BlueLinx Holdings Inc. - Quarter Report: 2011 July (Form 10-Q)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission file number: 1-32383

BlueLinx Holdings Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

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

As of August 5, 2011 there were 61,811,862 shares of BlueLinx Holdings Inc. common stock, par value $0.01, outstanding.

 

 

BLUELINX HOLDINGS INC.

Form 10-Q

For the Quarterly Period Ended July 2, 2011

INDEX

		PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements — BlueLinx Holdings Inc. (Unaudited)
Consolidated Statements of Operations			3
Consolidated Balance Sheets			5
Consolidated Statements of Cash Flows			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 5. Other Events			36
Item 6. Exhibits			37
Signatures			38
Exhibit Index			39
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS

BLUELINX HOLDINGS INC.

		Second Quarter
		Period from				Period from
		April 3, 2011				April 4, 2010
		to				to
		July 2, 2011				July 3, 2010
Net sales		$	500,810			$	540,781
Cost of sales			443,165				476,662
Gross profit			57,645				64,119
Operating expenses:
Selling, general, and administrative			56,780				57,089
Depreciation and amortization			2,624				3,434
Total operating expenses			59,404				60,523
Operating (loss) income			(1,759	)			3,596
Non-operating expenses:
Interest expense			7,730				8,205
Changes associated with the ineffective interest rate swap			—				(1,256	)
Other expense, net			134				18
Loss before provision for income taxes			(9,623	)			(3,371	)
Provision for income taxes			158				36
Net loss		$	(9,781	)		$	(3,407	)
Basic and diluted weighted average number of common shares outstanding			31,063				30,699
Basic and diluted net loss per share applicable to common stock		$	(0.31	)		$	(0.11	)

See accompanying notes.

BLUELINX HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)

		Six Months Ended
		Period from				Period from
		January 2, 2011				January 3, 2010
		to				to
		July 2, 2011				July 3, 2010
Net sales		$	891,414			$	971,831
Cost of sales			787,500				855,434
Gross profit			103,914				116,397
Operating expenses:
Selling, general, and administrative			105,227				113,603
Depreciation and amortization			5,561				7,178
Total operating expenses			110,788				120,781
Operating loss			(6,874	)			(4,384	)
Non-operating expenses:
Interest expense			16,791				15,520
Changes associated with the ineffective interest rate swap			(1,751	)			(2,061	)
Other expense, net			149				251
Loss before provision for income taxes			(22,063	)			(18,094	)
Provision for income taxes			44				52
Net loss		$	(22,107	)		$	(18,146	)
Basic and diluted weighted average number of common shares outstanding			30,953				30,643
Basic and diluted net loss per share applicable to common stock		$	(0.71	)		$	(0.59	)

See accompanying notes.

BLUELINX HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

		July 2, 2011				January 1, 2011
		(unaudited)
Assets:
Current assets:
Cash and cash equivalents		$	6,109			$	14,297
Receivables, net			205,735				119,202
Inventories, net			212,654				188,250
Deferred income tax assets, net			59				143
Other current assets			62,902				22,768
Total current assets			487,459				344,660
Property, plant, and equipment:
Land and land improvements			51,968				52,540
Buildings			97,691				96,720
Machinery and equipment			74,495				70,860
Construction in progress			1,027				2,028
Property, plant, and equipment, at cost			225,181				222,148
Accumulated depreciation			(95,985	)			(92,517	)
Property, plant, and equipment, net			129,196				129,631
Other non-current assets			18,613				50,728
Total assets		$	635,268			$	525,019
Liabilities:
Current liabilities:
Accounts payable		$	95,322			$	62,827
Bank overdrafts			28,798				23,089
Accrued compensation			5,402				4,594
Current maturities of long-term debt			151,507				1,190
Other current liabilities			14,938				16,792
Total current liabilities			295,967				108,492
Non-current liabilities:
Long-term debt			323,072				381,679
Deferred income taxes, net			107				192
Other non-current liabilities			35,514				33,665
Total liabilities			654,660				524,028
Stockholders’ (Deficit) Equity:
Common Stock, $0.01 par value, 100,000,000 shares authorized; 33,243,238 and 32,667,504 shares issued at July 2, 2011 and January 1, 2011, respectively			332				327
Additional paid-in capital			148,567				147,427
Accumulated other comprehensive loss			(6,773	)			(7,358	)
Accumulated deficit			(161,518	)			(139,405	)
Total stockholders’ (deficit) equity			(19,392	)			991
Total liabilities and stockholders’ (deficit) equity		$	635,268			$	525,019

See accompanying notes.

BLUELINX HOLDINGS INC.

		Six Months Ended
		Period				Period from
		from January 2,				January 3, 2010
		2011 to				to
		July 2, 2011				July 3, 2010
Cash flows from operating activities:
Net loss		$	(22,107	)		$	(18,146	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization			5,561				7,178
Amortization of debt issue costs			1,094				379
Payment from terminating the Georgia-Pacific supply agreement			—				4,706
Gain from sale of properties			(7,222	)			—
Changes associated with the ineffective interest rate swap			(1,751	)			(2,061	)
Deferred income tax benefit			(214	)			(414	)
Share-based compensation expense			1,137				1,969
Decrease in restricted cash related to the ineffective interest rate swap, insurance, and other			432				5,607
Changes in assets and liabilities:
Receivables			(86,533	)			(82,222	)
Inventories			(24,404	)			(52,973	)
Accounts payable			32,495				38,860
Changes in other working capital			(1,338	)			18,538
Other			1,804				(2,295	)
Net cash used in operating activities			(101,046	)			(80,874	)
Cash flows from investing activities:
Property, plant and equipment investments			(5,520	)			(1,263	)
Proceeds from disposition of assets			8,971				656
Net cash provided by (used in) investing activities			3,451				(607	)
Cash flows from financing activities:
Repurchase of common stock			—				(583	)
Increase in borrowings from revolving credit facility			91,710				68,687
Payment on capital lease obligations			(197	)			(473	)
Increase in bank overdrafts			5,709				9,880
Increase in restricted cash related to the mortgage			(7,815	)			(6,581	)
Debt financing costs			—				(91	)
Other			—				6
Net cash provided by financing activities			89,407				70,845
Decrease in cash			(8,188	)			(10,636	)
Balance, beginning of period			14,297				29,457
Balance, end of period		$	6,109			$	18,821
Noncash transactions:
Capital leases		$	2,544			$	—

See accompanying notes.

BLUELINX HOLDINGS INC.

1. Basis of Presentation and Background

Basis of Presentation

BlueLinx Holdings Inc. has prepared the accompanying Unaudited Consolidated Financial Statements, including its accounts and the accounts of its wholly-owned subsidiaries, in accordance with the instructions to Form 10-Q and therefore they do not include all of the information and notes required by United States generally accepted accounting principles (“GAAP”). These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended January 1, 2011, as filed with the Securities and Exchange Commission (“SEC”). Our fiscal year is a 52- or 53-week period ending on the Saturday closest to the end of the calendar year. Fiscal year 2011 and fiscal year 2010 each contain 52 weeks. BlueLinx Corporation is the wholly-owned operating subsidiary of BlueLinx Holdings Inc. and is referred to herein as the “operating subsidiary” when necessary.

