BlueLinx Holdings Inc. - Annual Report: 2005 (Form 10-K)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

BLUELINX HOLDINGS INC.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

      As of March 15, 2005, the registrant had 30,185,000 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of BlueLinx Holdings Inc.’s definitive Proxy Statement for use in connection with its Annual Meeting of Stockholders, scheduled to be held on May 11, 2005, have been incorporated by reference into Part III of this Report.

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BLUELINX HOLDINGS INC.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended January 1, 2005

TABLE OF CONTENTS

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

      This Annual Report on Form 10-K includes “forward-looking statements.” Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” “will be,” “will likely continue,” “will likely result” or words or phrases of similar meaning. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include those discussed under the heading “Factors Affecting Future Results” and other factors, some of which may not be known to us. We operate in a changing environment in which new risks can emerge from time to time. It is not possible for management to predict all of these risks, nor can it assess the extent to which any factor, or a combination of factors, may cause our business, strategy or actual results to differ materially from those contained in forward-looking statements. Factors you should consider that could cause these differences include, among other things:

      Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

PART I

      As used herein, unless the context otherwise requires, “BlueLinx,” and the “Company,” refer to BlueLinx Holdings Inc. and its subsidiaries. Reference to “fiscal 2004” refers to the 52-week period ended January 1, 2005 (fiscal 2004 is comprised of the period from inception (March 8, 2004) to January 1, 2005 and the period from January 4, 2004 to May 7, 2004). Reference to “fiscal 2003” refers to the 53-week period ended January 3, 2004. Reference to “fiscal 2002” refers to the 52-week period ended December 28, 2002.

Company Overview

      BlueLinx Holdings Inc., operating through its wholly-owned subsidiary, BlueLinx Corporation, is a leading distributor of building products in the United States. The Company operates in all of the major metropolitan areas in the United States and, as of January 1, 2005, distributed over 10,000 products to more than 11,700 customers through the Company’s network of more than 60 warehouses and third-party operated warehouses.

      The Company distributes products in two principal categories: structural products and specialty products. Structural products, which represented approximately 57% of the Company’s fiscal 2004 gross sales, include plywood, oriented strand board, or OSB, lumber and other wood products primarily used for structural support, walls and flooring in residential construction projects. Specialty products, which represented approximately 43% of the Company’s fiscal 2004 gross sales, include roofing, insulation, moulding, engineered wood products, vinyl products (used primarily in siding) and metal products.

      BlueLinx’s customers include building materials dealers, industrial users of building products, manufactured housing builders and home improvement centers. The Company purchases products from over 750 vendors and serves as a national distributor for a number of the Company’s suppliers. BlueLinx distributes products through its owned fleet of over 900 trucks and over 1,200 trailers, as well as by common carrier.

      The Company’s net income was $56.2 million in fiscal 2003, and increased to $76.3 million in fiscal 2004. During fiscal 2004, net sales increased by 30% and unit sales by 8.2%, compared to fiscal 2003.

      The Company was created on March 8, 2004 as a Georgia corporation named ABP Distribution Holdings Inc., or ABP. ABP was owned by Cerberus Capital Management, L.P. (“Cerberus”), a private, New York-based investment firm, and members of our management team. Prior to May 7, 2004, the Company’s assets were owned by the distribution division (the “Division”) of Georgia-Pacific Corporation. The Division commenced operations in 1954 with 13 warehouses primarily used as an outlet for Georgia-Pacific’s plywood. On May 7, 2004, Georgia-Pacific sold the Division to ABP. ABP subsequently merged into BlueLinx Holdings Inc. The total purchase price for the acquisition of the assets, including fees and expenses was approximately $823 million. The acquisition was funded with net proceeds of $526 million from drawings under the Company’s revolving credit facility, net proceeds of $97 million from the Company’s former term loan, 94% of which was held by Cerberus and its affiliate, proceeds of $100 million from a mortgage loan payable to ABPMC LLC, or ABPMC, an affiliate of Cerberus, proceeds of $95 million from the issuance of preferred stock, 100% of which was held by an affiliate of Cerberus, and proceeds of $5 million from the issuance of common stock. In addition, the Company paid debt issue costs of $12.1 million and $3.2 million for its revolving credit facility and its former term loan facility, respectively.

      On October 27, 2004, the Company obtained from Column Financial, Inc., a wholly-owned subsidiary of Credit Suisse First Boston LLC, a new mortgage loan in the principal amount of $165 million. Proceeds from the new mortgage loan were used to (i) repay the Company’s then existing $100 million principal amount of mortgage debt including the unpaid interest thereon, and (ii) redeem a portion of the then outstanding shares of the Company’s series A preferred stock at an aggregate redemption price of approximately $59.2 million (including accrued and unpaid dividends thereon).

      On December 17, 2004, the Company consummated an initial public offering of 9,500,000 shares of its common stock, par value $.01 per share, at the initial public offering price of $13.50 per share (the “Equity Offering”). On January 5, 2005, the underwriters for the Equity Offering exercised an option to purchase 685,000 additional shares of common stock to cover the over-allotment of shares in connection with the Equity Offering. BlueLinx received net proceeds from the Equity Offering of $124.1 million (including net proceeds of $8.6 million from the exercise of the over-allotment option). Net proceeds from the offering and funds from the Company’s revolving credit facility were used (i) to repay the Company’s $100 million term loan plus accrued and unpaid interest thereon, and (ii) to redeem the remainder of the Company’s outstanding series A preferred stock, of which approximately $38.5 million was outstanding, and pay all accrued and unpaid dividends thereon. Unamortized debt issue costs of approximately $3 million were written off upon retirement of the term loan.

      The Company’s principal executive offices are located at 4300 Wildwood Parkway, Atlanta, Georgia 30339 and its telephone number is (770) 953-7000. BlueLinx’s official website address is www.BlueLinxCo.com. The Company’s board committee charters, code of conduct and ethics, and filings with the U.S. Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are accessible free of charge at www.BlueLinxCo.com. Any waiver of the terms of the Company’s code of conduct and ethics for the chief executive officer, the chief financial officer, any accounting officer and all other officers will be disclosed on its website. The reference to the Company’s website does not constitute incorporation by reference of the information contained at the site.

Products and Services

      As of January 1, 2005, the Company distributed over 10,000 different products to more than 11,700 customers nationwide. The Company distributes these products in two principal categories: structural products and specialty products. Structural products include plywood panels, OSB and lumber. These products are primarily used for structural support, walls, flooring and roofing in construction projects. Additional end-uses of the Company’s structural products include outdoor decks, sheathing, crates and boxes. Approximately 57% of the Company’s fiscal 2004 gross sales consisted of structural products. Specialty products include engineered lumber, roofing, insulation, metal products, vinyl products (used primarily in siding), moulding and particleboard. Specialty products generated 43% of the Company’s gross sales during fiscal 2004. In some cases, these products are branded.

      The Company also provides a wide range of value-added services and solutions to the Company’s customers and vendors including:

Distribution Channels

      The Company sells products through three main distribution channels:

      Warehouse sales are delivered from the Company’s warehouses to dealers, home improvement centers and industrial users. The Company delivers products primarily using its fleet of over 900 trucks and over 1,200 trailers, but also occasionally uses common carriers for peak load flexibility. The Company operates in all of the major metropolitan areas in the United States through its network of more than 60 warehouses and third-party operated warehouses. The Company’s warehouses have over ten million square feet of space under roof plus significant outdoor storage space. Warehouse sales accounted for approximately 56% of the Company’s fiscal 2004 gross sales.

      Reload sales are similar to warehouse sales but are shipped from third-party warehouses where the Company stores owned product in order to expand the Company’s geographic reach. This channel is employed primarily to service strategic customers that would be uneconomical to service from the Company’s warehouses and to distribute large volumes of imported products such as metal or hardwood plywood from port facilities. A large portion of the Company’s Canadian sales are reload sales. The Company leases space at some third-party warehouse facilities in Canada. Reload sales accounted for approximately 12% of the Company’s fiscal 2004 gross sales.

