BlueLinx Holdings Inc.

Regulatory Filings • Aug 26, 2009

CORRESP 1 filename1.htm SEC CORRESPONDENCE / BLUELINX HOLDINGS INC PAGEBREAK

BlueLinx Holdings Inc. 4300 Wildwood Parkway Atlanta, GA 30338

August 26, 2009

VIA EDGAR CORRESPONDENCE United States Securities & Exchange Commission 100 F Street, NE Mail Stop 4631 Washington, D.C. 20549

Attn: Mr. Rufus Decker, Accounting Branch Chief

RE: BlueLinx Holdings, Inc. Form 10-K for Fiscal Year Ended January 3, 2009 Form 10-Q for Fiscal Quarter Ended April 4, 2009 Definitive Proxy Statement filed April 16, 2009 File No. 1-32383

Dear Mr. Decker:

On behalf of BlueLinx Holdings Inc. (“we”, “our”, “us” or the “Company”), this letter responds to the comments of the Staff of the Commission to the above referenced filings, as set forth in your letter dated July 30, 2009. Each of the Company’s responses is set forth immediately below the text of the correlative Staff comment.

Form 10-K for the Year Ended January 3, 2009

	General
1.	Where a comment below requests additional disclosures or other revisions to be made, these
revisions should be included in your future filings, including your interim filings if
applicable.
	The Company acknowledges the foregoing comment and will make in its future filings, including
interim filings, such additional disclosures or other revisions, as applicable, as are required
to address the Staff’s comments below.
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operation, Page 22
	Results of Operations, page 25 Fiscal 2008 Compared to Fiscal 2007, page 25

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1. Please expand/revise your discussion under results of operations for all periods to:

• Fully address changes in costs of sales underlying your principal product lines. If these product lines have materially different gross profits, ensure your discussion of cost of sales adequately addresses this fact. Please also quantify factors affecting gross profit where practical. For example, you indicate that the increase in gross margin percentage is primarily attributable to an increase in certain structural metal prices earlier in the year and a shift in product mix from structural to higher margin specialty products. However, you have not quantified the impact of each factor identified; and

• Quantify each factor you cite as impacting your operations. For example, you disclose the decrease in selling, general and administrative expenses is due to the continued efforts to reduce ongoing annual operating expenses resulting in reduced payroll, commissions and other operating expenses. However, you have not quantified the impact of each item.

| Note that this is not meant to represent an all-inclusive list of where your MD&A should be
improved. We encourage you to provide quantification of amounts and further clarification
throughout your discussion, including your results by segment. See Item 303(a)(3) of
Regulation S-K. |
| --- |
| The Company will include detail regarding “product lines” that have materially different gross
profits when shifts in product mix have had an effect on gross margin. The Company will also
disclose other factors affecting gross margin in its future periodic filings when applicable. |
| In response to the Staff’s comments, the Company has included the following disclosures in the
Results of Operations section of MD&A in its Form 10-Q for the second quarter of 2009, filed
with the SEC on August 11, 2009, and will include comparable disclosures in future annual and
interim filings: |
| “Gross Profit. Gross profit for the first six months of fiscal 2009 was $92.6 million, or 11.1%
of sales, compared to $185.2 million, or 11.9% of sales, in the prior year period. The decrease
in gross profit dollars compared to the first six months of fiscal 2008 was driven primarily by
a decrease in specialty and structural product volumes of 37.9% and 48.5%, respectively, due to
the ongoing slowdown in the housing market. Gross margin for the first six months of fiscal
2008 benefited from a 19.2% increase in structural metal product prices. |
| Selling, General, and Administrative Expenses. Selling, general and administrative expenses for
the first six months of fiscal 2009 were $108.5 million, or 13.1% of net sales, compared to
$161.9 million, or 10.4% of net sales, during the first six months of fiscal 2008. The decline
in selling, general, and administrative expenses was primarily due to a $30.8 million decrease
in payroll and payroll related cost due to a 22% decrease in headcount and a $4.2 million gain
associated with the sale of certain real properties. In addition, there was a $19.1 million
decrease in other operating expenses as a result of our cost reduction initiatives, which have
resulted in additional savings in certain expenses, such as marketing, general maintenance and
traveling and entertainment. |
| Net Gain From Terminating the Georgia-Pacific Supply Agreement. During the first six months of
fiscal 2009, G-P agreed to pay us $18.8 million in exchange for our agreement to enter into the
Modification Agreement one-year earlier than the originally agreed upon May 7, 2010 termination
date of the Supply Agreement. As a result of the termination, we recognized a net gain of $17.4
million in the second quarter of fiscal 2009 as a reduction to operating expense. The gain was
net of a discount of $0.4 million and a $1.0 million write-off of an intangible asset associated
with the Supply Agreement. |

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| | Interest Expense, net. Interest expense totaled $16.6 million, down $2.1 million from the prior
year
because of the $94.0 million decrease in debt. Interest expense related to our revolving credit
facility and mortgage was $5.5 million and $9.9 million (includes the $0.6 million prepayment
penalty), respectively, during this period. Interest expense totaled $18.7 million for the first
six months of fiscal 2008. Interest expense related to our revolving credit facility and
mortgage was $8.1 million and $9.4 million, respectively, during this period. In addition,
interest expense included $1.2 million of debt issue cost amortization for the first six months
of fiscal 2009 and for the first six months of fiscal 2008, respectively.” |
| --- | --- |
| | Liquidity and Capital Resources, page 27 |
| | Working Capital, page 28 |
| 3. | You indicate that the $150 million of cash on your balance sheet at January 3, 2009 primarily
reflects cash generated due to reductions in working capital and customer remittances received
in your lockboxes on Friday and Saturday that are not available until the next Monday. Please
tell us what consideration you gave to EITF 95-22 regarding your lockbox arrangements. Please
revise your disclosure to discuss whether your lockbox arrangement has a subjective
acceleration clause. |
| | The Company is not subject to a subjective acceleration clause. However, our revolving debt
agreement does include an objective acceleration clause that calls for outstanding borrowings to
be reduced by customer remittances maintained in our lockboxes when our excess availability is
below $40 million for three consecutive business days. The Company had $184 million and $192
million of excess availability as of July 4, 2009 and January 3, 2009, respectively. In the
previous three years, our lowest level of excess availability was $180 million as of April 4,
2009. |
| | In response to the Staff’s comments, the Company has included the following disclosure in Note
7 of our Notes to Condensed Consolidated Financial Statements in the Form 10-Q for the second
quarter of 2009, filed with the SEC on August 11, 2009, and will include comparable disclosure
in future annual and interim filings: |
| | “Under our revolving credit facility agreement, we are required to maintain a springing
lock-box arrangement where customer remittances go directly to a lock-box maintained by our
lenders and then are forwarded to our general bank accounts. Our outstanding borrowings are
not reduced by these payments unless our excess availability is less than $40.0 million for
three consecutive business days or in the event of default. Our revolving credit facility
does not contain a subjective acceleration clause which would allow our lenders to accelerate
the scheduled maturities of our debt or to cancel our agreement.” |
| | Operating Activities, page 28 |
| 4. | Please enhance your disclosure to discuss all material changes in your operating activities
as depicted in your statement of cash flows. For example, you should expand upon your
disclosure to discuss in greater detail that “cash flows from operations related to working
capital, of $213 million reflected decreases in accounts receivable and a reduction in
inventory partially offset by a contribution to the hourly pension plan of $7.5 Million...”
Specifically, you should discuss in greater detail the changes in your working capital
accounts such as inventory, accounts receivable, and accounts payable and provide a more
robust explanation of the reasons for those changes. |
| | In response to the Staff’s comments, the Company has included the following disclosures in the
Liquidity and Capital Resources section of MD&A under the “Operating Activities” caption in the
Form 10-Q for the second quarter of 2009, filed with the SEC on August 11, 2009, and will
include
comparable disclosure in future annual and interim filings: |

