**FORM          10-Q**

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE          SECURITIES **

**EXCHANGE          ACT OF 1934**

**OR**

**TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE          SECURITIES **

**EXCHANGE          ACT OF 1934**

*www.bmhc.com*

**Building          Materials Holding Corporation**

| **Delaware**                                                   |   | **91-1834269**                                          |
|----------------------------------------------------------------|--------|---------------------------------------------------------|
| (State                    of                    incorporation) |   | (I.R.S.                    Employer Identification No.) |

**Four          Embarcadero Center, Suite 3200, San Francisco, CA 94111**

**(415)          627-9100**

**N/A**

----

**FORM              10-Q**

|                                                                                                                                                                                                                                                      |   |   | **Page****Number** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------|--------|
|                                                                                                                                                                                                                                                 |   |   |               |   |
| **PART                        I - FINANCIAL INFORMATION**                                                                                                                                                                                            |   |   |               |   |
|                                                                                                                                                                                                                                                 |   |   |                    |   |
|  **Item                        1**-                        Financial                        Statements (unaudited)                                                                                                                              |   |   | 2                  |   |
|                                                                                                                                                                                                                                                 |   |   |                    |   |
|    Consolidated                        Statements of Operations for the Three and Six Months Ended      June                        30, 2008 and 2007                                                   |   |   | 2                  |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
|    Consolidated                        Balance Sheets as of June 30, 2008 and December 31, 2007                                                                                                                                       |   |   | 3                  |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
|    Consolidated                        Statements of Shareholders’ Equity for the Six Months Ended       June                        30, 2008 and 2007                                            |   |   | 4                  |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
|    Consolidated                        Statements of Comprehensive (Loss) Income for Six Months                        Ended                              June                        30, 2008 and 2007 |   |   | 5                  |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
|    Consolidated                        Statements of Cash Flows for the Six Months Ended June 30,                        2008 and                        2007                                                                         |   |   | 6                  |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
|    Notes                        to Consolidated Financial Statements                                                                                                                                                                  |   |   | 7                  |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        2**                        -                        Management's Discussion and Analysis of Financial Condition                        and Results of                        Operations                          |   |   | 40                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
|  **Item                        3**                        -                        Quantitative and Qualitative Disclosures about Market Risk                                                                                                   |   |   | 56                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        4**                        - Controls                        and Procedures                                                                                                                                      |   |   | 57                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| **PART                        II - OTHER INFORMATION**                                                                                                                                                                                               |   |   |                    |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        1**                        - Legal                        Proceedings                                                                                                                                            |   |   | 58                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        1A**                        - Risk                        Factors                                                                                                                                                |   |   | 59                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        2**                        -                        Unregistered Sales of Equity Securities and Use of                        Proceeds                                                                           |   |   | 64                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        3**                        - Defaults                        Upon Senior Securities                                                                                                                              |   |   | 65                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        4**                        - Submission                        of Matters to a Vote of Security Holders                                                                                                          |   |   | 66                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        5**                        - Other                        Information                                                                                                                                            |   |   | 68                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| ** Item                        6**                        -                        Exhibits                                                                                                                                                     |   |   | 69                 |   |
|                                                                                                                                                                                                                                                 |   |   |               |   |
| **SIGNATURES**                                                                                                                                                                                                                                       |   |   | 70                 |   |