      Direct sales are shipped from the manufacturer to the customer without the Company’s taking physical inventory possession. This channel requires the lowest amount of committed capital and fixed costs. Direct sales accounted for approximately 32% of the Company’s fiscal 2004 gross sales.

Customers

      As of January 1, 2005, the Company’s customer base included over 11,700 customers across multiple market segments and various end-use markets, including the following types of customers:

Sales and Marketing

      The Company’s sales efforts primarily are directed through its sales force of over 950 sales representatives. Approximately 600 of the Company’s sales representatives are located at its two sales centers in Denver and Atlanta. Within these sales centers, the Company’s sales representatives primarily interact with the Company’s customers over the telephone. The remaining 350 sales representatives are located throughout the country and are responsible for maintaining a local dialogue with the Company’s customers, including making frequent, in-person visits.

      The Company’s sales force is separated between industrial/dealer sales and home improvement center sales. Industrial/dealer sales are managed by regional vice-presidents with sales teams organized by customer regions. The majority of industrial/dealer orders are processed by telephone and are facilitated by the Company’s centralized database of customer preferences and purchasing history.

Suppliers

      The Company’s vendor base includes over 750 suppliers of both structural and specialty building products. In some cases, these products are branded. The Company has supply contracts in place with many of its vendors. Terms for these agreements frequently include prompt payment discounts and freight allowances and occasionally include volume discounts, growth incentives, marketing allowances, consigned inventory and extended payment terms.

      Purchases of products manufactured by Georgia-Pacific accounted for approximately 27% of total purchases in fiscal 2004, with no other supplier accounting for more than 3.1% of fiscal 2004 purchases. As part of the acquisition transactions, whereby the Company acquired the assets of Georgia-Pacific’s distribution division, the Company entered into a Master Purchase, Supply & Distribution Agreement with Georgia-Pacific, or the Supply Agreement. The Supply Agreement details distribution rights by product categories, including exclusivity rights and minimum supply volume commitments from Georgia-Pacific with respect to certain products. This agreement also details the Company’s purchase obligations by product categories, including substantial minimum purchase volume commitments with respect to most of the products supplied to the Company. Based on 2004 average market prices, the Company’s purchase obligation under this agreement is approximately $1.2 billion for each of the next four years. If the Company fails or refuses to purchase any products that the Company is obligated to purchase pursuant to the Supply Agreement, Georgia-Pacific has the right to sell products to third parties and for certain products terminate the Company’s exclusivity, and the Company may be required to pay monetary penalties. The agreement has a five-year initial term and remains continuously in effect thereafter unless it is terminated. Termination of the Supply Agreement requires two years’ notice, exercisable after year four. The Supply Agreement may be terminated by either party for material breach. However, if the material breach only affects one or more, but not all, of the product categories, the non-breaching party may only terminate the Supply Agreement in respect of the affected product categories, and the Supply Agreement will remain in full force with respect to the remaining product categories. The Supply Agreement also provides for certain advertising, marketing and promotion arrangements between the Company and Georgia-Pacific for certain products. In addition, the Company was granted a limited, non-exclusive, royalty-free, fully paid license to use certain proprietary information and intellectual property of Georgia-Pacific.

Competition

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

      The Company’s two largest competitors are Weyerhaeuser Company, or Weyerhaeuser, and Boise Cascade Holdings, LLC, or Boise Cascade. Weyerhaeuser and Boise Cascade are integrated building products manufacturers-distributors that offer products manufactured by them as well as third-party manufactured products. Most major markets are served by at least one of these distributors.

Trademarks

      The Company has 35 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 become generic. Registrations of trademarks can generally be renewed indefinitely as long as the trademarks are in use. The Company’s

patent expires in September 2013. The Company does not believe its business is dependent on any one of the Company’s trademarks or on its patent.

Employees

      As of March 1, 2005 the Company employed approximately 3,400 persons on a full-time basis. Approximately 1,200 of the Company’s employees are represented by labor unions. As of March 1, 2005, the Company had approximately 50 collective bargaining agreements, of which five are up for renewal in 2005. As of March 1, 2005, 124 employees were represented by the collective bargaining agreements which are up for renewal in 2005. The Company considers its relationship with its employees generally to be good.

Environmental and Other Governmental Regulations

      The Company’s operations are subject to various federal, state, provincial and local laws, rules and regulations.

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

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

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

      The Company also is subject to the requirements of the U.S. Department of Labor Occupational Safety and Health Administration, or OSHA. In order to maintain compliance with applicable OSHA requirements, the Company has established uniform safety and compliance procedures for its operations and implemented measures to prevent workplace injuries.

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

      The Company has incurred and will continue to incur costs to comply with the requirements of environmental, health and safety and transportation laws, ordinances and regulations. The Company anticipates that these requirements will become more stringent in the future, and the Company cannot assure you that compliance costs will not be material.

      The Company operates warehouse facilities in 64 markets. The Company owns warehouse facilities in 61 of these cities and leases the remainder. The total square footage under roof at the Company’s warehouses is approximately 10.8 million square feet. These warehouse facilities secure the Company’s new mortgage loan. In addition, the Company’s headquarters is located in Atlanta, Georgia, where it leases from a third party approximately 250,000 square feet of space.

      The following table lists each of the Company’s warehouse facilities, including their inside square footage. At all of the Company’s warehouse locations, the Company also stores materials outdoors, such as lumber, which increases its distribution and storage capacity. The Company believes that substantially all of its property and equipment is in good condition, subject to normal wear and tear, and that its facilities have sufficient capacity to meet its current and projected distribution needs.

Warehouse & Shed Under Roof Square Footage

      On November 19, 2004, the Company received a letter from Wickes Lumber, or Wickes, asserting that approximately $16 million in payments received by the Division during the 90-day period prior to Wickes’ January 20, 2004 Chapter 11 filing were preferential payments under section 547 of the United States Bankruptcy Code. Although the ultimate outcome of this matter cannot be determined with certainty, the Company believes Wickes’ assertion to be without merit and, in any event, subject to one or more complete defenses, including, but not limited to, that the payments were made and received in the

ordinary course of business and were in substantially contemporaneous exchange for new value given to Wickes. Accordingly, the Company has no plans to establish a reserve with respect to the asserted claim.

      The Company is, and from time to time may be, a party to routine legal proceedings incidental to the operation of its business. The outcome of any pending or threatened proceedings is not expected to have a material adverse effect on the financial condition, operating results or cash flows of the Company, based on its current understanding of the relevant facts. Legal expenses incurred related to these contingencies are generally expensed as incurred.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      On November 18, 2004, a majority of our stockholders took action by written consent to amend our articles of incorporation and bylaws. The articles of incorporation were amended as follows:

      The articles of amendment to our articles of incorporation were filed with the Secretary of State of Delaware on December 7, 2004.

PART II

      The Company’s equity securities consist of one class of common stock. The common stock began trading on December 14, 2004, the initial public offering date. The common stock is traded on the New York Stock Exchange under the symbol BXC. The high and low sales prices quoted on the New York Stock Exchange for the fourth quarter ended January 1, 2005 were $14.70 and $13.00, respectively.

      As of March 1, 2005, there were approximately 3,900 stockholders of record.

      On March 10, 2005, the Company declared a dividend at the rate of $0.125 per share. The Company intends to continue to pay dividends on its common stock at the quarterly rate of $0.125 per share. The Company’s board of directors may, in its discretion, modify or repeal the Company’s dividend policy. Future dividends, if any, with respect to the Company’s shares of common stock will depend on, among other things, its results of operations, cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that its board of directors may deem relevant. See Item 8. Financial Statements and Supplementary Data, Note 8. Revolving Credit Facility for additional information regarding limitations on the ability of BlueLinx Corporation to transfer funds to its parent, BlueLinx Holdings, which could impact the Company’s ability to pay dividends to its stockholders. Accordingly, the Company may not be able to continue to pay dividends at the same quarterly rate in the future, if at all.

