** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

** **

**FORM 10-K**

 

| **ý****  Annual report pursuant to Section 13 or 15  (d) of the Securities Exchange Act of 1934.**                                                                                                                               |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **For the fiscal year period ended December  31, 2003**                                                                                                                                                                                    |
| **or**                                                                                                                                                                                                                                     |
| **o****  Transition report pursuant to Section 13  or 15(d) of the Securities Exchange Act of 1934.**                                                                                                                                 |
| **For the Transition period from                    to                  ** |
|                                                                                                                                                                                                                                       |
| **Commission file number 0-19335.**                                                                                                                                                                                                        |

 

**BUILDINGMATERIALS HOLDING CORPORATION**

 

| Incorporated in the State of **Delaware**                                  |   | I.R.S. Employer Number**91-1834269** |
|----------------------------------------------------------------------------|--------|--------------------------------------|
|                                                                       |   |                                 |
| **BUILDING MATERIALS HOLDING CORPORATION**                                 |
| **Four Embarcadero Center, Suite 3250, San Francisco, CA  94111**     |
| **Telephone:  (415) 627-9100**                                        |
|                                                                       |   |                                 |
| Securities registered pursuant to Section 12(b) of the Act:  **None** |
| Securities registered pursuant to Section 12(g) of the Act:                |
|                                                                       |
| **Common Stock, $.001 par value**                                          |
| Title of class                                                             |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes  ý   No  o

 

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

 

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

 

The aggregate market value of the voting stock held by non-affiliatesof the registrant, computed by reference to the price at which the stock wassold, or the average bid and asked prices of such stock, as of the close ofbusiness on June 30, 2003 was $95,406,849.*

 

*                                         Excludes6,863,161 shares of Common Stock held by directors, officers and holders ofmore than 5% of the Company’s shares outstanding at June 30, 2003.  Exclusion of shares held by any personshould not be construed to indicate that such person possesses the power,direct or indirect, to direct or cause the direction of the management orpolicies of the Registrant, or that such person is controlled by or undercommon control with the Registrant.

 

| **Class**                     |   | **Shares  Outstanding  as of March 11, 2004** |
|-------------------------------|--------|-----------------------------------------------|
| Common Stock  $.001 par value |   | 13,369,481                                    |

 

Documents Incorporated by reference

 

Listed hereunder are the documents any portions of which areincorporated by reference and the Parts of this Form 10-K into which suchportions are incorporated:

1.                                       The registrant’sannual report for the fiscal year ended December 31, 2003, portions of whichare incorporated by reference into Parts II and IV of this Form 10-K, and

 

2.                                       The registrant’sdefinitive proxy statement dated April 1, 2004, for use in connection with theannual meeting of shareholders to be held on May 4, 2004, portions of which areincorporated by reference into Part III of this Form 10-K.

 

 

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BUILDING MATERIALS HOLDING CORPORATION

TABLE OF CONTENTS

 
| PART I   |
|----------|
|     |   |
| Item     |   |   |
|     |   |   |
| 1.       | Business |   |
| 2.       | Properties |   |
| 3.       | Legal Proceedings |   |
| 4.       | Submission of Matters to a Vote of Security  Holders |   |
|     |   |   |
| PART II  |
|     |   |   |
| 5.       | Market for Registrant’s Common Stock and  Related Stockholder Matters |   |
| 6.       | Selected Financial Data |   |
| 7.       | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |   |
| 7A.      | Quantitative and Qualitative Disclosures  About Market Risk |   |
| 8.       | Financial Statements and Supplementary Data |   |
| 9.       | Changes in and Disagreements With  Accountants on Accounting and Financial Disclosure |   |
| 9A.      | Controls and Procedures |   |
|     |   |   |
| PART III |
|     |   |   |
| 10.      | Directors and Executive Officers of the  Registrant |   |
| 11.      | Executive Compensation |   |
| 12.      | Security Ownership of Certain Beneficial  Owners and Management |   |
| 13.      | Certain Relationships and Related  Transactions |   |
| 14.      | Principal Accounting Fees and Services |   |
|     |   |   |
| PART IV  |
|     |   |   |
| 15.      | Exhibits,  Financial Statement Schedules and Reports on Form 8-K |   |

 

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Item 1.Business

 

Introduction

Certain statements contained in this Annual Report on Form 10-Kconstitute “forward-looking statements” within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Such forward-looking statementsinvolve known and unknown risks, uncertainties and other factors that may causethe actual results, performance or achievements of the Company, or industryresults, to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements. Giventhese uncertainties, we caution prospective investors not to place unduereliance on such forward-looking statements. We disclaim any obligation toupdate any such factors or to announce publicly the results of any revisions toany of the forward-looking statements contained in the Annual Report on Form10-K.

 

Business 

Building Materials Holding Corporation (“BMHC”) is a NASDAQ-tradedholding company headquartered in San Francisco, California. We specialize inproviding construction services – including structural framing and shellconstruction, manufacturing building components and installation, valueengineering – and lumber and high-quality building materials to residentialbuilders across the United States. Our principal operating subsidiaries includeBMC Construction, Inc. (“BMC Construction”), which provides constructionservices, and BMC West Corporation (“BMC West”), which is primarily engaged inlumber and building materials distribution, truss manufacturing and millworkoperations as well as installation and framing services in selectedmarkets.  We present informationpertaining to each of our two operating segments in Note 18, SegmentInformation, of the Notes to Consolidated Financial Statements that asreferenced in “Item 8. Financial Statements and Supplementary Data” of thisForm 10-K.  BMHC’s website address iswww.bmhc.com and it makes its periodic and current reports available free ofcharge, on its website as soon as reasonably practicable after such material iselectronically filed with, or furnished to, the Securities and ExchangeCommission.

 

In recent years wehave increased our sales of construction services and manufacturedcomponents. Wefabricate roof and floor trusses, purchase and pre-assemble doors and othermillwork and select and distribute pre-assembled windows based on customerspecifications.  Through BMCConstruction, we participate in the framing, turnkey framing and shell constructionmarket. Our diversification into construction services reduces our sensitivity to commodity woodproduct price volatility and requires less invested capital.

 

BMHCtargets professional builders and contractors engaged in residentialconstruction. We focus on developing and maintaining strong relationships withnational, regional and local developers, builders, architects, engineers andcontractors. Professional builders and contractors generally are high-volume,repeat customers who require specialized value engineering, manufacturing andinstallation services, on-time job-site delivery, volume purchasing and tradecredit, which are not typically offered by consumer-oriented retailers. We donot compete directly against retailers such as Home Depot or Lowe’s, which donot offer the range of specialized services that we provide and generally sellto retail consumers in small quantities and with limited services. We also sellto the repair and remodel market, consisting of contractors and consumersinvolved in major home improvement projects and to contractors involved inlight commercial and industrial construction.

 

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In July 2001, we acquired the remaining 51% interest in Knipp BrothersIndustries, LLC and its related entities (“KBI”) that provide framing servicesin Arizona, Southern California and Nevada. Having purchased a 49% interest inKBI in May of 1999, we decided to complete the acquisition earlier thanoriginally contemplated to enhance our capabilities in the framing business, whichwe believe will continue to be an important part of our construction servicessegment. On July1, 2002, we further enhanced our framing capabilities by purchasing a 51%interest in a newly formed partnership, KBI Norcal, which provides turnkeyframing services in Northern California. Effective January 1, 2003, wepurchased a 60% interest in WBC Construction, LLC (“WBC”), which primarilyprovides shell construction services for single family and multi-familydevelopments in Florida.  In October,2003, we purchased a 67.33% interest in WBC Mid-Atlantic LLC, which primarilyprovides framing services for high-volume production homebuilders in Virginia,Maryland and Delaware.

 

A business unit represents an entity whose financial results arecaptured as a separate profit center. Our business units offer services and products tailored to the needs ofprofessional builders and contractors. Each unit also customizes its serviceand product mix to meet the demands of its local market. Our offerings includethe following:

 

•                  Framing, turnkey framing and shellconstruction

•                  Roof truss, floor truss and wall panelengineering and manufacturing

•                  Pre-hanging of doors and pre-assembly ofwindows

•                  Customized millwork manufacturing andinstallation

•                  Professional-grade building materials andsupplies, including:

•                  lumber and panel products

•                  engineered wood products

•                  roofing and siding

•                  cabinets

•                  hardware, tools and miscellaneous supplies

•                  windows

•                  Other professional services, including:

•                  analysis of project designs and materialsspecifications to reduce total building costs

•                  accurate estimates of materials costs on whichcontractors can base bids

•                  just-in-time delivery of home constructionpackages to job sites

•                  provision of trade credit to pre-approvedcustomers

•                  evaluation of industry and product trends

•                  software-based design and engineering ofmanufactured components to ensure compliance with local building codes andsuitability to the customer’s project

 

Webelieve that our focus on service is a key factor that distinguishes us frommany of our competitors. We have developed a variety of specialty services inorder to help our customers build high quality and cost-effective projects. Weemploy experienced, service-oriented employees. Because of our enhanced productknowledge and installation skills, our customers often seek out our people fordesign and product recommendations. Our focus on high-quality service providedto professional customers allows our employees to develop long-termrelationships with homebuilders and contractors and to generate a large volumeof repeat and referral business.