----

**Item          1. Financial          Statements**

**Building          Materials Holding Corporation**

**Consolidated          Statements of Operations**

**(thousands,          except per share data)**

**(unaudited)**

|                                                                                                                                                                        |   | **Three                      Months Ended****June                      30** |        | **Six                      Months Ended****June                      30** |   | **Year                      Ended****December                      31** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|-------------|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                                                                                                                        |   | **2008**                                                                    |        | **2007**                                                                  |   | **2008**                                                                |   |  **2007** |   | **2007** |   |
| **Sales**                                                                                                                                                                   |   |                                                                   |        |                                                                 |   |                                                               |   |    |   |    |   |
|    Building                      products                                                                                                                    |   | **$**                                                                       | **198,309** |                                                                      | $      | 278,978                                                                 |   | **$** | **377,873** |   | $ | 519,726 |   | $ | 997,035 |   |
|    Construction                      services                                                                                                                |   |                                                                        | **186,311** |                                                                      |   | 377,022                                                                 |   |   | **349,695** |   |   | 662,448 |   |   | 1,182,038 |   |
| **      Total                      sales**                                                                                                    |   |                                                                        | **384,620** |                                                                      |   | 656,000                                                                 |   |   | **727,568** |   |   | 1,182,174 |   |   | 2,179,073 |   |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
| **Costs                      and operating expenses**                                                                                                                       |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
|    Cost                      of goods sold                                                                                                                   |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
|       Building                      products                                                                                                  |   |                                                                        | **145,814** |                                                                      |   | 202,588                                                                 |   |   | **276,497** |   |   | 376,802 |   |   | 722,786 |   |
|       Construction                      services                                                                                              |   |                                                                        | **166,491** |                                                                      |   | 320,548                                                                 |   |   | **317,286** |   |   | 567,991 |   |   | 1,027,796 |   |
|    Impairment                      of assets                                                                                                                 |   |                                                                        | **8,469**   |                                                                      |   | —                                                                 |   |   | **8,469** |   |   | — |   |   | 272,152 |   |
|    Selling,                      general and administrative       expenses                                                     |   |                                                                        | **98,693**  |                                                                      |   | 107,199                                                                 |   |   | **182,949** |   |   | 214,794 |   |   | 422,694 |   |
|    Other                      income, net                                                                                                                    |   |                                                                        | **(2,286**  | **)**                                                                     |   | (10,201                                                                 | )      |   | **(6,716** | **)** |   | (12,042 | ) |   | (9,971 | ) |
|       Total                      costs and operating expenses                                                                                 |   |                                                                        | **417,181** |                                                                      |   | 620,134                                                                 |   |   | **778,485** |   |   | 1,147,545 |   |   | 2,435,457 |   |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                      income from operations**                                                                                                                      |   |                                                                        | **(32,561** | **)**                                                                     |   | 35,866                                                                  |   |   | **(50,917** | **)** |   | 34,629 |   |   | (256,384 | ) |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
|    Interest                      expense                                                                                                                     |   |                                                                        | **9,246**   |                                                                      |   | 9,501                                                                   |   |   | **20,884** |   |   | 17,719 |   |   | 33,800 |   |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                      income from continuing operations****   before                      income taxes and minority****   interests** |   |                                                                        | **(41,807** | **)**                                                                     |   | 26,365                                                                  |   |   | **(71,801** | **)** |   | 16,910 |   |   | (290,184 | ) |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
|    Income                      tax benefit (expense)                                                                                                         |   |                                                                        | **457**     |                                                                      |   | (8,325                                                                  | )      |   | **(3,392** | **)** |   | (4,783 | ) |   | 25,670 |   |
|    Minority                      interests loss (income)                                                                                                     |   |                                                                        | **24**      |                                                                      |   | (156                                                                    | )      |   | **63** |   |   | (641 | ) |   | (1,253 | ) |
| **(Loss)                      income from continuing operations**                                                                                                           |   |                                                                        | **(41,326** | **)**                                                                     |   | 17,884                                                                  |   |   | **(75,130** | **)** |   | 11,486 |   |   | (265,767 | ) |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
|    (Loss)                      income from discontinued       operations                      prior to sale                    |   |                                                                        | **(2,195**  | )                                                                         |   | 2,471                                                                   |   |   | **(5,708** | **)** |   | 4,778 |   |   | 2,937 |   |
|    Impairment                      of assets                                                                                                                 |   |                                                                        | **6,212**   |                                                                      |   | —                                                                 |   |   | **6,212** |   |   | — |   |   | 64,922 |   |
|    Gain                      on sale of discontinued operations                                                                                              |   |                                                                        | **—** |                                                                      |   | —                                                                 |   |   | **—** |   |   | — |   |   | 20,029 |   |
|    Income                      tax benefit (expense)                                                                                                         |   |                                                                        | **17,792**  |                                                                      |   | (938                                                                    | )      |   | **21,248** |   |   | (1,813 | ) |   | (4,990 | ) |
| **Income                      (loss) from discontinued****   operations**                                                                                    |   |                                                                        | **9,385**   |                                                                      |   | 1,533                                                                   |   |   | **9,328** |   |   | 2,965 |   |   | (46,946 | ) |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
| **Net                      (loss) income**                                                                                                                                  |   | **$**                                                                       | **(31,941** | **)**                                                                     | $      | 19,417                                                                  |   | **$** | **(65,802** | **)** | $ | 14,451 |   | $ | (312,713 | ) |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
| **Net                      (loss) income per share:**                                                                                                                       |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
|    Continuing                      operations                                                                                                                |   |                                                                        | **$(1.42**  | **)**                                                                     |   | $0.62                                                                   |   |   | **$(2.59** | **)** |   | $0.40 |   |   | $                      (9.23 | ) |
|    Discontinued                      operations                                                                                                              |   |                                                                        | **0.32**    |                                                                      |   | 0.05                                                                    |   |   | **0.32** |   |   | 0.10 |   |   | (1.63 | ) |
|       Basic                                                                                                                                   |   |                                                                        | **$(1.10**  | **)**                                                                     |   | $0.67                                                                   |   |   | **$(2.27** | **)** |   | $0.50 |   |   | $(10.86 | ) |
|                                                                                                                                                                        |   |                                                                        |        |                                                                      |   |                                                                    |   |   |   |   |   |   |   |   |   |   |
|    Continuing                      operations                                                                                                                |   |                                                                        | **$(1.42**  | **)**                                                                     |   | $0.61                                                                   |   |   | **$(2.59** | **)** |   | $0.39 |   |   | $                      (9.23 | ) |
|    Discontinued                      operations                                                                                                              |   |                                                                        | **0.32**    |                                                                      |   | 0.05                                                                    |   |   | **0.32** |   |   | 0.10 |   |   | (1.63 | ) |
|       Diluted                                                                                                                                 |   |                                                                        | **$(1.10**  | **)**                                                                     |   | $0.66                                                                   |   |   | **$(2.27** | **)** |   | $0.49 |   |   | $(10.86 | ) |

