awards to participants of the 2006 plan selected by our Board ofDirectors or a committee of the Board that administers the 2006 Plan. We reserved 3,200,000 shares of our common stock for issuance under the 2006 Plan.The terms and conditions of awards under the 2006 Plan are determined by the administrator for each grant. Awards issued under the 2006 Plan are subject toaccelerated vesting in the event of a change in control as such event is defined in the 2006 Plan. On January 12, 2011, June 23, 2011, and December 1, 2011,the Compensation Committee granted 568,972, 50,000, and 200,000 restricted shares of our common stock to certain members of our management,respectively. There were no stock options granted during fiscal 2011, 2010 or fiscal 2009.We recognize compensation expense equal to the grant-date fair value for all share-based payment awards that are expected to vest. This expense isrecorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to market or performance conditions, inwhich case we recognize compensation expense over the requisite service period of each separate vesting tranche to the extent the occurrence of such conditionsare probable. All compensation expense related to our share-based payment awards is recorded in “Selling, general and administrative” expense in theConsolidated Statements of Operations. 59Table of ContentsAs of December 31, 2011, there was $2.3 million of total unrecognized compensation expense related to restricted stock. The unrecognized compensationexpense for restricted stock is expected to be recognized over weighted average term of 1.2 years. There was no future compensation expense remaining foroptions as of December 31, 2011. As of December 31, 2011, the weighted average remaining contractual term for our options and restricted stock is 5.9 yearsand 1.2 years. As of January 1, 2011, there was $0.1 million and $2.5 million of total unrecognized compensation expense related to stock options andrestricted stock, respectively. The maximum contractual term for stock options and restricted stock is 10 years and 3 to 5 years, respectively.For fiscal 2011, fiscal 2010 and fiscal 2009, our total stock-based compensation expense was $2.0 million, $4.0 million, and $3.0 million, respectively.We also recognized related income tax benefits of $0.8 million, $1.5 million and $1.2 million, respectively, which has been offset by a valuation allowance.The total fair value of the options vested in fiscal 2011, fiscal 2010 and fiscal 2009 was $0.7 million, $1.0 million and $0.6 million, respectively. Forrestricted stock, the total fair value vested in fiscal 2011, fiscal 2010, and fiscal 2009 was $2.2 million, $1.5 million and $1.2 million, respectively.There were no stock option exercises during fiscal 2011, fiscal 2010, or fiscal 2009. We present the benefits of tax deductions in excess of recognizedcompensation expense as both a financing cash inflow and an operating cash outflow in our Consolidated Statements of Cash Flows when present. There wereno excess tax benefits in fiscal 2011, fiscal 2010, or fiscal 2009.On December 14, 2010, the Compensation Committee approved an amendment to the 2008 Performance Share Award Agreement under the 2006 Plan.The Amendment provides that the Company may, at the discretion of the Compensation Committee, settle grants pursuant to Performance Share AwardAgreements either in (i) one share of common stock of the Company for each Performance Share (as defined in the 2006 Plan) earned or (ii) a lump sum cashpayment equal to the Fair Market Value (as defined in the 2006 Plan) of one share of common stock of the Company for each Performance Share earned. TheAmendment was determined to be a modification of the award and an adjustment related to the difference in fair value was recorded in fiscal 2010. The award,which impacts eight employees, was classified as a liability award and was marked to market. On January 1, 2011, the fair value of these awards was basedon the closing price of our common stock on December 31, 2010 of $3.66. These awards were settled in cash on January 7, 2011.The tables below summarize activity and include certain additional information related to our outstanding employee stock options for the three yearsended December 31, 2011. There have been no new employee stock option grants for the three years ended December 31, 2011. Shares WeightedAverageExercisePrice Options outstanding at January 3, 2009 1,038,515 6.78 Options granted — — Options exercised — — Options forfeited (30,268) 13.67 Options expired (79,932) 9.39 Options outstanding at January 2, 2010 928,315 6.34 Options granted — — Options exercised — — Options forfeited (2,300) 14.01 Options expired (1,200) 14.01 Options outstanding at January 1, 2011 924,815 6.31 Options granted — — Options exercised — — Options forfeited — — Options expired (19,499) 12.53 Options outstanding at December 31, 2011 905,316 6.18 Options exercisable at December 31, 2011 905,316 $6.18 60Table of Contents Outstanding Exercisable Price Range Number ofOptions WeightedAverageExercisePrice RemainingContractual Life(in Years) Number ofOptions WeightedAverageExercisePrice RemainingContractual Life(in Years) $4.66 750,000 $4.66 6.2 750,000 $4.66 6.2 $10.29-$14.01 155,316 $13.51 4.3 155,316 $13.51 4.3 905,316 5.9 905,316 5.9 The following tables summarize activity for our performance shares, restricted stock awards and restricted stock unit awards during fiscal 2011, fiscal2010, and fiscal 2009: Performance Restricted Restricted Stock Shares Stock Units Weighted Number ofAwards Average FairValue Number ofAwards Number ofAwards (1) Outstanding at January 3, 2009 1,201,288 5.62 292,306 164,700 Granted 681,151 2.64 — — Vested (250,000) 4.86 — — Forfeited (93,310) 5.58 (111,701) (20,150) Outstanding at January 2, 2010 1,539,129 4.42 180,605 144,550 Granted 747,737 3.07 — — Increase due to assumption changes — — 112,955 — Vested (340,578) 4.49 — — Forfeited (32,000) 3.47 (52,725) (16,600) Outstanding at January 1, 2011 1,914,288 2.67 240,835 127,950 Granted 819,240 3.14 — — Vested (364,303) 6.16 (240,835) (63,200) Forfeited (7,801) 3.26 — (15,400) Outstanding at December 31, 2011 2,361,424 $3.22 — 49,350 (1)As the restricted stock units will be settled in cash, the fair value of these awards is marked-to-market each reporting period through the date ofsettlement. During fiscal 2011, certain restricted stock units vested and approximately $0.2 million was paid out to settle these awards.8. Employee BenefitsDefined Benefit Pension PlansMost of our hourly employees participate in noncontributory defined benefit pension plans, which 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 andthe applicable requirements of federal law. We met our required contribution to the hourly pension plan in fiscal 2011. We believe that each multiemployerpension plan is immaterial to our financial statements and that we represent an immaterial portion of the total contributions and future obligations of theseplans. Contributions to multiemployer plans are generally based on negotiated labor contracts. We contributed $1.2 million, $1.1 million, and $1.0 million tounion administered multiemployer pension plans for fiscal 2011, fiscal 2010, and fiscal 2009, respectively. Benefits under the majority of plans for hourlyemployees (including multiemployer plans) are primarily related to years of service. 61Table of ContentsThe following tables set forth the change in projected benefit obligation and the change in plan assets for the hourly pension plan: December 31,2011 January 1,2011 (In thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of period $87,510 $79,500 Service cost 2,091 1,992 Interest cost 4,609 4,744 Actuarial loss 9,029 4,868 Curtailment — — Benefits paid (3,814) (3,594) Projected benefit obligation at end of period 99,425 87,510 Change in plan assets: Fair value of assets at beginning of period 68,725 61,563 Actual (loss) return on plan assets (1,015) 8,290 Employer contributions — 2,466 Benefits paid (3,814) (3,594) Fair value of assets at end of period 63,896 68,725 Unfunded Status of Plan $(35,529) $(18,785) We recognize the unfunded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of our pension plan inour Consolidated Balance Sheets, with a corresponding adjustment to accumulated other comprehensive loss, net of tax, offset by a valuation allowance. OnDecember 31, 2011, we measured the fair value of our plan assets and benefit obligations. As of December 31, 2011 and January 1, 2011, the net unfundedstatus of our benefit plan was $35.5 million and $18.8 million, respectively. These amounts were included in “Other non-current liabilities” on ourConsolidated Balance Sheets. The net adjustment to other comprehensive loss for fiscal 2011, fiscal 2010, and fiscal 2009 was $15.0 million loss ($15.0million loss, net of tax, offset by a valuation allowance), $1.0 million loss ($0.6 million loss, net of tax), and $1.5 million gain ($0.9 million gain, net oftax), respectively, which represents the net unrecognized actuarial (loss) gain and unrecognized prior service cost.The unfunded status and the amounts recognized on our Consolidated Balance Sheets for the hourly pension plan are set forth in the following table: December 31,2011 January 1,2011 (In thousands) Unfunded status $(35,529) $(18,785) Unrecognized prior service cost 3 3 Unrecognized actuarial loss 29,213 14,244 Net amount recognized $(6,313) $(4,538) Amounts recognized on the balance sheet consist of: Accrued pension liability (35,529) (18,785) Accumulated other comprehensive loss (pre-tax) 29,216 14,247 Net amount recognized $(6,313) $(4,538) The portion of estimated net loss for the hourly pension plan that is expected to be amortized from accumulated other comprehensive loss into netperiodic cost over the next fiscal year is $2.1 million. The expected amortization of prior service cost recognized into net periodic cost over the next fiscal yearis nominal.The accumulated benefit obligation for the hourly pension plan was $96.8 million and $85.2 million at December 31, 2011 and January 1, 2011,respectively.Net periodic pension cost for our pension plans included the following: Fiscal Year EndedDecember 31,2011 Fiscal Year EndedJanuary 1,2011 Fiscal Year EndedJanuary 2,2010 (In thousands) Service cost $2,091 $1,992 $1,808 Interest cost on projected benefit obligation 4,609 4,744 4,511 Expected return on plan assets (5,505) (4,926) (4,531) Amortization of unrecognized loss 579 494 723 Amortization of unrecognized prior service cost — — — Net periodic pension cost $1,774 $2,304 $2,511 62Table of ContentsThe following assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic pension cost: December 31,2011 January 1,2011 Projected benefit obligation: Discount rate 5.02% 5.39% Average rate of increase in future compensation levels 3.00% 4.00% Net periodic pension cost Discount rate 5.39% 6.11% Average rate of increase in future compensation levels 4.00% 4.00% Expected long-term rate of return on plan assets 8.25% 8.25% Our estimates of the amount and timing of our future funding obligations for our defined benefit pension plans are based upon various assumptionsspecified above. These assumptions include, but