 

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Industry Overview

BMHC operates in the residential construction services and buildingmaterials industry in the United States. Our primary customers are professionalbuilders and contractors, whose needs and expectations are significantlydifferent from those of retail customers, who generally buy from mass-markethome improvement chains. Professional builders and contractors tend to developlong-term relationships with suppliers and base purchase decisions on acombination of factors including:

 

•                  dependability,breadth and quality of services

•                  quality andavailability of products

•                  track record ofon-time delivery and production cycle time

•                  availability oftrade credit

•                  competitivepricing

•                  flexibility intransaction processing

•                  ability toprovide integrated service and product packages, such as turnkey framing andshell construction, as well as millwork manufacturing and installation

 

The composition of the industry is characterized by large number ofsmall, privately owned enterprises, including framing and shell constructioncontractors; local and regional materials distributors; and single ormulti-site lumberyards, truss manufacturing and millwork operations. While asignificant amount of consolidation has occurred during the past five to tenyears — particularly through the acquisition activities of Stock BuildingSupply (formerly known as Carolina Holdings, a unit of U.K.-based Wolseley,plc, NYSE: WOS), Builders FirstSource (privately held), 84 Lumber (privatelyheld), Lanoga (privately held) and others — the industry remains fragmented,particularly on the services side. These businesses are typically family run,relationship-based operations, with limited access to sophisticated workingcapital management and control systems, or large-scale purchasing advantages.

 

Many large production homebuilders outsource structural framing andshell construction to contractors under construction contracts. Framing andshell construction contracting is a highly fragmented area of the industry,with participants ranging from small single-crew operations to largeintegrated, multi-crew businesses. The integrated businesses typically includesupply chain activities, such as materials procurement and truss and componentmanufacturing, in addition to installation. Many of these businesses lack theworking capital management, control systems, purchasing expertise and advantagesof a large entity, such as BMHC.

 

Constructionexpenditures are largely a function of new residential, commercial andindustrial building demand and repair and remodeling projects undertaken. Theresidential construction services and building materials industry responds tothe seasonality and economic cycles associated with the homebuilding industry. Inclement weather patterns inmany of our markets result in decreased construction activity during the firstand fourth quarters, which adversely affects sales. Residentialconstruction is closely linked to new job formation, household formation,interest rates, housing affordability, availability of mortgage financing,regional demographics and consumer confidence. Vacancy and absorption rates,interest rates, long-term regional economic outlooks and the availability offinancing all significantly affect commercial construction. Industrialconstruction expenditures are linked to the industrial economic outlook,corporate profitability, interest rates and capacity utilization. In difficulteconomic environments, 

 

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repair and remodelingexpenditures generally represent a greater percentage of housing constructionexpenditures as new housing starts decline. BMHC targets primarily the newresidential construction sector.

 

Geographic Markets

We believe our presence is in attractive markets for residentialconstruction services and building materials. Historical population andmigration trends in the markets we serve, as well as their relative economicstrength, have generally supported steady growth of residential construction.

 

OperatingStrategy

Our strategy is to continue increasing sales of construction services and manufacturedbuilding components as a percentage of total sales, thereby furtherreducing our percentage of direct sales of commodity wood products. We plan tocontinue expanding the availability of our manufactured building components toevery business unit in which market demand justifies the expansion. We alsoplan to continue introducing new constructionservices and manufactured building components, as exemplified by BMCConstruction’s recent investments in KBI Norcal, WBC and WBC Mid-Atlantic.Business unit managers at BMC West have introduced specialty installationservices for windows, doors, wall panels and insulation to meet localcustomers’ needs. They have also started offering turnkey framing in certainmarkets. The installation of our products by our own employees, or bysubcontractors we hire and supervise, allows professional builders andcontractors to reduce their on-site labor costs and the number of suppliers. Wewill continue to expand these and other specialty services where appropriate.

 

Our business unit managers have substantial autonomy and responsibilityto address customer needs in their markets. A vendor’s reputation is oftendetermined locally, where service, product suitability and knowledgeablecustomer service are critical. Our managers are responsible for optimizingbusiness activities in their markets, including managing sales and estimatingpersonnel, configuring and maintaining inventory levels, identifying potentialcustomers for targeted marketing efforts and developing service and productoptions. Our compensation system for managers has incentive features based onbusiness unit earnings, efficient working capital management and the ability tomanage a safe work environment. We seek to expand our sales to new and existingcustomers by capitalizing on our reputation for quality, accuracy anddependability.

 

We focus on improving efficiency and productivity at all business unitswhile giving special attention and support to any units that are not performingto company objectives. If objectives are not met, alternatives includerestructuring management, consolidation or liquidation of the business unit. Wetry to anticipate changes in each market by adjusting the mix of services andproducts.

 

Acquisition Strategy

We look for acquisitions that will complement our existing service andproduct offerings, provide geographic diversification or enhance our existingcapabilities. Acquired businesses must also have an established customer baseof professional builders and contractors and a quality management team. Weevaluate potential acquisitions based on their expected ability to meet ourperformance objectives and improve operating efficiencies by leveraging ourexisting administrative infrastructure. Additional criteria include thereputation of the business among builders and contractors and the quality ofthe management, accounting systems and sales 

 

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organization. We assemble andassign a multi-disciplined team to guide the successful integration of eachnewly acquired business.

 

In 2003, we acquired 60% of WBC Construction, 67.3% of WBCMid-Atlantic, 51% of BBD Construction and 100% of Total Concrete. In 2002 weacquired 51% of KBI Norcal, which resulted in the formation of three newbusiness units and, in 2001 we completed the acquisition of KBI, which addedfour new business units (see Note 5 to the consolidated financial statementsfor the year ended December 31, 2003). In 2001 we also designated four existinglocations as business units. The following table sets forth the number ofbusiness units acquired or opened and consolidated during each of the last twofiscal years.

 
|                               |   | **Year Ended  Dec. 31, 2003** |   | **Year Ended  Dec. 31, 2002** |   |
|------------------------------------|--------|-------------------------------|--------|-------------------------------|--------|
|                               |   |                          |   |                          |   |
| Beginning number of business units |   | 60                            |   | 61                            |   |
| Acquisitions and denovo            |   | 7                             |   | 3                             |   |
| Consolidations and closures        |   | (2                            | )      | (4                            | )      |
|                               |   |                          |   |                          |   |
| Ending balance                     |   | 65                            |   | 60                            |   |

 

Acquisition candidates of a scale equal to KBI, KBI Norcal and WBC maynot be available to us.

 

Services and Products

Our principal service and product mix varies by business unit. Constructionservices include framing, turnkey framing and shell construction; slabpreparation; design, engineering and manufacture of roof trusses, floor trussesand wall panels; pre-hung door fabrication; assembly of manufactured windowsinto frames; manufacture and installation of custom doors, windows andmillwork; and installation of a variety of other products. Building materialsproducts include dimensional lumber, panel products, engineered wood products,roof and floor trusses, wall panels, roofing materials, cabinets, windows,millwork, hardware, paint and tools.

 

The following table sets forth information regarding the percentage ofsales represented by the specified categories of building products andconstruction services provided during each of the last two fiscal years. Whilewe believe the percentages included in the table generally indicate the mix ofour sales, the specific percentages are affected year-to-year by changes in theprices of commodity wood products, changes in unit volumes sold and changes inthe markets we serve.

 
| **Category**          |   | **2003** |   | **2002** |   |
|-----------------------|--------|----------|--------|----------|--------|
| Building Products     |   | 65%      |   | 75%      |   |
| Construction Services |   | 35       |   | 25       |   |
|                  |   | 100%     |   | 100%     |   |

 

BMC Construction provides national and regional production homebuilderswith integrated construction services including project estimating, structuralengineering, materials procurement and handling, component manufacturing,delivery and on-site installation of framing, millwork and trim packages, shellconstruction and concrete slab preparation. With the exception of WBC 

 

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and WBC Mid-Atlantic,components and materials are generally sourced through BMC Construction’s ownfacilities.

 

BMC West provides regional and local builders and contractors, as wellas national production builders, with component manufacturing, millworkincluding pre-hung doors and installation services and distributes a broadrange of lumber and professional-grade building materials and supplies.

 

We use computerized systems to design and engineer roof trusses, floortrusses and wall panels from customers’ blueprints. We route the completeddesigns to a third-party firm for certification of engineering standards andbuilding code compliance, then manufacture the components in our own plants anddeliver them to job-sites. We purchase door blanks and manufactured windows forinstallation into frames with hardware and trim as specified by the customer.

 

Construction services and manufactured building components arerelatively more attractive than lumber and building materials distributionbecause they generally bring higher operating margins on less invested capital,exhibit less price volatility and are not as available from as manycompetitors. We believe that our ability to provide either integrated constructionservices or stand-alone manufactured and fabricated components is a competitiveadvantage when soliciting business from builders and contractors.

 

Sales and Marketing

Each of our business units customizes its service and product mix toits target market and operates as a profit center. BMC Construction relies onnational and regional relationships with high-volume production homebuilders tomarket and sell our products and services. At BMC West, we reach new local andregional customers through field sales representatives, referrals,advertisements in trade journals and local promotional events.

 

Customers

Our business focuses on two major customer categories in the newresidential construction market: large, high-volume production homebuilders withnational or multiple-market operations; and local custom, low-volume productionhomebuilders and new-home contractors. A smaller third category includescommercial and industrial contractors, repair and remodel contractors andmiscellaneous sales to consumers. No single customer accounted for more than4.3% of total sales in 2003.

 

*High-Volume Production Homebuilders*

In 2003, salesto these customers accounted for approximately 29% of sales, compared to 19% ofsales in 2002. This increase year over year is primarily due to the differencebetween a full twelve months of consolidation of KBI Norcal in 2003 which wasacquired July 1, 2002, the consolidation of WBC starting in August 2003, andthe acquisition and consolidation of WBC Mid-Atlantic beginning in October2003. A significant amount of this business consists of sales of turnkeyframing construction or shell construction services or complete house packages(which may include framing lumber, panel products, pre-hung doors and trimpackages, roof and floor trusses, cement slabs, pre-assembled windows andrelated products).