----

**Building        Materials Holding Corporation**

**Consolidated        Balance Sheets**

**(thousands)**

**(unaudited)**

|                                                                        |   | **June                      30** |   |   | **December                      31** |   |                                                                                                            |   | **June                      30** |   |   | **December                      31** |
|-----------------------------------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------------|
|                                                                        |   | **2008**                         |   |   | **2007**                             |   |                                                                                                            |   | **2008**                         |   |   | **2007**                             |
| **Assets**                                                                  |   |                             |   |   |                                 |   | **Liabilities,                      Minority Interests and****Shareholders’                      Equity** |   |                             |   |   |                                 |
| Cash                      and cash                      equivalents         | **$**  | **56,192 **                 |   | $      | 60,587                          |   |                                                                                                            |   |                             |   |   |                                 |
| Marketable                      securities                                  |   | **787 **                    |   |   | 1,872                           |   |                                                                                                            |   |                             |   |   |                                 |
| Receivables,                      net of allowances                         |   |                             |   |   |                                 |   | Accounts                      payable                                                                           | **$**  | **68,289 **                 |   | $      | 74,025                          |
|    of                      $8,652 and $4,656                 |   | **195,346 **                |   |   | 200,995                         |   | Accrued                      compensation                                                                       |   | **28,224 **                 |   |   | 31,537                          |
| Inventory                                                                   |   | **104,307 **                |   |   | 115,524                         |   | Insurance                      deductible reserves                                                              |   | **23,082 **                 |   |   | 27,189                          |
| Unbilled                      receivables                                   |   | **34,793 **                 |   |   | 39,189                          |   | Other                      accrued                      liabilities                                             |   | **42,431 **                 |   |   | 28,989                          |
| Income                      tax                      receivable             |   | **49,894 **                 |   |   | 9,812                           |   | Billings                      in                      excess of costs and estimated                             |   |                             |   |   |                                 |
| Deferred                      income taxes                                  |   | **— **                |   |   | 11,470                          |   |    earnings                                                                                      |   | **29,119 **                 |   |   | 20,977                          |
| Prepaid                      expenses and other                             |   | **8,200 **                  |   |   | 8,973                           |   | Current                      portion of long-term debt                                                          |   | **379,991 **                |   |   | 4,923                           |
| Assets                      of                      discontinued operations |   | **16,492 **                 |   |   | 10,492                          |   | Liabilities                      of                      discontinued operations                                |   | **7,854 **                  |   |   | 8,533                           |
| **   Current                      assets**                   |   | **466,011 **                |   |   | 458,914                         |   | **   Current                      liabilities**                                                  |   | **578,990 **                |   |   | 196,173                         |
|                                                                        |   |                             |   |   |                                 |   |                                                                                                            |   |                             |   |   |                                 |
| Property                      and                      equipment            |   |                             |   |   |                                 |   | Insurance                      deductible reserves                                                              |   | **25,439 **                 |   |   | 27,898                          |
|    Land                                                      |   | **40,711 **                 |   |   | 60,052                          |   | Long-term                      debt                                                                             |   | **1,246 **                  |   |   | 343,937                         |
|    Buildings                      and improvements           |   | **129,596 **                |   |   | 135,009                         |   | Other                      long-term liabilities                                                                |   | **40,575 **                 |   |   | 44,503                          |
|    Equipment                                                 |   | **178,182 **                |   |   | 185,958                         |   |                                                                                                            |   |                             |   |   |                                 |
|    Construction                      in progress             |   | **19,855 **                 |   |   | 16,134                          |   | Minority                      interests                                                                         |   | **— **                |   |   | 8,591                           |
|    Accumulated                      depreciation             |   | **(158,732)**                    |   |   | (155,083)                            |   |                                                                                                            |   |                             |   |   |                                 |
| Assets                      held                      for sale              |   | **23,968 **                 |   |   | —                         |   | Commitments                      and contingent liabilities                                                     |   | **— **                |   |   | —                         |
| Marketable                      securities                                  |   | **38,882 **                 |   |   | 40,039                          |   |                                                                                                            |   |                             |   |   |                                 |
| Deferred                      income taxes                                  |   | **— **                |   |   | 11,269                          |   | Shareholders’                      equity                                                                 |   |                             |   |   |                                 |
| Deferred                      loan                      costs               |   | **6,087 **                  |   |   | 4,358                           |   |                         Common shares, $0.001 par value:                                              |   |                             |   |   |                                 |
| Other                      long-term assets                                 |   | **27,821 **                 |   |   | 30,956                          |   |    authorized                      50 million shares; issued and                                 |   |                             |   |   |                                 |
| Other                      intangibles, net                                 |   | **47,320 **                 |   |   | 58,310                          |   |    outstanding                      29.5 and 29.2 million shares                                 |   | **29 **                     |   |   | 29                              |
| Goodwill                                                                    |   | **13,886 **                 |   |   | 14,196                          |   |    Additional                      paid-in capital                                               |   | **166,642 **                |   |   | 164,043                         |
| Assets                      of                      discontinued operations |   | **— **                |   |   | 14,732                          |   |    Deferred                      compensation common shares obligation                           |   | **1,309 **                  |   |   | 1,427                           |
|                                                                        | **$**  | **833,587 **                |   | $      | 874,844                         |   |                         Deferred compensation common shares                                           |   | **(1,309)**                      |   |   | (1,427)                              |
|                                                                        |   |                             |   |   |                                 |   |    Retained                      earnings                                                        |   | **28,680 **                 |   |   | 94,482                          |
|                                                                        |   |                             |   |   |                                 |   |    Accumulated                      other comprehensive loss, net                                |   | **(8,014)**                      |   |   | (4,812)                              |
|                                                                        |   |                             |   |   |                                 |   | **      Shareholders’                      equity**                         |   | **187,337 **                |   |   | 253,742                         |
|                                                                        |   |                             |   |   |                                 |   |                                                                                                            | **$**  | **833,587 **                |   | $      | 874,844                         |