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| “During the first six months of fiscal 2009, cash flows used in operating activities totaled
$12.8 million. The primary driver of cash flows used in operations was a net loss, as adjusted
for non-cash charges of $29.3 million and a $30.1 million increase in receivables due to an
increase in average payment terms, primarily related to an increase in our warehouse sales,
which typically have longer terms than reload or direct sales. These cash outflows were offset
by an increase in cash flow from operations related to reductions in inventory of $26.9 million
due to our initiative to reduce inventory levels to increase cash on hand and an increase in
accounts payable of $26.6 million due to the seasonality of our business. |
| --- |
| During the first six months of fiscal 2008, cash flows provided by operating activities totaled
$30.8 million. The primary driver of cash flow from operations was an increase in cash flow
from operations related to decreases in inventories of $20.5 million due to our initiatives to
reduce inventory levels to increase cash on hand and increases in accounts payable and other
current liabilities of $33.0 million due to the seasonality of our business. In addition, net
income, as adjusted, for non-cash charges of $5.5 million contributed to an increase in cash
flow provided by operating activities. These cash inflows were offset by increases in
receivables of $31.9 million due to the seasonality of our business.” |

Debt and Credit Sources, page 29

| 5. |
| --- |
| Our revolving credit agreement contains one material covenant and we do not believe any of the
covenants in our mortgage agreement are material. The material covenant in our revolving credit
agreement is a fixed charge ratio requirement discussed in the proposed note disclosure below.
However, the fixed charge ratio covenant only applies if our availability under the revolving
credit facility falls below $40 million for 3 consecutive business days. Our excess
availability as of July 4, 2009 was $184 million. Our lowest level of availability under
the revolving credit facility in the past three years was $180 million as of April 4, 2009. We do not anticipate our excess
availability will fall below $40 million in the future. Therefore, the requirement to maintain
a fixed charge ratio of 1.1 to 1.0 is currently not applicable. |
| In response to the Staff’s comments, the Company has included the following disclosure,
substantially in the form below, in the Liquidity and Capital Resources section of MD&A under
the “Debt and Credit Sources” caption in the Form 10-Q for the second quarter of 2009, filed
with the SEC on August 11, 2009, and will include comparable disclosures in future annual and
interim filings: |

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| | “As of July 4, 2009, we had outstanding borrowings of $81.0 million and excess availability of
$184 million under the terms of our revolving credit facility. Based on borrowing base
limitations, we classify the lowest projected balance under the credit facility over the next
twelve months of $56.0 million as long-term debt. As of July 4, 2009 and January 3, 2009, we had
outstanding letters of credit totaling $13.6 million and $12.9 million, respectively, primarily
for the purposes of securing collateral requirements under the casualty insurance programs for us
and for guaranteeing payment of international purchases based on the fulfillment of certain
conditions. Our revolving credit facility contains customary negative covenants and restrictions
for asset based loans. The only covenant we deem material is a requirement that we maintain a
fixed charge ratio of 1.1 to 1.0 in the event our excess availability under the revolving credit
facility falls below $40.0 million. The fixed charge ratio is calculated as EBITDA over the sum
of cash payments for income taxes, interest expense, cash dividends, principal payments on debt,
and capital expenditures. EBITDA is defined as BlueLinx Corporation’s net income before interest
and tax expense, depreciation and amortization expense, and other non-cash charges. The Company
had $184 million and $192 million of availability as of July 4, 2009 and January 3, 2009,
respectively. Our lowest level of availability in the last three years is $180 million as of
April 4, 2009. We do not anticipate our excess availability will drop below $40 million in the
foreseeable future.” |
| --- | --- |
| | Critical Accounting Policies, page 31 Impairment of Long-Lived Assets, page 33 |
| 6. | In the interest of providing readers with a better insight into management’s judgments in
accounting for long-lived assets, please disclose the following: |

| • | How you determine when your long-lived assets should be tested for impairment,
including what types of events and circumstances indicate impairment, and how frequently
you evaluate for these types of events and circumstances; |
| --- | --- |
| • | How you group long-lived assets for impairment and your basis for that determination; |
| • | Sufficient information to enable a reader to understand how you apply your discounted
expected future cash flow model in estimating the fair value of your asset groups; |
| • | Expand your discussion of the significant estimates and assumptions used to determine
internal cash flow estimates and fair value. You should discuss how sensitive the fair
value estimates are to each of these significant estimates and assumptions and whether
certain estimates and assumptions are more subjective than others; |
| • | If applicable, how the assumptions and methodologies used for valuing property, plant
and equipment and intangible assets with definite useful lives in the current year have
changed since the prior year, highlighting the impact of any changes; and |
| • | For any asset groups for which the carrying value was close to the fair value, please
disclose the carrying value of the asset groups. |

We caution you that, to the extent you gather and analyze information regarding the risks of recoverability of your assets, such information may be required to be disclosed if it would be material and useful to investors. We believe that it is important to provide investors with information to help

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them evaluate the current assumptions underlying your impairment assessment relative to your current market conditions and your peers to enable them to attempt to assess the likelihood of potential future impairments. We believe that detailed rather than general disclosures regarding these risks and exposures would provide investors with the appropriate information to make this evaluation. In this regard, we urge you to consider what additional quantitative disclosures can be provided to convey the risk that additional impairment or restructuring charges may be recorded.

| The Company’s total amount of intangible assets is
$1.6 million which the Company considers
immaterial. Therefore, the impairment discussion below is related to property and equipment.
The Company’s previous impairment charges resulted from management’s decisions to exit certain
facilities or businesses. Prior to the decision to exit each facility or business there were
no impaired assets. |
| --- |
| In response to the Staff’s comments, the Company has included the following disclosures,
substantially in the form below, in the Critical Accounting Policies section of MD&A under the
“Impairment of Long Lived Assets” caption in the Form 10-Q for the second quarter of 2009,
filed with the SEC on August 11, 2009, and will include comparable disclosure in future annual
and interim filings: |
| “Under Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” (“SFAS 144”), long-lived assets, including property and
equipment and intangible assets with definite useful lives, are reviewed for possible
impairment whenever events or circumstances indicate that the carrying amount of an asset may
not be recoverable. |
| We evaluate our long-lived assets each quarter for indicators of potential impairment.
Indicators of impairment include current period losses combined with a history of losses,
management’s decision to exit a facility, reductions in the fair market value of real
properties and changes in other circumstances that indicate the carrying amount of an asset
may not be recoverable. |
| Our evaluation of long-lived assets is performed at the lowest level of identifiable cash
flows, which is generally the individual distribution facility. In the event of indicators of
impairment, the assets of the distribution facility are evaluated by comparing the facility’s
undiscounted cash flows over the estimated remaining useful life of the asset, which ranges
between 5-20 years, to its carrying value. If the carrying value is greater than the
undiscounted cash flows, an impairment loss is recognized for the difference between the
carrying value of the asset and the estimated fair market value. Impairment losses are
recorded as a component of “Selling, general and administrative” in the Consolidated
Statements of Operations. |
| Our estimate of undiscounted cash flows is subject to assumptions that affect estimated
operating income at a distribution facility level. These assumptions are related to future
sales, margin growth rates, economic conditions, market competition and inflation. Our
estimates of fair market value are generally based on market appraisals and our experience
with related market transactions. We use a historical average of income, with no growth
factor assumption, to estimate undiscounted cash flows. These assumptions used to determine
impairment are considered to be level 3 measurements in the fair value hierarchy as defined in
Note 10 in our Annual Report on Form 10-K for the year ended January 3, 2009. |
| Currently, we are experiencing a reduction in operating income at the distribution facility
level due to the ongoing downturn in the housing market. To the extent that reductions in
volume and operating income have resulted in impairment indicators, in most cases our carrying
values continue to be less than our projected undiscounted cash flows. We had approximately
$24.0 million, out of $152.8 million of net book value as of January 3, 2009, in fixed assets
for which the |