 

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While pricing is an important vendor-selection criterion for thesecustomers, we believe that other factors such as materials procurement andlogistics; construction cycle time, component design, engineering andmanufacturing capabilities and expertise; and outsourcing of labor and riskmanagement are also important. We believe that our skills in these areasprovide us with competitive advantages.

 

Almost all of BMC Construction’s sales are to customers in thiscategory. Its integrated approach to delivery of services as well as materialsand labor management allows the customer to focus on other aspects of itsbusiness, including land development and new home sales. BMC Construction’sexperience, reliability and ongoing working relationship with productionbuilders enable it to maintain and grow market share. BMC West also sellslumber, building materials and trusses to this customer category and providesconstruction services primarily in areas where BMC Construction does not have apresence.

 

*Custom Homebuilders and Low Volume ProductionHomebuilders*

In 2003, salesto these customers accounted for approximately 59% of sales, compared to 66% ofsales in 2002. BMC West is primarily responsible for sales to these customers.A significant amount of this business consists of sales of dimensional lumberand panel products, pre-hung doors and trim packages, roof and floor trusses,pre-assembled windows and other building materials and supplies.

 

Our principal channel for reaching these customers is a sales force ofapproximately 340 field sales representative employees supported byapproximately 280 inside salespeople. Field sales representatives activelysolicit business and work with the inside salespeople and managers to developbids for customer projects. We provide sales training for all representativesand sales management training for all sales managers and business unitmanagers. We generally compensate sales representatives through a combinationof salary and commissions based on individual sales volume and gross margin.

 

We deliver building materials to job sites according to customerspecifications and schedules. Technical personnel involved in purchasing,dispatching, invoicing and credit functions, support both field sales force andlocation managers to enhance customer satisfaction.

 

*Other Customers*

This customer category consists generally of commercial and industrialcontractors involved in multi-family and light industrial constructionprojects, residential repair and remodel contractors and a minimal number ofconsumers. In 2003, sales to these customers accounted for approximately 12% ofsales compared to 15% of sales in 2002.

 

Credit

Corporate management establishes overall credit policy, however eachbusiness unit is responsible for overseeing its own accounts. We train ourmanagers and staff to have a thorough understanding of state lien laws, whichprovide security for accounts receivable. Our credit policies, together withdaily monitoring of customer balances, have resulted in average bad debtexpense of approximately 0.17% of sales during the last five years, with nosingle year exceeding 0.21%. We believe our bad debt expense levels are amongthe lowest in the industry.

 

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Approximately 96% of our salesin 2003 were to customers to whom we had extended credit for such sales.

 

Management Information Systems

Our financial information, operational data and other relatedstatistical information are processed and maintained at our data center inBoise, Idaho. Our financial reporting and relational database system wasdesigned and customized for us by Oracle Corporation. The flexible nature ofour installed network allows for the accumulation, processing and distributionof information using industry standard computing resources and programs.Subsidiary information systems connect to the data center through a high-speedwide area network.  For BMC West, thesesystems provide real-time pricing, inventory availability and marginanalysis. This allows each sales staff to offer a high level of customerservice, while giving management the ability to access and use timelyinformation to monitor operations. We believe these systems enable us toenhance profit margins, improve inventory turnover, accelerate analysis ofsales trends and better monitor accounts receivable, employee productivity,customer credit limits and lien protections.

 

Our financial information, operational data and other relatedstatistical information for BMC Construction are maintained at each respectiveentity comprising this business segment and are therefore separate from the BMCWest management information systems.

 

As a safeguard to protect our critical data centers, our systems arebacked-up daily on tape and held at an offsite location.  In the event of partial or a complete lossof our data centers, systems can be restored within one to two days.

 

Purchasing

We purchase merchandise from a large number of manufacturers andsuppliers. In 2003, our largest supplier accounted for approximately 6.2% ofour total purchases. We do not believe the loss of any single supplier wouldhave a material adverse effect on our financial position, results of operationsor cash flows.

 

We purchase inventory primarily on a coordinated basis in order tocapitalize on economies of scale, although local business units conduct alimited amount of purchasing in response to specific customer needs. Mostordering occurs at the business unit level to ensure that we meet local productneeds and maximize inventory turns.

 

Commodity woodproduct prices were exceptionally volatile in 2003. Prices of commodity woodproducts, which are subject to significant volatility, adversely impactoperating income when prices rapidly rise or fall within a relatively shortperiod of time. Our commodity wood product buyers monitor inventory and saleslevels in each facility on a regular basis. With this supply and demandinformation, buyers generally can avoid overstocking commodity wood products.As a result, we turn our commodity wood product inventory approximately 10 to12 times per year. Such rapid inventory turnover limits our potential exposureto inventory loss from commodity price fluctuations. In addition, our real-timecomputer network allows our business units to adjust sales prices as purchaseprices of commodity products change.

 

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Competition

We operate in a changing and highly competitive environment.

 

For the business of high-volume production homebuilders, whom we serveprimarily through BMC Construction, we compete with independent framing andshell construction contractors, building materials distribution companies andsome of the homebuilders themselves. Independent framing and shell construction contractors range in sizefrom single-crew operations to large well-managed organizations spanningmultiple markets. Distribution companies such as Stock Building Supply,Builders FirstSource, 84 Lumber, Lanoga and others offer construction servicesin select markets. Several of the large production homebuilders continue toperform framing and other construction services in-house. We believe we comparefavorably to our competitors because of the quality and reliability of ourproducts and services, supply chain integration, volume, scale, geographicreach and capital resources.

 

For the business of customhomebuilders and low volume production homebuilders, whom we serve primarilythrough BMC West, we compete primarily with privately owned, single-siteenterprises as well as local, regional and national building materials chains.Professional builders and contractors generally select suppliers based on theavailability of knowledgeable personnel, on-time delivery, reliableinventory levels, availability of trade credit and competitive pricing. Wecompete favorably on each of these bases. Our relatively large size alsopermits us to attract experienced and professional sales and service personneland provides us the resources to offer Company-wide product and servicetraining programs. By working closely with our customers and supported by ourmanagement information systems, our business units maintain appropriateinventory and staffing levels and are well positioned to deliver completedorders on time to individual job sites.

 

For the business of commercial and industrial contractors, repair andremodel contractors and consumers, all of whom we serve through BMC West, wecompete primarily with local lumberyards and hardware stores and, in certain ofour markets, with larger home center chains such as Home Depot and Lowe’s. Wealso provide construction services in select markets for the framing ormillwork installation of multi-family facilities, small motels and similarbuildings.  We believe we effectivelymeet the needs of these customers by providing higher-quality products,offering access to our knowledgeable staff and providing competitiveconstruction services.

 

Safety and Risk Management

With the growth in construction services at BMHC, the number of framingand skilled craftsman has increased.  The construction services industryincurs a higher number of accidents and subsequent costs associated with workers’compensation claims then typically experienced at building materialdistribution facilities.  The number of work-related accidents,particularly in California, continues to present a challenge for the Company toaddress.  At the BMC Construction business segment, and taking intoaccount a 100% increase in the workforce, the growth in the incidence of claimsin 2003 were 23% higher compared to prior year.  This increase in theincidence of claims is primarily attributable to the higher concentration ofconstruction services BMC Construction is providing in California.  At theBMC West business segment, claims actually decreased 16%. The Company continuesto target improved workplace safety as a key component of making BMHC theemployer of choice in our industry and to address the rapid escalation ininsurance costs in recent years.

 

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Employees

Our success is highly dependent on the quality of our personnel at alllevels. Because we face competition in attracting and retaining qualifiedemployees, we maintain competitive compensation and benefit programs toattract, motivate and retain top-performers. We also provide extensive productknowledge, customer service and supervisory and managerial training programs toassure employee and customer satisfaction.

 

At December 31, 2003, we employed approximately 8,300 persons, of whichunions represented approximately 334. We have not experienced any strikes orother work interruptions and have maintained generally favorable relations withour employees. The following table shows the approximate breakdown by jobfunction of our employees:

 

| Officers, corporate and unit management,  and corporate and unit administration |   | 10 | % |
|---------------------------------------------------------------------------------|--------|----|---|
| Delivery (truck drivers, load builders, yard)                                   |   | 14 | % |
| Manufacturing (truss, millwork, window)                                         |   | 20 | % |
| Field labor (framing carpentry - excluding  subcontract labor)                  |   | 46 | % |
| Field sales force (outside/inside sales)                                        |   | 8  | % |
| Retail operations (cashiers/receiving/sales  support)                           |   | 2  | % |

 

Risk Factors

 

General and local economic conditions can have a significant effect onour business.

 

The Company’s financialperformance will be impacted by economic changes nationally and locally in themarkets it serves.  The residentialconstruction services and building materials industry has experiencedcyclicality in the past.  The Company’soperations are subject to fluctuations from period to period as a reflection ofchanges in general economic conditions and changes in local market conditions,commodity wood prices, building permit activity, interest rates, single-familyhousing starts, employment levels, availability and cost of labor, consumerconfidence, the impact on the economy of geopolitical events and theavailability of credit to professional builders, contractors andhomeowners.  These factors may have amore significant impact on the Company, which derives a significant percentageof its sales from professional builders and contractors engaged in newresidential construction, than on those building supply companies that target abroad range of retail customers whose activities are generally more related tohome repair and remodeling.  The Companyexpects that fluctuations from period to period will continue in the future.

 

Our business is dependent on weather patterns in the markets we serve.