We believe the accompanying Unaudited Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows for the periods presented. The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates and such differences could be material. In addition, the operating results for interim periods may not be indicative of the results of operations for a full year. We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors, with the second and third quarters typically accounting for the highest sales volumes. These seasonal factors are common in the building products distribution industry.

We are a leading distributor of building products in North America with approximately 2,000 employees. We offer approximately 10,000 products from over 750 suppliers to service more than 11,500 customers nationwide, including dealers, industrial manufacturers, manufactured housing producers and home improvement retailers. We operate our distribution business from sales centers in Atlanta and Denver, and our network of approximately 60 distribution centers.

2. Summary of Significant Accounting Policies

Revenue Recognition

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

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

•

We are the primary obligor responsible for fulfillment and all other aspects of the customer relationship.

•

Title passes to BlueLinx and we carry all risk of loss related to warehouse and third-party (“reload”) inventory and inventory shipped directly from vendors to our customers.

•

We are responsible for all product returns.

•

We control the selling price for all channels.

•

We select the supplier.

•

We bear all credit risk.

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

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

Cash and Cash Equivalents

Cash and cash equivalents include all highly-liquid investments with maturity dates of less than three months when purchased.

Restricted Cash

We had restricted cash of $50.0 million and $42.2 million at July 2, 2011 and January 1, 2011, respectively. Restricted cash primarily includes amounts held in escrow related to our mortgage and insurance for workers’ compensation, auto liability, and general liability. Restricted cash is included in “Other current assets” and “Other non-current assets” on the accompanying Consolidated Balance Sheets.

The table below provides the balances of each individual component in restricted cash as of July 2, 2011 and January 1, 2011 (in thousands):

		July 2,				January 1,
		2011				2011
Cash in escrow:
Mortgage*		$	38,349			$	30,616
Insurance			8,781				9,430
Other			2,422				2,124
Total		$	49,552			$	42,170

Allowance for Doubtful Accounts and Related Reserves

We evaluate the collectability of accounts receivable based on numerous factors, including past transaction history with customers and their creditworthiness. We maintain an allowance for doubtful accounts for each aging category on our aged trial balance, which is aged utilizing contractual terms, based on our historical loss experience. This estimate is periodically adjusted when we become aware of specific customers’ inability to meet their financial obligations (e.g., bankruptcy filing or other evidence of liquidity problems). As we determine that specific balances will ultimately be uncollectible, we remove them from our aged trial balance. Additionally, we maintain reserves for cash discounts that we expect customers to earn as well as expected returns. At July 2, 2011 and January 1, 2011, these reserves totaled $5.4 million and $5.7 million, respectively. Adjustments to earnings resulting from revisions to estimates on discounts and uncollectible accounts have been insignificant.

Inventory Valuation

Inventories are carried at the lower of cost or market. The cost of all inventories is determined by the moving average cost method. We have included all material charges directly or indirectly incurred in bringing inventory to its existing condition and location. We evaluate our inventory value at the end of each quarter to ensure that first quality, actively moving inventory, when viewed by category, is carried at the lower of cost or market. At July 2, 2011 and January 1, 2011, the market value of our inventory exceeded its cost. Adjustments to earnings resulting from revisions to lower of cost or market estimates have been insignificant.

Additionally, we maintain a reserve for the estimated value impairment associated with damaged, excess and obsolete inventory. The damaged, excess and obsolete reserve generally includes discontinued items or inventory that has turn days in excess of 270 days, excluding new items during their product launch. At July 2, 2011 and January 1, 2011, our damaged, excess and obsolete inventory reserves were $2.0 million and $1.7 million, respectively. Adjustments to earnings resulting from revisions to damaged, excess and obsolete estimates have been insignificant.

Consignment Inventory

We enter into consignment inventory agreements with our vendors. This vendor consignment inventory relationship allows us to obtain and store vendor inventory at our warehouses and reload facilities; however, ownership remains with the vendor and risk of loss generally remains with the vendor. When the inventory is sold, we are required to the pay the vendor and we simultaneously take and transfer ownership from the vendor to the customer.

Consideration Received from Vendors and Paid to Customers

Each year, we enter into agreements with many of our vendors providing for inventory purchase rebates, generally based on achievement of specified volume purchasing levels, price protection and various marketing allowances that are common industry practice. We accrue for the receipt of vendor rebates based on purchases, and also reduce inventory value to reflect the net acquisition cost (purchase price less expected purchase rebates). At July 2, 2011 and January 1, 2011, the vendor rebate receivable totaled $7.0 million and $8.1 million, respectively. Adjustments to earnings resulting from revisions to rebate estimates have been insignificant.

In addition, we enter into agreements with many of our customers to offer customer rebates, generally based on achievement of specified volume sales levels and various marketing allowances that are common industry practice. We accrue for the payment of customer rebates based on sales to the customer, and also reduce sales value to reflect the net sales (sales price less expected customer rebates). At July 2, 2011 and January 1, 2011, the customer rebate payable totaled $8.0 million and $6.4 million, respectively. Adjustments to earnings resulting from revisions to rebate estimates have been insignificant.

Loss per Common Share

We calculate our basic loss per share by dividing net loss by the weighted average number of common shares and participating securities outstanding for the period. Restricted stock granted by us to certain management level employees and directors participate in dividends on the same basis as common shares and are non-forfeitable by the holder. The unvested restricted stock contains non-forfeitable rights to dividends or dividend equivalents. As a result, these share-based awards meet the definition of a participating security and are included in the weighted average number of common shares outstanding, pursuant to the two-class method, for the periods that present net income. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders. Given that the restricted stockholders do not have a contractual obligation to participate in the losses and the inclusion of such unvested restricted shares in our basic and dilutive per share calculations would be anti-dilutive, we have not included these amounts in our weighted average number of common shares outstanding for periods in which we report a net loss. Therefore, we have not included 2,163,956 and 2,011,365 of unvested restricted shares that had the right to participate in dividends in our basic and dilutive calculations for the first six months of fiscal 2011 and for the first six months of fiscal 2010, respectively.

Except when the effect would be anti-dilutive, the diluted earnings per share calculation includes the dilutive effect of the assumed exercise of stock options using the treasury stock method. Our restricted stock units are settled in cash upon vesting and are considered liability awards. Therefore, these restricted stock units are not included in the computation of the basic and diluted earnings per share.

As we experienced losses in all periods, basic and diluted loss per share are computed by dividing net loss by the weighted average number of common shares outstanding for the period. For the second quarter of fiscal 2011 and for the first six months of fiscal 2011, we excluded 3,080,772 unvested share-based awards, respectively, from the diluted earnings per share calculation because they were anti-dilutive. For the second quarter of fiscal 2010 and for the first six months of fiscal 2010, we excluded 3,178,307 unvested share-based awards, respectively, from the diluted earnings per share calculation because they were anti-dilutive.