Recent Sales of Unregistered Securities

      In March 2004, the Company issued 100 shares of its common stock to Cerberus ABP Investor LLC, or Cerberus ABP, for an aggregate purchase price of $1,000. The shares were issued in reliance on Section 4(2) of the Securities Act as the sale of the securities did not involve a public offering. The offer and sale did not involve a public offering because the shares were issued to Cerberus ABP in connection with the Company’s formation. The Company was formed by affiliates of Cerberus ABP to serve as the acquisition vehicle for the purchase of assets of the building products distribution division of Georgia-Pacific. In addition, in the purchase agreement, Cerberus ABP represented to the Company that it was an accredited investor and was acquiring shares for investment and not distribution. Appropriate legends were affixed to the share certificate issued in such transaction.

      In May 2004, the Company issued 18,099,900 shares of its common stock to Cerberus ABP for an aggregate purchase price of $4,524,975. The shares were issued in reliance on Section 4(2) of the Securities Act as the sale of the securities did not involve a public offering. As indicated above, the Company was formed by affiliates of Cerberus ABP to serve as the acquisition vehicle for the purchase of assets of the building products distribution division of Georgia-Pacific. The issuance to Cerberus ABP was used in part to fund the price of the Company’s acquisition by Cerberus and its affiliate. In addition, Cerberus ABP represented to the Company, in the purchase agreement, that it was an accredited investor and was acquiring the shares for investment and not distribution. Appropriate legends were affixed to the share certificate issued in such transaction.

      In May 2004, the Company issued 95,000 shares of its series A preferred stock to Cerberus ABP LLC for an aggregate purchase price of $95,000,000. The shares were issued in reliance on Section 4(2) of the Securities Act as the sale of the securities did not involve a public offering. As indicated in above, the Company was formed by affiliates of Cerberus ABP to serve as the acquisition vehicle for the purchase of assets of the building products distribution division of Georgia-Pacific. The issuance to Cerberus ABP was used in part to fund the purchase price of our acquisition by Cerberus and its affiliate. In addition, Cerberus ABP represented to the Company that it was an accredited investor and was acquiring shares for investment and not distribution. Appropriate legends were affixed to the share certificate issued in such transaction. All of the Company’s issued and outstanding shares of Series A preferred stock were redeemed in fiscal 2004.

      In May 2004, the Company issued shares of its common stock in private placements to certain of its executives as follows:

      All of the foregoing shares were issued in reliance on Section 4(2) of the Securities Act as none of the sales of the securities involved a public offering. Each of the purchasers represented to the Company that he was an accredited investor and was acquiring the shares for investment and not distribution, and appropriate legends were affixed to the share certificates issued in each transaction.

      The Company was created on March 8, 2004 (date of inception) as a Georgia corporation named ABP Distribution Holdings Inc. On May 7, 2004, the Company and its subsidiary acquired the assets of the distribution division of Georgia Pacific, or the Division, as described below. On August 30, 2004, ABP Distribution Holdings Inc. merged into BlueLinx Holdings Inc., a Delaware corporation. The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

      The financial statements of the Division reflect the accounts and results of certain operations of the business conducted by the Division. The accompanying financial statements of the Division have been prepared from Georgia-Pacific’s historical accounting records and are presented on a carve-out basis reflecting these certain assets, liabilities, and operations. The Division was an unincorporated business of Georgia-Pacific and, accordingly, Georgia-Pacific’s net investment in these operations (parent’s net investment) is presented in lieu of stockholder’s equity. All significant intradivision transactions have been eliminated. The financial statements are not necessarily indicative of the financial position, results of operations and cash flows that might have occurred had the Division been an independent entity not

integrated into Georgia-Pacific’s other operations. Also, they may not be indicative of the actual financial position that might have otherwise resulted, or of future results of operations or financial position of the Division.

      The following table sets forth certain historical financial data of the Company. The selected financial data for the period from inception (March 8, 2004) to January 1, 2005, the period from January 4, 2004 to May 7, 2004 (the aggregate period from January 4, 2004 through January 1, 2005 referred to herein as “fiscal 2004”), the fiscal year ended January 3, 2004 (“fiscal 2003”), the fiscal year ended December 28, 2002 (“fiscal 2002”), the fiscal year ended December 29, 2001 (“fiscal 2001”) and the fiscal year ended December 30, 2000 (“fiscal 2000”) have been derived from the Company’s and the Division’s audited financial statements included elsewhere in this Annual Report on Form 10-K. The financial statements prior to May 7, 2004 are referred to as “pre-acquisition period” statements. The following information should be read in conjunction with the Company’s financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

      The acquisition of the assets of the Division was accounted for using the purchase method of accounting, and the assets acquired and liabilities assumed were accounted for at their fair market values at the date of consummation.

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

Overview

      The Company is a leading distributor of building products in the United States. The Company measures its market share based on data published annually by Home Channel News, or HCN. The Company defines market share as the Company’s sales as a percentage of the reported sales of the firms on HCN’s list, as adjusted to eliminate firms that do not compete with the Company and, for certain firms, the portion of their sales attributable to businesses that do not compete with the Company.

      As of January 1, 2005, the Company distributed over 10,000 products to more than 11,700 customers through its network of more than 60 warehouses and third-party operated warehouses which serve all major metropolitan markets in the United States. The Company distributes products in two principal categories: structural products and specialty products. Structural products include plywood, OSB, lumber and other wood products primarily used for structural support, walls and flooring in construction projects. Structural products represented approximately 57% of the Company’s fiscal 2004 gross sales. Specialty products include roofing, insulation, moulding, engineered wood, vinyl products (used primarily in siding) and metal products. Specialty products accounted for approximately 43% of the Company’s fiscal 2004 gross sales.

      On March 12, 2004, the Company and its operating company entered into two separate definitive agreements to acquire the real estate and operating assets, respectively, of the distribution division of Georgia-Pacific Corporation (the “Division”). The transactions were consummated on May 7, 2004. As of January 1, 2005, the Company had paid purchase consideration of approximately $823 million. On October 29, 2004, the Company made a final working capital settlement payment of $48.0 million to Georgia-Pacific. The working capital payment was funded by borrowings under the Company’s revolving credit facility. The acquisition was funded with:

      In addition, the Company paid debt issue costs of $12.1 million and $3.2 million for its revolving credit facility and its term loan, respectively. The Company and its wholly-owned subsidiary were formed by Cerberus in connection with the acquisition.

      The Company refers to the period prior to May 7, 2004 as the “pre-acquisition period.” The Division’s financial data for the pre-acquisition period generally will not be comparable to the Company’s financial data for the period after the acquisition. The principal factors affecting comparability are incremental costs that the Company will incur as a separate company, discussed in greater detail below; interest costs attributable to debt the Company incurred in connection with the acquisition transactions and mortgage refinancing transactions; and the effects of purchase method accounting applied to the acquisition transactions. The acquisition of the assets of the Division was accounted for using the purchase method of accounting, and the assets acquired and liabilities assumed were accounted for at their fair market values at the date of consummation.

      On December 17, 2004, the Company consummated an initial public offering of 9,500,000 shares of its common stock, par value $.01 per share, at the initial public offering price of $13.50 per share (the “Equity Offering”). On January 5, 2005, the underwriters for the Equity Offering exercised an option to purchase 685,000 additional shares of common stock to cover over-allotment of shares in connection with the Equity Offering. BlueLinx received net proceeds from the Equity Offering of $124.1 million (including net proceeds of $8.6 million from the exercise of the over-allotment option). Net proceeds from the offering and funds from the Company’s revolving credit facility were used (i) to repay the Company’s $100 million term loan plus accrued and unpaid interest thereon, and (ii) to redeem the remainder of the Company’s outstanding series A preferred stock, of which approximately $38.5 million was outstanding, and pay all accrued and unpaid dividends thereon. Unamortized debt issue costs of approximately $3 million were written off upon retirement of the term loan.