 

The Company’s first and fourthquarters historically have been, and are expected to continue to be, adverselyaffected by weather patterns in some of the Company’s markets, causingdecreases in levels of residential construction activity.  In addition, quarterly results historicallyhave reflected, and are expected to continue to reflect, fluctuations fromperiod to period from various other factors, including general economic conditions,commodity wood prices, interest rates, building permit activity, single-familyhousing starts, employment levels, consumer confidence and the availability ofcredit to professional builders and contractors.

 

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Our growth is dependent upon our ability to locate suitable acquisitioncandidates and to manage and integrate acquisitions properly.

 

The Company’s growth over thepast several years has been largely attributable to acquisitions and it plansto continue to grow through acquisitions.  Failure to identify and acquire on appropriate terms suitableacquisition candidates could have a material adverse effect on the Company’sgrowth.  In particular, the number ofsuitable acquisition candidates with the size and scale of operations similar toKBI, KBI Norcal or WBC is limited.

 

The management and integrationof acquired businesses involves substantial risk, including: integration of theacquired business, which may result in significant integration relatedexpenses; diversion of management’s time and attention; departure of keypersonnel from the acquired business; integration of different accounting andreporting systems and practices relating to estimating jobs; the impairment ofgoodwill; the uncertainty that an acquired business will achieve anticipatedrevenues and earnings; and possible changes in accounting rules that couldimpact the accounting for the purchase of minority interests.

 

Our operating results are affected by the price of commodity woodproducts.

 

Prices of commodity wood productsare subject to significant volatility and directly affect the Company’s salesand income.  Increases in commodity woodprices may increase sales, but also may decrease margins due to the Company’slimited ability to pass on short-term price increases under existing customercommitments.  Decreases in commoditywood prices can reduce sales and gross profit as a result of the increased costas a percentage of sales, since the Company ships more raw materials per dollarof sales.  The Company does not utilizeany derivative financial instruments to hedge commodity price movements.  BMC Construction purchases certain commoditymaterials, including wood, steel and concrete, which are used as directproduction inputs for construction of the completed house shell which itdelivers.

 

Our business is subject to intense competition.

 

For the business of high-volumeproduction homebuilders, whom we serve primarily through BMC Construction, wecompete with independent framing and shell construction contractors, buildingmaterials distribution companies and some of the homebuilders themselves. Forthe business of custom homebuildersand low volume production homebuilders, whom we serve primarily through BMCWest, we compete primarily with privately owned, single-siteenterprises as well as local, regional and national building materials chains.

 

Our growth in certain markets is dependent upon the availability ofqualified skilled labor.

 

Our construction servicesbusiness is dependent upon the availability of qualified framingemployees.  In certain of our markets wehave decided to restrict growth due to the limited availability of qualifiedframing employees.

 

13

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Executive Officers as of December 31, 2003

 
| **Name**             |   | **Age** |   | **Position or Office**                                       |   | **Date First  Elected as  An Officer** |
|----------------------|--------|---------|--------|--------------------------------------------------------------|--------|----------------------------------------|
|                 |   |    |   |                                                         |   |                                   |
| Robert E. Mellor     |   | 60      |   | Chairman of the Board, President and Chief Executive Officer |   | 1997                                   |
|                 |   |    |   |                                                         |   |                                   |
| Richard F. Blackwood |   | 66      |   | Executive Vice President,                                    |   | 1987                                   |
|                 |   |    |   | President BMC West,                                          |   |                                   |
|                 |   |    |   | Retired December 31, 2003                                    |   |                                   |
|                 |   |    |   |                                                         |   |                                   |
| Robert L. Becci      |   | 63      |   | Vice President and Controller                                |   | 1990                                   |
|                 |   |    |   |                                                         |   |                                   |
| Ellis C. Goebel      |   | 62      |   | Senior Vice President - Finance                              |   | 1987                                   |
|                 |   |    |   |                                                         |   |                                   |
| Mark R. Kailer       |   | 50      |   | Vice President and Treasurer                                 |   | 2003                                   |
|                 |   |    |   |                                                         |   |                                   |
| Jack D. LaRock       |   | 60      |   | Vice President; Regional                                     |   | 2001                                   |
|                 |   |    |   | Millwork Manager, BMC West                                   |   |                                   |
|                 |   |    |   |                                                         |   |                                   |
| Michael D. Mahre     |   | 44      |   | Senior Vice President – Corporate                       |   | 2001                                   |
|                 |   |    |   | Development; Chief                                           |   |                                   |
|                 |   |    |   | Executive Officer, BMC Construction                          |   |                                   |
|                 |   |    |   |                                                         |   |                                   |
| Steven H. Pearson    |   | 56      |   | Senior Vice President - Human Resources                      |   | 1987                                   |
|                 |   |    |   |                                                         |   |                                   |
| Paul S. Street       |   | 55      |   | Senior Vice President, Chief                                 |   | 1999                                   |
|                 |   |    |   | Administrative Officer, General                              |   |                                   |
|                 |   |    |   | Counsel and Corporate Secretary                              |   |                                   |
|                 |   |    |   |                                                         |   |                                   |
| Stanley M. Wilson    |   | 59      |   | Senior Vice President;                                       |   | 1997                                   |
|                 |   |    |   | President and CEO, BMC West                                  |   |                                   |

 

Mr. Mellor becameChairman of the Board of Directors of BMHC in 2002 and has been President andChief Executive Officer since joining the Company in 1997.  He was previously Of Counsel with the lawfirm of Gibson, Dunn & Crutcher LLP from 1990 to 1997.  Mr. Mellor also serves as a director ofCoeur d’Alene Mines Corporation, The Ryland Group, Inc. and Monroe MufflerBrake Inc.

 

Mr. Blackwood retired as of December 31, 2003.

 

Mr. Becci has served as Vice President since 1990 and as Controllersince the Company’s inception in 1987.

 

Mr. Goebel has been Senior Vice President - Finance of BMHC since1997.  From 1987 to 1997 he served asVice President and Treasurer of the Company.

 

14

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Mr. Kailer has been Vice President and Treasurer since 2003. He joinedthe company in 2000 as Assistant Treasurer.  He was previouslySenior Manager of Treasury Services at Circle International Group, apublicly-traded global logistics company based in San Francisco, from 1997to 2000.

 

Mr. LaRock has been Vice President since 2001 and is the MillworkManager for the Colorado/Front Range Region. He was General Manager of Millwork Operations for the IntermountainDivision of BMC West since 2000.  Hepreviously held various management positions within the Company since 1993.

 

Mr. Mahre was elected a Senior Vice President in 2003.He was elected Vice President of Corporate Development in 2001 and made ChiefExecutive Officer of BMC Construction in 2002. He joined the Company in 1999 asDirector of Financial Planning and Analysis. Mr. Mahre was a principal of TheCambria Group, a private equity investment firm, from 1997 to 1999.

 

Mr. Pearson has been Senior Vice President - Human Resources of theCompany since 2001. From 1987 through 2001 he served as Vice President - HumanResources.

 

Mr. Street joined the Company in 1999 as Senior Vice President, GeneralCounsel and Corporate Secretary and has been Chief Administrative Officer since2001. He previously served as outside General Counsel & Secretary to theCompany while a partner of Moffatt, Thomas, Barrett, Rock & Fields.

 

Mr. Wilson was elected President and CEO of BMC West in 2004 and wasappointed a Senior Vice President in 2003. He was elected Vice President in2000 and has been General Manager of the Pacific Division of BMC West since1997.  He was manager of the West Coastdistrict of BMC West from 1993 to 1998.

 

Item 2.Properties

 

BMHC’s headquarters are in San Francisco, California, with subsidiaryadministrative offices in Boise, Idaho and San Francisco, California.  We have several types of facilities,including lumber and building materials distribution centers, millworkfabrication and distribution centers and warehouses, truss-manufacturing plantsand various sales offices and showrooms. The facilities listed below do not include stand-alone sales offices orshowrooms.  We believe that all of ourlocations are in good condition and are generally adequate for our needs forthe near future.  We own or lease all ofour material assets, including land and facilities.

 
| **State and City**     |   | **Date  Acquired** |   | **Owned  Acreage** |   | **Leased  Acreage** |   |
|------------------------|--------|--------------------|--------|--------------------|--------|---------------------|--------|
|                   |   |               |   |               |   |                |   |
| ARIZONA                |   |               |   |               |   |                |   |
| (1) Chandler           |   | 2001               |   | —             |   | 12.7                |   |
| (1) Phoenix – KBI |   | 2001               |   | 19.2               |   | —              |   |
| Phoenix – Royal   |   | 2000               |   | —             |   | 0.5                 |   |
| (1) Tucson             |   | 2001               |   | —             |   | 2.2                 |   |

 