Stock-Based Compensation

We have two stock-based compensation plans covering officers, directors, certain employees and consultants: the 2004 Equity Incentive Plan (the “2004 Plan”) and the 2006 Long Term Equity Incentive Plan (the “2006 Plan”). The plans are designed to motivate and retain individuals who are responsible for the attainment of our primary long-term performance goals. The plans provide a means whereby our employees and directors develop a sense of proprietorship and personal involvement in our development and financial success and encourage them to devote their best efforts to our business. Although we do not have a formal policy on the matter, we issue new shares of our common stock to participants, upon the exercise of options or vesting of restricted stock, out of the total amount of common shares authorized for issuance under the 2004 Plan and the 2006 Plan. During the first six months of fiscal 2011, the Compensation Committee granted 618,972 restricted shares of our common stock to certain of our officers. Restricted shares of 364,303 vested in the first six months of 2011 due to completion of the vesting term.

We recognize compensation expense equal to the grant-date fair value for all share-based payment awards that are expected to vest. This expense is recorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to market or performance conditions, in which case we recognize compensation expense over the requisite service period of each separate vesting tranche to the extent the occurrence of such conditions are probable. All compensation expense related to our share-based payment awards is recorded in “Selling, general and administrative” expense in the Consolidated Statements of Operations. For the second quarter of fiscal 2011 and for the first six months of fiscal 2011, our total stock-based compensation expense was $0.4 million and $1.1 million, respectively. For the second quarter of fiscal 2010 and for the first six months of fiscal 2010, our total stock-based compensation expense was $0.7 million and $1.9 million, respectively. We did not recognize related income tax benefits during these periods.

Income Taxes

Deferred income taxes are provided using the liability method. Accordingly, deferred income taxes are recognized for differences between the income tax and financial reporting bases of our assets and liabilities based on enacted tax laws and tax rates applicable to the periods in which the differences are expected to affect taxable income. We recognize a valuation allowance, when based on the weight of all available evidence, we believe it is more likely than not that some or all of our deferred tax assets will not be realized. In evaluating our ability to recover our deferred income tax assets, we considered available positive and negative evidence, including our past operating results, our ability to carryback losses against prior taxable income, the existence of cumulative losses in the most recent years, our forecast of future taxable income and an excess of appreciated assets over the tax basis of our net assets. In estimating future taxable income, we developed assumptions including the amount of future state and federal pretax operating and non-operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions required significant judgment about the forecasts of future taxable income. We considered all of the available positive and negative evidence during the second quarter of fiscal 2011 and based on the weight of available evidence, we recorded an additional deferred tax asset and valuation allowance of $3.6 million relating to our current period net operating losses, which resulted in a total net deferred tax asset of $54.9 million with a valuation allowance of a corresponding amount as of July 2, 2011.

If the realization of deferred tax assets in the future is considered more likely than not, a reduction to the valuation allowance related to the deferred tax assets would increase net income in the period such determination is made. The amount of the deferred tax asset considered realizable is based on significant estimates, and it is possible that changes in these estimates could materially affect the financial condition and results of operations. Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss; changes to the valuation allowance; changes to federal or state tax laws; and as a result of acquisitions.

We generally believe that the positions taken on previously filed tax returns are more likely than not to be sustained by the taxing authorities. We have recorded income tax and related interest liabilities where we believe our position may not be sustained. Such amounts are disclosed in Note 5 in our Annual Report on Form 10-K for the year-ended January 1, 2011. There have been nominal changes to our tax positions during the first six months of fiscal 2011.

Impairment of Long-Lived Assets

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

We consider whether there were indicators of potential impairment on a quarterly basis. Indicators of impairment include current period losses combined with a history of losses, management’s decision to exit a facility, reductions in the fair market value of real properties and changes in other circumstances that indicate the carrying amount of an asset may not be recoverable.

Our evaluation of long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual distribution facility. In the event of indicators of impairment, the assets of the distribution facility are evaluated by comparing the facility’s undiscounted cash flows over the estimated useful life of the asset, which ranges between 5-40 years, to its carrying value. If the carrying value is greater than the undiscounted cash flows, an impairment loss is recognized for the difference between the carrying value of the asset and the estimated fair market value. Impairment losses are recorded as a component of “Selling, general and administrative” expenses in the Consolidated Statements of Operations.

Our estimate of undiscounted cash flows is subject to assumptions that affect estimated operating income at a distribution facility level. These assumptions are related to future sales, margin growth rates, economic conditions, market competition and inflation. In the event that undiscounted cash flows do not exceed the carrying value of a facility, our estimates of fair market value are generally based on market appraisals and our experience with related market transactions. We use a two year average of cash flows based on 2010 EBITDA and 2011 projected EBITDA, which includes a small growth factor assumption, to estimate undiscounted cash flows. These assumptions used to determine impairment are considered to be level 3 measurements in the fair value hierarchy as defined in Note 13 of the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2011.

Our results for the first six months of fiscal 2011 were negatively impacted by severe winter weather and a decrease in housing starts when compared to the first six months of fiscal 2010. The higher number of housing starts in the first six months of 2010 was due in part to the effect of the housing tax credit expiration which expired in April of 2010. The reductions in volume and operating income have not resulted in impairment indictors of a magnitude that would result in reductions to our January 1, 2011 projected undiscounted cash flows, which exceeded our carrying value in all cases during the performance of our January 1, 2011 impairment analysis.

During the first quarter of fiscal 2011 our Newtown, CT facility was damaged due to severe winter weather. As a result of this damage we recognized an impairment of approximately $1.0 million related to the damaged building, a loss related to the insurance deductible of $0.1 million and an insurance recovery of $1.0 million in selling, general and administrative expenses during the first quarter. During the second quarter of fiscal 2011 we recognized approximately $1.9 million of impairment related to damaged inventory and a corresponding insurance recovery of the same amount in selling, general and administrative expenses. The net impact to selling, general and administrative expenses for the six month period ended July 2, 2011 was a loss of $0.1 million, which represents the amount of our insurance deductible. We recorded the recovery of such losses at the time that the minimum expected proceeds under our insurance policy became probable and estimable.

Self-Insurance

It is our policy to self-insure, up to certain limits, traditional risks including workers’ compensation, comprehensive general liability, and auto liability. Our self-insured deductible for each claim involving workers’ compensation, comprehensive general liability (including product liability claims), and auto liability is limited to $0.8 million, $0.8 million, and $2.0 million, respectively. We are also self-insured up to certain limits for certain other insurable risks, primarily physical loss to property ($0.1 million per occurrence) and the majority of our medical benefit plans ($0.3 million per occurrence). Insurance coverage is maintained for catastrophic property and casualty exposures as well as those risks required to be insured by law or contract. A provision for claims under this self-insured program, based on our estimate of the aggregate liability for claims incurred, is revised and recorded annually. The estimate is derived from both internal and external sources including but not limited to actuarial estimates. The actuarial estimates are subject to uncertainty from various sources, including, among others, changes in claim reporting patterns, claim settlement patterns, judicial decisions, legislation, and economic conditions. Although, we believe that the actuarial estimates are reasonable, significant differences related to the items noted above could materially affect our self-insurance obligations, future expense and cash flow. At July 2, 2011 and January 1, 2011, the self-insurance reserves totaled $8.1 million and $7.6 million, respectively.