      Supply Agreement. On May 7, 2004, the Company entered into a multi-year supply agreement with Georgia-Pacific. Under the agreement, the Company has exclusive distribution rights on certain products and certain customer segments. Georgia-Pacific is the Company’s largest vendor, with Georgia-Pacific products representing approximately 27% of purchases during fiscal 2004.

      Transition Agreements. At the closing of the acquisition, the Company’s operating company entered into a transition services agreement with Georgia-Pacific. The services covered under the agreement included all currently provided support services in several operating areas, including transportation management and sales and marketing. The Company agreed to compensate Georgia-Pacific for services provided during the transition period on an agreed upon cost-plus basis. The majority of these agreements expired as of January 1, 2005.

      In addition to the transition services agreement, the Company also entered into agreements with Georgia-Pacific to provide transition services in information technology (IT) and human resources. The IT support services agreement provided for infrastructure, business systems, operational systems and network support services for a period of one year. However, BlueLinx elected to terminate most sub-categories of IT support services during fiscal 2004. The human resources agreement that provided for payroll, employee benefits administration and other specified human resources-related administrative services expired December 31, 2004, when the Company converted to its own service.

      Charges for transition services were approximately $1 million per month. The Company expects to stop incurring these charges by the end of the first quarter of 2005. The Company expects the total cost for transition services from the completion of the acquisition through March 2005 to be approximately $8.5 million.

      During the pre-acquisition period, Georgia-Pacific charged the Division for the estimated cost of certain functions that were managed by Georgia-Pacific and could reasonably be directly attributed to the operations of the Division. These costs included dedicated human resources, legal, accounting and information systems support. The charges to the Division were based on Georgia-Pacific management’s estimate of the services specifically used by the Division. Where determinations based on specific usage alone were impracticable, other methods and criteria were used that management believes are equitable and provide a reasonable estimate of the cost attributable to the Division. The total of the allocations were $19.0 million and $5.9 million for fiscal 2003 and the period from January 4, 2004 to May 7, 2004, respectively. Certain general corporate expenses were not allocated to the Division. These expenses included portions of property and casualty insurance premiums, health and welfare administration costs, human resources administration costs, finance administration costs, and legal costs. The Company estimates that these incremental costs would have been approximately $13 million and $5 million for fiscal 2003 and the period from January 4, 2004 to May 7, 2004, respectively.

      The Company believes the assumptions underlying the Division’s financial statements are reasonable. However, the Division’s financial statements do not necessarily reflect what the Company’s future results of operations, financial position and cash flows will be, nor do they reflect what the Company’s results of operations, financial position and cash flows would have been had the Company been a separate, independent company during the periods presented.

Selected Factors that Affect the Company’s Operating Results

      The Company’s operating results are affected by housing starts, mobile home production, industrial production, repair and remodeling spending and non-residential construction. The table below shows increases and decreases with respect to each of the indicators for fiscal 2004, fiscal 2003 and fiscal 2002. Included are the Company’s estimates of the relative weight of each of the foregoing end-use markets on the Company’s sales, based on the percentage each end market contributed to net sales over the applicable period.

Source: Data from Resource Information Systems, Inc., or RISI as of March 8, 2005, and weighting reflects management estimates.

      The Company measures its growth in unit volume (on a constant dollar basis) compared to the weighted average growth of the foregoing end-use indicators. Starting in fiscal 2003, as the growth strategies developed by the Division in fiscal 2002 began to take effect, the Company has grown faster than the market, and at an increasing rate during fiscal 2004. The Company’s unit volume grew faster than the weighted end-use markets by 0.5 percentage points in fiscal 2003 and by 3.5 percentage points in fiscal 2004. The Company expects to continue to grow its unit volume at a faster rate than the marketplace for the foreseeable future. The Company’s market share in fiscal 2002, of the building products distribution market, was 10.4%. In fiscal 2003, the Company’s market share increased to 10.9%, representing market share growth of 0.5 percentage points.

      The following table displays the trends discussed above:

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

      The following table sets forth changes in net sales by product category, sales variances due to changes in unit volume and dollar and percentage changes in unit volume and price, in each case for fiscal 2004, fiscal 2003 and fiscal 2002.

Sales Revenue Variances by Product

      The following table sets forth changes in net sales and gross margin by channel and percentage changes in gross margin by channel, in each case for fiscal 2004, fiscal 2003, and fiscal 2002.

      The Company’s fiscal year is a 52- or 53-week period ending on the Saturday closest to the end of the calendar year. The fiscal years 2004 and 2002 contained 52 weeks and fiscal year 2003 contained 53 weeks. The additional week in fiscal year 2003 was included in the fourth quarter of that year.

Results of Operations

      For the quarter ended January 1, 2005, sales were $1.2 billion, up 3.4% from the fourth quarter of fiscal 2003. This increase was driven by 9.4% growth in unit volume, partially offset by the impact of the shorter reporting period in the fourth quarter of fiscal 2004 versus fiscal 2003.

      Gross profit for the fourth quarter of fiscal 2004 was $101.4 million compared to $118.7 million in the prior year period. The decline in gross profit is primarily due to the significant decline in structural product prices. During fiscal 2004, from the end of the third quarter to their fourth quarter lows, prices for OSB declined by 31%, plywood declined by 38%, and lumber fell by 18%. Prices then staged a moderate recovery from Thanksgiving week through year-end, but on thin holiday volume and, therefore, provided limited favorable impact on fourth quarter gross margins.

      Operating income for the fourth quarter of fiscal 2004 was $4.8 million, versus $16.8 million in the fourth quarter of fiscal 2003, reflecting the decline in gross profit, partially offset by lower operating expenses. The reduction in operating expenses was primarily the result of lower sales commissions and reduced incentive compensation expense related to lower gross margins and reduced operating results for the quarter ended January 1, 2005.

      Interest expense totaled $11.1 million for the fourth quarter of fiscal 2004. Interest expense related to the Company’s term loan, revolving credit facility, old mortgage and new mortgage was $2.2 million, $5.6 million, $0.9 million and $1.4 million, respectively. Interest expense includes $1.0 million of debt issue cost amortization. In addition, the Company wrote off $2.9 million of unamortized debt issue costs

upon retirement of the Company’s term loan. The Division did not incur interest expense prior to the acquisition.

      Net loss applicable to common stockholders for the fourth quarter of fiscal 2004 was $(7.1) million compared to net income of $10.1 million for the fourth quarter of fiscal 2003. The Company’s net income for fiscal 2003 was achieved as a division of Georgia-Pacific and did not include interest expense, preferred stock dividends and certain corporate overhead expenses that are included in the results for the quarter ended January 1, 2005.

      On a per-share basis, the loss applicable to common stockholders for the quarter ended January 1, 2005 was $(0.34). Earnings per share for fiscal 2004 and for the prior year periods is not available as a result of the business operating for much of that period as a division of Georgia-Pacific.

      The following table sets forth the Company’s and the Division’s results of operations for fiscal 2004 and fiscal 2003. The results of operations for fiscal 2004 combine the pre-acquisition period from January 4, 2004 to May 7, 2004 of the Division and the period from inception (March 8, 2004) to January 1, 2005 of the Company.

      Net Sales. Net sales for fiscal 2004 increased by 30% to $5,558 million from $4,272 million during fiscal 2003. This increase in net sales of $1,286 was driven by an 8.2% increase in unit volume, which increased sales revenue by $351 million and higher product prices due to increased demand for our products which increased sales revenue by $935 million. The increase in unit volume reflects the Company’s strategy of increasing volume through focused value-added selling, which the Company began to implement in late fiscal 2002, and strong underlying demand in the Company’s end-use markets.

      Gross Profit. Gross profit for fiscal 2004 increased by 23%, or $103 million, to $560 million from $457 million in fiscal 2003. Of this increase, $134 million was primarily the result of higher sales revenue which was partially offset by a $31 million decline primarily due to a reduction in gross profit margin from 10.7% in fiscal 2003 to 10.1% in fiscal 2004.