15

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| **State and City**        |   | **Date  Acquired** |   | **Owned  Acreage** |   | **Leased  Acreage** |   |
|---------------------------|--------|--------------------|--------|--------------------|--------|---------------------|--------|
|                      |   |               |   |               |   |                |   |
| CALIFORNIA                |   |               |   |               |   |                |   |
| Bakersfield               |   | 2000               |   | 3.4                |   | —              |   |
| Corona                    |   | 2001               |   | —             |   | 2.0                 |   |
| (1) Dixon                 |   | 2002               |   | —             |   | .1                  |   |
| Fresno                    |   | 1989               |   | 13.0               |   | —              |   |
| (1) Marysville            |   | 2002               |   | —             |   | 10.5                |   |
| (1) Marysville            |   | 2002               |   | —             |   | 10.0                |   |
| Merced                    |   | 1987               |   | 2.9                |   | 1.0                 |   |
| Modesto                   |   | 2003               |   | —             |   | 10.0                |   |
| Modesto                   |   | 1989               |   | 14.0               |   | —              |   |
| San Francisco             |   |               |   |               |   |                |   |
| Headquarters              |   | 1997               |   | —             |   | —              |   |
|                      |   |               |   |               |   |                |   |
| COLORADO                  |   |               |   |               |   |                |   |
| Aspen                     |   | 1987               |   | 4.6                |   | —              |   |
| Boulder                   |   | 1990               |   | 10.0               |   | —              |   |
| Colorado Springs          |   | 1994               |   | 11.4               |   | —              |   |
| Colorado Springs Millwork |   | 1999               |   | —             |   | 0.8                 |   |
| Commerce City             |   | 2003               |   | —             |   | .1                  |   |
| Denver Door North         |   | 1990               |   | —             |   | 1.5                 |   |
| Denver Door South         |   | 1997               |   | —             |   | 1.2                 |   |
| Denver                    |   | 1994               |   | 9.4                |   | —              |   |
| Evergreen                 |   | 1990               |   | 3.7                |   | —              |   |
| Fort Collins              |   | 1990               |   | 12.0               |   | —              |   |
| Fort Collins Millwork     |   | 2001               |   | 0.9                |   | —              |   |
| Fort Lupton               |   | 1994               |   | 10.4               |   | —              |   |
| Glenwood Springs          |   | 1990               |   | 2.0                |   | —              |   |
| Greeley                   |   | 1994               |   | 11.1               |   | —              |   |
| Pueblo                    |   | 1994               |   | 10.7               |   | —              |   |
| Steamboat Springs         |   | 1987               |   | 1.3                |   | 2.8                 |   |
|                      |   |               |   |               |   |                |   |
| FLORIDA                   |   |               |   |               |   |                |   |
| (1)Sunrise                |   | 2003               |   | —             |   | .1                  |   |
| (1)Venice                 |   | 2003               |   | —             |   | .1                  |   |
|                      |   |               |   |               |   |                |   |
| IDAHO                     |   |               |   |               |   |                |   |
| Boise                     |   | 1987               |   | 15.8               |   | —              |   |
| Boise Millwork            |   | 1999               |   | —             |   | 1.2                 |   |
| Boise (office)            |   | 1988               |   | —             |   | —              |   |
| Idaho Falls               |   | 1987               |   | 5.3                |   | —              |   |
| Idaho Falls Truss         |   | 1987               |   | 6.0                |   | —              |   |
| Nampa                     |   | 2003               |   | —             |   | .1                  |   |
| Rexburg                   |   | 1987               |   | 1.9                |   | —              |   |

 

16

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| **State and City**       |   | **Date  Acquired** |   | **Owned  Acreage** |   | **Leased  Acreage** |   |
|--------------------------|--------|--------------------|--------|--------------------|--------|---------------------|--------|
|                     |   |               |   |               |   |                |   |
| MONTANA                  |   |               |   |               |   |                |   |
| Helena                   |   | 1998               |   | 4.1                |   | —              |   |
| Helena Truss             |   | 1998               |   | 3.6                |   | —              |   |
| Kalispell                |   | 1998               |   | 5.4                |   | —              |   |
| Kalispell Door           |   | 1999               |   | 1.3                |   | —              |   |
| Missoula                 |   | 1998               |   | —             |   | 15.1                |   |
| Missoula                 |   | 2003               |   | —             |   | 17.1                |   |
| Missoula Door            |   | 1999               |   | 1.4                |   | —              |   |
| Missoula Wood Specialty  |   | 1999               |   | 2.8                |   | —              |   |
|                     |   |               |   |               |   |                |   |
| NEVADA                   |   |               |   |               |   |                |   |
| Carson Valley            |   | 1998               |   | 10.3               |   | —              |   |
| Las Vegas                |   | 2001               |   | —             |   | 27.0                |   |
| Northern Nevada Millwork |   | 1999               |   | 0.5                |   | —              |   |
| Sparks                   |   | 1997               |   | 7.0                |   | —              |   |
|                     |   |               |   |               |   |                |   |
| NORTH CAROLINA           |   |               |   |               |   |                |   |
| Charlotte – Royal   |   | 2000               |   | —             |   | 2.4                 |   |
|                     |   |               |   |               |   |                |   |
| OREGON                   |   |               |   |               |   |                |   |
| Beaverton                |   | 2000               |   | —             |   | 0.5                 |   |
| Sherwood                 |   | 2000               |   | 18.3               |   | —              |   |
|                     |   |               |   |               |   |                |   |
| TEXAS                    |   |               |   |               |   |                |   |
| Abilene                  |   | 1995               |   | 16.1               |   | —              |   |
| Austin                   |   | 1998               |   | —             |   | 4.3                 |   |
| Austin                   |   | 1995               |   | 18.3               |   | —              |   |
| Austin MWPC              |   | 2001               |   | —             |   | 0.1                 |   |
| Coppell                  |   | 1997               |   | 9.4                |   | —              |   |
| Dallas – Marvin     |   | 2000               |   | —             |   | 0.6                 |   |
| Dallas – Royal      |   | 1999               |   | —             |   | 1.0                 |   |
| El Paso                  |   | 1991               |   | 7.0                |   | —              |   |
| Frisco                   |   | 2000               |   | 10.6               |   | 2.0                 |   |
| Houston                  |   | 1997               |   | 7.1                |   | —              |   |
| Houston                  |   | 1998               |   | —             |   | 2.5                 |   |
| Houston                  |   | 2002               |   | 29.0               |   | —              |   |
| Hurst                    |   | 1994               |   | 6.4                |   | 2.3                 |   |
| Killeen                  |   | 1994               |   | 3.6                |   | —              |   |
| New Braunfels            |   | 1995               |   | 23.3               |   | —              |   |
| San Antonio              |   | 1998               |   | —             |   | 4.2                 |   |
| Wylie                    |   | 2003               |   | —             |   | .1                  |   |

 

17

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| **State and City**   |   | **Date  Acquired** |   | **Owned  Acreage** |   | **Leased  Acreage** |   |
|----------------------|--------|--------------------|--------|--------------------|--------|---------------------|--------|
|                 |   |               |   |               |   |                |   |
| UTAH                 |   |               |   |               |   |                |   |
| Heber City           |   | 1997               |   | —             |   | 2.5                 |   |
| Orem                 |   | 1987               |   | 9.5                |   | —              |   |
| Salt Lake            |   | 1990               |   | 13.2               |   | —              |   |
| Salt Lake Millwork   |   | 1999               |   | —             |   | 1.4                 |   |
| West Haven           |   | 1996               |   | 5.4                |   | —              |   |
| Lindon               |   | 2002               |   | 6.8                |   | —              |   |
|                 |   |               |   |               |   |                |   |
| VIRGINIA             |   |               |   |               |   |                |   |
| Fredericksburg       |   | 2003               |   | —             |   | .1                  |   |
|                 |   |               |   |               |   |                |   |
| WASHINGTON           |   |               |   |               |   |                |   |
| Everett              |   | 1994               |   | 29.3               |   | —              |   |
| Issaquah             |   | 1994               |   | 16.5               |   | —              |   |
| Kent                 |   | 1994               |   | 4.5                |   | —              |   |
| Puget Sound Millwork |   | 1998               |   | —             |   | —              |   |
| Tacoma               |   | 1987               |   | 8.9                |   | —              |   |
| Vancouver            |   | 1994               |   | —             |   | 5.4                 |   |

####  

BMHC and BMC are trade names. Other brand names or trademarks appearing in this Form 10-K are the propertyof their respective holders.  Locationsindicated with a “(1)” are attributed to the BMC Construction businesssegment.  Remaining properties pertainto the BMC West business segment.

 

Item 3.Legal Proceedings

 

We are involved in litigation and other legal matters arising in thenormal course of business.  Managementbelieves that our recovery or liability, if any, under any of these matterswill not have a material effect on our financial position, liquidity or resultsof operations.

 

Item 4.Submission of Matters to a Vote of Security Holders

 

No matters were submitted to the shareholders for a vote during thefourth quarter of the fiscal year.

 

PART II

 

Item 5.Market for Registrant’s Common Stock and Related Stockholder Matters

 

BMHC’s Common Stock trades on the NASDAQ National Market under thesymbol “BMHC”.  The following table setsforth the range of high and low closing sales prices on the NASDAQ NationalMarket for the Common Stock for the periods indicated.  Such quotations represent inter-dealerprices without retail markup, markdown or commission and may not necessarilyrepresent actual transactions.

 

18

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|                             |   | **Common  Stock Prices:** |   |
|----------------------------------|--------|---------------------------|--------|
| **Fiscal 2003**                  |   | **High**                  |   | **Low** |   |
|                             |   |                      |   |   |   |
| Quarter ended March 31, 2003     |   | $                         | 15.750 |   | $ | 12.680 |   |
| Quarter ended June 30, 2003      |   | 15.350                    |   | 12.160 |   |
| Quarter ended September 30, 2003 |   | 15.710                    |   | 11.750 |   |
| Quarter ended December 31, 2003  |   | 15.530                    |   | 12.750 |   |
|                                  |        |                           |        |  |  |  |  |

 
| **Fiscal 2002**                  |   | **High** |   | **Low** |   |
|----------------------------------|--------|----------|--------|---------|--------|
|                             |   |     |   |    |   |
| Quarter ended March 31, 2002     |   | $        | 18.360 |    | $      | 10.850 |   |
| Quarter ended June 30, 2002      |   | 17.720   |   | 14.000  |   |
| Quarter ended September 30, 2002 |   | 15.358   |   | 10.410  |   |
| Quarter ended December 31, 2002  |   | 14.600   |   | 10.000  |   |
|                                  |        |          |        |         |        |  |  |

 

The Board of Directors approved implementation of a cash dividendprogram in November 2002.  The firstquarterly dividend of $0.05 per common share was declared for shareholders ofrecord December 23, 2002 and payable January 15, 2003.  The Board of Directors approved an increasein the Company’s quarterly cash dividend to $0.06 per common share payable onJanuary 15, 2004 to common shareholders of record as of December 23, 2003.  The amount of dividend payments is includedin calculations of certain loan covenants in our bank credit facility.  At March 11, 2004, our Common Stock was heldby approximately 3,255 shareholders of record or through nominee or street nameaccounts with brokers (401 registered holders).  The last sales price for our Common Stock, as reported by NASDAQon March 11, 2004, was $16.98.