3. Restructuring Charges

We account for exit and disposal costs by recognizing a liability for costs associated with an exit or disposal activity at fair value in the period in which it is incurred or when the entity ceases using the right conveyed by a contract (i.e. the right to use a leased property). Our restructuring charges included accruals for estimated losses on facility costs based on our contractual obligations net of estimated sublease income based on current comparable market rates for leases. We reassess this liability periodically based on current market conditions. Revisions to our estimates of this liability could materially impact our operating results and financial position in future periods if anticipated events and key assumptions, such as the timing and amounts of sublease rental income, either do not materialize or change. These costs are included in “Selling, general, and administrative” expenses in the Consolidated Statements of Operations for the first six months of fiscal 2011 and the first six months of fiscal 2010, and “Other current liabilities” and “Other non-current liabilities” on the Consolidated Balance Sheets at July 2, 2011 and January 1, 2011.

We account for severance and outplacement costs by recognizing a liability for employees’ rights to post-employment benefits. These costs are included in “Selling, general, and administrative” expenses in the Consolidated Statements of Operations for the first six months of fiscal 2011 and the first six months of fiscal 2010, and in “Accrued compensation” on the Consolidated Balance Sheets for the periods ended July 2, 2011 and January 1, 2011.

2007 Facility Consolidation and Severance Costs

During fiscal 2007, we announced a plan to adjust our cost structure in order to manage our costs more effectively. The plan included the consolidation of our corporate headquarters and sales center to one building from two buildings and reduction in force initiatives which resulted in charges of $17.1 million during the fourth quarter of fiscal 2007. As of July 2, 2011 and January 1, 2011, there was no remaining accrued severance related to reduction in force initiatives completed in fiscal 2007.

The table below summarizes the balance of accrued facility consolidation reserve and changes in the accrual for the second quarter of fiscal 2011 (in thousands):

Balance at April 2, 2011		$	9,821
Payments			(537	)
Accretion of liability			132
Balance at July 2, 2011		$	9,416

The table below summarizes the balance of accrued facility consolidation reserve and changes in the accrual for the first six months of fiscal 2011 (in thousands):

Balance at January 1, 2011		$	10,227
Payments			(1,074	)
Accretion of liability			263
Balance at July 2, 2011		$	9,416

2008 Facility Consolidation and Severance Costs

During fiscal 2008, our board of directors approved a plan to exit our custom milling operations in California primarily due to the impact of unfavorable market conditions on that business. The closure of the custom milling facilities resulted in facility consolidation charges of $2.0 million and severance and outplacement costs of $1.0 million. In addition, we executed other reduction in force initiatives which resulted in $4.2 million of severance. At July 2, 2011 and January 1, 2011, there was no remaining severance reserve.

The table below summarizes the balance of accrued facility consolidation reserve and changes in the accrual for the second quarter of fiscal 2011 (in thousands):

Balance at April 2, 2011		$	40
Payments			(76	)
Sublease income			46
Balance at July 2, 2011		$	10

The table below summarizes the balance of accrued facility consolidation reserve and changes in the accrual for the first six months of fiscal 2011 (in thousands):

Balance at January 1, 2011		$	72
Payments			(152	)
Sublease income			90
Balance at July 2, 2011		$	10

2009 Facility Consolidations and Severance Costs

During fiscal 2009, we exited our BlueLinx Hardwoods facility in Austin, Texas to improve overall effectiveness and efficiency by consolidating these operations with our San Antonio and Houston branches. Our exit of the Austin facility resulted in a facility consolidation charge of $0.7 million. In May of 2011, we terminated the lease via a termination payment of $0.4 million. In addition, we recorded severance charges related to reduction in force initiatives of $1.8 million. There were no facility or severance reserves remaining as of July 2, 2011.

The table below summarizes the balances of the accrued facility consolidation and the changes in the accruals for the second quarter of fiscal 2011 (in thousands):

Balance at April 2, 2011		$	484
Assumption Changes			(99	)
Payments			(385	)
Balance at July 2, 2011		$	0

The table below summarizes the balances of the accrued facility consolidation and the changes in the accruals for the first six months of fiscal 2011 (in thousands):

Balance at January 1, 2011		$	523
Assumption Changes			(95	)
Payments			(428	)
Balance at July 2, 2011		$	0

2010 Severance Costs

During fiscal 2010, we had certain reduction in force activities, which resulted in severance charges of $1.1 million.

The table below summarizes the balances of the accrued severance reserves and the changes in the accruals for the second quarter of fiscal 2011 (in thousands):

Balance at April 2, 2011		$	486
Assumption Changes			(191	)
Payments			(103	)
Balance at July 2, 2011		$	192

The table below summarizes the balances of the accrued severance reserves and the changes in the accruals for the first six months of fiscal 2011 (in thousands):

Balance at January 1, 2011		$	777
Assumption Changes			(254	)
Payments			(331	)
Balance at July 2, 2011		$	192

2011 Severance Costs

During fiscal 2011, we had certain reduction in force activities, which resulted in severance charges of $0.5 million.

The table below summarizes the balances of the accrued severance reserves and the changes in the accruals for the second quarter of fiscal 2011 (in thousands):

Balance at April 2, 2011		$	21
Charges			345
Payments			(258	)
Balance at July 2, 2011		$	108

The table below summarizes the balances of the accrued severance reserves and the changes in the accruals for the first six months of fiscal 2011 (in thousands):

Balance at January 1, 2011		$	—
Charges			461
Payments			(353	)
Balance at July 2, 2011		$	108

4. Assets Held for Sale and Net Gain on Disposition

As part of our restructuring efforts to improve our cost structure and cash flow, we closed certain facilities and designated them as assets held for sale. At the time of designation, we ceased recognizing depreciation expense on these assets. As of July 2, 2011 and January 1, 2011, total assets held for sale were $2.2 million and $1.6 million respectively, and were included in “Other current assets” in our Consolidated Balance Sheets. During the first six months of fiscal 2011, we sold certain real properties held for sale that resulted in a $7.2 million gain recorded in “Selling, general, and administrative” expenses in the Consolidated Statements of Operations. All of this activity occurred during the first quarter of 2011. We continue to actively market the remaining properties that are held for sale. Due to the fact that, as of July 2, 2011 the remaining properties are all primarily land, depreciation expense is not materially impacted.