      Operating Expenses. Selling, general and administrative expenses for fiscal 2004 were $387 million, or 7.0% of net sales, compared to $347 million, or 8.1% of net sales, during fiscal 2003. Higher expenses in fiscal 2004 as compared to fiscal 2003 were primarily due to increases in employee bonuses and sales commissions due to strong performance and increased variable expenses such as warehouse and delivery labor associated with higher unit volume. Additionally, fiscal 2004 included approximately $10 million in expenses associated with the acquisition transactions and the related transition.

      Depreciation and Amortization. Depreciation and amortization expense totaled $16.3 million for fiscal 2004, while depreciation expense totaled $19.5 million for fiscal 2003. Property, plant and equipment was purchased by the Company for less than Georgia-Pacific’s book value. As a result, book value and associated depreciation following the acquisition is lower than it was during the pre-acquisition period. The Company did not have any amortization expense during the pre-acquisition period.

      Operating Income. Operating income for fiscal 2004 increased by $66 million to $157 million, or 2.8% of net sales, from $91 million, or 2.1% of net sales, for fiscal 2003. This improvement was the result of higher unit volume, higher product prices and higher gross profit.

      Interest Expense. Interest expense totaled $28.8 million for fiscal 2004. Interest expense related to the Company’s term loan, revolving credit facility, old mortgage and new mortgage was $6.4 million, $13.1 million, $4.8 million, and $1.4 million, respectively. Additionally, interest on the final working capital settlement with Georgia-Pacific was $.8 million. Interest expense includes $2.3 million of debt issue cost amortization. In addition, the Company wrote off $2.9 million of unamortized debt issue costs upon retirement of the Company’s term loan. The Division did not incur interest expense prior to the acquisition.

      Provision for Income Taxes. The effective tax rate was 38.9% and 38.3% for fiscal 2004 and fiscal 2003, respectively.

      Net Income. Net income totaled $76.3 million and $56.2 million for fiscal 2004 and fiscal 2003, respectively. Earnings per share for fiscal 2004 and for the prior year periods is not available as a result of the business operating for much of that period as a division of Georgia-Pacific.

      The following table sets forth the Company’s results of operations for fiscal 2003 and fiscal 2002.

      Net Sales. Net sales for fiscal 2003 increased 14% to $4,272 million from $3,734 million in fiscal 2002. This increase of $538 million was caused by price increases amounting to $444 million and unit volume increases amounting to $94 million. Unit sales, adjusted to a 52 week basis, increased by 2.5% during fiscal 2003. The increase in unit sales, in part, reflected the early results of the Company’s strategy

of increasing volume through focused value-added selling, which the Company began to implement in late fiscal 2002.

      Gross Profit. Gross profit for fiscal 2003 increased by 26%, or $94 million, to $457 million from $363 million in fiscal 2002. Of this increase, $30 million was primarily the result of higher sales revenue and $64 million was the primarily result of an increase in the gross profit margin to 10.7% in fiscal 2003 compared to 9.7% in fiscal 2002. This increase was driven by significant increases in structural product prices during the second half of fiscal 2002 and continued focus on improving margin.

      Operating Expenses. Selling, general and administrative expenses for fiscal 2003 were $347 million, or 8.1% of net sales, while selling, general and administrative expenses for fiscal 2002 were $295 million, or 7.9% of net sales. Higher expenses in fiscal 2003 as compared to fiscal 2002 were primarily due to an increase in employee bonuses and sales commissions due to strong performance, increased variable expenses including delivery, labor and sales and marketing expenses associated with higher unit volume, increased Georgia-Pacific corporate overhead charges, increased pension charges associated with declining pension fund returns and associated interest rate assumptions and a $5 million expense associated with the several extra days in Georgia-Pacific’s 2003 fiscal year.

      Depreciation and Amortization. Depreciation expense totaled $19.5 million and $21.8 million for fiscal 2003 and fiscal 2002, respectively. From fiscal 1994 to 1997, capital investment totaled over $400 million. The declining depreciation trend reflects the completion of the book depreciation of portions of this investment. The Company did not have any amortization expense during the pre-acquisition period.

      Operating Income. Operating income in fiscal 2003 increased by $45.6 million to $91.4 million, or 2.1% of net sales, from $45.8 million, or 1.2% of net sales, in fiscal 2002. This improvement was the result of higher unit volume, higher product prices and higher gross margins.

      Provision for Income Taxes. The effective tax rate was 38.3% and 38.7% in fiscal 2003 and fiscal 2002, respectively.

      Net Income. Net income totaled $56.2 million and $27.8 million in fiscal 2003 and fiscal 2002, respectively. Earnings per share for fiscal 2003 and for the prior year periods is not available as a result of the business operating for that period as a division of Georgia-Pacific.

Seasonality

      The Company is exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors. These seasonal factors are common in the building products distribution industry. The first quarter is the Company’s slowest quarter due to the impact of poor weather on the construction market. The Company’s second quarter typically improves from its first quarter as the weather begins to improve and held-over construction demand from the winter season is released. The Company’s third quarter is typically its strongest quarter, reflecting a substantial increase in construction due to more favorable weather conditions. The Company’s working capital and accounts receivable and payable generally peak in the third quarter, while inventory generally peaks in second quarter in anticipation of the third quarter season. The fourth quarter is typically the Company’s second slowest quarter due to the decline in construction with the onset of the winter season. The Company expects these trends to continue for the foreseeable future.

Liquidity and Capital Resources

      The Division’s principal source of liquidity historically had been the consolidated resources of Georgia-Pacific. The Company intends to fund future capital needs through its operating cash flows and its revolving credit facility. The Company believes that the amounts available from this and other sources will be sufficient to fund operations and capital requirements for the foreseeable future.

      The Company’s capital expenditures for 2004 were approximately $11 million, and were incurred primarily in connection with mobile equipment. The Company’s 2004 capital expenditures were paid for from cash flows provided by operating activities or borrowings under its revolving credit facility. The Company estimates that capital expenditures for 2005 will be approximately $12 million, primarily for mobile equipment consisting of trucks, trailers, forklifts and automobiles. The Company’s 2005 capital expenditures are anticipated to be paid from its current cash and cash provided from operating activities. Part of the Company’s growth strategy is to selectively pursue acquisitions. Accordingly, depending on the nature of the acquisition or currency, the Company may use cash or stock, or a combination of both, as acquisition currency. The Company’s cash requirements may significantly increase and incremental cash expenditures will be required in connection with the integration of the acquired company’s business and to pay fees and expenses in connection with acquisitions. To the extent that significant amounts of cash are expended in connection with acquisitions, the Company’s liquidity position may be adversely impacted. In addition, there can be no assurance that the Company will be successful in implementing its acquisition strategy. For a discussion of the risks associated with the Company’s acquisition strategy, see risk factor on integrating acquisitions.

      The following tables indicate the Company’s working capital and cash flows for the periods indicated.

      Working capital increased by $49 million to $492 million at January 1, 2005, from $443 million at January 3, 2004. Accounts receivable increased by $71 million and finished goods inventories increased by $162 million; these increases were partially offset by a $160 million increase in accounts payable, which includes approximately $92 million of trade payables due to Georgia-Pacific. Prior to the acquisition, purchases from Georgia-Pacific were treated as inter-company transactions and were not included in accounts payable. Additionally, cash increased from $0.5 million on January 3, 2004 to $15.6 million at January 1, 2005. During the pre-acquisition period, Georgia-Pacific consolidated all cash balances and the Division only maintained petty cash and other minor balances. The $15.6 million of cash on the Company’s balance sheet at January 1, 2005 primarily reflects customer remittances received in the Company’s lock boxes on Friday and Saturday that are not available until the next Monday, which is part of the following fiscal period.