 

Item 6.Selected Financial Data

 

The following table shows selected consolidated financial data of BMHCfor the years indicated.  It is derivedfrom our audited consolidated financial statements and should be read inconjunction with the disclosures in Item 7, “Management’s Discussion and Analysisof Financial Condition and Results of Operations”, and the consolidatedfinancial statements and notes thereto presented in our 2003 AnnualReport.  (Amounts are in thousands,except share data.)

 
|                                                                   |   | **2003**  |    | **2002**  |   | **2001**  |   | **2000**  |    | **1999**  |   |
|------------------------------------------------------------------------|--------|-----------|---------|-----------|--------|-----------|--------|-----------|---------|-----------|--------|
| Sales                                                                  |   |      |    |      |   |      |   |      |    |      |   |
| Building Products                                                      |   | $         | 916,256 |      | $      | 867,623   |   | $         | 945,504 |      | $      | 1,013,968 |   | $ | 1,007,108 |   |
| Construction Services                                                  |   | 498,815   |    | 293,871   |   | 147,363   |   | —    |    | —    |   |
| Total Sales                                                            |   | 1,415,071 |    | 1,161,494 |   | 1,092,867 |   | 1,013,968 |    | 1,007,108 |   |
| Impairment  of assets(a)                                               |   | 829       |    | 6,698     |   | 1,750     |   | 1,800     |    | —    |   |
| Income from operations                                                 |   | 40,429    |    | 39,121    |   | 42,629    |   | 42,536    |    | 45,662    |   |
| Interest expense                                                       |   | 9,279     |    | 9,812     |   | 13,553    |   | 17,722    |    | 13,184    |   |
| Equity in earnings of unconsolidated  companies, net of tax (b)        |   | 1,431     |    | —    |   | 2,962     |   | 4,994     |    | 3,061     |   |
| Change in accounting principle, net of tax  (c)                        |   | —    |    | (11,650   | )      | —    |   | —    |    | —    |   |
| Net income                                                             |   | $         | 19,929  |      | $      | 7,015     |   | $         | 20,844  |      | $      | 19,712 |   | $ | 19,683 |   |
|                                                                   |   |      |    |      |   |      |   |      |    |      |   |
| Income per diluted common share before  change in accounting principle |   | $         | 1.48    |      | $      | 1.41      |   | $         | 1.60    |      | $      | 1.54 |   | $ | 1.80 |   |
|                                                                   |   |      |    |      |   |      |   |      |    |      |   |
| Net income per common share after change in  accounting principle:     |   |      |    |      |   |      |   |      |    |      |   |
| Basic                                                                  |   | $         | 1.50    |      | $      | 0.54      |   | $         | 1.61    |      | $      | 1.55 |   | $ | 1.55 |   |
| Diluted                                                                |   | $         | 1.48    |      | $      | 0.53      |   | $         | 1.60    |      | $      | 1.54 |   | $ | 1.54 |   |

 

19

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BALANCE SHEET DATA:

 
| **December 31**                                                           |   | **2003** |    | **2002** |   | **2001** |   | **2000** |    | **1999** |   |
|---------------------------------------------------------------------------|--------|----------|---------|----------|--------|----------|--------|----------|---------|----------|--------|
|                                                                      |   |     |    |     |   |     |   |     |    |     |   |
| Working capital                                                           |   | $        | 219,803 |     | $      | 170,492  |   | $        | 160,904 |     | $      | 142,075 |   | $ | 139,283 |   |
| Total assets                                                              |   | 604,199  |    | 503,074  |   | 485,742  |   | 459,634  |    | 450,119  |   |
| Long-term debt, net of current maturities  and redeemable preferred stock |   | 189,678  |    | 157,375  |   | 167,417  |   | 165,006  |    | 170,547  |   |
| Shareholders’ equity                                                 |   | $        | 271,010 |     | $      | 251,300  |   | $        | 242,894 |     | $      | 220,555 |   | $ | 200,110 |   |

 

----

(a) The yearended December 31, 2003 includes a $0.8 million charge related to BMCConstruction’s KBI reporting unit. Specifically, three customer relationships were severed in favor ofacquiring new more profitable business relationships.  The year ended December 31, 2002 includes a $6.7 million chargerelated to BMC West’s Dallas/Ft. Worth and Marvin Windows Reporting Units.  See Item 7, “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” for moreinformation.

(b) The yearsended December 31, 2001 and 1999 include six months and eight months,respectively, of equity earnings with respect to the Company’s 49% investmentin KBI.  See Notes 5 and 7 to theconsolidated financial statement for more information.

(c) The yearended December 31, 2002 included a charge related to a change in accountingprinciple.  See Note 3 to theconsolidated financial statements for more information.

 

Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations

 

Management’s discussion and analysis of financial condition and resultsof operations is presented under the caption “Financial Review” in BMHC’s 2003Annual Report to Shareholders (“Annual Report”). The information under thiscaption is incorporated herein by this reference.

 

Item 7A. Quantitative and QualitativeDisclosures About Market Risk

 

Quantitative and qualitative disclosures about market risk arepresented under the caption “Financial Review” in the Annual Report.  The information under this caption isincorporated herein by this reference.

 

20

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Item 8. Financial Statements andSupplementary Data

 

BMHC’s consolidated financial statements and related notes, togetherwith the report of our independent accountants, are presented in the AnnualReport and are incorporated herein by this reference.

** **

Item 9.Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure

 

Informationrequired by this Item concerning changes in and disagreements with accountantsfor the year ended December 31, 2003, is presented under the caption “Fees Paidto Independent Auditors—Independent Public Accountants” of the Proxy Statementand is incorporated herein by this reference.

 

Item 9A. Controls andProcedures

 

Ourprincipal executive and financial officers have evaluated our disclosurecontrols and procedures (as defined in Rules 130a-15(e) and 15d-15(e)under the Securities Exchange Act of 1934) as of December 31, 2003. Theyhave determined that such disclosure controls and procedures are effective toensure information required to be disclosed in our filings under the SecuritiesExchange Act of 1934 with respect to the Company and its consolidatedsubsidiaries is recorded, processed, summarized and reported within the timeperiods specified in the Securities and Exchange Commission’s rules and formsand is accumulated and communicated to our management, including our principalexecutive officer and principal financial officer, as appropriate, to allowtimely decisions regarding required disclosures.

 

Weregularly evaluate our internal controls and discuss these matters with ourindependent accountants and Audit Committee. Based on these evaluations and discussions, we consider what revisions,improvements or corrections are necessary in order to ensure that our internalcontrols are and remain effective.

 

As part of the audit of thefinancial statements for the year ended December 31, 2003, the Company’sauditors communicated to the Company’s management and Audit Committee twoconditions in the Company’s internal controls that were considered to be amaterial weakness in the Company’s internal controls:  (1) the process to record the liabilities related to its largedeductible insurance program and (2) the process utilized by the Company to gatherinformation in order to complete its annual impairment testing of its recordedgoodwill and indefinite lived intangible assets as required by generallyaccepted accounting principles.

 

Asa result, we are currently enhancing internal processes related to recordingthe liabilities of our large deductible insurance program and the testing andreview of actuarial and claims data.  Wehave a plan in place to avoid these issues in 2004.    We have also implemented a new process involving the timing ofcommunications between field personnel and senior management relating tocircumstances that might affect impairment analyses under SFAS 142,particularly relating to amortization of customer relationships.

 

We are also enhancing ourinternal controls, processes and procedures to more rapidly and effectivelyassimilate and integrate businesses that we acquire and to formalize ourinternal communications processes among the functional departments of humanresources, legal, finance and operations as it relates to disclosure mattersfor our external communications, including our financial statements andmanagement’s discussion and analysis.

 

21

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We anticipate theseenhancements may continue through the end of 2004.  We have implemented interim processes, where appropriate, toinsure that we are able to accurately record, process, summarize financial dataand prepare financial statements for external purposes that fairly present ourfinancial condition, results of operations and cash flows.

 

Therehave been no other significant changes in internal controls, or other factorsthat could significantly affect internal controls, including any correctiveactions with regard to material weaknesses or significant deficiencies.  We intend to continue to proactively refineour internal controls on an ongoing basis as appropriate.

 

Itshould be noted that any system of controls, however well designed andoperated, can provide only reasonable, and not absolute, assurance that theobjective of the system are met.   Inaddition, the design of any control system is based in part upon certainassumptions about the likelihood of future events.  Because of these and other inherent limitations of controlsystems, there can be no assurance that any design will succeed in achievingits stated goals under all potential conditions, regardless of how remote.

 

PART III

 

Item 10.Directors and Executive Officersof the Registrant

 

The nominees for directors of the Company are presented on pages five andsix of the Company’s definitive Proxy Statement (“Proxy Statement”) and isincorporated herein by this reference.

 

The information required by this Item concerning the Company’sexecutive officers is set forth in Part I, under the caption “Executive Officers”,of this report and is incorporated herein by this reference.