are not limited to, the discount rate, projected return on plan assets, compensation increase rates, mortalityrates, retirement patterns, and turnover rates.Determination of expected long-term rate of returnIn developing expected return assumptions for our pension plan, the most influential decision affecting long-term portfolio performance is thedetermination of overall asset allocation. An asset class is a group of securities that exhibit similar characteristics and behave similarly in the marketplace. Thethree main asset classes are equities, fixed income, and cash equivalents.Upon calculation of the historical risk premium for each asset class, an expected rate of return can be established based on assumed 90-day Treasurybill rates. Based on the normal asset allocation structure of the portfolio (65% equities, 30% fixed income, and 5% other) with historical compound annualizedrisk free rate of 4.40%, the expected overall portfolio return is 8.35% offset by 0.5% expense estimate resulting in a 7.85% net long term rate of return as ofDecember 31, 2011.Our percentage of fair value of total assets by asset category as of our measurement date is as follows: Asset Category December 31,2011 January 1,2011 Equity securities — domestic 47% 45% Equity securities — international 5% 15% Fixed income 45% 32% Other 3% 8% Total 100% 100% The fair value of our plan assets by asset category as of December 31, 2011 was as follows (in thousands): Asset Category Level 1 Equity securities — domestic $30,179 Equity securities — international 2,843 Fixed income 28,975 Other 1,899 Total $63,896 The fair value of our plan assets by asset category as of January 1, 2011 was as follows (in thousands): Asset Category Level 1 Equity securities — domestic $30,891 Equity securities — international 10,389 Fixed income 22,248 Other 5,197 Total $68,725 63Table of ContentsThe plan assets are valued using quoted market prices in active markets and we consider the investments to be Level 1 in the fair value hierarchy. SeeNote 13 for a discussion of the levels of inputs to determine fair value.Investment policy and strategyPlan assets are managed as a balanced portfolio comprised of two major components: an equity portion and a fixed income portion. The expected role ofplan equity investments will be to maximize the long-term real growth of fund assets, while the role of fixed income investments will be to generate currentincome, provide for more stable periodic returns, and provide some downside protection against the possibility of a prolonged decline in the market value ofequity investments. We review this investment policy statement at least once per year. In addition, the portfolio will be reviewed quarterly to determine thedeviation from target weightings and will be rebalanced as necessary. Target allocations for fiscal 2012 are 50% domestic and 15% international equityinvestments, 30% fixed income investments, and 5% cash. The expected long-term rate of return for the plan’s total assets is based on the expected return ofeach of the above categories, weighted based on the target allocation for each class.Our estimated future benefit payments reflecting expected future service are as follows (in thousands): Fiscal Year Ending (In thousands) December 29, 2012 $1,167 December 28, 2013 4,295 January 3, 2015 4,762 January 2, 2016 4,972 December 31, 2016 5,288 Thereafter 31,171 The Company’s required cash contribution to the pension plan in 2012 is approximately $4.1 million. This contribution is comprised of approximately$1.2 million related to our 2011 minimum required contribution and approximately $2.9 million related to our 2012 minimum required contribution. TheCompany’s minimum required contribution for plan year 2012 is $5.4 million. The Company will fund the $1.2 million related to its 2011 minimumrequired contribution with cash in 2012. However, in an effort to preserve additional cash for operations, we intend to seek a waiver from the IRS for our2012 minimum required contribution. If we are granted the requested waiver, our contributions for 2012 will be deferred and amortized over the following fiveyears, increasing our future minimum required contributions.Defined Contribution PlansOur employees also participate in several defined contribution plans. Contributions to the plans are based on employee contributions and compensation.Contributions to the hourly defined contribution plan totaled $0.1 million, $0.1 million, and $0.1 million for fiscal 2011, fiscal 2010, and fiscal 2009,respectively. During fiscal 2009, we suspended the Company matching contributions to our defined salaried contribution plan as part of our cost reductioninitiatives. The Company match will be reinstated beginning on January 1, 2012.9. Inventory Reserve AccountsThe following reflects our activity for inventory reserve accounts (in thousands): BeginningBalance Expense Write-offs andOther, net EndingBalance Fiscal 2009 Obsolescence/damaged inventory reserve $4,031 $909 $(2,367) $2,573 Lower of cost or market reserve $3,400 $419 $(3,819) $— Fiscal 2010 Obsolescence/damaged inventory reserve $2,573 $667 $(1570) $1,670 Lower of cost or market reserve $— $722 $(722) $— Fiscal 2011 Obsolescence/damaged inventory reserve $1,670 $2,309 $(2,487) $1,492 Lower of cost or market reserve $— $— $— $— 64Table of Contents10. Revolving Credit FacilitiesAs of December 31, 2011, we had outstanding borrowings of $93.4 million and excess availability of $115.7 million under the terms of our U.S.revolving credit facility (the “U.S. revolving credit facility”). The interest rate on the U.S. revolving credit facility was 4.2% at December 31, 2011. As ofDecember 31, 2011 and January 1, 2011, we had outstanding letters of credit totaling $2.7 million and $5.9 million, respectively, primarily for the purposesof securing collateral requirements under the interest rate swap (which was terminated in March of 2011), casualty insurance programs and for guaranteeinglease and certain other obligations.On July 7, 2010, we reached an agreement with Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, NationalAssociation, and the other signatories to our existing U.S. revolving credit facility, dated August 4, 2006, as amended, to amend the terms thereof. Thisamendment extended the date of final maturity of the facility to January 7, 2014 and decreased the maximum availability under the agreement from$500 million to $400 million. This amendment also includes an additional $100 million uncommitted accordion credit facility, which will permit us toincrease the maximum borrowing capacity up to $500 million. As a result of reducing our maximum borrowing capacity from $500 million to $400 million,we recorded expense of $0.2 million in fiscal 2010 for the write-off of debt issuance costs associated with the reduction in borrowing capacity. We also incurred$6.5 million in new debt issuance costs, which we capitalized and will continue to amortize to interest expense over the renewed debt term.On May 10, 2011, we entered into an amendment to our U.S. revolving credit facility, which became effective on July 29, 2011, following thesuccessful completion of the rights offering described below. Certain components of the borrowing base calculation and excess liquidity calculation wereadjusted as part of this amendment. The most significant of the changes included in the amendment are described in the discussion of the terms and covenantsof the U.S. revolving credit facility below.As of December 31, 2011, under the amended agreement, our U.S. revolving credit facility contains customary negative covenants and restrictions forasset based loans. Our most significant covenant is a requirement that we maintain a fixed charge coverage ratio of 1.1 to 1.0 in the event our excessavailability falls below the greater of $30 million or the amount equal to 15% of the lesser of the borrowing base or $400 million (the “Excess AvailabilityThreshold”). We are required to maintain the Excess Availability Threshold in order to avoid being required to meet certain financial ratios and triggeringadditional limits on capital expenditures. The amount of our eligible accounts receivable included in the calculation of the borrowing base is 87.5%. Under theamended U.S. revolving credit facility agreement, the applicable percentage of the net liquidation value of our eligible inventory included in the calculation ofthe borrowing base is 90% for the periods January to March 2012 and January to March 2013, subject to specified EBITDA targets. The percentage of the netliquidation value of our eligible inventory included in the borrowing base remains the same as under the original agreement outside of the time period justspecified. Also included in the calculation of our excess availability is certain cash on the balance sheet, which is subject to a deposit account controlagreement. The fixed charge coverage ratio is calculated as EBITDA divided by the sum of cash payments for income taxes, interest expense, cash dividends,principal payments on debt, and capital expenditures. EBITDA is defined as BlueLinx Corporation’s net income before interest and tax expense, depreciationand amortization expense, and other non-cash charges. The fixed charge coverage ratio requirement only applies to us when excess availability under ouramended U.S. revolving credit facility is less than the Excess Availability Threshold on any date. As of December 31, 2011 and through the time of the filingof this Form 10-K, we were in compliance with all covenants. We had $115.7 million and $103.4 million of availability as of December 31, 2011 andJanuary 1, 2011, respectively. Our lowest level of fiscal month end availability in the last three years as of December 31, 2011 was $94.0 million. We do notanticipate our excess availability in fiscal 2012 will drop below the Excess Availability Threshold. Should our excess availability fall below the ExcessAvailability Threshold on any date, however, we would not meet the required fixed charge coverage ratio with our current operating results. In addition, wemust maintain a springing lock-box arrangement where customer remittances go directly to a lock-box maintained by our lenders and then are forwarded to ourgeneral bank accounts. Our outstanding borrowings are not reduced by these payments unless our excess availability falls below the greater of $35 million orthe amount equal to 15% of the lesser of the borrowing base or $400 million on any date or in the event of default. Our amended U.S. revolving credit facilitydoes not contain a subjective acceleration clause which would allow our lenders to accelerate the scheduled maturities of our debt or to cancel our agreement.On July 22, 2011, we concluded an offering of our common stock to our stockholders, pursuant to which we distributed to our common stockholderstransferable rights to subscribe for and purchase up to $60 million of our common stock. The rights offering was fully subscribed and resulted in grossproceeds of approximately $60 million. The majority of the proceeds from the rights offering of approximately $56 million were used to pay down the U.S.revolving credit facility. A payment on the 65Table of ContentsU.S. revolving credit facility of $50.0 million was made on July 29, 2011 and an additional payment of $6.0 million was made on August 1, 2011. Weaccounted for the rights issued as a component of additional paid in capital as they were indexed to the Company’s equity and there were no net cash settlementprovisions. The amendment to our U.S. revolving credit facility, which was a condition to the rights offering, became effective upon the successful completionof the rights offering. In addition, as a condition to the rights offering, we entered into an amendment to our mortgage. The amendment to the mortgage isdescribed further in Note 11.On August 12, 2011, our subsidiary BlueLinx Building Products Canada Ltd.