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undiscounted cash flows were less than the carrying values of the assets. The fair value of these assets, primarily real estate, exceeded the carrying value by approximately $23.8 million. As such, we have not identified significant known trends impacting the fair value of long-lived assets to an extent that would indicate impairment.”

Financial Statements

Statements of Operations and Comprehensive (Loss) Income, page 44

| 7. |
| --- |
| The Company is a distribution company and does not engage in any substantial production or
manufacturing activities. Therefore, the majority of depreciation and amortization is not a
direct component of cost of sales. However, there are some products that the Company makes
certain modifications to prior to sale and the Company allocates labor and overhead to
inventory related to those activities excluding immaterial amounts of depreciation associated
with the equipment used to make the modification. For the six month and current period ended
July 4, 2009 and January 3, 2009, depreciation that could be allocated to inventory was
$217,000 and $504,000, respectively. We have included all material charges directly or
indirectly incurred in bringing inventory to its existing condition and location as dictated
under Accounting Research Bulleting No. 43. Therefore, we believe the presentation of gross
margin to be appropriate. |
| In response to the Staff’s comments, the Company has included the following disclosure,
substantially in the form below, in Note 2 of the Notes to Condensed Consolidated Financial
Statements under the “Inventory Valuation” caption in Form 10-Q for the second quarter of
2009, filed with the SEC on August 11, 2009, and will include comparable disclosure in future
annual and interim filings: |
| “We have included all material charges directly or indirectly incurred in bringing inventory to
its existing condition and location.” |

1. Summary of Significant Accounting Policies, page 48

Restricted Cash, page 48

| 8. |
| --- |
| We have evaluated the classification of amounts held in escrow, considering Statement of
Financial Accounting Standards No. 95, Statement of Cash Flows, (“SFAS 95”). In doing so, we
considered the nature of the items to which the restricted cash
relates, including amounts held
in escrow related to our interest rate swap and certain insurance and reserve requirements
related to our mortgage. Relative to the interest rate swap, we determined that the arrangement,
which is not a requirement of our debt facility, represents an instrument entered into by the
Company from an operational perspective, in order to hedge our cash flows. We concluded that,
from the perspective of the |

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| guidance of SFAS No. 95, such instrument is not clearly and closely linked to the debt facility,
in that it remains in place regardless of principal payments made to reduce, or additional
amounts borrowed on our revolving line of credit. Given the purpose and nature of the swap
arrangement, which relates to a significant portion of the escrowed cash, we determined that the
change in such cash was appropriately reflected in operating cash flows. The FASB staff has
addressed the issue of cash flows associated with derivatives that are not directly addressed by
Statement of Financial Standards Board No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities , as financing activities by stating that such cash flows are
not necessarily either exclusively investing activities or operating activities. The FASB staff
has acknowledged that the nature of the use of the derivative must be evaluated to determine
classification. Additionally, we concluded that the portion of the restricted cash
attributable to insurance represent operational activities of the business which will be paid
out over the next year, and therefore changes to this portion of our restricted cash balances
are also associated with operations. |
| --- |
| Relative to the cash held in escrow associated with our mortgage, we considered the
classification of such amount as a financing activity versus the potential for confusion created
by disparate classifications of the aforementioned components of restricted cash. We determined
that the benefit of separate classification of portions of restricted cash in the statement of
cash flows did not outweigh the potential confusion that such treatment might create to the
users of our financial statements. We determined that, given the size of the restricted cash
held in escrow related to the mortgage, as compared to the entire restricted cash balance, and
total cash flows from operations presented in our Form 10-K for the year ended January 3, 2009,
that reclassification of such amount, which would serve to increase our cash flows from
operations, was not required as the amount is not material. |
| In response to the Staff’s comments, the Company has included the following disclosures in
Note 2 of the Notes to Condensed Consolidated Financial Statements under the “Restricted Cash”
caption in the Form 10-Q for the second quarter of 2009 , filed with the SEC on August 11,
2009 and will include comparable disclosure in future annual and interim filings: |
| “We had restricted cash of $29.0 million and $25.5 million at July 4, 2009 and January 3,
2009, respectively. Restricted cash primarily includes amounts held in escrow related to our
interest rate swap and mortgage. Restricted cash is included in “Other current assets” and
“Other non-current assets” in the accompanying Condensed Consolidated Balance Sheets. |
| The table below provides the balances of each individual component in restricted cash as of
July 4, 2009 and January 3, 2009 (in thousands):” |

	At July 4,	At January 3,
	2009	2009
Cash in escrow:
Interest rate swap	$ 10,920	$ 13,590
Mortgage	16,661	10,303
Other	1,429	1,626
Total	$ 29,010	$ 25,519

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	Revenue Recognition, page 49
9.	We note, as indicated on page 5 of your filing, that direct sales are shipped from the
manufacturer to the customer without your taking physical inventory possession. Please expand
your discussion of EITF 99-19 to address these sales, with specific reference as to whether
you take title to direct sales inventory.
	The Company has evaluated direct sales and recorded revenue on a gross basis considering the
guidance of EITF 99-19. We considered the following factors:

| • | 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. |
| • | We are responsible for product returns. |
| • | We control the selling price. |
| • | We select the supplier. |
| • | We bear all credit risk. |

| In response to the Staff’s comments, the Company has included the following disclosures in the
Critical Accounting Policies section of the MD&A under the “Revenue Recognition” caption in
the Form 10-Q for the second quarter of 2009, filed with the SEC on August 11, 2009, and will
include comparable disclosure in future annual and interim filings: |
| --- |
| “We recognize revenue when the following criteria are met: persuasive evidence of an
agreement exists, delivery has occurred or services have been rendered, our price to the
buyer is fixed and determinable and collectibility is reasonably assured. Delivery is not
considered to have occurred until the customer takes title and assumes the risks and
rewards of ownership. The timing of revenue recognition is largely dependent on shipping
terms. Revenue is recorded at the time of shipment for terms designated as FOB (free on
board) shipping point. For sales transactions designated FOB destination, revenue is
recorded when the product is delivered to the customer’s delivery site. |
| All revenues are recorded at gross in accordance with the guidance outlined by Emerging Issues
Task Force No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent”, (“EITF
99-19”) and in accordance with standard industry practice. The key indicators used to
determine this are as follows: |

| • | We are the primary obligor responsible for fulfillment and all other aspects of
the customer relationship. |
| --- | --- |
| • | Title passes to BlueLinx and we carry all risk of loss related to warehouse,
reload 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. |

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.”