 

The information required by this Item concerning compliance withSection 16(a) of the Exchange Act is presented under the caption “CertainRelationships and Other Transactions” of the Proxy Statement and isincorporated herein by this reference.

 

Item 11.Executive Compensation

 

Information required by this Item concerning compensation of theCompany’s executive officers for the year ended December 31, 2003, is presentedunder the caption “Executive Compensation and Other Information” of the ProxyStatement and is incorporated herein by this reference.

 

Item 12.Security Ownership of Certain Beneficial Owners and Management

 

Information required by this Item concerning the security ownership ofcertain beneficial owners, directors and executive officers,as of December 31,2003, is set forth under the caption “Security Ownership of Certain BeneficialOwners” of the Proxy Statement and is incorporated herein by this reference.

 

22

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The followingtable summarizes the equity compensation plan information as of December 31,2003:

 
| **Plan category**                                           |   | **Number of securities to be  issued upon exercise of  outstanding****options, warrants and  rights** |   | **Weighted-average exercise  price of outstanding options,****warrants and rights** |   | **Number of securities  remaining available for future   issuance under equity  compensation plans (1)** |   |
|-------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|
| Equity compensation plans approved by  security holders     |   | 1,471,177                                                                                             |   | $                                                                                   | 12.19  |                                                                                                     | 27,000 | (2) |
| Equity compensation plans not approved by  security holders |   | 50,000                                                                                                | (3)    | 12.50                                                                               |   | —                                                                                                   |   |
| Total                                                       |   | 1,521,177                                                                                             |   | $                                                                                   | 12.20  |                                                                                                     | 27,000 |   |

 

----

 

(1)               Excludes securities reflected in thesecond column.  Includes 23,500 from the1993 Amended and Restated Non-Employee Stock Option Plan and 3,500 from the2000 Stock Incentive Plan.  The 2000Stock Incentive Plan allows for an increase of 100,000 shares each year not toexceed 1,100,000 for the plan.

(2)               Includes 23,500 from the 1993 Amendedand Restated Non-Employee Stock Option Plan and 3,500 from the 2000 StockIncentive Plan. The 2000 Stock Incentive Plan allows for an increase of 100,000shares each year not to exceed 1,100,000 for the plan.

(3)               The exercise price was equal to the fairmarket value of BMHC’s common stock on the date the options were granted.  These options vested in February 2002 andexpire 10 years from the date of grant, or 2007.

 

Item 13.Certain Relationships and RelatedTransactions

 

Information required by this Item concerning certain relationships andrelated transactions during 2003 is set forth under the caption “CertainRelationships and Other Transactions” of the Proxy Statement and isincorporated herein by this reference.

 

Item 14.Principal Accountant Fees and Services

 

Information required by this Item concerning the principal accountantfees and services during 2003 is set forth under the caption “Fees Paid toIndependent Auditors” of the Proxy Statement and is incorporated herein by thisreference.

 

PART IV

 

Item 15.Exhibits,Financial Statement Schedules and Reports on Form 8-K

 
| (a)    | The following documents are filed as part of this annual report on  Form 10-K: |                                                                                                        |
|--------|--------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|
|   |                                                                           |                                                                                                        |
|   | 1.                                                                             | Financial Statements:                                                                                       |   |
|   |                                                                           | Incorporated herein by this reference in the Annual Report.                                                 |   |
|   |                                                                           |                                                                                                        |   |
|   | •                                                                         | Consolidated Statements of Income for the years ended  December 31, 2003, 2002 and 2001.                    |   |
|   | •                                                                         | Consolidated Balance Sheets as of December 31, 2003 and  December 31, 2002.                                 |   |
|   | •                                                                         | Consolidated Statements of Shareholders’ Equity for the years ended  December 31, 2003, 2002 and 2001. |   |

 

23

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|   | • | Consolidated Statements of Cash Flows for the years ended  December 31, 2003, 2002 and 2001.                                   |   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|--------|
|   | • | Notes to Consolidated Financial Statements.                                                                                    |   |
|   | • | Report of Independent Accountants.                                                                                             |   |
|   |   |                                                                                                                           |   |
|   | 2.     | Financial Statement Schedules:                                                                                                 |   |
|   |   | Report of Independent  Accountants on Financial Statement Schedule                                                             |   |
|   |   | I.       Valuation and  Qualifying Accounts for the years ended December 31, 2003, 2002 and 2001 |   |

 

Schedules other than those listed are omittedbecause they are not applicable or because the required information is shown inthe financial statements or notes.

 
|   | 3.     | Exhibits:                                                                                                                                                                                                                                                               |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | A list of the exhibits required to be filed as part of this report is  set forth in the Index to Exhibits, which immediately precedes such exhibits,  and is incorporated herein by this reference.                                                                     |
|   |   |                                                                                                                                                                                                                                                                    |
| (b)    |   | Reports on Form 8-K                                                                                                                                                                                                                                                     |
|   |   | On October 29, 2003, Building Materials Holding Corporation,  Registrant, filed a form 8-K with the Securities and Exchange Commission  reporting its financial results for the quarter ended September 30, 2003.                                                       |
|   |   |                                                                                                                                                                                                                                                                    |
|   |   | On December  11, 2003 Building Materials Holding Corporation , Registrant, filed a Form  8-K with the Securities and Exchange Commission dismissing its independent  accountants, PricewaterhouseCoopers LLP and engaging KPMG LLP as its new  independent accountants. |

 

24

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**Report of Independent Auditors on**

# **Financial Statement Schedule**

 

 

To the Board of Directors of BuildingMaterials Holding Corporation:

 

Our audits of the consolidated financialstatements referred to in our report dated March 12, 2004 appearing in the 2003Annual Report to Shareholders of Building Materials Holding Corporation (whichreport and consolidated financial statements are incorporated by reference inthis Annual Report on Form 10-K) also included an audit of the financialstatement schedule listed in Item 15(a)(2) of this Form 10-K.  In our opinion, this financial statementschedule presents fairly, in all material respects, the information set forththerein when read in conjunction with the related consolidated financialstatements.

 
| /s/  PricewaterhouseCoopers LLP |   |
|---------------------------------|--------|
|                            |
|                            |
| San  Francisco, California      |
| March  12, 2004                 |

 

25

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# SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 

 

BUILDING MATERIALS HOLDING CORPORATION

 
| By                                              | /s/ Robert E. Mellor |   |
|-------------------------------------------------|----------------------|--------|
| Robert E. Mellor                                |
| President, Chief Executive Officer and Director |
|                                            |
|                                            |
| Dated: March  15, 2004                          |

 

 

KNOW ALL PERSONS BY THESEPRESENTS, that each person whose signature appears below constitutes andappoints Robert E. Mellor, Ellis C. Goebel, and Robert L. Becci, and each ofthem, as his true and lawful attorneys-in-fact and agents, with full power ofsubstitution and resubstitution, for him and in his name, place, and stead, inany and all capacities, to sign any and all amendments to this Report, and tofile the same, with all exhibits thereto, and other documents in connectiontherewith, with the Securities and Exchange Commission, granting unto saidattorneys-in-fact and agents, and each of them, full power and authority to doand perform each and every act and thing requisite and necessary to be done inconnection therewith, as fully to all intents and purposes as he might or coulddo in person, hereby ratifying and confirming that all said attorneys-in-factand agents, or any of them or their or his substitutes or substituted, maylawfully do or cause to be done by virtue hereof.  This Form 10-K may be executed in multiple counterparts, each ofwhich shall be an original, but which shall together constitute but oneagreement.

 

26

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Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.

 
| (i) Principal Executive Officer:                 |   | (iv) Directors:                     |
|--------------------------------------------------|--------|-------------------------------------|
|                                             |   |                                |
| /s/ Robert E. Mellor                             |   |                                | /s/ Robert E. Mellor |   |
| Robert E. Mellor                                 |   | Robert E. Mellor                    |
| President, Chief Executive  Officer and Director |   | Chairman of the Board  of Directors |
| March 15, 2004                                   |   | March 15, 2004                      |
|                                             |   |                                |
| (ii) Principal Financial Officer:                |   | /s/ Alec F. Beck                    |   |
|                                             |   | Alec F. Beck                        |
| /s/ Ellis C. Goebel                              |   |                                | March 15, 2004 |
| Ellis C. Goebel                                  |   |                                |
| Senior Vice President — Finance             |   | /s/ Sara L. Beckman                 |   |
| March 15, 2004                                   |   | Sara L. Beckman                     |
|                                             |   | March 15, 2004                      |
| (iii) Principal Accounting Officer:              |   |                                |
|                                             |   | /s/ H. James Brown                  |   |
| /s/ Robert L. Becci                              |   |                                | H. James Brown |
| Robert L. Becci                                  |   | March 15, 2004                      |
| Vice President and Controller                    |   |                                |
| March 15, 2004                                   |   | /s/ Wilbur J. Fix                   |   |
|                                             |   | Wilbur J. Fix                       |
|                                             |   | March 15, 2004                      |
|                                             |   |                                |
|                                             |   | /s/ Donald S. Hendrickson           |   |
|                                             |   | Donald S. Hendrickson               |
|                                             |   | March 15, 2004                      |
|                                             |   |                                |
|                                             |   | /s/ James K. Jennings, Jr.          |   |
|                                             |   | James K. Jennings, Jr.              |
|                                             |   | March 15, 2004                      |
|                                             |   |                                |
|                                             |   | /s/ Guy O. Mabry                    |   |
|                                             |   | Guy O. Mabry                        |
|                                             |   | March 15, 2004                      |
|                                             |   |                                |
|                                             |   | /s/ Peter S. O’Neill           |   |
|                                             |   | Peter S. O’Neill               |
|                                             |   | March 15, 2004                      |
|                                             |   |                                |
|                                             |   | /s/ Richard G. Reiten               |   |
|                                             |   | Richard G. Reiten                   |
|                                             |   | March 15, 2004                      |
|                                                  |        |                                     |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