(“BlueLinx Canada”) entered into a revolving credit agreement (the“Canadian revolving credit facility”) with CIBC Asset-Based Lending Inc., as lender, administrative agent and collateral agent (the “Agent”). The maturitydate of this agreement is August 12, 2014. The Canadian revolving credit facility provides for an asset-based revolving credit facility with an aggregate lendercommitment of up to $10 million at any time outstanding, subject to borrowing base availability. In addition, the Canadian revolving credit facility providesfor an additional $5 million uncommitted accordion credit facility. Revolving loan (and letter of credit) availability under the facility is subject to a borrowingbase. The amount of our eligible Canadian accounts receivable included in the calculation of the borrowing base is 85%. The amount of our eligible inventoryincluded in the calculation of the borrowing base is 65%. The sum of items included in the borrowing base is reduced by $0.5 million (the “availabilityblock”) and other availability reserves. In addition to paying interest on outstanding principal under the facility, we are required to pay a fee in respect ofcommitted but unutilized commitments equal to 0.25% per annum. As of December 31, 2011, we had outstanding borrowings of $1.1 million and excessavailability of $2.6 million under the terms of our Canadian revolving credit facility. The interest rate on the Canadian revolving credit facility was 4.0% atDecember 31, 2011. The Canadian revolving credit facility contains customary covenants and events of default for asset-based credit agreements of this type,including the requirement for BlueLinx Canada to maintain a minimum adjusted tangible net worth of $3.9 million and for that entity’s capital expendituresnot to exceed 120% of the amount budgeted in a given year. As of December 31, 2011 and through the time of the filing of this Form 10-K, we were incompliance with all covenants.In conjunction with the Canadian revolving credit facility and the modification of our U.S. revolving credit facility we incurred approximately $1.0million in debt fees that were capitalized and are being amortized over the remaining terms of each respective agreement.We believe that the amounts available from our revolving credit facilities and other sources are sufficient to fund our routine operations and capitalrequirements for the next 12 months. If economic conditions, especially those related to the housing market, do not improve, we may need to seek additionalsources of capital to support our operations.11. MortgageWe have a $295 million mortgage loan with the German American Capital Corporation. The mortgage has a term of ten years and is secured by 55distribution facilities and 1 office building owned by the special purpose entities. The stated interest rate on the mortgage is fixed at 6.35%. German AmericanCapital Corporation assigned half of its interest in the mortgage loan to Wachovia Bank, National Association and both lenders securitized their Notes inseparate commercial mortgage backed securities pools in 2006.On July 14, 2011, we entered into an amendment to the mortgage which (i) eliminated the requirement to obtain lender approval for any transfer of equityinterests that would reduce Cerberus ABP Investor LLC’s ownership in the Company and certain of our subsidiaries, directly or indirectly, to less than 51%,(ii) provided for the immediate prepayment of $38.3 million of the indebtedness under the mortgage without incurring a prepayment premium from fundscurrently held as collateral under the mortgage and, if certain conditions are met, will allow for an additional prepayment on or after July 30, 2014 from fundsheld as collateral without incurrence of a prepayment premium, (iii) allow us, at the lenders’ reasonable discretion, to use a portion of the cash held ascollateral under the mortgage for specified alterations, repairs, replacements and other improvements to the mortgaged properties, and (iv) in the event certainfinancial conditions are met and the Company extends the Amended and Restated Master Lease by and among certain of our subsidiaries with respect toproperties covered by the mortgage for an additional five years, we may request the lenders to disburse to the Company a portion of the cash held as collateralunder the mortgage. In conjunction with the modification of our mortgage agreement we incurred approximately $2.9 million in debt fees that were capitalizedand are being amortized over the remaining term of the mortgage. 66Table of ContentsUnder the terms of our mortgage, we are required to transfer funds to be held as collateral (“the cash trap”). We expect to transfer $10.8 million in 2012related to the “cash trap”.During fiscal 2011, we sold certain real properties that ceased operations. As a result of the sale of these properties during fiscal 2011, we increased therestricted cash related to our mortgage by $6.5 million. Restricted cash of $6.5 million was applied to the mortgage loan in January of fiscal 2012. We did notsell any properties subject to the mortgage in 2010.The mortgage loan required interest-only payments through June 2011, at which time we began making payments on the outstanding principal balance.The balance of the loan outstanding at the end of ten years will then become due and payable. The principal will be paid in the following increments (inthousands): 2012* $9,046 2013 2,768 2014 2,952 2015 3,147 2016 225,340 Thereafter — *Principal payments to be made in 2012 include $6.5 million related to the 2011 property sales, included in restricted cash as of December 31, 2011,that will be used to reduce to the principal of our mortgage in January 2012.12. DerivativesWe are exposed to risks such as changes in interest rates, commodity prices and foreign currency exchange rates. We employ a variety of practices tomanage these risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Derivative instruments areused only for risk management purposes and not for speculation or trading, and are not used to address risks related to foreign currency rates. We recordderivative instruments as assets or liabilities on the balance sheet at fair value.On June 12, 2006, we entered into an interest rate swap agreement with Goldman Sachs Capital Markets, to hedge against interest rate risks related toour variable rate U.S. revolving credit facility. The interest rate swap was terminated in March of 2011. This interest rate swap was designated as a cash flowhedge. During fiscal 2009, our debt levels decreased below the interest rate swap notional, at which point the hedge became ineffective in offsetting futurechanges in expected cash flows during the remaining term of the interest rate swap.Changes associated with the ineffective interest rate swap recognized in the Consolidated Statements of Operations for fiscal 2011 were approximately$1.7 million of income and are comprised of amortization of the remaining accumulated other comprehensive loss of the ineffective interest rate swap of$0.5 million, which was recorded through interest expense, offset by income of $2.2 million related to reducing the fair value of the ineffective interest rateswap liability to zero. Changes associated with the ineffective interest rate swap recognized in the Consolidated Statement of Operations for fiscal 2010 wereapproximately $4.6 million of income and are comprised of amortization of the remaining accumulated other comprehensive loss over the life of the ineffectiveswap of $2.1 million offset by income of $6.7 million related to changes during 2010 in the fair value of the ineffective interest rate swap liability.The following table presents a reconciliation of the unrealized losses related to our interest rate swap measured at fair value in accumulated othercomprehensive loss as of December 31, 2011 (in thousands): Balance at January 1, 2011 $519 Changes associated with ineffective interest rate swap recorded to interest expense (519) Balance at December 31, 2011 $— 13. Fair Value MeasurementsWe determine a fair value measurement based on the assumptions a market participant would use in pricing an asset or liability. The fair valuemeasurement guidance established a three level hierarchy making a distinction between market 67Table of Contentsparticipant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices in markets thatare not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices orvaluation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (Level 3).We had an ineffective interest rate swap that terminated in March of fiscal 2011. The swap was valued using a valuation model with inputs other thanquoted market prices that are both observable and unobservable.We endeavored to utilize the best available information in measuring the fair value of the interest rate swap. The interest rate swap was classified in itsentirety based on the lowest level of input that is significant to the fair value measurement. To determine fair value of the interest rate swap we used thediscounted estimated future cash flows methodology. Assumptions critical to our fair value in the period were: (i) the present value factors used in determiningfair value (ii) projected LIBOR, and (iii) the risk of non-performance. These and other assumptions are impacted by economic conditions and expectations ofmanagement. We determined that the fair value of our interest rate swap was a level 3 measurement in the fair value hierarchy. The level 3 measurement was therisk of counterparty non-performance on the interest rate swap liability that was not secured by cash collateral. The risk of counterparty non-performance didnot affect the fair value at January 1, 2011, the last period prior to termination of the ineffective interest rate swap, due to the fact that the risk of counterpartynon-performance was nominal. The fair value of the interest rate swap was a liability of $2.2 million at January 1, 2011. This balance is included in “Othercurrent liabilities” and “Other non-current liabilities” on the Consolidated Balance Sheets.The following table presents a reconciliation of the level 3 interest rate swap liability measured at fair value on a recurring basis as of December 31, 2011(in thousands): Fair value at January 1, 2011 $(2,195) Unrealized gains included in earnings, net 2,195 Fair value at December 31, 2011 $— The $2.2 million unrealized gain is included in “Interest expense” in the Consolidated Statements of Operations.Carrying amounts