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Inventory Valuation, page 50

| 10. |
| --- |
| We have certain goods that are carried by our customers on a consignment basis.
Consignment customers report consumption to us as inventory is depleted on a weekly basis
and as the goods are consumed we recognize revenue weekly on a gross basis. We recognize
revenue on a gross basis as we are the primary obligor responsible for all aspects of the
customer relationship. |
| In response to the Staff’s comments, the Company has included the following disclosures in
Critical Accounting Policies section of MD&A under the “Revenue Recognition” caption in the
Form 10-Q for the second quarter of 2009, filed with the SEC on August 11, 2009, and will
include comparable disclosure in future annual and interim filings: |
| “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. Once the inventory is sold by the
customer, we recognize revenue. We record revenue on a gross basis due to the guidance outlined
above relative to EITF 99-19.” |

Restructuring Charges, page 52

| 11. |
| --- |
| In response to the Staff’s comments below, the Company has included separate tables for each
discrete restructuring event in Note 3 of the Notes to Condensed Consolidated Financial
Statements in the Form 10-Q for the second quarter of 2009, filed with the SEC on August 11,
2009, and will include such disclosures in substantially the same form in future annual and
interim filings: |
| “We account for exit and disposal costs in accordance with Statement of Financial
Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal
Activities” (“SFAS 146”), which requires that a liability be recognized for a cost 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 will reassess this liability periodically based on
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 and “Other current liabilities” and
“Other non-current liabilities” on the Consolidated Balance Sheets at July 4, 2009 and January
3, 2009. |

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| We account for severance and outplacement costs in accordance with Statement of Financial
Accounting Standards No. 112, “Employers’ Accounting for Postemployment Benefits-an amendment
to FASB Statements No. 5 and 43” (“SFAS 112”). These costs were included in “Selling, general,
and administrative” expenses in the Consolidated Statements of Operations and in “Accrued
Compensation” on the Consolidated Balance Sheets at July 4, 2009 and January 3, 2009. |
| --- |
| 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. Since the
inception of this plan, we recorded an additional charge of $2.4 million related to an
assumption change related to an increase to the anticipated time required to sublease the
vacated headquarters’ building during the fourth quarter of fiscal 2008. As of July 4, 2009
and January 3, 2009, 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 the
changes in the accrual for the second quarter ended July 4, 2009 (in thousands): |

Balance at April 4, 2009	$
Charges	—
Payments	(530	)
Accretion of discount used to calculate liability	154
Balance at July 4, 2009	$ 11,656

The table below summarizes the balance of accrued facility consolidation reserve and the changes in the accrual for the six months ended July 4, 2009 (in thousands):

Balance at January 3, 2009	$
Charges	—
Payments	(1,066	)
Accretion of discount used to calculate liability	382
Balance at July 4, 2009	$ 11,656

| 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 during fiscal 2008. In addition, we recorded severance and
outplacement costs of $1.0 million in connection with involuntary terminations at our custom
milling facilities and $4.2 million related from reduction in force initiatives. At January
3, 2009, our severance reserve totaled $0.5 million. As of July 4, 2009, all amounts related
to these activities were paid. |
| During the second quarter of fiscal 2009, we modified certain assumptions related to
sublease income that resulted in a reduction to the reserve of approximately $0.3 million. |
| The table below summarizes the balance of accrued facility consolidation reserve and the
changes in the accrual for the second quarter ended July 4, 2009 (in thousands): |

	Facility — Consolidation	Costs		Total
Balance at January 3, 2009	$ 1,535	$	111	$	1,646
Assumption changes	(254	)	—		(254	)
Payments	(282	)	(34	)	(316	)
Accretion of discount used to calculate liability	31		—		31
Balance at July 4, 2009	$ 1,030	$	77	$	1,107

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The table below summarizes the balances of the accrued facility consolidation and severance reserves and the changes in the accruals as of and for the six months ended July 4, 2009 (in thousands):

	Facility — Consolidation	Costs		Total
Balance at January 3, 2009	$ 1,792	$	512	$	2,304
Assumption changes	(254	)	—		(254	)
Payments	(567	)	(435	)	(1,002	)
Accretion of discount used to calculate liability	59		—		59
Balance at July 4, 2009	$ 1,030	$	77	$	1,107

| 2009 Facility Consolidations and Severance |
| --- |
| During the second quarter of fiscal 2009, we exited our BlueLinx Hardwoods facility in
Austin Texas to improve overall effectiveness and efficiency by transferring operations to our
San Antonio and Houston branches. The result of exiting our Austin facility resulted in
charges of $0.7 million. In addition, we recorded severance charges related to reduction in
force initiatives of $1.4 million. |
| The table below summarizes the balances of the accrued facility consolidation and
severance reserves and the changes in the accrual for the second quarter ended July 4, 2009
(in thousands): |

	Facility — Consolidation	Severance — Costs	Total
Balance at April 4, 2009	$ —	$ 644	$	644
Charges	731	343		1,074
Payments	—	(907	)	(907	)
Accretion of discount used to calculate liability	—	—		—
Balance at July 4, 2009	$ 731	$ 80	$	811

The table below summarizes the balances of the accrued facility consolidation and severance reserves and the changes in the accrual for the six months ended July 4, 2009 (in thousands):”

	Facility — Consolidation	Severance — Costs	Total
Balance at January 3, 2009	$ —	$ —	$	—
Charges	731	1,422		2,153
Payments	—	(1,342	)	(1,342	)
Accretion of discount used to calculate liability	—	—		—
Balance at July 4, 2009	$ 731	$ 80	$	811

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	12. Commitments and Contingencies, page 74 Self-Insurance, page 74
12.	Please disclose your excess loss limits associated with each risk you are self-insured for,
including but not limited to workers’ compensation, comprehensive general liability and auto
liability. Please also disclose each risk for which you do not have excess loss limits.
Please similarly revise your disclosures elsewhere in the filing.
	In response to the Staff’s comments, the Company has included the following disclosures in Note 2
of the Notes to Condensed Consolidated Financial Statements under the “Self-Insurance” caption in
the Form 10-Q for the second quarter of 2009, filed with the SEC on August 11, 2009, and will
include comparable disclosure in future annual and interim filings:
	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, $1.0 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). 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 4, 2009 and January 3, 2009,
the self-insurance reserves totaled $9.1 million and $8.9 million, respectively.
	14. Unaudited Selected Quarterly Financial Data. page 76
13.	Your quarterly data table should discuss material non-recurring quarterly adjustments, such
as impairments or restructuring charges. Please revise your quarterly data to include
disclosures required by Item 302(A)(3) of Regulation S-K.
	The Company proposes to revise its quarterly data to include disclosures in substantially the form
as presented on attached Exhibit 1 in our Form 10-K filing for fiscal 2009.
	15. Supplemental Condensed Consolidation Financial Statements, page 77
14.	Your January 3, 2009 and December 29, 2007 condensed consolidating balance sheet reflects
material intercompany receivable and intercompany payable. Please tell us how you determined
that changes in intercompany receivables/payables should be classified as operating
activities instead of financing activities. The guidance in paragraph 18 and 136 of SEAS 95
regarding the classification of intercompany advances may be relevant.
	We considered the transactions that created the intercompany receivable/payable balances and the
guidance under Statement of Financial Accounting Standard No. 95, Statement of Cash Flows , (“FAS
95”) in determining the presentation within the consolidating cash flows. BlueLinx Corporation
(the “Operating Company”) paid certain dividends to the Company and certain loans were made from
the Company to the Operating Company in fiscal years 2008 and 2009. In addition certain
repayments of the loan were made by the Operating Company to the Company in each period. The
Company inadvertently classified these activities as operating activities in Note 15 of the Notes
to the Consolidated Financial Statement in our fiscal year 2008 Form 10-K and Note 14 of the Notes
to the Condensed Consolidated Financial Statements in our Form 10-Q
for the first fiscal quarter of 2009. The Company has determined that these items
meet the definition of financing activities under FAS 95. The misclassification in each of the
Notes did not materially affect any cash flow caption in the consolidated financial statements due
to the fact that the