27

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BUILDINGMATERIALS HOLDING CORPORATION

 

SCHEDULE I -VALUATION AND QUALIFYING ACCOUNTS

 

FORTHE YEARS ENDED DECEMBER 31, 2003, 2002 and 2001 

*(amounts in thousands)*

 

 
| **Description**                                         |   | **Balance at  Beginning of  Year** |   | **Additions  Charged to  Costs and  Expenses** |   | **Additions  Charged to  Other  Accounts** |   | **Deductions** |   | **Balance at  End of Year** |   |
|---------------------------------------------------------|--------|------------------------------------|--------|------------------------------------------------|--------|--------------------------------------------|--------|----------------|--------|-----------------------------|--------|
|                                                    |   |                               |   |                                           |   |                                       |   |           |   |                        |   |
| DEDUCTED FROM ASSET ACCOUNTS:                           |   |                               |   |                                           |   |                                       |   |           |   |                        |   |
| ALLOWANCE FOR RETURNS, DISCOUNTS AND  DOUBTFUL ACCOUNTS |   |                               |   |                                           |   |                                       |   |           |   |                        |   |
|                                                    |   |                               |   |                                           |   |                                       |   |           |   |                        |   |
| Year Ended December 31, 2003                            |   | $                                  | 2,022  |                                           | $      | 1,818                                      |   | $              | — |                        | $      | 1,415 | (1) | $ | 2,425 |   |
| Year Ended December 31, 2002                            |   | $                                  | 1,966  |                                           | $      | 2,347                                      |   | $              | — |                        | $      | 2,291 | (1) | $ | 2,022 |   |
| Year Ended December 31, 2001                            |   | $                                  | 2,184  |                                           | $      | 1,679                                      |   | $              | — |                        | $      | 1,897 | (1) | $ | 1,966 |   |

 

----

(1)           Representswrite-offs of uncollectible receivables, net of recoveries.

 

28

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BUILDING MATERIALS HOLDING CORPORATION

 

INDEX TO EXHIBITS

Filed with the Annual Report

on Form 10-K for the

Year Ended December 31, 2003

 
| **Exhibit  Footnote** |   | **Exhibit  Number** |   | **Description**                                                                                                                                                                                                                                 |
|-----------------------|--------|---------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (f)                   |   | 3.5                 |   | Amended Certificate of Incorporation, filed with the office of the  Secretary of State of the State of Delaware on September 23, 1997.                                                                                                          |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (j)                   |   | 3.6.1               |   | Amended and Restated By-laws of the Registrant.                                                                                                                                                                                                 |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (c)                   |   | 4.2                 |   | Form of Note.                                                                                                                                                                                                                                   |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (f)                   |   | 4.7                 |   | Rights Agreement, dated September 19, 1997, as amended November 5,  1998 by and between the Registrant and American Stock Transfer and Trust  Company.                                                                                          |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (a)                   |   | 10.4*               |   | 1990 Bonus Plan of the Company                                                                                                                                                                                                                  |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (l)                   |   | 10.7.1              |   | Amended Form of Indemnity Agreement between the Company and its  officers and directors.                                                                                                                                                        |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (d)                   |   | 10.13*              |   | Supplemental Retirement Plan dated January 1, 1993.                                                                                                                                                                                             |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (e)                   |   | 10.19*              |   | Amended and Restated 1992 Non-Qualified Stock Plan.                                                                                                                                                                                             |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (e)                   |   | 10.20*              |   | Amended and Restated 1993 Employee Stock Option Plan.                                                                                                                                                                                           |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (e)                   |   | 10.21*              |   | Amended and Restated 1993 Non-Employee Director Stock Option Plan.                                                                                                                                                                              |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (g)                   |   | 10.34               |   | Asset Purchase Agreement dated as of October 13, 1999, between BMCW,  LLC and Rowland Manufacturing Corporation dba Royal Door Company, Inc.                                                                                                    |
|                  |   |                |   |                                                                                                                                                                                                                                            |
| (g)                   |   | 10.35               |   | Promissory Note between BMCW, LLC Rowland Manufacturing Corporation  dba Royal Door Company, Inc.                                                                                                                                               |
|                  |   |                |   |                                                                                                                                                                                                                                            |
|                  |   | 10.36               |   | Amended and Restated Credit Agreement among Wells Fargo Bank, N.A.,  as Agent, the Company, Letter Of Credit Issuing Bank First Union Bank, as  Syndication Agent, and Twelve Other Financial Institutions Party Hereto dated  August 13, 2003. |

 

29

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| (g)    |   | 10.37                                                                                                                                                                                                                 |   | Amended and Restated Severance Plan for Certain Key Executive  Officers, Senior Management and Key Employees of the Company and its  subsidiaries as Adopted by the Board of Directors of the Company on February  17, 2000.                                                                             |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
| (h)    |   | 10.38                                                                                                                                                                                                                 |   | Building Materials Holding Corporation 2000 Stock Incentive Plan.                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
| (i)    |   | 10.39                                                                                                                                                                                                                 |   | Building Materials Holding Corporation Employee Stock Purchase Plan.                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
| (l)    |   | 10.40                                                                                                                                                                                                                 |   | Employment Agreement by and between Robert E. Mellor and the Company  as of June 1, 2002.                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 10.41                                                                                                                                                                                                                 |   | First Amendment to Employment Agreement between Robert E. Mellor and  the Company as of February 23, 2004.                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 10.42                                                                                                                                                                                                                 |   | Consent of Mercer Oliver Wyman                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 11.0                                                                                                                                                                                                                  |   | Statement regarding computation of earnings per share.                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 13.1                                                                                                                                                                                                                  |   | Building Materials Holding Corporation’s 2003 Annual Report. Such  report, except to the extent incorporated herein by reference, is being  furnished for the information of the Securities and Exchange Commission only  and is not to be deemed filed as part of this Annual Report on Form 10-K. |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 21.1                                                                                                                                                                                                                  |   | Subsidiaries of Building Materials Holding Corporation.                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 23.1                                                                                                                                                                                                                  |   | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 24.1                                                                                                                                                                                                                  |   | Power of Attorney.  Reference  is made to page 26.                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 31.                                                                                                                                                                                                                   |   | Certifications of Chief Executive Officer and Senior Vice President —  Finance                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
|   |   | 32.                                                                                                                                                                                                                   |   | Section 1350 Certifications of Chief Executive Officer Senior Vice  President — Finance                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                     |
| (a)    |   | Filed as an  Exhibit to the Registration Statement on Form S-1 filed with the Commission  on June 6, 1991 (Registration No. 33-41040) (the “Registration Statement”)  and incorporated herein by reference. |
|   |   |                                                                                                                                                                                                                  |
| (b)    |   | Filed as an  Exhibit to Amendment No. 2 to the Registration Statement, filed with the  Commission on August 2, 1991 and incorporated herein by reference.                                                             |

 

30

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| (c)    |   | Filed as an  Exhibit to Amendment No.1 to the Registration Statement on Form S-1, filed  with the Commission on October 20, 1992 (Registration No. 33-52432), and  incorporated herein by reference.   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                   |
| (d)    |   | Filed as an  Exhibit to Company’s Annual Report on Form 10-K for the fiscal year ended  December 31, 1994, filed with the Commission on March 30, 1995, and  incorporated herein by reference.    |
|   |   |                                                                                                                                                                                                   |
| (e)    |   | Filed as an  Exhibit to Company’s Annual Report on Form 10-K for the fiscal year ended  December 31, 1996, filed with the Commission on March 28, 1997, and  incorporated herein by reference.    |
|   |   |                                                                                                                                                                                                   |
| (f)    |   | Filed as an  Exhibit to BMHC’s Report on Form 8-K12G3, filed with the Commission on  September 23, 1997 and incorporated herein by reference.                                                     |
|   |   |                                                                                                                                                                                                   |
| (g)    |   | Filed as an  Exhibit to Company’s Annual Report on Form 10-K for the fiscal year ended  December 31, 1999, filed with the Commission on March 31, 2000, and  incorporated herein by reference.    |
|   |   |                                                                                                                                                                                                   |
| (h)    |   | Filed as an  Exhibit to BMHC’s Report on Form S-8, filed with the Commission on August 22,  2000 and incorporated herein by reference.                                                            |
|   |   |                                                                                                                                                                                                   |
| (i)    |   | Filed as an  Exhibit to BMHC’s Report on Form S-8, filed with the Commission on October 2,  2000 and incorporated herein by reference.                                                            |
|   |   |                                                                                                                                                                                                   |
| (j)    |   | Filed as an  Exhibit to Company’s Quarterly Report on Form 10-Q for the quarter ended  September 30, 2001, filed with the Commission on November 14, 2001, and  incorporated herein by reference. |
|   |   |                                                                                                                                                                                                   |
| (k)    |   | Filed as an  Exhibit to Company’s Annual Report on Form 10-K for the fiscal year ended  December 31, 2001, filed with the Commission on March 27, 2002, and  incorporated herein by reference.    |
|   |   |                                                                                                                                                                                                   |
| (l)    |   | Filed as an  Exhibit to Company’s Annual Report on Form 10-K for the fiscal year ended  December 31, 2002, filed with the Commission on March 26, 2003, and  incorporated herein by reference.    |

 

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* Component of executive compensation.

 

31

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