for our financial instruments are not significantly different from their fair value, with the exception of our mortgage. The differencebetween carrying value and fair value is primarily related to differences between the fixed interest rate of the mortgage and current market rates. To determinethe fair value of our mortgage, we used a discounted cash flow model. We believe the mortgage fair value valuation to be Level 2 in the fair value hierarchy, asthe valuation model has inputs that are observable for substantially the full term of the liability. Assumptions critical to our fair value in the period werepresent value factors used in determining fair value and an interest rate. At December 31, 2011, the carrying value and fair value of our mortgage was$243.3 million and $243.1 million, respectively.14. Related Party TransactionsCerberus Capital Management, L.P., our equity sponsor, retains consultants that specialize in operations management and support and who provideCerberus with consulting advice concerning portfolio companies in which funds and accounts managed by Cerberus or its affiliates have invested. From timeto time, Cerberus makes the services of these consultants available to Cerberus portfolio companies. We believe that the terms of these consulting arrangementsare favorable to us, or, alternatively, are materially consistent with those terms that would have been obtained by us in an arrangement with an unaffiliatedthird party. We have normal service, purchase and sales arrangements with other entities that are owned or controlled by Cerberus. We believe that thesetransactions are not material to our results of operations or financial position.On April 26, 2011, we entered into an investment agreement with Cerberus ABP Investor LLC (“Cerberus”) in connection with our rights offering,which expired on July 22, 2011. Pursuant to the investment agreement, Cerberus agreed to purchase from us, unsubscribed shares of our common stock,after the other stockholders had exercised their basic subscription rights and over-subscription privileges in connection with the rights offering, such that grossproceeds of the rights offering would be no less than $60.0 million. The price per share paid by Cerberus for such common stock under the investmentagreement was equal to the subscription price paid in the rights offering by all stockholders. As a result of the rights offering, Cerberus purchased only its prorata share of the common stock issued in the rights offering. 68Table of Contents15. Commitments and ContingenciesSelf-InsuranceIt is our policy to self-insure, up to certain limits, traditional risks including workers’ compensation, comprehensive general liability, and auto liability.Our self-insured deductible for each claim involving workers’ compensation, comprehensive general liability (including product liability claims), and autoliability is limited to $0.8 million, $0.8 million, and $2.0 million, respectively. We are also self-insured up to certain limits for certain other insurable risks,primarily physical loss to property, excluding natural catastrophes ($0.1 million per occurrence), Director and Officer ($0.8 million per occurrence) and themajority of our medical benefit plans ($0.3 million per occurrence). Insurance coverage is maintained for catastrophic property and casualty exposures as wellas those risks required to be insured by law or contract. A provision for claims under this self-insured program, based on our estimate of the aggregate liabilityfor claims incurred, is revised and recorded annually. The estimate is derived from both internal and external sources including but not limited to actuarialestimates. The actuarial estimates are subject to uncertainty from various sources, including, among others, changes in claim reporting patterns, claimsettlement patterns, judicial decisions, legislation, and economic conditions. Although, we believe that the actuarial estimates are reasonable, significantdifferences related to the items noted above could materially affect our self-insurance obligations, future expense and cash flow. At December 31, 2011 andJanuary 1, 2011, the self-insurance reserves totaled $7.6 million. We incurred $12.6 million in expense and payments, net of reimbursements in fiscal 2011related to our workers compensation, auto, general liability and health and welfare reserves. We incurred $13.3 million in expense and $14.9 million inpayments, net of reimbursements in fiscal 2010 related to our workers compensation, auto, general liability and health and welfare reserves.Operating LeasesTotal rental expense was approximately $4.8 million, $5.0 million, and $5.8 million for fiscal 2011, fiscal 2010, and fiscal 2009, respectively.At December 31, 2011, our total commitments under long-term, non-cancelable operating leases were as follows (in thousands): 2012 $10,256 2013 3,998 2014 3,525 2015 2,923 2016 2,959 Thereafter 5,308 Total $28,969 Certain of our operating leases have extension options and escalation clauses.Capital LeasesWe entered into certain capital leases for trucks and trailers during fiscal 2011 and fiscal 2010. As of December 31, 2011, the basis and net book valueof our capital leases was $5.0 million and $4.0 million, respectively. As of January 1, 2011, the basis and net book value of our capital leases was $1.9million and $1.6 million, respectively. There were no capital leases entered into during fiscal 2009. Depreciation expense for capital leases is included in thetotal depreciation expense disclosed above.At December 31, 2011, our total commitments under long-term, non-cancelable capital leases were as follows (in thousands): Principal Interest 2012 $643 $152 2013 657 121 2014 676 76 2015 686 52 2016 588 13 Thereafter 26 — Total $3,276 $414 69Table of ContentsExecutory costs are nominal for each of the years present.Environmental and Legal MattersWe are involved in various proceedings incidental to our businesses and are subject to a variety of environmental and pollution control laws andregulations in all jurisdictions in which we operate. Although the ultimate outcome of these proceedings cannot be determined with certainty, based on presentlyavailable information management believes that adequate reserves have been established for probable losses with respect thereto. Management further believesthat the ultimate outcome of these matters could be material to operating results in any given quarter but will not have a materially adverse effect on our long-term financial condition, our results of operations, or our cash flows.Collective Bargaining AgreementsAs of December 31, 2011, approximately 30% of our employees were represented by various labor unions. As of December 31, 2011, we had 42collective bargaining agreements, of which 5, covering approximately 80 total employees, are up for renewal in fiscal 2012. Of the five collective bargainingagreements expiring in fiscal 2012, one will expire in each of the first three quarters of fiscal 2012 and two will expire in the fourth quarter of fiscal 2012. Twoadditional collective bargaining agreements, which cover approximately 80 total employees, will expire on December 31, 2012. Five collective bargainingagreements, covering approximately 50 employees, renewed in 2011. We consider our relationship with our employees generally to be good.16. Subsequent EventsOn February 12, 2012, our three-year purchase agreement with G-P for engineered lumber expired in accordance with its terms. In February of 2012, welaunched our own privately branded engineered product line for all geographic markets other than New England. In addition, on February 13, 2012 we enteredinto a supply agreement with Weyerhaeuser Company for the sale of certain engineered wood products in the New England region. At this time we cannotpredict what impact this product change will have on our gross profit, net income and cash flows.We are not aware of any additional significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that wouldhave a material impact on our Consolidated Financial Statements.17. Accumulated Other Comprehensive LossComprehensive (loss) income is a measure of income which includes both net (loss) income and other comprehensive (loss) income. Othercomprehensive (loss) income results from items deferred from recognition into our Consolidated Statements of Operations. Accumulated other comprehensive(loss) income is separately presented on our Consolidated Balance Sheets as part of common stockholders’ equity. Other comprehensive (loss) income was$(14.5) million, $1.0 million, and $8.5 million for fiscal 2011, fiscal 2010, and fiscal 2009, respectively.Other comprehensive (loss) income for fiscal 2011, fiscal 2010, and fiscal 2009 included tax benefits (expense) of $0.0 million, $(0.8) million, and$(4.1) million, respectively, related to our interest rate swap (see Note 12). For fiscal 2011, fiscal 2010, and fiscal 2009, other comprehensive (loss) incomeincluded tax benefits (expense) benefits of $0.0 million, $0.4 million, and $(0.6) million related to our pension plan (see Note 8). Income tax expense recordedin other comprehensive income related to foreign currency translation was $0.0 million, $(0.2) million, and $(0.8) million for fiscal 2011, 2010, and 2009,respectively. For fiscal 2011, there was no tax effect for any other comprehensive income items due to the fact that there was no intraperiod income taxallocation and the deferred tax benefit was fully offset by a valuation allowance.The accumulated balances for each component of other comprehensive income (loss) were as follows (in thousands): Fiscal YearEndedDecember 31,2011 Fiscal YearEndedJanuary 1,2011 Fiscal YearEndedJanuary 2,2010 Foreign currency translation adjustment, net of tax $1,694 $1,786 $1,450 Unrealized loss from pension plan, net of tax (23,806) (8,837) (8,220) Unrealized loss from cash flow hedge, net of tax 212 (307) (1,605) Accumulated other comprehensive loss $(21,900) $(7,358) $(8,375) 70Table of Contents18. Unaudited Selected Quarterly Financial DataOur fiscal year is a 52 or 53-week period ending on the Saturday closest to the end of the calendar year. Fiscal 2011, fiscal 2010, and fiscal 2009 eachcontained 52 weeks. Our fiscal quarters are based on a 5-4-4 week period. First Quarter Second Quarter Third Quarter Fourth Quarter Three MonthsEndedApril 2,2011(a) Three MonthsEndedApril 3,2010(b) Three MonthsEndedJuly 2,2011(c) Three MonthsEndedJuly 3,2010(d) Three MonthsEndedOctober 1,2011(e) Three MonthsEndedOctober 2,2010(f) Three MonthsEndedDecember 31,2011(g) Three MonthsEndedJanuary 1,2011(h) (In thousands, except per share amounts) Net sales $390,604 $431,050 $500,810 $540,781 $472,898 $464,690 $391,119 $367,897 Gross profit 46,269 52,278 57,645 64,119 58,278 49,942 47,957 44,334 Operating expenses: Selling, general and administrative 55,668 56,514 56,290 57,089 56,599 55,985 51,926 52,741 OSB lawsuit settlement gain — — — — — (5,236) — — Tender offer expenses — — — — — 3,030 — — Gain on modification of lease agreement — — — — (1,971) — — — Gain from property insurance settlement — — — — (1,230) — (203) — Gain from sale of properties (7,222) — 283 — — — (3,665) — Restructuring and other