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| | transactions eliminate between consolidating entities. The Company will prospectively adjust the
classification within the consolidating schedules and has made the corresponding reclassification
to the presentation in Note 16 in the Note to our Condensed Consolidated Financial Statements in
our Form 10-Q filing for the second quarter of 2009, filed with the SEC on August 11, 2009. The
misclassification does not have any impact on consolidated debt. |
| --- | --- |
| | The remaining transactions primarily relate to operating lease transactions between the Company
and the Operating Company. The Company’s balance sheet contains all of the real estate associated
with our Mortgage, which is primarily our warehouses and related property. The Operating Company
leases these properties from the Company. FAS 95 states, “operating activities generally involve
producing and delivering goods and providing services”. As the payments relate to rent and other
services we believe that these activities are properly classified as operating activities under
FAS 95. |
| | Exhibits, page 87 |
| 15. | We note that it appears you have not filed on EDGAR certain exhibits and schedules to the
loan and security agreements you have filed as exhibits 10.11 and 10.14 to the Form 10-K .
Please refer to Item 601(b)(10) of Regulation S-K. Please advise. |
| | We will refile the loan and security agreements to include the exhibits and schedules with our
Form 10-K filing for fiscal 2009. With respect to certain of the previously omitted exhibits and
schedules, where the inclusion would be unduly burdensome as a result of the voluminous nature of
such exhibits or schedules, we will include a summary of the material terms of such exhibit or
schedule. |
| 16. | We note that the exhibit reference to exhibit 10 14, an amended and restated loan and
security agreement, is inaccurate. This exhibit is not in the location disclosed in the
exhibit list. Please tell us where this document is located. |
| | Exhibit 10.14, the Amended and Restated Loan and Security Agreement, dated August 4, 2006, by and
between BlueLinx Corporation, Wachovia and the other signatories listed therein, was filed on
August 9, 2006 on Form 10-Q. The reference to the document being filed on Form 8-K is erroneous
and will be corrected in the Company’s Form 10-K for fiscal 2009. |
| | Exhibits 31.1 and 31.2 |
| 17. | In future filings, when identifying the individual at the beginning of the certification,
please do not include the title of the certifying individual. |
| | We will make the requested revision in our future filings. |

Form 10-Q for the Quarterly Period Ended April 4, 2009

General

| 18. |
| --- |
| The Company has set forth the proposed revisions described above where called for by the
Staff’s comments in its Form 10-Q for the second quarter of 2009, filed with the SEC on August 11,
2009, and will include comparable disclosures in future interim filings. |

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1. Summary of Significant Accounting Policies, page 6

Earnings per Common Share, page 7

| 19. |
| --- |
| We considered the guidance of FSP EITF 03-06-1 in conjunction with reporting our loss per share
for the quarter ended April 4, 2009. Based on the guidance of the FSP, EITF 03-06, and SFAS No.
128, we recognize that our outstanding restricted stock represents a participating security, in
that the restricted stock would have the right to participate if the Company were to pay
dividends. |
| As such, we evaluated the facts and circumstances in the first quarter of 2009 as we adopted the
FSP, including that a net loss was presented for all periods, we are in an accumulated deficit
position, and that the unvested restricted shareholders do not have a contractual obligation to
share in the losses of the Company. We considered the fact that the holders are not obligated to
fund the losses of the Company, and the contractual principal or mandatory redemption amount of
the participating security is not reduced as a result of losses incurred. We have not paid
dividends in 2009 or 2008, and do not anticipate paying dividends in the foreseeable future. |
| As a result of these considerations, we have determined that losses should not be allocated to
participating unvested restricted shareholders. In addition, due to the fact that the inclusion
of such unvested restricted shareholders in our basic and dilutive per share calculations would be
antidilutive under SFAS No. 128, we have excluded unvested restricted shares in the first quarter
of fiscal year 2009 and 2008 from our basic and dilutive loss per share calculations. |
| In our Form 10-Q for the second quarter of 2009, filed with the SEC on August 11, 2009, we have
included an allocation of our earnings per share to our unvested restricted shareholders using the
two class method, as the Company reported net income in the second quarter of 2008 and 2009. In
accordance with the FSP, we recast second quarter 2008 earnings per share under the two class
method. We will include unvested restricted stock in basic and diluted earnings per share in all
future periods in which the impact is dilutive. |
| In response to the Staff’s comments, the Company has included the following disclosures in Note 2
of the Notes to Condensed Consolidated Financial Statements under the “Earnings per Common Share”
caption in the Form 10-Q for the second quarter 2009, filed with the SEC on August 11, 2009, and
will include such disclosures in substantially the same form in future annual and interim
filings: |
| “Effective January 4, 2009, we adopted FSP No. Emerging Issues Task Force (“EITF”) 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating
Securities” (“FSP 03-6-1”), which states that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered
participating securities and shall be included in the computation of earnings per share pursuant to
the two class method. 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 shareholders. Restricted stock granted by us to certain management level employees
participate in dividends on the same basis as common shares and are nonforfeitable by the holder.
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 for the periods that present
net income. Given that the restricted |

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| stockholders do not have a contractual obligation to participate in the losses, we have not
included these amounts in our weighted average number of common shares outstanding for periods in
which we report a net loss. In addition, because the inclusion of such unvested restricted
shareholders in our basic and dilutive per shares calculations would be antidilutive, we have not
included 1,541,803 and 1,329,554 of unvested restricted shares that participated in dividends in
our basic and dilutive calculations for the first six months of fiscal 2009 and for the first six
months of fiscal 2008, respectively, because both periods reflected net losses. Basic and diluted
earnings per share are computed by dividing net income by the weighted average number of common
shares outstanding for the period. The provisions of this FSP are retroactive; therefore, prior
periods have been adjusted when necessary. |
| --- |
| 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 and performance shares using the
treasury stock method. During fiscal 2008, we granted 440,733 performance shares under our 2006
Long-Term Incentive Plan in which shares are issuable upon satisfaction of certain performance
criteria. As of July 4, 2009, we assumed that a total of 233,306 performance shares will eventually
vest based on our assumption that certain performance criteria will be met and that certain shares
will be forfeited over the vesting term. The 233,306 performance shares we assume will vest were
included in the computation of diluted earnings per share. We will continue to evaluate the effect
of the performance conditions on our diluted earnings per share calculation in accordance with
Statement of Financial Accounting Standards No. 128, “Earnings per Share” (“SFAS 128”) and will
change our assumption if it becomes probable that the performance conditions will not be met. 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. |
| For the second quarter of fiscal 2009 and for the first six months of fiscal 2009, we excluded
928,315 and 2,703,424 unvested share-based awards, respectively, from the diluted earnings per
share calculation because they were anti-dilutive. For the second quarter of fiscal 2008 and for
the first six months of fiscal 2008, we excluded 1,333,382 and 2,858,607 unvested share-based
awards, respectively, from the diluted earnings per share calculation because they were
anti-dilutive.” |

Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 20

Overview, page 21 Supply Agreement with Georgia Pacific, page 21

| 20. |
| --- |
| We believe the early termination of the Supply Agreement initially will negatively impact our
structural product sales volume. However, we are pursuing relationships with other suppliers to
mitigate any adverse impact to our structural product sales. Additionally, we continue to sell
Georgia-Pacific (“G-P”) structural products. Because the majority of these structural product
sales are through the direct sales channel, we do not expect the lower sales volume to have a
significant impact on our gross profit. To the extent we are unable to replace these volumes
with structural product from G-P or other suppliers, the early termination of the Supply
Agreement may continue to negatively impact our sales volume of structural products, which would
impact our net sales and our costs, which in turn could impact our gross profit, net income, and
cash flows. |

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| In response to the Staff’s comments, the Company has included the following disclosure,
substantially in the form below, in the MD&A in Form 10-Q for the second quarter of 2009, filed
with the SEC on August 11, 2009, and will include comparable disclosure in future annual and
interim filings: |
| --- |
| “On April 27, 2009, we entered into a Termination and Modification Agreement (“Modification
Agreement”) related to our Supply Agreement with G-P. The Modification Agreement effectively
terminates the existing Supply Agreement with respect to the distribution of Georgia-Pacific
(“G-P”) plywood, oriented strand board and lumber by us. We continue to distribute a variety of
G-P building products, including Engineered Lumber, which is covered under a three-year purchase
agreement dated February 12, 2009. As a result of terminating this agreement, we are no longer
contractually obligated to make minimum purchases of products from G-P. As of January 3, 2009,
our minimum purchases requirement had totaled $31.9 million. |
| G-P agreed to pay us $18.8 million in exchange for our agreement to enter into the Modification
Agreement one-year earlier than the originally agreed upon May 7, 2010 termination date of the
Supply Agreement. We will receive four quarterly cash payments of $4.7 million which began on May
1, 2009 and end on Feb 1, 2010. As a result of the termination, we recognized a net gain of
$17.4 million in the second quarter of fiscal 2009 as a reduction to operating expense. We
believe the early termination of the Supply Agreement contributed to the decline in our
structural product sales in the second quarter of fiscal 2009. However, since the majority of
these sales go through the direct sales channel, the lower structural
product sales volume had an
insignificant impact on our gross profit in the second quarter. To the extent we are unable to
replace these volumes with structural product from G-P or other suppliers, the early termination
of the Supply Agreement may continue to negatively impact our sales of structural products which
would impact our net sales and our costs, which in turn could impact our gross profit, net
income, and cash flows. For further discussion of the risks associated with the termination of
the Master Supply Agreement, please also refer to our risk factors disclosed in our Annual Report
on Form 10-K for the year ended January 3, 2009, as further supplemented in our Quarterly Report
on Form 10-Q for the period ended April 4, 2009, as filed with the SEC.” |

Critical Accounting Policies, page 28

Income Taxes, page 30

| 21. |
| --- |
| The Company evaluated its deferred tax assets to determine if they were realizable under Statement
of Financial Accounting Standards No 109, Income Taxes , (“FAS 109”) and considered the weight of
all positive and negative evidence to determine if deferred tax assets were realizable at January
3, 2009. |
| Per FAS 109, “The four sources of taxable income that should be considered when determining whether
a valuation allowance is required include (from least to most subjective): a) taxable income in prior carryback years, if carryback is permitted under the tax law; b) future reversals of existing taxable temporary differences (i.e., offset gross deferred tax |

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| assets against gross deferred tax liabilities); c) tax planning strategies; and d) future taxable income exclusive of reversing temporary differences and carryforwards.” |
| --- |
| The Company determined that there was no taxable income in prior carryback years to offset any net
operating losses recorded as deferred tax assets at January 3, 2009. In addition, the Company
considered the reversal of all temporary differences prior to projecting future taxable income.
Net deferred tax assets totaled $29.4 million at January 3, 2009. |
| The Company was projecting a cumulative pre tax profit for the three year period ended 2010. The
cumulative profit was substantially driven by projected positive results from operations in 2010
(and on a cumulative three year basis), which was developed using the housing starts and operating
expense assumptions described below. Additionally, approximately $88 million of expected gains
from the disposal of appreciated real estate in 2009 and 2010 impacted the Company’s projections of
cumulative pretax income for the three year period ended 2010. The fair value of the Company’s
real estate assets substantially exceeded the carrying value. This resulted in a unique position
as there were potential gains relative to real estate that created future income for consideration.
Other assumptions used in developing the Company’s expectations were as follows: |

2009 Housing Starts	716,000
2009 Operating Expenses	15% below 2008
2009 Real Estate Gains	$50 million
2010 Housing Starts	950,000
2010 Operating Expenses	12% below 2008
2010 Real Estate Gains	$38 million

| The Company’s business is closely tied to housing starts and third party estimates of housing
starts are considered when estimating revenue. The Company develops housing starts assumptions
using internal data, which is validated using external housing start forecasts published by eight
third party sources, including RISI, National Association of Home Builders, National Association of
Realtors, Freddie Mac, Wachovia, Deutsche Bank, Goldman Sachs, and
APA. |
| --- |
| Based on the weight of the available positive and negative evidence the Company concluded that the
potential future income generated from operations and the sale of appreciated real estate would
generate income sufficient to realize the net deferred tax assets. Therefore, management
determined that the existing deferred tax assets would be realized in conjunction with closing and
reporting fiscal year 2008 and did not record any valuation allowance related to federal deferred
tax assets. In regard to our state deferred tax assets, we considered tax planning strategies that
would be implemented to avoid the loss of these assets. We recorded a valuation allowance of $1.4
million ($1.1 million for those states where we would not be able to execute the strategy as of the
end of fiscal year end 2008 and $0.3 million related to non-deductible excess compensation). |
| During the first quarter fiscal year 2009 net deferred tax assets increased to $40.2 million, net of a $1.1 million valuation allowance. The increase in deferred tax assets was
primarily attributable to a pretax loss of approximately $33 million for the first quarter ended
2009. |
| The Company evaluated the weight of available positive and negative evidence during the first
quarter 2009 closing and reporting process. The Company noted in late March and April, subsequent
to the filing of the Form 10-K, that there was a substantial drop in revenue compared to expectations.
The Company operates in a seasonal business environment, with the summer months representing the
peak time for construction and related sales of building products. Therefore, the Company
typically expects increases |

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| in revenue in the spring and summer months relative to the anticipated increase in construction as
compared to the fall and winter months. As the Company entered into the early spring, late March
and April sales were not increasing at the rate initially expected, as worsening unemployment and
high inventories of homes available for sale led to a continued drop in housing starts during the
first four months of 2009. Therefore, the Company evaluated March and April results compared to
expectations and determined that revenue and gross margin were significantly below expectations for
March and April, and expectations for the year would be negatively impacted by the apparent
continued decline in the housing industry. For the month of March revenue and gross margin were
below expectations by approximately $40 million and $5 million, respectively. The gross margin
shortfall in March accounted for 81% of our first quarter shortfall to expectations. In addition,
due to a combination of tighter lending standards and deteriorating conditions in non-residential
construction, negotiations stalled or were terminated for several of the Company’s real estate
holdings. |
| --- |
| Due to the deterioration noted above, the Company updated its projections. As previously
discussed, the Company utilizes third party forecasts in developing its annual projections. In
conjunction with revising 2009 projections, the Company updated its analysis of third party
information concerning estimated 2009 housing starts and noted that NAHB, NAR, Freddie Mac,
Wachovia, RISI and APA revised their January estimates at the end of March and in early April by an
average of 26% (701k versus 520k). |
| The Company’s new assumptions used to determine internal expectations were as follows: |