      Working capital increased by $9 million to $443 million at January 3, 2004, from $434 million at December 28, 2002. The increase in working capital was primarily attributable to higher accounts receivable balances of $53.7 million driven by net sales growth and partially offset by higher accounts payable and bank overdrafts of $25.2 million and higher accrued compensation of $12.2 million.

      During fiscal 2004 and fiscal 2003, cash flows provided by operating activities totaled $23.3 million and $59.6 million, respectively. The decrease of $36.3 million in cash flows provided by operating activities was primarily driven by larger increases in accounts receivable of $17.2 million, offset in part by $20.2 million in improved earnings. Increases in inventory of $162 million were offset by larger increases in trade payables of $142 million which includes $92 million in payables to Georgia-Pacific, compared to zero during the pre-acquisition period, when amounts due Georgia-Pacific were classified as parent’s investment. The remaining sources were from changes in other working capital.

      In fiscal 2003 and fiscal 2002, cash flows provided by operating activities totaled $59.6 million and $46.7 million, respectively. The increase of $12.9 million in operating cash flows in fiscal 2003 was primarily due to increased net income of $28.3 million and decreases in inventories of $14.1 million, accounts payable of $31.5 million and accrued compensation of $16.7 million. Partially offsetting these operating cash flow increases were increases in accounts receivable of $86.6 million. The increases in inventories and accounts payable in fiscal 2003 were primarily caused by increased purchasing activity to support higher business volume. Increased accrued compensation in fiscal 2003 was caused by higher employee bonuses and other compensation linked to the Division’s improved performance. Accounts receivable increased in fiscal 2003 due to increased net sales in fiscal 2003 compared to fiscal 2002.

      During fiscal 2004 and fiscal 2003, cash flows used for investing activities totaled $834 million and $4 million, respectively.

      On May 7, 2004, the Company and its operating company acquired the real estate and the operating assets of the Division, respectively. The Company paid purchase consideration of approximately $823 million for the acquisition.

      During fiscal 2004 and fiscal 2003, and the Company’s expenditures for property and equipment were $11.1 million and $5.4 million, respectively. These expenditures were primarily for mobile equipment consisting of trucks, trailers, forklifts and sales force automobiles.

      Proceeds from the sale of property and equipment totaled $.3 million and $1.3 million during fiscal 2004 and fiscal 2003, respectively.

      The Company’s expenditures for property and equipment were $3.6 million in fiscal 2002. These expenditures were primarily for mobile equipment.

      Proceeds from the sale of property and equipment totaled $0.8 million in fiscal 2002.

      Net cash provided by (used in) financing activities was $826 million during fiscal 2004 and $(55) million during fiscal 2003. The increase in cash provided by financing activities in fiscal 2004 primarily reflects the outstanding balance of the Company’s revolving credit facility ($487 million), its mortgage payable ($165 million) and its issuance of common stock ($121 million), all of which relate to the Company’s acquisition of the assets of the Division. Fees paid to issue debt in 2004 totaled $21.2 million.

      Cash used for financing activities was $44.1 million for fiscal 2002. During the pre-acquisition period, the Company was financed by Georgia-Pacific and the use of bank overdrafts.

      On May 7, 2004, the Company’s operating company entered into a revolving credit facility. As of March 4, 2005, advances outstanding under the revolving credit facility were approximately $523 million. Borrowing availability was approximately $139 million and outstanding letters of credit on this facility were approximately $5.4 million. (As of January 1, 2005, the interest rate on outstanding balances under the revolving credit facility was 4.89%.)

      On October 27, 2004, the existing mortgage was refinanced by a new mortgage loan in the amount of $165 million, which was provided by Column Financial, Inc., a wholly-owned subsidiary of Credit Suisse First Boston LLC. The interest rate on the new mortgage loan is equal to LIBOR (subject to a 2% floor and a 6% cap), plus a 2.25% spread. On January 1, 2005, the interest rate was 4.653%.

      Contractual Commitments. The following table represents the Company’s contractual commitments, excluding interest, associated with its debt and other obligations disclosed above as of January 1, 2005.

Purchase orders entered into in the ordinary course of business are excluded from the above table. Amounts for which the Company is liable under purchase orders are reflected on its consolidated balance sheet (to the extent entered into prior to the end of the applicable period) as accounts payable and accrued liabilities.

Factors Affecting Future Results

      The building products distribution industry is subject to cyclical market pressures. Prices of building products are determined by overall supply and demand in the market for building products. Market prices of building products historically have been volatile and cyclical and the Company has limited ability to control the timing and amount of pricing changes for building products. Demand for building products is driven mainly by factors outside of the Company’s control, such as general economic and political

conditions, interest rates, the construction, repair and remodeling and industrial markets, weather and population growth. The supply of building products fluctuates based on available manufacturing capacity, and excess capacity in the industry can result in significant declines in market prices for those products. To the extent that prices and volumes experience a sustained or sharp decline, the Company’s net sales and margins would likely decline as well. The Company’s 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 its structural products inventory. All of these factors make it difficult to forecast the Company’s operating results.

      The Company has a substantial amount of debt. As of March 4, 2005, advances outstanding under the revolving credit facility were approximately $523 million. Borrowing availability was approximately $139 million and outstanding letters of credit on this facility were approximately $5.4 million. The Company also has a mortgage loan in the amount of $165 million.

      The Company’s substantial debt could have important consequences to you. For example, it could:

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

      If the Company’s cash flows and capital resources are insufficient to fund its debt service obligations, the Company may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital or restructure its debt. Obtaining additional capital or restructuring the Company’s debt could be accomplished in part, through new or additional borrowings or placements of debt or equity securities. There is no assurance that the Company could obtain additional capital or restructure its debt on terms acceptable to it or at all. In the event that the Company is required to dispose of material assets or operations to meet its debt service and other obligations, the value realized on such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things, be for a sufficient dollar amount. The Company’s obligations under the revolving credit facility are secured by a first priority security interest in all of the operating company’s inventories,

receivables and proceeds from those items. In addition, the Company’s new mortgage loan is secured by its real property. The foregoing encumbrances may limit its ability to dispose of material assets or operations. The Company also may not be able to restructure its indebtedness on favorable economic terms, if at all. The Company may incur substantial additional indebtedness in the future, including under the revolving credit facility. The Company’s incurrence of additional indebtedness would intensify the risks described above.

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

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

      On May 7, 2004, the Company and its operating company acquired the real estate and operating assets of the Division, respectively. Therefore, the Company’s operating history as a separate company is limited. The Company’s business strategy as an independent entity may not be successful on a long-term basis. BlueLinx may not be able to grow its business as planned and may not remain a profitable business. The historical financial information included in this filing may not necessarily reflect what the Company’s results of operations, financial condition and cash flows would have been had it been a separate, independent entity pursuing its own strategies during the periods presented.

      Georgia-Pacific is the Company’s largest supplier, accounting for approximately 27% of the Company’s purchases during fiscal 2004. Concurrently with the acquisition, the Company entered into a Master Purchase, Supply & Distribution Agreement with Georgia-Pacific, which is referred to as the Supply Agreement. The Supply Agreement has a five-year initial term and remains continuously in effect thereafter unless it is terminated. Termination of the Supply Agreement requires two years’ notice, exercisable after year four. It may be terminated, including before year five, by Georgia-Pacific upon a

material breach of the agreement by the Company. If Georgia-Pacific does not renew the Supply Agreement or if it discontinues sales of a product, the Company would experience a product shortage unless and until it obtains a replacement supplier. The Company may not be able to obtain replacement products on favorable economic terms, if at all. An inability to replace products on favorable economic terms would adversely impact the Company’s net sales and its costs, which in turn could impact the Company’s gross profit, net income and cash flows.