charges — — 207 — 1,139 342 36 720 Depreciation and amortization 2,938 3,744 2,624 3,434 2,559 3,111 2,441 3,076 Operating (loss) income (5,115) (7,980) (1,759) 3,596 1,182 (7,290) (2,578) (12,203) Non-operating expenses: Interest expense 8,986 7,315 7,730 8,205 6,963 9,121 6,831 9,147 Changes associated with ineffective interest rate swap (1,676) (805) — (1,256) — (1,156) — (1,386) Write-off of debt issue costs — — — — — 183 — — Other (income) expense 15 233 134 18 333 192 19 144 (Benefit from) provision for income taxes (4,916) (5,667) (3,556) (1,265) (2,265) (6,811) (2,873) (7,624) Tax valuation allowance 4,802 5,683 3,714 1,301 2,359 6,033 3,697 7,761 Net loss $(12,326) $(14,739) $(9,781) $(3,407) $(6,208) $(14,852) $(10,252) $(20,245) (a)During the three months ended April 2, 2011, basic and diluted weighted average shares were 30,843,732. Total share-based awards of 3,096,843 wereexcluded from our diluted earnings per share calculation because they were anti-dilutive. (b)During the three months ended April 3, 2010, basic and diluted weighted average shares were 30,587,258. Total share-based awards of 3,160,774 wereexcluded from our diluted earnings per share calculation because they were anti-dilutive. (c)During the three months ended July 2, 2011, basic and diluted weighted average shares were 31,062,794. Total share-based awards of 3,079,540 wereexcluded from our diluted earnings per share calculation because they were anti-dilutive. (d)During the three months ended July 3, 2010, basic and diluted weighted average shares were 30,698,973. Total share-based awards of 3,177,074 wereexcluded from our diluted earnings per share calculation because they were anti-dilutive. (e)During the three months ended October 1, 2011, basic and diluted weighted average shares were 51,182,748. Total share-based awards of 3,076,739were excluded from our diluted earnings per share calculation because they were anti-dilutive. (f)During the three months ended October 2, 2010, basic and diluted weighted average shares were 30,714,191. Total share-based awards of 3,127,459were excluded from our diluted earnings per share calculation because they were anti-dilutive. (g)During the three months ended December 31, 2011, basic and diluted weighted average shares were 59,659,984, respectively. Total share-basedawards of 3,266,739 were excluded from our diluted earnings per share calculation because they were anti-dilutive. (h)During the three months ended January 1, 2011, basic and diluted weighted average shares were 30,753,705, respectively. Total share-based awards of2,837,871 were excluded from our diluted earnings per share calculation because they were anti-dilutive. 71Table of Contents19. Supplemental Condensed Consolidating Financial StatementsThe condensed consolidating financial information as of December 31, 2011 and January 1, 2011 and for fiscal 2011, fiscal 2010, and fiscal 2009 isprovided due to restrictions in our revolving credit facility that limit distributions by BlueLinx Corporation, our operating company and our wholly-ownedsubsidiary, to us, which, in turn, may limit our ability to pay dividends to holders of our common stock (see Note 10, Revolving Credit Facility, for a moredetailed discussion of these restrictions and the terms of the facility). Also included in the supplemental condensed consolidated/combining financialstatements are fifty-seven single member limited liability companies, which are wholly owned by us (the “LLC subsidiaries”). The LLC subsidiaries owncertain warehouse properties that are occupied by BlueLinx Corporation, each under the terms of a master lease agreement. The warehouse propertiescollateralize a mortgage loan and are not available to satisfy the debts and other obligations of either us or BlueLinx Corporation. Certain changes have beenmade to the prior year presentation to conform to the current year presentation. 72Table of ContentsThe condensed consolidating statement of operations for BlueLinx Holdings Inc. for the fiscal year ended December 31, 2011 follows (in thousands): BlueLinxHoldings BlueLinxCorporationand Subsidiaries LLCSubsidiaries Eliminations Consolidated Net sales $— $1,755,431 $29,665 $(29,665) $1,755,431 Cost of sales — 1,545,282 — — 1,545,282 Gross profit — 210,149 29,665 (29,665) 210,149 Operating expenses (income): Selling, general and administrative 3,728 244,398 (10,604) (29,665) 207,857 Depreciation and amortization — 6,790 3,772 — 10,562 Total operating expenses (income) 3,728 251,188 (6,832) (29,665) 218,419 Operating (loss) income (3.728) (41,039) 36,497 — (8,270) Non-operating expenses: Interest expense — 12,528 17,982 — 30,510 Changes associated with ineffective interest rate swap — (1,676) — — (1,676) Other expense (income), net — 516 (15) — 501 (Loss) income before (benefit from) provision for income taxes (3,728) (52,407) 18,530 — (37,605) (Benefit from) provision for income taxes (6,768) 503 7,227 — 962 Equity in (loss) income of subsidiaries (41,607) — — 41,607 — Net (loss) income $(38,567) $(52,910) $11,303 $41,607 $(38,567) 73Table of ContentsThe condensed consolidating statement of operations for BlueLinx Holdings Inc. for the fiscal year ended January 1, 2011 follows (in thousands): BlueLinxHoldings BlueLinxCorporationand Subsidiaries LLCSubsidiaries Eliminations Consolidated Net sales $— $1,804,418 $29,825 $(29,825) $1,804,418 Cost of sales — 1,593,745 — — 1,593,745 Gross profit — 210,673 29,825 (29,825) 210,673 Operating expenses (income): Selling, general and administrative 9,663 241,152 195 (29,825) 221,185 Depreciation and amortization — 9,524 3,841 — 13,365 Total operating expenses (income) 9,663 250,676 4,036 (29,825) 234,550 Operating (loss) income (9,663) (40,003) 25,789 — (23,877) Non-operating expenses: Interest expense — 14,780 19,008 — 33,788 Changes associated with ineffective interest rate swap — (4,603) — — (4,603) Write-off of debt issuance costs — 183 — — 183 Other expense (income), net — 576 11 — 587 (Loss) income before (benefit from) provision for income taxes (9,663) (50,939) 6,770 — (53,832) (Benefit from) provision for income taxes (2,533) (696) 2,640 — (589) Equity in (loss) income of subsidiaries (46,113) — — 46,113 — Net (loss) income $(53,243) $(50,243) $4,130 $46,113 $(53,243) 74Table of ContentsThe condensed consolidating statement of operations for BlueLinx Holdings Inc. for the fiscal year ended January 2, 2010 follows (in thousands): BlueLinxHoldings BlueLinxCorporationand Subsidiaries LLCSubsidiaries Eliminations Consolidated Net sales $— $1,646,108 $29,916 $(29,916) $1,646,108 Cost of sales — 1,452,947 — — 1,452,947 Gross profit — 193,161 29,916 (29,916) 193,161 Operating expenses (income): Selling, general and administrative 5,809 244,378 (10,057) (29,916) 210,214 Net gain from terminating the Georgia-Pacific supply agreement — (17,772) — — (17,772) Depreciation and amortization — 13,060 3,924 — 16,984 Total operating expenses (income) 5,809 239,666 (6,133) (29,916) 209,426 Operating (loss) income (5,809) (46,505) 36,049 — (16,265) Non-operating expenses: Interest expense — 13,223 19,233 — 32,456 Changes associated with ineffective interest rate swap — 6,252 — — 6,252 Write-off of debt issuance costs — 1,407 — — 1,407 Other expense (income), net — 767 (248) — 519 (Loss) income before (benefit from) provision for income taxes (5,809) (68,154) 17,064 — (56,899) (Benefit from) provision for income taxes (2,261) 170 6,655 — 4,564 Equity in (loss) income of subsidiaries (57,915) — — 57,915 — Net (loss) income $(61,463) $(68,324) $10,409 $57,915 $(61,463) 75Table of ContentsThe condensed consolidating balance sheet for BlueLinx Holdings Inc. as of December 31, 2011 follows (in thousands): BlueLinxHoldings Inc. BlueLinxCorporationandSubsidiaries LLCSubsidiaries Eliminations Consolidated Assets: Current assets: Cash $27 $4,871 $— $— $4,898 Receivables — 138,872 — — 138,872 Inventories — 185,577 — — 185,577 Deferred income tax assets, current — — — — — Other current assets 498 17,882 8,761 — 27,141 Intercompany receivable 67,041 18,482 — (85,523) — Total current assets 67,566 365,684 8,761 (85,523) 356,488 Property and equipment: Land and land improvements — 2,938 46,624 — 49,562 Buildings — 10,463 85,189 — 95,652 Machinery and equipment — 75,508 — — 75,508 Construction in progress — 741 — — 741 Property and equipment, at cost — 89,650 131,813 — 221,463 Accumulated depreciation — (70,426) (27,909) — (98,335) Property and equipment, net — 19,224 103,904 — 123,128 Investment in subsidiaries (40,549) — — 40,549 — Non-current deferred income tax assets, net — 358 — — 358 Other non-current assets — 14,747 9,194 — 23,941 Total assets $27,017 $400,013 $121,859 $(44,974) $503,915 Liabilities: Current liabilities: Accounts payable $161 $68,639 $1,428 $— 70,228 Bank overdrafts — 22,364 — — 22,364 Accrued compensation — 4,496 — — 4,496 Current maturities of long-term debt — — 9,046 — 9,046 Deferred income tax liabilities, net — 382 — — 382 Other current liabilities — 15,205 1,353 — 16,558 Intercompany payable 18,482 67,041 — (85,523) — Total current liabilities 18,643 178,127 11,827 (85,523) 123,074 Non-current liabilities: Long-term debt — 94,488 234,207 — 328,695 Non current deferred income tax liabilities — — — — — Other non-current liabilities — 43,772 — — 43,772 Total liabilities 18,643 316,387 246,034 (85,523) 495,541 Stockholders’ Equity/Parent’s Investment 8,374 83,626 (124,175) 40,549 8,374 Total liabilities and equity $27,017 $400,013 $121,859 $(44,974) $503,915 76Table of ContentsThe condensed consolidating balance sheet for BlueLinx Holdings Inc. as of January 1, 2011 follows (in thousands): BlueLinxHoldings Inc. BlueLinxCorporationandSubsidiaries LLCSubsidiaries Eliminations Consolidated Assets: Current assets: Cash $384 $13,913 $— $— $14,297 Receivables — 119,202 — — 119,202 Inventories — 188,250 — — 188,250 Deferred income tax assets, current — 143 — — 143 Other current assets 669 20,500 1,599 — 22,768 Intercompany receivable 55,307 9,246 — (64,553) — Total current assets 56,360 351,254 1,599 (64,553) 344,660 Property and equipment: Land and land improvements — 3,027 49,513 — 52,540 Buildings — 8,069 88,651 — 96,720 Machinery and equipment — 70,860 — — 70,860 Construction in progress — 2,028 — — 2,028 Property and equipment, at cost — 83,984 138,164 — 222,148 Accumulated depreciation — (65,564) (26,953) — (92,517) Property and equipment, net — 18,420 111,211 — 129,631 Investment in subsidiaries (46,041) — — 46,041 — Other non-current assets — 16,456 34,272 — 50,728 Total assets $10,319 $386,130 $147,082 $(18,512) $525,019 Liabilities: Current liabilities: Accounts payable $59 $62,768 $— $— 62,827 Bank overdrafts — 23,089 — — 23,089 Accrued compensation — 4,594 — — 4,594 Current maturities of long-term debt — — 1,190 — 1,190 Other current liabilities — 15,065 1,727 — 16,792 Intercompany payable 9,265 55,288 — (64,553) — Total current liabilities 9,324 160,804 2,917 (64,553) 108,492 Non-current liabilities: Long-term debt — 97,200 284,479 — 381,679 Non current deferred income tax liabilities — 192 — — 192 Other non-current liabilities 4 33,661 — — 33,665 Total liabilities 9,328 291,857 287,396 (64,553) 524,028 Stockholders’ Equity/Parent’s Investment 991 94,273 (140,314) 46,041 991 Total liabilities and equity $10,319 $386,130 $147,082 $(18,512) $525,019 77Table of ContentsThe condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the fiscal year ended December 31, 2011 follows (in thousands): BlueLinxHoldings Inc. BlueLinxCorporation LLCSubsidiaries Eliminations Consolidated Cash flows from operating activities: Net (loss) income $(38,567) $(52,910) $11,303 $41,607 $(38,567) Adjustments to reconcile net (loss) income to cash (used in) providedby operations: Depreciation and amortization — 6,790 3,772 — 10,562 Amortization of debt issue costs — 1,983 957 — 2,940 Gain from sale of properties — — (10,604) — (10,604) Gain from property insurance settlement — — (1,230) — (1,230) Changes associated with ineffective interest rate swap — (1,676) — — (1,676) Vacant property changes — (291) — — (291) Gain on modification of lease agreement — (1,971) — — (1,971) Deferred income tax benefit — (25) — — (25) Share-based compensation expense — 1,602 372 — 1,974 Decrease in restricted cash related to the ineffective interestswap, insurance, and other — 987 — — 987 Equity in earnings of subsidiaries 41,607 — — (41,607) — Changes in assets and liabilities: Receivables — (19,670) — — (19,670) Inventories — 2,673 — — 2,673 Accounts payable 102 5,871 — — 5,973 Changes in other working capital 167 530 172 (1,244) (375) Intercompany receivable (9,833) (9,723) — 19,556 — Intercompany payable 9,218 9,094 — (18,312) — Other (503) 2,436 (2,276) — (343) Net cash provided by (used in) operating activities 2,191 (54,300) 2,466 — (49,643) Cash flows from investing activities: Investment in subsidiaries (61,073) 54,706 6,367 — — Property, plant and equipment investments — (3,892) (3,330) — (7,222) Proceeds from sale of assets — 504 17,851 — 18,355 Net cash provided by (used in) investing activities (61,073) 51,318 20,888 — 11,133 Cash flows from financing activities: Net transactions with Parent — — — — — Repayments on revolving credit facilities — (478,630) — — (478,630) Borrowings on revolving credit facilities — 475,918 — — 475,918 Payment of principal on mortgage — — (42,416) — (42,416) Payments on capital lease obligations — (1,440) — — (1,440) Decrease in bank overdrafts — (725) — — (725) Decrease in restricted cash related to the mortgage — — 20,604 — 20,604 Debt financing costs — (1,179) (1,542) — (2,721) Proceeds from stock offering less expenses paid 58,521 — — — 58,521 Intercompany receivable — — — — — Intercompany payable — — — — — Net cash (used in) provided by financing activities 58,521 (6,056) (23,354) — 29,111 Increase (decrease) in cash (361) (9,038) — — (9,399) Cash and cash equivalents balance, beginning of period 384 13,913 — — 14,297 Cash and cash equivalents balance, end of period $23 $4,875 $— $— $4,898 Supplemental cash flow information: Net income tax refunds (income taxes paid) during the period $— $231 $(253) $— $(22) Interest paid during the period $— $10,783 $17,315 $— $28,098 Noncash transactions: Capital leases $— $3,131 $— $— $3,131 78Table of ContentsThe condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the fiscal year ended January 1, 2011 follows (in thousands): BlueLinxHoldings Inc. BlueLinxCorporation LLCSubsidiaries Eliminations Consolidated Cash flows from operating activities: Net (loss) income $(53,243) $(50,243) $4,130 $46,113 $(53,243) Adjustments to reconcile net (loss) income to cash (used in) providedby operations: Depreciation and amortization — 9,854 3,511 — 13,365 Amortization of debt issue costs — 1,298 665 — 1,963 Net gain from terminating the G-P Supply Agreement — — — — — Payments from terminating the G-P Supply Agreement — 4,706 — — 4,706 Gain from sale of properties — — — — — Prepayment penalty associated with sale of facility — — — — — Changes associated with ineffective interest rate swap — (4,603) — — (4,603) Write-off of debt issuance costs — 183 — — 183 Vacant property changes — 53 — — 53 Deferred income tax provision (benefit) 910 1,041 (2,551) — (600) Share-based compensation expense 1,856 2,122 — — 3,978 Increase in restricted cash related to the ineffective interestswap, insurance, and other — 6,556 — — 6,556 Equity in earnings of subsidiaries 46,113 — — (46,113) — Changes in assets and liabilities: Receivables — 145 — — 145 Inventories — (15,065) — — (15,065) Accounts payable 21 (1,812) — — (1,791) Changes in other working capital 279 15,267 (94) — 15,452 Intercompany receivable 8,598 (3,453) — (5,145) — Intercompany payable 6,122 (6,356) (4,911) 5,145 — Other (47) (1,442) 481 — (1,008) Net cash provided by (used in) operating activities 10,609 (41,749) 1,231 — (29,909) Cash flows from investing activities: Investment in subsidiaries (9,674) — 9,674 — — Property, plant and equipment investments — (4,092) — — (4,092) Proceeds from sale of assets — 711 — — 711 Net cash provided by (used in) investing activities (9,674) (3,381) 9,674 — (3,381) Cash flows from financing activities: Net transactions with Parent — — — — — Repurchase of common stock (583) — — — (583) Repayments on revolving credit facility — (466,219) — — (466,219) Borrowings on revolving credit facility — 507,419 — — 507,419 Debt financing costs — (6,521) — — (6,521) Payment of principal on mortgage — — — — — Prepayment fees associated with sale of facility — — — — — Decrease in bank overdrafts — (4,143) — — (4,143) Increase in restricted cash related to the mortgage — — (11,201) — (11,201) Intercompany receivable — — — — — Intercompany payable — — — — — Payments on capital lease obligations — (622) — — (622) Net cash (used in) provided by financing activities (583) 29,914 (11,201) — 18,130 Increase (decrease) in cash 352 (15,216) (296) — (15,160) Cash and cash equivalents balance, beginning of period 32 29,129 296 — 29,457 Cash and cash equivalents balance, end of period $384 $13,913 $— $— $14,297 Supplemental cash flow information: Net income tax refunds (income taxes paid) during the period $— $20,098 $(115) $— $19,983 Interest paid during the period $— $13,280 $18,395 $— $31,675 Noncash transactions: Capital leases $— $1,889 $— $— $1,889 79Table of ContentsThe condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the fiscal year ended January 2, 2010 follows (in thousands): BlueLinxHoldings Inc. BlueLinxCorporation LLCSubsidiaries Eliminations Consolidated Cash flows from operating activities: Net (loss) income $(61,463) $(68,324) $10,409 $57,915 $(61,463) Adjustments to reconcile net (loss) income to cash (used in) providedby operations: Depreciation and amortization — 13,059 3,925 — 16,984 Amortization of debt issue costs — 1,806 653 — 2,459 Net gain from terminating the G-P Supply Agreement — (17,772) — — (17,772) Payments from terminating the G-P Supply Agreement — 14,118 — — 14,118 Gain from sale of properties — (169) (10,228) — (10,397) Prepayment penalty associated with sale of facility — — 616 — 616 Changes associated with ineffective interest rate swap — 6,252 — — 6,252 Write-off of debt issuance costs — 1,407 — — 1,407 Vacant property changes — 1,222 — — 1,222 Deferred income tax (benefit) provision (620) 22,565 2,275 — 24,220 Share-based compensation expense 1,773 1,149 — — 2,922 Increase in restricted cash related to the ineffective interestswap, insurance, and other — (2,511) — — (2,511) Equity in earnings of subsidiaries 57,915 — — (57,915) — Changes in assets and liabilities: Receivables — 11,306 — — 11,306 Inventories — 16,297 — — 16,297 Accounts payable (79) (13,670) — — (13,749) Changes in other working capital (1,225) (10,585) (1,773) — (13,583) Intercompany receivable (1,039) 248 3,229 (2,438) — Intercompany payable (2,898) — 460 2,438 — Other — 2,017 (198) — 1,819 Net cash (used in) provided by operating activities (7,636) (21,585) 9,368 — (19,853) Cash flows from investing activities: Investment in subsidiaries 32,392 — — (32,392) — Property, plant and equipment investments — (1,815) — — (1,815) Proceeds from sale of assets — 2,027 12,424 — 14,451 Net cash provided by (used in) investing activities 32,392 212 12,424 (32,392) 12,636 Cash flows from financing activities: Net transactions with Parent — (24,994) (7,398) 32,392 — Repurchase of common stock (2,042) — — — (2,042) Repayments on revolving credit facility — (116,682) — — (116,682) Borrowings on revolving credit facility — 16,682 — — 16,682 Payment of principal on mortgage — — (3,201) — (3,201) Prepayment fees associated with sale of facility — — (616) — (616) Increase in bank overdrafts — 2,517 — — 2,517 Increase in restricted cash related to the mortgage — — (10,296) (10,296) Intercompany receivable (22,720) — — 22,720 — Intercompany payable — 22,720 — (22,720) — Other 6 — (47) — (41) Net cash (used in) provided by financing activities (24,756) (99,757) (21,558) 32,392 (113,679) (Decrease) increase in cash — (121,130) 234 — (120,896) Cash and cash equivalents balance, beginning of period 32 150,259 62 — 150,353 Cash and cash equivalents balance, end of period $32 $29,129 $296 $— $29,457 Supplemental cash flow information: Net income tax refunds (income taxes paid) during the period $— $10,797 $(498) $— $10,299 Interest paid during the period $— $11,373 $16,915 $— $28,288 80Table of ContentsThe condensed consolidating statement of stockholders’ equity for BlueLinx Holdings Inc. for fiscal 2009, fiscal 2010 and fiscal 2011 follows (inthousands): BlueLinxHoldings Inc. BlueLinxCorporationand Subsidiaries LLCSubsidiaries Eliminations Consolidated Balance, January 3, 2009 $102,852 $225,987 $(157,129) $(68,858) $102,852 Net income (loss) (61,463) (68,324) 10,409 57,915 (61,463) Foreign currency translation adjustment, net of tax 1,173 1,173 — (1,173) 1,173 Unrealized net gain from pension plan, net of tax 941 941 — (941) 941 Unrealized gain from cash flow hedge, net of tax 6,431 6,431 — (6,431) 6,431 Issuance of restricted stock 6 — — — 6 Repurchase of restricted stock (2,042) — — — (2,042) Compensation related to share-based grants 2,922 — — — 2,922 Net transactions with the Parent — (23,845) (7,398) 31,243 — Balance, January 2, 2010 $50,820 $142,363 $(154,118) $11,755 $50,820 Net income (loss) (53,243) (50,243) 4,130 46,113 (53,243) Foreign currency translation adjustment, net of tax 336 336 — (336) 336 Unrealized loss from pension plan, net of tax (616) (616) — 616 (616) Unrealized gain from cash flow hedge, net of tax 1,297 1,297 — (1,297) 1,297 Issuance of restricted stock 7 — — — 7 Repurchase of restricted stock (583) — — — (583) Compensation related to share-based grants 3,876 — — — 3,876 Reclassification of equity award to liability (903) — — — (903) Net transactions with the Parent — 1,136 9,674 (10,810) — Balance, January 1, 2011 $991 $94,273 $(140,314) $46,041 $991 Net income (loss) (38,567) (52,910) 11,303 41,607 (38,567) Foreign currency translation adjustment, net of tax (92) (92) — 92 (92) Unrealized loss from pension plan, net of tax (14,969) (14,969) — 14,969 (14,969) Unrealized gain from cash flow hedge, net of tax 519 519 — (519) 519 Issuance of restricted stock, net of forfeitures 7 — — — 7 Issuance of stock related to the rights offering, net of expenses 58,521 — — — 58,521 Compensation related to share-based grants 2,158 — — — 2,158 Impact of net settled shares for vested grants (194) — — — (194) Net transactions