2009 Housing Starts	616,000
2009 Operating Expenses	19% below 2008
2009 Real Estate Gains	$36 million
2010 Housing Starts	800,000
2010 Operating Expenses	14% below 2008
2010 Real Estate Gains	$38 million

| The changes in our internal assumptions and revised expectations resulted in a cumulative pre tax
loss for the three year period ended 2010. |
| --- |
| The downward revisions in forecasted housing starts at the end of the first quarter 2009, the lack
of signs of recovery in the overall economy and the lack of ability to close real estate deals in
late March and April caused the Company to conclude that the positive evidence under paragraphs 21
and 24(b) of FAS 109 were no longer sufficient to overcome the negative evidence from cumulative
losses and that a full valuation allowance of $40.2 million for all deferred income tax assets was
necessary as of April 4, 2009. |
| In response to the Staff’s comments, the Company proposes to include the following disclosure,
substantially in the form below in future annual and interim filings: |
| Our financial statements contain certain deferred tax assets which have arisen primarily as a
result of tax benefits associated with the loss before income taxes incurred during fiscal 2008 and
the first XXX months of fiscal 2009, as well as deferred income tax assets resulting from temporary
differences. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”
(“SFAS 109”), requires the consideration of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. Significant management judgment is required in determining any
valuation allowance recorded against net deferred tax assets. In evaluating our ability to recover
our deferred income tax assets, we considered available positive and negative evidence, relative to
the four sources of taxable income, to |

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determine whether a valuation allowance was necessary. This positive and negative evidence considered included:

| • | the lack of taxable income available in prior carryback years to offset net operating
losses and timing differences recorded as deferred tax assets; |
| --- | --- |
| • | the fact that our deferred tax assets, after offsetting them against available reversing
deferred tax liabilities, remain substantial; |
| • | the lack of available tax planning strategies; |
| • | future taxable income, including gains associated with appreciated real estate, was not
sufficient to realize our deferred tax assets; and |
| • | we have cumulative losses in the most recent years. |

| Based on the weight of available evidence, we determined that there was not sufficient evidence to
realize our deferred tax assets and continue to record a valuation allowance for all net deferred
tax assets. |
| --- |
| 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 comprised of the following: |

| • | future taxable income based on projected growth rates, projected gross margins and
projected selling, general and administrative expenses; |
| --- | --- |
| • | the timing and amount of gains recorded relative to potential real estate sales; and |
| • | possible changes in legislation relative to carryback provisions. |

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.

Definitive Proxy Statement filed on April 16, 2009

Compensation Discussion and Analysis, page 11

| 22. |
| --- |
| As described on page 12 of the Proxy Statement, the Compensation Committee does consider the level
of compensation paid to executive officers in comparable executive positions within a comparator
group (the members of which are disclosed in the Proxy Statement) when evaluating our overall
executive compensation program. Specific elements of executive compensation are not tied to any
specific benchmarks at peer companies or within the comparator group. The Company and the
Compensation Committee have used the data from the competitive compensation studies performed by
Hewitt Associates in 2005 and 2008 as a reference point to assist them in evaluating the Company’s
market competitiveness with regard to executive compensation. The Compensation Committee
generally considers the 50 th and 75 th percentiles of companies in the
comparator group. It does not tie executive compensation to a single reference benchmark or
target. Instead, the studies are used as a general |

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comparative tool in the Compensation Committee’s evaluation of the Company’s executive compensation in relation to companies believed to represent the appropriate comparable labor market for executive talent. We will clarify our disclosure regarding peer company data and its use by the Compensation Committee in making compensation decisions and awards in our 2010 proxy statement.

Elements of Compensation, page 12

| 23. |
| --- |
| The Compensation Committee did not increase any component of compensation provided by an employment
agreement to any of our named executive officers. There are no circumstances in which actual
compensation fell outside the parameters of that which is contemplated by a named executive
officer’s employment agreement. In the event actual compensation does fall outside the parameters
of what is contemplated by the employment agreements in the future, the Company will expressly
disclose such circumstances in its future filings. |
| Employment agreements are used by the Company to attract and/or retain executive officers to
BlueLinx. The Company serves primarily the housing and remodeling industries which are
historically cyclical industries. Employment agreements enhance the Company’s ability to attract
and retain top executive talent by providing some degree of certainty in light of these major
cycles. The Compensation Committee, with assistance from the Company’s human resources department
and legal counsel both inside and outside of the Company, establish and negotiate the terms of the
employment agreements. As stated in the Proxy Statement, our primary goal is to establish a
compensation program that serves the long-term interests of our stockholders and our program is
designed to attract and retain top quality executives with qualifications necessary for the
long-term success of the Company. The Compensation Committee believes multi-year employment
agreements are necessary to secure executive talent for the long-term benefit of the Company and
our shareholders. The Compensation Committee further believes that not utilizing employment
agreements would put the Company at a competitive disadvantage to its peers in recruiting
executives. Our employment agreements also include confidentiality, non-competition and
non-solicitation provisions, all for the benefit of the Company. Consistent with the Company’s
compensation philosophy, the employment agreements provide for a significant component of each
executive’s annual compensation to be variable, as cash bonuses under the Company’s short term
incentive plan are awarded based on Company performance against pre-established financial or
operational goals. Additionally, the value of annual equity compensation is determined by the
Company’s common stock price so that executives’ interests are aligned with those of our
shareholders in this regard. We will include this information in our 2010 Proxy Statement and
clarify the disclosure accordingly. |

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Base Salary and Annual Bonuses, page 14

| 24. |
| --- |
| The Compensation Committee considers individual performance when approving annual salary increases.
The only annual salary increases approved in 2008 were for Mr. Goforth and Mr. Adelman. The
Committee recommended increasing Mr. Goforth’s salary to $375,000 based on his performance in 2008,
particularly as it related to managing the Company’s working capital and generating free cash flow
for the Company and its shareholders. Mr. Goforth led the Company’s financial team through a
difficult year and achieved reductions in overall expenses of approximately $70 million. The
Company produced approximately $181 million in cash from operations and reduced its net debt by
over $175 million during 2008. Mr. Goforth deferred his salary increase until business conditions
improve. |
| As discussed in detail below in our response to Comment 26, the Compensation Committee approved an
increase to Mr. Adelman’s base salary in connection with his promotion from Vice President — Human
Resources to Chief Administrative Officer. In connection with this promotion, Mr. Adelman assumed
the added responsibility for managing the Company’s legal function, replacing the Company’s
retiring General Counsel. He also managed the Company’s pricing group for part of 2008 and is
generally responsible for the administration of the Company’s day-to-day business operations in his
role as Chief Administrative Officer. Mr. Adelman made substantial contributions to the Company’s
efforts to reduce its overall expenses by $70 million during 2008 by diligently managing the
Company’s headcount during the past several years as the downturn in housing has continued. |
| With the exception of Mr. Adelman, the annual bonuses were determined based on the Company’s EBITDA
and Free Cash Flow results as provided by the terms of the short term incentive plan (“STIP”) as
discussed in the Proxy Statement on page 15 and below in our response to Comment 25. As discussed
in detail in our response to Comment 26 and on page 15 of the Proxy Statement, Mr. Adelman’s STIP
award included a discretionary bonus of $82,871. The discretionary bonus was provided to Mr.
Adelman so that his STIP bonus award reflected the work and responsibilities demanded by the role
of Chief Administrative Officer, which he performed for the majority of 2008. The adjustment was
made because his base salary was not adjusted to reflect his new role until January of 2009. |
| We will disclose in applicable future filings the elements of individual performance the
Compensation Committee considered in determining base salaries and bonuses of each named executive
officer. |