      BlueLinx believes that the economic terms of the Supply Agreement are beneficial to the Company since they provide the Company with certain discounts off standard industry pricing indices, certain cash discounts and favorable payment terms. While the Company also believes these terms benefit Georgia-Pacific, Georgia-Pacific could, if it chose, terminate the Supply Agreement as early as May 7, 2010. If it did so and the Company could not obtain comparable terms from Georgia-Pacific or another vendor thereafter, its operating performance could be impaired by an interruption in the delivery of products and/or an increase in cost to the Company from sourcing comparable products from other suppliers.

      Under the Supply Agreement, the Company has substantial minimum purchase volume commitments with respect to a number of products supplied to it. Based on 2004 average market prices, the Company’s purchase obligations under this agreement are $1.2 billion for each of the next four years. These products account for a majority of the Company’s purchases from Georgia-Pacific. If the Company fails or refuses to purchase any products that it is obligated to purchase pursuant to the Supply Agreement, Georgia-Pacific has the right to sell products to third parties and, for certain products, terminate the Company’s exclusivity, which could reduce the Company’s net sales due to the unavailability of products or its gross profit if it is required to pay higher product prices to other suppliers. A reduction in the Company’s net sales or gross profit may also reduce its net income and cash flows.

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

      Part of BlueLinx’s growth strategy includes pursuing acquisitions. Any integration process may be complex and time consuming, may be disruptive to the business and may cause an interruption of, or a distraction of management’s attention from, the business as a result of a number of obstacles, including but not limited to:

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

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

      As of March 1, 2005, approximately 1,200 of the Company’s employees were represented by various labor unions. As of March 1, 2005, the Company had approximately 50 collective bargaining agreements, of which four, covering 124 employees, are up for renewal in 2005. The Company may become subject to material cost increases, or additional work rules imposed by agreements with labor unions. The foregoing could increase BlueLinx’s selling, general and administrative expenses in absolute terms and/or as a percentage of net sales. In addition, work stoppages or other labor disturbances may occur in the future, which could adversely impact the Company’s net sales and/or selling, general and administrative expenses. All of these factors could negatively impact the Company’s net income and cash flows.

      BlueLinx uses its own fleet of over 900 trucks and over 1,200 trailers to service customers throughout the United States. The U.S. Department of Transportation, or DOT, regulates the Company’s operations in domestic interstate commerce. BlueLinx is subject to safety requirements governing interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also remain subject to both federal and state regulation. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service would increase the Company’s costs, which, if it is unable to pass these cost increases on to its customers, would reduce the Company’s gross margins, increase its selling, general and administrative expenses and reduce its net income.

      BlueLinx’s operations are subject to federal, state, provincial and local laws, rules and regulations governing the protection of the environment, including, but not limited to, those regulating discharges into the air and water, the use, handling and disposal of hazardous or toxic substances, the management of wastes, the cleanup of contamination and the control of noise and odors. The Company has made, and will continue to make, expenditures to comply with these requirements. While the Company believes, based upon current information, that it is in substantial compliance with all applicable environmental laws, rules and regulations, the Company could be subject to potentially significant fines or penalties for any failure to comply. Moreover, under certain environmental laws, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of at real property, may be held liable for the cost to investigate or clean up such real property and for related damages to natural resources. The Company may be subject to liability, including liability for investigation and cleanup

costs, if contamination is discovered at one of its current or former warehouse facilities, or at a landfill or other location where it has disposed of, or arranged for the disposal of, wastes. Georgia-Pacific has agreed to indemnify the Company against any claim arising from environmental conditions that existed prior to May 7, 2004. The Company also carries environmental insurance. However, any remediation costs not related to conditions existing prior to May 7, 2004 may not be covered by indemnification. In addition, certain remediation costs may not be covered by insurance. In addition, the Company could be subject to claims brought pursuant to applicable laws, rules or regulations for property damage or personal injury resulting from the environmental impact of its operations. Increasingly stringent environmental requirements, more aggressive enforcement actions, the discovery of unknown conditions or the bringing of future claims may cause the Company’s expenditures for environmental matters to increase, and it may incur material costs associated with these matters.

      In the aftermath of the terrorist attacks on the United States, federal, state and local authorities have implemented and are implementing various security measures, including checkpoints and travel restrictions on large trucks. The Company’s customers typically need quick delivery and rely on its on-time delivery capabilities. If security measures disrupt or impede the timing of the Company’s deliveries, it may fail to meet the needs of its customers, or may incur increased expenses to do so.

      Georgia-Pacific is a defendant in suits brought in various courts around the nation by plaintiffs who allege that they have suffered personal injury as a result of exposure to products containing asbestos. These suits allege a variety of lung and other diseases based on alleged exposure to products previously manufactured by Georgia-Pacific. Based on Georgia-Pacific’s public disclosure in its Annual Report on Form 10-K for the year ended January 1, 2005, there were 59,700 unresolved asbestos claims against Georgia-Pacific at the end of fiscal 2004. Although the terms of the asset purchase agreement provide that Georgia-Pacific will indemnify the Company against all obligations and liabilities arising out of, relating to or otherwise in any way in respect of any product liability claims (including, without limitation, claims, obligations or liabilities relating to the presence or alleged presence of asbestos-containing materials) with respect to products purchased, sold, marketed, stored, delivered, distributed or transported by Georgia-Pacific and its affiliates, including the Division prior to the acquisition, the Company believes that circumstances may arise under which asbestos-related claims against Georgia-Pacific could cause the Company to incur substantial costs.

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

      Funds and accounts managed by Cerberus or its affiliated management companies, which are referred to collectively as the controlling stockholder, collectively own approximately 60% of the Company’s common stock. As a result, the controlling stockholder will continue to be able to control the election of our directors, determine the Company’s corporate and management policies and determine, without the consent of the Company’s other stockholders, the outcome of any corporate transaction or other matter submitted to the Company’s stockholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions.

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

      The Company’s Amended and Restated Certificate of Incorporation and Bylaws contain provisions that:

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

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

      The Company intends to pay dividends on its common stock at the quarterly rate of $0.125 per share. The Company’s board of directors may, in its discretion, modify or repeal its dividend policy. Future

dividends, if any, with respect to shares of the Company’s common stock will depend on, among other things, its results of operations, cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that its board of directors may deem relevant. Accordingly, the Company may not be able to pay dividends in any given amount in the future, or at all.

      The Company’s revolving credit facility limits distributions by the operating company to BlueLinx, which, in turn, may limit the Company’s ability to pay dividends to holders of its common stock. See Notes to Financial Statements — Note 8 Revolving Credit Facility for more information on limits on the Company’s ability to pay dividends.

Critical Accounting Policies

      The Company’s significant accounting policies are more fully described in the notes to the consolidated financial statements. Certain of the Company’s accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. As with all judgments, they are subject to an inherent degree of uncertainty. These judgments are based on the Company’s historical experience, current economic trends in the industry, information provided by customers, vendors and other outside sources and management’s estimates, as appropriate.

      The following are accounting policies that management believes are important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective or complex judgment.

      The Company recognizes revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have been rendered, the Company’s price to the buyer is fixed and determinable, and collectibility is reasonably assured. Delivery is not considered to have occurred until the customer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. Revenue is recorded at the time of shipment for terms designated as FOB (free on board) shipping point. For sales transactions designated FOB destination, revenue is recorded when the product is delivered to the customer’s delivery site. Discounts and allowances are comprised of trade allowances, cash discounts and sales returns. Cash discounts and sales returns are estimated using historical experience. Trade allowances are based on the estimated obligations and historical experience. Adjustments to earnings resulting from revisions to estimates on discounts and returns have been insignificant for each of the years in the two-year period ended January 3, 2004 or the period from January 4, 2004 to May 7, 2004 or the period from inception (March 8, 2004) to January 1, 2005.