with the Parent — 56,805 4,836 (61,641) — Balance, December 31, 2011 $8,374 $83,626 $(124,175) $40,549 $8,374 81Table of ContentsITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.None. ITEM 9A.CONTROLS AND PROCEDURES.Conclusion Regarding the Effectiveness of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports pursuant to the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financialofficer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs andbenefits of such controls and procedures that, by their nature, can provide only reasonable assurance regarding management’s control objectives.Our management performed an evaluation, as of the end of the period covered by this Annual Report on Form 10-K, under the supervision of our chiefexecutive officer and chief financial officer of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosurecontrols and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to ourmanagement including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.Management’s Report on Internal Control over Financial ReportingManagement’s Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set outin Item 8 of this Annual Report on Form 10-K.Changes in Internal Control over Financial ReportingNo change in our internal control over financial reporting occurred during the fiscal quarter ended December 31, 2011 that materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.The certifications of our Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed asExhibits 31.1 and 31.2 to this Annual Report on Form 10-K. Additionally, as required by Section 303A.12 (a) of the NYSE Listed Company Manual, ourChief Executive Officer filed a certification with the NYSE on June 24, 2011 reporting that he was not aware of any violation by us of the NYSE’s CorporateGovernance listing standards. ITEM 9B.OTHER INFORMATION.None.PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.Certain information required by this Item is set forth in our definitive proxy statement for the 2011 Annual Meeting of Stockholders of BlueLinxHoldings Inc. to be held on May 17, 2012, and is incorporated herein by reference. Information regarding executive officers is included under Item 1 of thisreport and is incorporated herein by reference. 82Table of ContentsITEM 11.EXECUTIVE COMPENSATION.The information required by this Item is set forth in our definitive proxy statement for the 2011 Annual Meeting of Stockholders of BlueLinx HoldingsInc. to be held on May 17, 2012, and is incorporated herein by reference. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS.Except as set forth below, the information required by this Item is set forth in our definitive proxy statement for the 2011 Annual Meeting ofStockholders of BlueLinx Holdings Inc. to be held on May 17, 2012, and is incorporated herein by reference.Equity Compensation Plan InformationThe following table provides information about the shares of our common stock that may be issued upon the exercise of options and other awards underour existing equity compensation plans as of December 31, 2011. Our stockholder-approved equity compensation plans are the 2004 Equity Incentive Plan andthe 2006 Long-Term Equity Incentive Plan. We do not have any non-stockholder approved equity compensation plans. (a) (b) (c) Plan Category Number of Securitiesto be Issued UponExercise ofOutstanding Options,Warrants and Rights Weighted-AverageExercise Price ofOutstandingOptions,Warrantsand Rights Number of Securities RemainingAvailable for Future Issuance UnderEquity Compensation Plans(Excluding Securities Reflected inColumn (a)) Equity compensation plans approved by security holders 905,316 $6.18 453,633 Equity compensation plans not approved by security holders — n/a — Total 905,316 $6.18 453,633 ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.The information required by this Item is set forth in our definitive proxy statement for the 2011 Annual Meeting of Stockholders of BlueLinx HoldingsInc. to be held on May 17, 2012, and is incorporated herein by reference. ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES.The information required by this Item is set forth in our definitive proxy statement for the 2011 Annual Meeting of Stockholders of BlueLinx HoldingsInc. to be held on May 17, 2012, and is incorporated herein by reference.PART IV ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES.(a) Financial Statements, Schedules and Exhibits1. Financial Statements. The Financial Statements of BlueLinx Holdings Inc. and the Reports of Independent Registered Public Accounting Firm arepresented under Item 8 of this Form 10-K.2. Financial Statement Schedules. Not applicable. 83Table of Contents3. Exhibits. ExhibitNumber Item3.1 Amended and Restated Certificate of Incorporation of BlueLinx(A)3.2 Amended and Restated By-Laws of BlueLinx(B)4.1 Registration Rights Agreement, dated as of May 7, 2004, by and among BlueLinx and the initial holders specified on the signature pagesthereto(C)4.2 Letter Agreement, dated as of August 30, 2004, by and among BlueLinx, Cerberus ABP Investor LLC, Charles H. McElrea, George R. Judd,David J. Morris, James C. Herbig, Wayne E. Wiggleton and Steven C. Hardin(C)4.3 Investment Letter, dated March 10, 2004, between BlueLinx and Cerberus ABP Investor LLC, as Purchaser of Common Stock(D)4.4 Investment Letter, dated May 7, 2004, between BlueLinx and Cerberus ABP Investor LLC, as Purchaser of Common Stock(D)4.5 Executive Purchase Agreement dated May 7, 2004 by and among BlueLinx, Cerberus ABP Investor LLC and Charles H. McElrea(D)4.6 Executive Purchase Agreement dated May 7, 2004 by and among BlueLinx, Cerberus ABP Investor LLC and George R. Judd(D)4.7 Registration Rights Agreement, dated as of June 16, 2011 between BlueLinx Holdings Inc. and Stadium Capital Management, LLC (incorporatedby reference to Exhibit 4.1 to the Current Report on Form 8-K filed by the Company on June 20, 2011)10.1 Asset Purchase Agreement, dated as of March 12, 2004, by and among Georgia-Pacific Corporation, Georgia-Pacific Building Materials Sales,Ltd. and BlueLinx Corporation(C)10.2 First Amendment to Asset Purchase Agreement, dated as of May 6, 2004, by and among Georgia-Pacific Corporation, Georgia-Pacific BuildingMaterials Sales, Ltd. and BlueLinx Corporation(C)10.3† Master Purchase, Supply and Distribution Agreement, dated May 7, 2004 by and between BlueLinx Corporation and G-P(B)10.4 Form of Director and Officer Indemnification Agreement (incorporated by reference to Form 8-K filed with the Securities and ExchangeCommission on January 13, 2011)10.5 BlueLinx Holdings Inc. Short-Term Incentive Plan (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission onFebruary 7, 2006)10.6 BlueLinx Holdings Inc. 2004 Long Term Equity Incentive Plan(C)10.7 BlueLinx Holdings Inc. 2004 Long-Term Equity Incentive Plan Form of Restricted Stock Award Agreement (incorporated by reference to Form 8-Kfiled with the Securities and Exchange Commission on January 11, 2008)10.8 BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan (incorporated by reference to Appendix A to the Definitive Proxy Statement for the2006 Annual Meeting of Stockholders, filed with the Securities and Exchange Commission on April 14, 2006)10.9 BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan Restricted Stock Award Agreement (incorporated by reference to Form 8-K filedwith the Securities and Exchange Commission on June 9, 2006)10.10 BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan Nonqualified Stock Option Award Agreement (incorporated by reference toForm 8-K filed with the Securities and Exchange Commission on June 9, 2006)10.11 BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan Form of Performance Share Award Agreement (incorporated by reference toForm 8-K filed with the Securities and Exchange Commission on April 4, 2007)10.12 Amendment No. 1 to BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan Form of Performance Share Award Agreement (incorporatedby reference to Form 8-K filed with the Securities and Exchange Commission on December 15, 2010)10.13 Amended and Restated Master Lease Agreement, dated as of June 9, 2006, by and between ABP AL (Midfield) LLC and the other partiesidentified as landlords therein and BlueLinx Corporation as tenant (incorporated by reference to Form 8-K filed with the Securities and ExchangeCommission on June 15, 2006)10.14† Letter Agreement, dated December 18, 2006, relating to and amending the Master Purchase, Supply and Distribution Agreement between Georgia-Pacific Corporation and BlueLinx Corporation dated May 7, 2004 (incorporated by reference to Form 8-K filed with the Securities and ExchangeCommission on December 22, 2006) 84Table of Contents ExhibitNumber Item10.15† Loan and Security Agreement, dated as of June 9, 2006, between the entities set forth therein collectively as borrower and German AmericanCapital Corporation as Lender (incorporated by reference to Form 10-Q filed with the Securities and Exchange Commission on November 6,2009)10.16 Guaranty of Recourse Obligations, dated as of June 9, 2006, by BlueLinx Holdings Inc. for the benefit of German American Capital Corporation(incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on June 15, 2006)10.17 Environmental Indemnity Agreement, dated as of June 9, 2006, by BlueLinx Holdings Inc. in favor of German American Capital Corporation(incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on June 15, 2006)10.18† Amended and Restated Loan and Security Agreement, dated August 4, 2006, by and between BlueLinx Corporation, Wachovia and the othersignatories listed therein (incorporated by reference to Form 10-Q filed with the Securities and Exchange Commission on November 6, 2009)10.19 Second Amendment to Amended and Restated Loan and Security Agreement, dated August 4, 2006, by and between BlueLinx Corporation, WellsFargo, as successor in interest to Wachovia, and the other signatories listed therein, dated July 7, 2010 (incorporated by reference to Form 8-Kfiled with the Securities and Exchange Commission on July 7, 2010)10.20 Amended and Restated Employment Agreement between BlueLinx Corporation and George R. Judd, dated January 21, 2011, (incorporated byreference to Form 8-K/A filed with the Securities and Exchange Commission on January 27, 2011)10.21 Amended and Restated Employment Agreement between BlueLinx Corporation and Howard D. Goforth, dated January 21, 2011 (incorporated byreference to Form 8-K/A filed with the Securities and Exchange Commission on January 27, 2011)10.22 Amended and Restated Employment Agreement between BlueLinx Corporation and Dean A. Adelman, dated January 21, 2011 (incorporated byreference to Form 8-K/A filed with the Securities and Exchange Commission on January 27, 2011)10.23 Amended and Restated BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan (as amended through May 19, 2011 and restated solelyfor purposes of filing pursuant to Item 601 of Regulation S-K) (Incorporated by reference to Appendix A to the proxy statement for the 2011Annual Meeting of Stockholders filed on Schedule 14A with the Securities and Exchange Commission on April 18, 2011.)10.24 BlueLinx Holdings Inc. Short-Term Incentive Plan (as amended