5. Comprehensive Loss

The calculation of comprehensive loss is as follows (in thousands):

		Second Quarter
		Period from				Period from
		April 3, 2011				April 4, 2010
		to				to
		July 2, 2011				July 3, 2010
Net loss		$	(9,781	)		$	(3,407	)
Other comprehensive (loss) income:
Foreign currency translation			54				(742	)
*Unrealized gain from cash flow hedge, net of taxes			—				324
Comprehensive loss		$	(9,727	)		$	(3,825	)

		Six Months Ended
		Period from				Period from
		January 2, 2011				January 3, 2010
		to				to
		July 2, 2011				July 3, 2010
Net loss		$	(22,107	)		$	(18,146	)
Other comprehensive income:
Foreign currency translation			351				345
*Unrealized gain from cash flow hedge, net of taxes			234				649
Comprehensive loss		$	(21,522	)		$	(17,152	)

6. Employee Benefits

Defined Benefit Pension Plans

Most of our hourly employees participate in noncontributory defined benefit pension plans. These include a plan that is administered solely by us (the “hourly pension plan”) and union-administered multiemployer plans. Our funding policy for the hourly pension plan is based on actuarial calculations and the applicable requirements of federal law. We are required to make a $3.3 million contribution to the hourly pension plan in fiscal 2011, all of which will be funded through a pre-funded balance. Benefits under the majority of plans for hourly employees (including multiemployer plans) are primarily related to years of service.

Net periodic pension cost for our pension plans included the following (in thousands):

		Second Quarter
		Period from April 3,				Period from April 4,
		2011 to July 2, 2011				2010 to July 3, 2010
Service cost		$	523			$	498
Interest cost on projected benefit obligation			1,152				1,186
Expected return on plan assets			(1,376	)			(1,232	)
Amortization of unrecognized loss			145				123
Net periodic pension cost		$	444			$	575

		Six Months Ended
		Period from January 2,				Period from January 3,
		2011 to July 2, 2011				2010 to July 3, 2010
Service cost		$	1,046			$	996
Interest cost on projected benefit obligation			2,304				2,372
Expected return on plan assets			(2,753	)			(2,464	)
Amortization of unrecognized loss			290				246
Net periodic pension cost		$	887			$	1,150

7. Revolving Credit Facility

As of July 2, 2011, we had outstanding borrowings of $188.9 million and excess availability of $94.0 million under the terms of our revolving credit facility. The interest rate on the revolving credit facility was 4.3% at July 2, 2011. As of July 2, 2011 and January 1, 2011, we had outstanding letters of credit totaling $2.5 million and $5.9 million, respectively, primarily for the purposes of securing collateral requirements under the interest rate swap (which was terminated in March of 2011), casualty insurance programs and for guaranteeing lease and certain other obligations.

On July 7, 2010, we reached an agreement with Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association, and the other signatories to our existing revolving credit facility, dated August 4, 2006, as amended, to amend the terms thereof. This amendment extends the date of final maturity of the facility to January 7, 2014 and decreases the maximum availability under the agreement from $500 million to $400 million. This decrease does not impact our current available borrowing capacity under the amended revolving credit facility since the borrowing base, which is based on eligible accounts receivable and inventory, currently permits less than $400 million in revolving credit facility borrowings. This amendment also includes an additional $100 million uncommitted accordion credit facility, which will permit us to increase the maximum borrowing capacity up to $500 million. As a result of reducing our maximum borrowing capacity from $500 million to $400 million, we recorded expense of $0.2 million in fiscal 2010 for the write-off of the old debt issuance costs associated with the reduction in borrowing capacity. We also incurred $6.5 million in new debt issuance costs, which we capitalized and will continue to amortize to interest expense over the renewed debt term.

As of July 2, 2011, under the amended agreement, our revolving credit facility contains customary negative covenants and restrictions for asset based loans. Our most significant covenant is a requirement that we maintain a fixed charge ratio of 1.1 to 1.0 in the event our excess availability falls below the greater of $40.0 million or the amount equal to 15% of the lesser of the borrowing base or $60.0 million (subject to increase to $75.0 million if we exercise the uncommitted accordion credit facility in full) (the “Excess Availability Threshold”). The fixed charge ratio is calculated as EBITDA divided by the sum of cash payments for income taxes, interest expense, cash dividends, principal payments on debt, and capital expenditures. EBITDA is defined as BlueLinx Corporation’s net income before interest and tax expense, depreciation and amortization expense, and other non-cash charges. The fixed charge ratio requirement only applies to us when excess availability under our amended revolving credit facility is less than the Excess Availability Threshold for three consecutive business days. As of July 2, 2011 and through the time of the filing of this Form 10-Q, we were in compliance with all covenants. We had $94.0 and $103.4 million of availability as of July 2, 2011 and January 1, 2011, respectively. Our lowest level of fiscal month end availability in the last three years was $94.0 million as of July 2, 2011. We do not anticipate our excess availability in fiscal 2011 will drop below the Excess Availability Threshold. Should our excess availability fall below the Excess Availability Threshold for more than three consecutive business days, however, we would not meet the required fixed charge ratio with our current operating results. In addition, we must maintain a springing lock-box arrangement where customer remittances go directly to a lock-box maintained by our lenders and then are forwarded to our general bank accounts. Our outstanding borrowings are not reduced by these payments unless our excess availability is less than the Excess Availability Threshold, excluding unrestricted cash, for three consecutive business days or in the event of default. Our amended revolving credit facility does not contain a subjective acceleration clause which would allow our lenders to accelerate the scheduled maturities of our debt or to cancel our agreement. On May 11, 2011, we entered into an amendment to our revolving credit facility that revises certain of the covenants described in this paragraph, which amendment became effective subsequent to the fiscal quarter ended July 2, 2011. Refer to Footnote 13, Subsequent Events for additional discussion of this amendment.

On June 24, 2011, we commenced a rights offering of our common stock to our stockholders, pursuant to which we distributed to our common stockholders transferable rights to subscribe for and purchase up to $60 million of our common stock. In conjunction with the rights offering, we entered into an investment agreement with Cerberus ABP Investor LLC, which beneficially owns approximately 55% of our common stock before giving effect to the rights offering, to backstop the rights offering, subject to certain conditions, by purchasing shares of common stock that related to any rights that remained unexercised at the expiration of the rights offering. The rights offering, which expired on July 22, 2011, was fully subscribed and resulted in gross proceeds of approximately $60 million. The majority of the gross proceeds from the rights offering of approximately $56 million were used to pay down the revolving credit facility. We accounted for the rights issued as a component of additional paid in capital as they were indexed to the Company’s equity and there were no net cash settlement provisions.

As of July 2, 2011, our current maturities of long-term debt related to the revolving credit facility totaled $110.6 million and $78.3 million, respectively. As indicated above, the majority of the proceeds from the rights offering were used to pay down a large portion of the revolving credit facility balance classified as current, subsequent to the fiscal quarter ended July 2, 2011. A payment on the revolving credit facility of $50.0 million was made on July 29, 2011 and an additional payment of $6.0 million was made on August 1, 2011. The remaining current maturities of long-term debt related to the revolving credit facility will be funded through seasonal working capital reductions.

We believe that amounts available from our revolving credit facility and other sources are sufficient to fund our routine operations and capital requirements for the next twelve months. If economic conditions, especially those related to the housing market, do not improve, we may need to seek additional sources of capital to support our operations.