      The Company evaluates the collectibility of accounts receivable based on numerous factors, including past transaction history with customers and their creditworthiness. The Company maintains an allowance for doubtful accounts for each aging category on the Company’s aged trial balance based on the Company’s historical loss experience. This estimate is periodically adjusted when the Company becomes aware of specific customers’ inability to meet their financial obligations (e.g., bankruptcy filing or other evidence of liquidity problems). As the Company determines that specific balances will be ultimately uncollectible, the Company removes them from its aged trial balance. Additionally, the Company maintains reserves for cash discounts that it expects customers to earn as well as expected returns. At January 1, 2005, January 3, 2004 and December 28, 2002, the allowance for doubtful accounts totaled $13.4 million, $9.2 million and $9.5 million, respectively. Adjustments to earnings resulting from revisions to estimates on discounts and uncollectible accounts have been insignificant for each of the two years in the two-year period ended January 3, 2004 or the period from January 4, 2004 to May 7, 2004 or the period from inception (March 8, 2004) to January 1, 2005.

      Inventories are carried at the lower of cost or market. The cost of substantially all inventories is determined by the moving average cost method. The Company evaluates its inventory value at the end of each quarter to ensure that first quality, actively moving inventory, when viewed by category, is carried at the lower of cost or market. At January 1, 2005, the lower of cost or market reserve totaled $1.0 million.

      Additionally, the Company maintains a reserve for the estimated value impairment associated with damaged and inactive inventory. The inactive reserve includes inventory that has had no sales in the past twelve months or has turn days in excess of 360 days. At January 1, 2005, January 3, 2004 and December 28, 2002, the Company’s damaged and inactive inventory reserves totaled $3.0 million, $2.1 million and $2.8 million, respectively.

      At the beginning of each calendar year, the Company enters into agreements with many of its vendors providing for inventory purchase rebates, generally based on achievement of specified volume purchasing levels and various marketing allowances that are common industry practice. The Company accrues for the receipt of vendor rebates based on purchases, and also reduces inventory value to reflect the net acquisition cost (purchase price less expected purchase rebates). Adjustments to earnings resulting from revisions to rebate estimates have been insignificant for each of the years in the two-year period ended January 3, 2004 or the period from January 4, 2004 to May 7, 2004 or the period from inception (March 8, 2004) to January 1, 2005.

      Long-lived assets, including property and equipment, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. The Company uses internal cash flow estimates, quoted market prices when available and independent appraisals as appropriate to determine fair value. The Company derives the required cash flow estimates from its historical experience and its internal business plans and applies an appropriate discount rate. If these projected cash flows are less than the carrying amount, an impairment loss is recognized based on the fair value of the asset less any costs of disposition. The Company’s judgment regarding the existence of impairment indicators is based on market and operational performance. There have been no adjustments to earnings resulting from the impairment of long-lived assets for each of the years in the two-year period ended January 3, 2004 or the period from January 4, 2004 to May 7, 2004 or the period from inception (March 8, 2004) to January 1, 2005.

Recently Issued Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”) which is a revision of SFAS No. 123. SFAS No. 123R supersedes APB No. 25 and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123R is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure will no longer be an alternative. SFAS No. 123R is effective for the first interim or annual period beginning after June 15, 2005. The Company expects to adopt SFAS No. 123R effective July 3, 2005.

      SFAS No. 123R permits public companies to adopt its requirements using one of two methods:

      The Company plans to adopt SFAS No. 123R using the modified prospective method. The Company does not expect the adoption of SFAS No. 123R to have a material impact on its results of operations.

      In November 2004, the FASB issued SFAS No. 151, Inventory Costs — an Amendment of ARB No. 43, Chapter 4 (“SFAS No. 151”), which is the result of the FASB’s efforts to converge U.S. accounting standards for inventory with International Accounting Standards. SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs, and wasted material to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently evaluating the impact of SFAS No. 151 on its results of operations.

      As a multinational enterprise, the Company is exposed to risks such as changes in interest rates, commodity prices and foreign currency exchange rates. The Company employs a variety of practices to manage these risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Derivative instruments are used only for risk management purposes and not for speculation or trading, and are not used to address risks related to foreign currency exchange rates.

      In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, the Company records derivative instruments as assets or liabilities on the balance sheet at fair value. Changes in the fair value of derivatives are recorded in income.

      The Company’s revolving credit facility accrues interest based on a floating benchmark rate (the prime rate or LIBOR rate), plus an applicable margin. A change in interest rates under the revolving credit facility could have an impact on results of operations. A change of 100 basis points in the market rate of interest would impact interest expense by approximately $4.87 million based on borrowings outstanding at January 1, 2005.

      The new mortgage loan bears interest at a floating rate, equal to LIBOR plus 225 basis points, determined monthly, subject to a floor interest rate of 4.25% (a 2% floor on LIBOR, plus 2.25%). Interest is capped pursuant to a rate cap agreement that caps LIBOR exposure at 6.0% and the overall rate at 8.25% (a 6.0% cap on LIBOR, plus 2.25%). Increases or decreases in 30-day LIBOR rates by 100 basis points between 2.0% and 6.0% will impact results of operations by $1.65 million.

      Fewer than 1.0% of the Company’s net sales are denominated in currencies other than the U.S. dollar, and the Company does not believe its total exposure to currency fluctuations to be significant.

      The Company believes that general inflation did not significantly affect its operating results or markets in fiscal 2004, fiscal 2003 or fiscal 2002. As discussed above, the Company’s results of operations were both favorably and unfavorably impacted by increases and decreases in the pricing of certain commodity-based products. Commodity price fluctuations have from time to time created cyclicality in the Company’s financial performance and may do so in the future.

Index to Financial Statements and Supplemental Data

BLUELINX HOLDINGS INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of BlueLinx Holdings Inc.

      We have audited the accompanying consolidated balance sheet of BlueLinx Holdings Inc. (formerly ABP Distribution Holdings Inc.) and subsidiaries as of January 1, 2005, and the related consolidated statement of operations and comprehensive income, shareholders’ equity, and cash flows for the period from inception (March 8, 2004) to January 1, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BlueLinx Holdings Inc. and subsidiaries at January 1, 2005, and the consolidated results of their operations and their cash flows for the period from inception (March 8, 2004) to January 1, 2005, in conformity with U.S. generally accepted accounting principles.

Atlanta, Georgia

March 20, 2005

BUILDING PRODUCTS DISTRIBUTION DIVISION

OF GEORGIA-PACIFIC CORPORATION

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Georgia-Pacific Corporation

      We have audited the accompanying statements of certain assets and liabilities of the Building Products Distribution Division of Georgia-Pacific Corporation as of January 3, 2004 and the related statements of revenue and direct expenses, direct cash flows, and parent’s investment for the period from January 4, 2004 to May 7, 2004 and for each of the two years in the period ended January 3, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      As described in Note 1, the statements referred to above as of January 3, 2004 and the related statements of revenue and direct expenses, direct cash flows, and parent’s investment for the period from January 4, 2004 to May 7, 2004 and for each of the two years in the period ended January 3, 2004 have been prepared for the purpose of possible sale of the Building Products Distribution Division of Georgia-Pacific Corporation, and are not intended to be a complete presentation of the Building Products Distribution Division of Georgia-Pacific Corporation’s financial position or results of operations as if it were operated on a stand-alone basis.

      In our opinion, the financial statements referred to above present fairly, in all material respects, certain assets and liabilities of the Building Products Distribution Division of Georgia-Pacific Corporation as of January 3, 2004 and its revenue and direct expenses, direct cash flows and parent’s investment for the period from January 4, 2004 to May 7, 2004 and for each of the two years in the period ended January 3, 2004, in conformity with U.S. generally accepted accounting principles.

      As discussed in Note 2, in 2003, the Building Products Distribution Division adopted the expense recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended.

Atlanta, Georgia

March 20, 2005

BLUELINX HOLDINGS INC.

(formerly ABP Distributions Holdings Inc.)

CONSOLIDATED BALANCE SHEET AND

BUILDING PRODUCTS DISTRIBUTION DIVISION

OF GEORGIA-PACIFIC CORPORATION

STATEMENT OF CERTAIN ASSETS AND LIABILITIES

(In thousands)