Annual Bonuses, page 15

| 25. |
| --- |
| The short term incentive plan STIP payouts for 2008 were entirely formula based (except for the
discretionary bonus paid to Mr. Adelman). The Compensation Committee established the STIP formula
including the EBITDA and free cash flow targets for 2008. The actual payouts were derived by the
Company’s Free Cash Flow and EBITDA results for 2008, each executive officer’s base salary and
each executive officer’s target bonus percentages as a percentage of their salary. The actual
payout was based on the threshold, target and maximum bonus percentage for each officer multiplied
by the officer’s salary. Fifty percent of each executive officer’s bonus is based on EBITDA
performance and fifty percent is based on free cash flow performance. For 2008, the Company
achieved free cash flow of $176.4 million, which exceeded the Maximum goal for Free Cash Flow of
$33 million. Accordingly, 50% of each executive’s bonus was paid at the Maximum level. Maximum
level is 200% of Target level. The Company’s EBITDA for STIP calculation purposes in 2008 was
$11.2 million, which falls |

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| between the Target goal of $6.2 million and the Maximum goal of $33 million for EBITDA.
Therefore, the other 50% of each executive’s bonus was paid at a pro rated rate between Target
level and Maximum level of 119%. |
| --- |
| To enhance our disclosure in future filings we intend to add a table substantially in the form
below to illustrate how the STIP payments are calculated, together with sufficient narrative
disclosure to explain the tabular disclosure. |

				Portion of	Portion of
				Target	Target		Actual
				Payout	Payout		Payout
				Related to	Related to	Actual Payout	Related to
			Total	EBITDA	Free Cash	Related to	Free Cash	Actual
	Base	Target	Target	Goal	Flow Goal	EBITDA Goal	Flow Goal	Total
	Salary	Bonus	Payout	(50%)	(50%)	(119%)	(200%)	Payout
Officer	($)	%	($)	($)	($)	($)	($)	($)
Howard S. Cohen (1)	500,000	75	375,000	187,500	187,500	222,656	375,000	597,646
George R. Judd,	450,000	65	292,500	146,250	146,250	173,672	292,500	466,172
H. Douglas Goforth	325,000	60	195,000	97,500	97,500	115,781	195,000	310,781
Duane G. Goodwin	267,048	65	173,581	86,791	86,791	108,064	173,581	276,645
Dean A. Adelman (2)	233,034	45	104,865	52,433	52,433	62,264	104,805	167,129

| (1) | Mr. Cohen’s annual base salary of $750,000 was prorated for the portion of the year he was
employed as the Company’s Interim Chief Executive Officer. |
| --- | --- |
| (2) | Mr. Adelman received an additional discretionary bonus of $82,871. |

| 26. |
| --- |
| Mr. Adelman was promoted from Vice President — Human Resources to Chief Administrative Officer in
April 2008 resulting in a major increase in his responsibilities. In connection with this
promotion, Mr. Adelman assumed the added responsibility for managing the Company’s legal function,
replacing the Company’s retiring General Counsel. He also managed the Company’s pricing group for
part of 2008 and is generally responsible for the administration of the Company’s day-to-day
business operations in his role as Chief Administrative Officer. Prior to this promotion, Mr.
Adelman was solely responsible for managing the Company’s Human Resources Department. At the time
of the promotion, Mr. Adelman’s salary increase was deferred until 2009. Therefore, his annual
cash bonus for 2008 was calculated pursuant to the terms of the Company’s Short Term Incentive Plan
based on his existing annual base salary as Vice President—Human Resources of $233,034 instead of
his new annual base salary as Chief Administrative Officer of $315,000, which did not take effect
until January 1, 2009. The Chief Executive Officer recommended and the Compensation Committee
determined Mr. Adelman’s cash bonus amount should reflect the work and responsibilities demanded by
the role of Chief Administrative Officer which he performed for the majority of 2008.
Additionally, Mr. Adelman was instrumental in managing the Company’s efforts to reduce its
headcount substantially during 2008 due to the continued decline in the United States housing
market. |

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We will disclose in applicable future filings the reasons why the Compensation Committee awards the form and level of compensation to Mr. Adelman and the other named executive officers.

---

The Company hereby acknowledges that:

| • | the Company is responsible for the adequacy and accuracy of the disclosure in its
filings; |
| --- | --- |
| • | staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and |
| • | the Company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United States. |

Very Truly Yours,

/s/ H. Douglas Goforth

H. Douglas Goforth Chief Financial Officer

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EXHIBIT 1

14. Unaudited Quarterly Financial Data

	First Quarter — Three Months		Three Months		Second Quarter — Three Months	Three Months		Third Quarter — Three Months	Three Months		Fourth Quarter — Three Months	Three Months
	Ended		Ended		Ended	Ended		Ended	Ended		Ended	Ended
	April 4,		March 29,		July 4,	June 29,		October 3,	September 27,		January 2,	January 3,
	2009		2008		2009	2008		2009	2008		2010	2009
Net sales	$ 407,111		$ 716,760		$ 423,526	$	834,669	$ XXX	$ 726,756		$ XXX	$ 501,514
Gross profit	44,276		77,803		48,300		107,435	XXX	83,249		XXX	46,446
Operating expenses:
Selling, general and administrative expense	56,587		78,637		49,778		79,827	XXX	70,617		XXX	62,129
Net gain from terminating the G-P Supply Agreement	—		—		(17,351	)	—	—	—		—	—
Restructuring
and other charges	1,078		1,998		1,074		1,400	XXX	3,176		XXX	5,620
Depreciation and amortization	5,030		4,968		4,241		5,103	XXX	4,940		XXX	5,507
Operating income	(18,419	)	(7,800	)	10,558		21,105	XXX	4,516		XXX	(26,810	)
Non-operating expenses:
Interest Expense	8,117		9,354		7,890		9,385		8,791			9,149
Charges associated with ineffective interest rate swap	4,832		—		1,078		—	XXX	—		XXX	—
Prepayment fees associated with principal payments on new mortgage	—		—		616		—	XXX	—		XXX	1,868
Write-off of debt issue costs	1,407		—		—		—	XXX	—		XXX	—
Other (income) expense	(157	)	130		315		190	XXX	65		XXX	216
(Benefit from) provision for income taxes	(12,165	)	(6,693	)	31		4,931	XXX	(1,746	)	XXX	(12,926	)
Tax valuation allowance	40,200		—		—		—	XXX	—		XXX	—
Net (loss) income	$ (60,653	)	$ (10,591	)	$ 628	$	6,599	$ XXX	$ (2,594	)	$ XXX	$ (25,117	)
Basic net (loss) income per share applicable to common shares	$ (1.95	)	$ (0.34	)	$ 0.02	$	0.20	$ XXX	$ (0.08	)	$ XXX	$ (0.81	)
Diluted net (loss) income per share applicable to common shares	$ (1.95	)	$ (0.34	)	$ 0.02	$	0.20	$ XXX	$ (0.08	)	$ XXX	$ (0.81	)

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