8. Mortgage

On June 9, 2006, certain special purpose entities that are wholly-owned subsidiaries of ours entered into a $295 million mortgage loan with the German American Capital Corporation. The mortgage has a term of ten years and is secured by 55 distribution facilities and 1 office building owned by the special purpose entities. The stated interest rate on the mortgage is fixed at 6.35%. German American Capital Corporation assigned half of its interest in the mortgage loan to Wachovia Bank, National Association and both lenders securitized their Notes in separate commercial mortgage backed securities pools in 2006. Subsequent to the quarter ended July 2, 2011, an amendment to the above agreement was executed. Refer to Footnote 13 Subsequent Events for additional discussion of this amendment.

The mortgage loan requires interest-only payments through June 2011. The balance of the loan outstanding at the end of ten years will then become due and payable. The principal will be paid in the following increments (in thousands):

2011		$	39,572	*
2012			2,658
2013			2,881
2014			3,072
2015			3,018
Thereafter			234,211

Subsequent to the fiscal quarter ended July 2, 2011, we entered into an amendment to the mortgage as described below in Footnote 13 Subsequent Events.

9. Derivatives

We are exposed to risks such as changes in interest rates, commodity prices and foreign currency exchange rates. We employ a variety of practices to manage these risks, including 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 rates. We record derivative instruments as assets or liabilities on the balance sheet at fair value.

On June 12, 2006, we entered into an interest rate swap agreement with Goldman Sachs Capital Markets, to hedge against interest rate risks related to our variable rate revolving credit facility. The interest rate swap was terminated in March of 2011. The interest rate swap had a notional amount of $150.0 million and the terms called for us to receive interest monthly at a variable rate equal to the 30-day LIBOR and to pay interest monthly at a fixed rate of 5.4%. This interest rate swap was designated as a cash flow hedge.

During fiscal 2009, we reduced our borrowings under the revolving credit facility by $100.0 million, which reduced outstanding debt below the interest rate swap’s notional amount of $150.0 million, at which point the hedge became ineffective in offsetting future changes in expected cash flows during the remaining term of the interest rate swap. As a result, changes in the fair value of the instrument were recorded through earnings from the point in time that the revolving credit facility balance was reduced below the interest rate swap’s notional amount of $150.0 million, which was during the first quarter of fiscal 2009. The remaining accumulated other comprehensive income was amortized over the life of the interest rate swap to interest expense.

Changes associated with the ineffective interest rate swap recognized in the Consolidated Statements of Operations for the period from January 1, 2011 to July 2, 2011 was approximately $1.8 million of income and are comprised of amortization of the remaining accumulated other comprehensive loss of the ineffective swap of $0.4 million offset by income of $2.2 million related to reducing the fair value of the ineffective interest rate swap liability to zero. Due to the termination of the swap in the first quarter of 2011, there was no such activity for the quarter ended July 2, 2011. Changes associated with the ineffective interest rate swap recognized in the Consolidated Statements of Operations for the period from January 3, 2010 to July 3, 2010 were approximately $2.1 million of income and are comprised of amortization of the remaining accumulated other comprehensive loss over the life of the ineffective swap of $1.1 million offset by income of $3.1 million related to current year changes in the fair value of the ineffective interest rate swap liability. Changes associated with the ineffective interest rate swap recognized in the Consolidated Statements of Operations for the period April 4, 2010 to July 3, 2010 were approximately $1.3 million of income and are comprised of amortization of the remaining accumulated other comprehensive loss over the life of the ineffective swap of $0.5 million offset by income of $1.8 million related to current year changes in the fair value of the ineffective interest rate swap liability.

The following table presents a reconciliation of the unrealized losses related to our interest rate swap measured at fair value in accumulated other comprehensive loss as of July 2, 2011 (in thousands):

Balance at January 1, 2011		$	444
Amortization of accumulated other comprehensive loss recorded to interest expense			(444	)
Balance at July 2, 2011		$	—

The fair value of our swap liability at January 1, 2011 was $2.2 million.

10. Fair Value Measurements

We determine a fair value measurement based on the assumptions a market participant would use in pricing an asset or liability. The fair value measurement guidance established a three level hierarchy making a distinction between market participant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (Level 3).

We are exposed to market risks from changes in interest rates, which may affect our operating results and financial position. When deemed appropriate, we minimize our risks from interest rate fluctuations through the use of an interest rate swap. This derivative financial instrument is used to manage risk and is not used for trading or speculative purposes. The swap is valued using a valuation model that has inputs other than quoted market prices that are both observable and unobservable. The interest rate swap was terminated in March of fiscal 2011.

The following table presents a reconciliation of the level 3 interest rate swap liability measured at fair value on a recurring basis as of July 2, 2011 (in thousands):

Fair value at January 1, 2011		$	(2,195	)
Realized gains included in earnings, net			2,195
Fair value at July 2, 2011		$	—

The $2.2 million realized gain is included in “Changes associated with ineffective interest rate swap” in the Consolidated Statements of Operations for the six month period ended July 2, 2011.

Carrying amounts for our financial instruments are not significantly different from their fair value, with the exception of our mortgage. To determine the fair value of our mortgage, we used a discounted cash flow model. Assumptions critical to our fair value in the period were present value factors used in determining fair value and an interest rate. At July 2, 2011, the carrying value and fair value of our mortgage was $285.7 million and $276.7 million, respectively.

11. Related Party Transactions

Cerberus Capital Management, L.P., our equity sponsor, retains consultants that specialize in operations management and support and who provide Cerberus with consulting advice concerning portfolio companies in which funds and accounts managed by Cerberus or its affiliates have invested. From time to time, Cerberus makes the services of these consultants available to Cerberus portfolio companies. We believe that the terms of these consulting arrangements are favorable to us, or, alternatively, are materially consistent with those terms that would have been obtained by us in an arrangement with an unaffiliated third party. We have normal service, purchase and sales arrangements with other entities that are owned or controlled by Cerberus. We believe that these transactions are at arms’ length terms and are not material to our results of operations or financial position.

On April 26, 2011, we entered into an investment agreement with Cerberus ABP Investor LLC (“Cerberus”) in connection with our rights offering, which expired on July 22, 2011. Pursuant to the investment agreement, Cerberus agreed to purchase from us, unsubscribed shares of our common stock, after the other stockholders had exercised their basic subscription rights and over-subscription privileges in connection with the rights offering, such that gross proceeds of the rights offering would be no less than $60.0 million. The price per share paid by Cerberus for such common stock under the investment agreement was equal to the subscription price paid in the rights offering by all stockholders. As a result of the rights offering, Cerberus purchased only its pro rata share of the common stock issued in the rights offering.

12. Commitments and Contingencies

Legal Proceedings

During the first six months of fiscal 2011, there were no material changes to our previously disclosed legal proceedings. Additionally, we are, and from time to time may be, a party to routine legal proceedings incidental to the operation of our business. The outcome of any pending or threatened proceedings is not expected to have a material adverse effect on our financial condition, operating results or cash flows, based on our current understanding of the relevant facts. Legal expenses incurred related to these contingencies are generally expensed as incurred.

Environmental and Legal Matters

From time to time, we are involved in various proceedings incidental to our businesses and we are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate. Although the ultimate outcome of these proceedings cannot be determined with certainty, based on presently available information management believes that adequate reserves have been established for probable losses with respect thereto. Management further believes that the ultimate outcome of these matters could be material to operating results in any given quarter but will not have a materially adverse effect on our long-term financial condition, our results of operations, or our cash flows.