and restated effective January 1, 2011) (Incorporated by reference to AttachmentB to the proxy statement for the 2011 Annual Meeting of Stockholders filed on Schedule 14A with the Securities and Exchange Commission onApril 18, 2011.)10.25 Canadian Credit Agreement, dated August 12, 2011, by and among BlueLinx Canada, CIBC Asset-Based Lending Inc. and the lenders fromtime to time parties thereto (Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by the Company on August 16,2011).10.26 The Third Amendment, dated May 10, 2011, to the Amended and Restated Loan and Security Agreement, dated August 4, 2006, as amended, byand between the Operating Company, Wells Fargo and the other signatories listed therein (Incorporated by reference to Exhibit 10.1 to the CurrentReport on Form 8-K filed by the Company on May 12, 2011).10.27 The Fourth Amendment, dated August 11,2011, to the Amended and Restated Loan and Security Agreement, dated August 4, 2006, as amended,by and between the Operating Company, Wells Fargo and the other signatories listed therein (Incorporated by reference to Exhibit 10.2 to theCurrent Report on Form 8-K filed by the Company on August 16, 2011)10.28 The Fifth Amendment to Loan and Security Agreement, dated July 14, 2011, to the Loan and Security Agreement, dated June 9, 2006, asamended, by and among the Company and certain of its subsidiaries and U.S. Bank National Association in its capacity as trustee for theregistered holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass Through Certificates, Series 2006-C 27, assuccessor in interest to German American Capital Corporation (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filedby the Company on July 14, 2011)10.29 Employment Agreement between BlueLinx Corporation and Ned M. Bassil, dated October 31, 2011, which became effective December 1, 2011,(incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on November 4, 2011)14.1 BlueLinx Code of Ethical Conduct (incorporated by reference to Exhibit 14 to Annual Report on Form 10-K for the year ended January 1, 2005,filed with the Securities and Exchange Commission on March 22, 2005) 85Table of Contents ExhibitNumber Item21.1 List of subsidiaries of the Company*23.1 Consent of Independent Registered Public Accounting Firm*31.1 Certification of George R. Judd, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2 Certification of Howard D. Goforth, Chief Financial Officer and Treasurer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*32.1 Certification of George R. Judd, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*32.2 Certification of Howard D. Goforth, Chief Financial Officer and Treasurer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*101 The following financial information from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, formattedin Extensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Operations and Comprehensive Loss, (ii) ConsolidatedBalance Sheets, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes toConsolidated Financial Statements.** *Filed herewith. **Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not to be “filed” or part of a registration statement or prospectus forpurposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Act of 1934, as amended, and otherwise are notsubject to liability under these sections. †Portions of this document were omitted and filed separately with the SEC pursuant to a request for confidential treatment in accordance with Rule 24b-2of the Exchange Act. (A)Previously filed as an exhibit to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-118750) filed with the Securitiesand Exchange Commission on December 10, 2004. (B)Previously filed as an exhibit to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-118750) filed with the Securitiesand Exchange Commission on November 26, 2004. (C)Previously filed as an exhibit to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-118750) filed with the Securitiesand Exchange Commission on October 1, 2004. (D)Previously filed as an exhibit to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-118750) filed with the Securitiesand Exchange Commission on October 8, 2004. 86Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. BLUELINX HOLDINGS INC.(Registrant)By: /s/ GEORGE R. JUDD George R. Judd President and Chief Executive OfficerDate: February 27, 2012Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Name Capacity Date/s/ George R. JuddGeorge R. Judd President and Chief Executive Officer and Director(Principal Executive Officer) February 27, 2012/s/ Howard D. GoforthHoward D. Goforth Senior Vice President, Chief Financial Officer andTreasurer (Principal Financial Officer) February 27, 2012/s/ Scott T. PhillipsScott T. Phillips Chief Accounting Officer (Principal AccountingOfficer) February 27, 2012/s/ Howard S. CohenHoward S. Cohen Chairman February 27, 2012/s/ Richard S. GrantRichard S. Grant Director February 27, 2012/s/ Steven F. MayerSteven F. Mayer Director February 27, 2012/s/ Charles H. McElreaCharles H. McElrea Director February 27, 2012/s/ Alan H. SchumacherAlan H. Schumacher Director February 27, 2012/s/ Robert G. WardenRobert G. Warden Director February 27, 2012/s/ M. Richard WarnerM. Richard Warner Director February 27, 2012 87Exhibit 21.1LIST OF SUBSIDIARIES Jurisdiction of Name of Subsidiary Organization1. BLUELINX CORPORATION Georgia2. BLUELINX SERVICES INC. Georgia3. BLUELINX FLORIDA LP Florida4. BLUELINX FLORIDA HOLDING NO. 1 INC. Georgia5. BLUELINX FLORIDA HOLDING NO. 2 INC. Georgia6. BLUELINX BUILDING PRODUCTS CANADA LTD. British Columbia, Canada7. BLX REAL ESTATE LLC Delaware8. ABP AL (MIDFIELD) LLC Delaware9. ABP AR (LITTLE ROCK) LLC Delaware10. ABP CA (CITY OF INDUSTRY) LLC Delaware11. ABP CA (NATIONAL CITY) LLC Delaware12. ABP CA (NEWARK) LLC Delaware13. ABP CO I (DENVER) LLC Delaware14. ABP CO II (DENVER) LLC Delaware15. ABP CT (NEWTOWN) LLC Delaware16. ABP FL (LAKE CITY) LLC Delaware17. ABP FL (MIAMI) LLC Delaware18. ABP FL (PENSACOLA) LLC Delaware19. ABP FL (TAMPA) LLC Delaware20. ABP FL (YULEE) LLC Delaware21. ABP GA (LAWRENCEVILLE) LLC Delaware22. ABP IA (DES MOINES) LLC Delaware23. ABP IL (UNIVERSITY PARK) LLC Delaware24. ABP IN (ELKHART) LLC Delaware Jurisdiction of Name of Subsidiary Organization25. ABP KY (INDEPENDENCE) LLC Delaware26. ABP LA (SHREVEPORT) LLC Delaware27. ABP LA (NEW ORLEANS) LLC Delaware28. ABP MA (BELLINGHAM) LLC Delaware29. ABP MD (BALTIMORE) LLC Delaware30. ABP ME (PORTLAND) LLC Delaware31. ABP MI (DETROIT) LLC Delaware32. ABP MI (GRAND RAPIDS) LLC Delaware33. ABP MN (MAPLE GROVE) LLC Delaware34. ABP MO (BRIDGETON) LLC Delaware35. ABP MO (KANSAS CITY) LLC Delaware36. ABP MO (SPRINGFIELD) LLC Delaware37. ABP MS (PEARL) LLC Delaware38. ABP NC (BUTNER) LLC Delaware39. ABP NC (CHARLOTTE) LLC Delaware40. ABP NJ (DENVILLE) LLC Delaware41. ABP NY (YAPHANK) LLC Delaware42. ABP OH (TALMADGE) LLC Delaware43. ABP OK (TULSA) LLC Delaware44. ABP OR (BEAVERTON) LLC Delaware45. ABP PA (ALLENTOWN) LLC Delaware46. ABP PA (STANTON) LLC Delaware47. ABP SC (CHARLESTON) LLC Delaware48. ABP SD (SIOUX FALLS) LLC Delaware49. ABP TN (ERWIN) LLC Delaware50. ABP TN (MEMPHIS) LLC Delaware50. ABP TN (MADISON) LLC Delaware Jurisdiction of Name of Subsidiary Organization51. ABP TX (EL PASO) LLC Delaware52. ABP TX (FORT WORTH) LLC Delaware53. ABP TX (HARLINGEN) LLC Delaware54. ABP TX (HOUSTON) LLC Delaware55. ABP TX (LUBBOCK) LLC Delaware56. ABP TX (SAN ANTONIO) LLC Delaware57. ABP VA (RICHMOND) LLC Delaware58. ABP VA (VIRGINIA BEACH) LLC Delaware59. ABP VT (SHELBURNE) LLC Delaware60. ABP WI (WAUSAU) LLC Delaware61. ABP MD (BALTIMORE) SUBSIDIARY LLC Delaware62. BLUELINX LANDLORD AGENT LLC Delaware63. BLX SC (CHARLESTON) LLC DelawareExhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-8 No. 333-124721) pertaining to the BlueLinx Holdings Inc. Equity Incentive Plan, (2)Registration Statement (Form S-8 No. 333-134612) pertaining to the BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan, and (3)Registration Statement (Form S-8 No. 333-151529) pertaining to the BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan; (4)Registration Statement (Form S-3 No. 333-176131) of BlueLinx Holdings Inc., (5)Registration Statement (Form S-8 No. 333-176130) pertaining to the BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan,of our reports dated February 27, 2012, with respect to the consolidated financial statements of BlueLinx Holdings Inc. and subsidiaries and the effectivenessof internal control over financial reporting of BlueLinx Holdings Inc. and subsidiaries included in this Annual Report (Form 10-K) for the year endedDecember 31, 2011./s/ Ernst & Young LLPAtlanta, GeorgiaFebruary 27, 2012Exhibit 31.1CERTIFICATION REQUIRED BY RULE 13a-14(a) OR RULE 15d-14(a) OF THE SECURITIESEXCHANGE ACT OF 1934I, George R. Judd certify that: (1)I have reviewed this annual report on Form 10-K of BlueLinx Holdings Inc; (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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; (3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and (5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the 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 arereasonably 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 internalcontrol over financial reporting.February 27, 2012 /s/ George R. Judd George R. Judd BlueLinx Holdings Inc.Chief Executive OfficerExhibit 31.2CERTIFICATION REQUIRED BY RULE 13a-14(a) OR RULE 15d-14(a) OF THE SECURITIESEXCHANGE ACT OF 1934 I,H. Douglas Goforth certify that: (1)I have reviewed this annual report on Form 10-K of BlueLinx Holdings Inc; (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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; (3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and (5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the 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 arereasonably 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 internalcontrol over financial reporting.February 27, 2012 /s/ H. Douglas Goforth H. Douglas Goforth BlueLinx Holdings Inc.Senior Vice President,Chief Financial Officer and TreasurerExhibit 32.1BLUELINX HOLDINGS INC.CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of BlueLinx Holdings Inc. (the “Company”) on Form 10-K for the year ending December 31, 2011, as filed with theUnited States Securities and Exchange Commission on the date hereof (the “Report”), I, George R. Judd, Chief Executive Officer of the Company, do herebycertify, 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.February 27, 2012 By: /s/ George R. Judd George R. Judd Chief Executive OfficerExhibit 32.2BLUELINX HOLDINGS INC.CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of BlueLinx Holdings Inc. (the “Company”) on Form 10-K for the year ending December 31, 2011, as filed with theUnited States Securities and Exchange Commission on the date hereof (the “Report”), I, H. Douglas Goforth, Chief Financial Officer and Treasurer of theCompany, 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.February 27, 2012 By: /s/ H. Douglas Goforth H. Douglas Goforth Senior Vice President,Chief Financial Officer and Treasurer

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