Collective Bargaining Agreements

As of July 2, 2011, approximately 30% of our total work force is covered by collective bargaining agreements. Collective bargaining agreements representing approximately 8% of our work force have expired or will expire within one year.

13. Subsequent Events

On May 10, 2011, we entered into an amendment to our revolving credit facility, which became effective on July 29, 2011, following the successful completion of the rights offering (see Footnote 7 Revolving Credit Facility for more information regarding the rights offering). The amendment to the revolving credit facility (i) reduced the excess liquidity we are required to maintain under the revolving credit facility to the greater of $35 million or the amount equal to 15% of the lesser of our borrowing base or $400 million, (ii) increased the amount of our accounts receivable included in the calculation of the borrowing base to 87.5%, (iii) increased the applicable percentage of the liquidation value of our inventory included in the calculation of the borrowing base to 90% for the periods January to March 2012 and January to March 2013, subject to specified EBITDA targets, (iv) included in the calculation of our excess liquidity certain cash on the balance sheet and subject to a deposit account control agreement, and (v) decreased the amount of excess liquidity we are required to maintain in order to avoid being required to meet certain financial ratios and triggering additional limits on capital expenditures under the revolving credit facility to the greater of $30 million or the amount equal to 15% of the lesser of our borrowing base or $400 million.

On July 14, 2011, we entered into an amendment to the mortgage which (i) eliminated the requirement to obtain lender approval for any transfer of equity interests that would reduce Cerberus ABP Investor LLC’s ownership in the Company and certain of our subsidiaries, directly or indirectly, to less than 51%, (ii) provided for the immediate prepayment of $38.3 million of the indebtedness under the mortgage without incurring a prepayment premium from funds currently held as collateral under the mortgage and, if certain conditions are met, will allow for an additional prepayment on or after July 30, 2014 from funds held as collateral without incurrence of a prepayment premium, (iii) allow us, at the lenders’ reasonable discretion, to use a portion of the cash held as collateral under the mortgage for specified alterations, repairs, replacements and other improvements to the mortgaged properties, and (iv) in the event certain financial conditions are met and the Company extends the Amended and Restated Master Lease by and among certain of our subsidiaries with respect to properties covered by the mortgage for an additional five years, we may request the lenders to disburse to the Company a portion of the cash held as collateral under the mortgage.

On July 22, 2011, the unexercised rights issued in connection with our rights offering, commenced on June 24, 2011, expired. As of that date, the rights offering was fully subscribed and, as a result, the backstop provisions with Cerberus, described in Footnote 7, were not utilized. We received cash proceeds of approximately $60 million, and issued 28.6 million shares of common stock on July 28, 2011. We used approximately $56 million of the gross proceeds from the rights offering to repay outstanding amounts under the revolving credit facility.

We are not aware of any other significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on our Consolidated Financial Statements.

14. Unaudited Supplemental Consolidating Financial Statements

The condensed consolidating financial information as of July 2, 2011 and January 1, 2011 and for the second quarters and first half of fiscal 2011 and fiscal 2010 is provided due to restrictions in our revolving credit facility that limit distributions by BlueLinx Corporation, our operating company and our wholly-owned subsidiary, to us, which, in turn, may limit our ability to pay dividends to holders of our common stock (see our Annual Report on Form 10-K for the year ended January 1, 2011, for a more detailed discussion of these restrictions and the terms of the facility). Also included in the supplemental condensed consolidated financial statements are sixty-two single member limited liability companies, which are wholly owned by us (the “LLC subsidiaries”). The LLC subsidiaries own certain warehouse properties that are occupied by BlueLinx Corporation, each under the terms of a master lease agreement. The warehouse properties collateralize a mortgage loan and are not available to satisfy the debts and other obligations of either us or BlueLinx Corporation.

The consolidating statement of operations for BlueLinx Holdings Inc. for the period from April 3, 2011 to July 2, 2011 follows (in thousands):

						BlueLinx
		BlueLinx				Corporation
		Holdings				and				LLC
		Inc.				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	500,810			$	7,429			$	(7,429	)		$	500,810
Cost of sales			—				443,165				—				—				443,165
Gross profit			—				57,645				7,429				(7,429	)			57,645
Operating expenses:
Selling, general and administrative			1,387				62,822				—				(7,429	)			56,780
Depreciation and amortization			—				1,663				961				—				2,624
Total operating expenses			1,387				64,485				961				(7,429	)			59,404
Operating (loss) income			(1,387	)			(6,840	)			6,468				—				(1,759	)
Non-operating expenses:
Interest expense			—				2,980				4,750				—				7,730
Changes associated with ineffective interest rate swap			—				—				—				—				—
Other (income) expense, net			—				133				1				—				134
(Loss) income before (benefit from) provision for income taxes			(1,387	)			(9,953	)			1,717				—				(9,623	)
(Benefit from) provision for income taxes			706				122				(670	)			—				158
Equity in loss of subsidiaries			(7,688	)			—				—				7,688				—
Net (loss) income		$	(9,781	)		$	(10,075	)		$	2,387			$	7,688			$	(9,781	)

The consolidating statement of operations for BlueLinx Holdings Inc. for the period from April 4, 2010 to July 3, 2010 follows (in thousands):

						BlueLinx
		BlueLinx				Corporation
		Holdings				and				LLC
		Inc.				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	540,781			$	7,456			$	(7,456	)		$	540,781
Cost of sales			—				476,662				—				—				476,662
Gross profit			—				64,119				7,456				(7,456	)			64,119
Operating expenses:
Selling, general and administrative			1,561				62,939				45				(7,456	)			57,089
Depreciation and amortization			—				2,473				961				—				3,434
Total operating expenses			1,561				65,412				1,006				(7,456	)			60,523
Operating (loss) income			(1,561	)			(1,293	)			6,450				—				3,596
Non-operating expenses:
Interest expense			—				3,447				4,758				—				8,205
Changes associated with ineffective interest rate swap			—				(1,256	)			—				—				(1,256	)
Other (income) expense, net			—				(48	)			66				—				18
(Loss) income before (benefit from) provision for income taxes			(1,561	)			(3,436	)			1,626				—				(3,371	)
(Benefit from) provision for income taxes			(630	)			32				634				—				36
Equity in loss of subsidiaries			(2,476	)			—				—				2,476				—
Net (loss) income		$	(3,407	)		$	(3,468	)		$	992			$	2,476			$	(3,407	)

The consolidating statement of operations for BlueLinx Holdings Inc. for the period from January 2, 2011 to July 2, 2011 follows (in thousands):

						BlueLinx
		BlueLinx				Corporation
		Holdings				and				LLC
		Inc.				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	891,414			$	14,857			$	(14,857	)		$	891,414
Cost of sales			—				787,500				—				—				787,500
Gross profit			—				103,914				14,857				(14,857	)			103,914
Operating expenses:
Selling, general and administrative			3,005				124,301				(7,222	)			(14,857	)			105,227
Depreciation and amortization			—				3,647				1,914				—				5,561
Total operating expenses			3,005				127,948				(5,308	)			(14,857	)			110,788
Operating (loss) income			(3,005	)			(24,034	)			20,165				—				(6,874	)
Non-operating expenses:
Interest expense			—				7,292				9,499				—				16,791
Changes associated with the ineffective interest rate swap			—				(1,751	)			—				—				(1,751	)
Other expense, net			—				155				(6	)			—				149
(Loss) income before (benefit from) provision for income taxes			(3,005	)			(29,730	)			10,672				—				(22,063	)
(Benefit from) provision for income taxes			(3,481	)			(637	)			4,162				—				44
Equity in loss of subsidiaries			(22,583	)			—				—				22,583				—
Net (loss) income		$	(22,107	)		$	(29,093	)		$	6,510			$	22,583			$	(22,107	)

The consolidating statement of operations for BlueLinx Holdings Inc. for the period from January 3, 2010 to July 3, 2010 follows (in thousands):

						BlueLinx
		BlueLinx				Corporation
		Holdings				and				LLC
		Inc.				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	971,831			$	14,912			$	(14,912	)		$	971,831
Cost of sales			—				855,434				—				—				855,434
Gross profit			—				116,397				14,912				(14,912	)			116,397
Operating expenses:
Selling, general and administrative			3,456				124,969				90				(14,912	)			113,603
Depreciation and amortization			—				5,257				1,921				—				7,178
Total operating expenses			3,456				130,226				2,011				(14,912	)			120,781
Operating (loss) income			(3,456	)			(13,829	)			12,901				—				(4,384	)
Non-operating expenses:
Interest expense			—				6,013				9,507				—				15,520
Changes associated with the ineffective interest rate swap			—				(2,061	)			—				—				(2,061	)
Other expense, net			—				214				37				—				251
(Loss) income before (benefit from) provision for income taxes			(3,456	)			(17,995	)			3,357				—				(18,094	)
(Benefit from) provision for income taxes			(1,318	)			61				1,309				—				52
Equity in loss of subsidiaries			(16,008	)			—				—				16,008				—
Net (loss) income		$	(18,146	)		$	(18,056	)		$	2,048			$	16,008			$	(18,146	)

The consolidating balance sheet for BlueLinx Holdings Inc. as of July 2, 2011 follows (in thousands):

						BlueLinx
		BlueLinx				Corporation				LLC
		Holdings Inc.				and Subsidiaries				Subsidiaries				Eliminations				Consolidated
Assets:
Current assets:
Cash		$	90			$	6,019			$	—			$	—			$	6,109
Receivables			—				205,735				—				—				205,735
Inventories			—				212,654				—				—				212,654
Deferred income tax assets			—				59				—				—				59
Other current assets			1,955				20,306				40,641				—				62,902
Intercompany receivable			59,169				10,287				2,637				(72,093	)			—
Total current assets			61,214				455,060				43,278				(72,093	)			487,459
Property and equipment:
Land and land improvements			—				3,021				48,947				—				51,968
Buildings			—				9,737				87,954				—				97,691
Machinery and equipment			—				74,495				—				—				74,495
Construction in progress			—				1,027				—				—				1,027
Property and equipment, at cost			—				88,280				136,901				—				225,181
Accumulated depreciation			—				(68,271	)			(27,714	)			—				(95,985	)
Property and equipment, net			—				20,009				109,187				—				129,196
Investment in subsidiaries			(67,763	)			—				—				67,763				—
Non-current deferred income tax assets			—				—				—				—				—
Other non-current assets			—				18,472				141				—				18,613
Total assets		$	(6,549	)		$	493,541			$	152,606			$	(4,330	)		$	635,268
Liabilities:
Current liabilities:
Accounts payable		$	203			$	95,119			$	—			$	—				95,322
Bank overdrafts			—				28,798				—				—				28,798
Accrued compensation			20				5,382				—				—				5,402
Current maturities of long-term debt			—				110,584				40,923				—				151,507
Other current liabilities			811				12,883				1,244				—				14,938
Intercompany payable			11,807				60,286				—				(72,093	)			—
Total current liabilities			12,841				313,052				42,167				(72,093	)			295,967
Non-current liabilities:
Long-term debt			—				78,326				244,746				—				323,072
Non-current deferred income tax liabilities			—				107				—				—				107
Other non-current liabilities			3				35,511				—				—				35,514
Total liabilities			12,844				426,996				286,913				(72,093	)			654,661
Stockholders’ (Deficit) Equity/Parent’s Investment			(19,393	)			66,545				(134,307	)			67,763				(19,392	)
Total liabilities and equity		$	(6,549	)		$	493,541			$	152,606			$	(4,330	)		$	635,268

The consolidating balance sheet for BlueLinx Holdings Inc. as of January 1, 2011 follows (in thousands):

						BlueLinx
		BlueLinx				Corporation				LLC
		Holdings Inc.				and Subsidiaries				Subsidiaries				Eliminations				Consolidated
Assets:
Current assets:
Cash		$	384			$	13,913			$	—			$	—			$	14,297
Receivables			—				119,202				—				—				119,202
Inventories			—				188,250				—				—				188,250
Deferred income tax assets, current			—				143				—				—				143
Other current assets			669				20,500				1,599				—				22,768
Intercompany receivable			57,208				8,759				—				(65,967	)			—
Total current assets			58,261				350,767				1,599				(65,967	)			344,660
Property and equipment:
Land and land improvements			—				3,027				49,513				—				52,540
Buildings			—				8,069				88,651				—				96,720
Machinery and equipment			—				70,860				—				—				70,860
Construction in progress			—				2,028				—				—				2,028
Property and equipment, at cost			—				83,984				138,164				—				222,148
Accumulated depreciation			—				(65,564	)			(26,953	)			—				(92,517	)
Property and equipment, net			—				18,420				111,211				—				129,631
Investment in subsidiaries			(47,943	)			—				—				47,943				—
Other non-current assets			—				19,602				31,126				—				50,728
Total assets		$	10,318			$	388,789			$	143,936			$	(18,024	)		$	525,019
Liabilities:
Current liabilities:
Accounts payable		$	59			$	62,768			$	—			$	—				62,827
Bank overdrafts			—				23,089				—				—				23,089
Accrued compensation			—				4,594				—				—				4,594
Current maturities of long-term debt			—				—				1,190				—				1,190
Other current liabilities			—				15,065				483				1,244				16,792
Intercompany payable			9,264				57,947				—				(67,211	)			—
Total current liabilities			9,323				163,463				1,673				(65,967	)			108,492
Non-current liabilities:
Long-term debt			—				97,200				284,479				—				381,679
Non-current deferred income tax liabilities			—				192				—				—				192
Other non-current liabilities			4				33,661				—				—				33,665
Total liabilities			9,327				294,516				286,152				(65,967	)			524,028
Stockholders’ Equity (Deficit)/Parent’s Investment			991				94,273				(142,216	)			47,943				991
Total liabilities and equity		$	10,318			$	388,789			$	143,936			$	(18,024	)		$	525,019