----

**Building        Materials Holding Corporation**

**Consolidated        Statements of Shareholders’ Equity**

**(thousands)**

**(unaudited)**

|                                                                                                                                                                  |   |   | **Six                      Months Ended****June                      30** |   |   | **Year                      Ended****December                      31** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------|--------|
|                                                                                                                                                                  |   |   | **2008**                                                                  |   |   | **2007**                                                                |   |   | **2007** |   |
|    Common                      shares - beginning balance                                                                                              |   | **$**  | **29**                                                                    |   | $      | 29                                                                      |   | $ | 29 |   |
|       Shares                      issued from Incentive and Performance Plans                                                           |   |   | —                                                                   |   |   | —                                                                 |   |   | — |   |
| **Common                      Shares**                                                                                                                                |   | **$**  | **29**                                                                    |   | $      | 29                                                                      |   | $ | 29 |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|    Additional                      paid-in capital - beginning balance                                                                                 |   | **$**  | **164,043**                                                               |   | $      | 154,405                                                                 |   | $ | 154,405 |   |
|       Shares                      issued from Incentive and Performance Plans                                                           |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|          Options                      exercised - Management                                                             |   |   | **9**                                                                     |   |   | 163                                                                     |   |   | 203 |   |
|             (Taxes)                      tax benefit for share options exercised                          |   |   | **(69**                                                                   | **)**  |   | 94                                                                      |   |   | 29 |   |
|          Restricted                      shares - Management                                                             |   |   | **294**                                                                   |   |   | 3,014                                                                   |   |   | 2,614 |   |
|             Unearned                      compensation                                                    |   |   | **(294**                                                                  | **)**  |   | (3,014                                                                  | )      |   | (2,614 | ) |
|             Tax                      benefit for dividends on restricted shares                           |   |   | **—**                                                               |   |   | —                                                                 |   |   | 63 |   |
|          Shares                      - Directors                                                                         |   |   | **402**                                                                   |   |   | 405                                                                     |   |   | 405 |   |
|       Earned                      compensation                                                                                          |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|          Options                      - Management                                                                       |   |   | **1,768**                                                                 |   |   | 2,565                                                                   |   |   | 5,177 |   |
|          Restricted                      shares - Management                                                             |   |   | **1,212**                                                                 |   |   | 1,730                                                                   |   |   | 3,317 |   |
|             (Taxes)                      tax benefit for vested restricted shares                         |   |   | **(723**                                                                  | **)**  |   | 158                                                                     |   |   | 167 |   |
|       Shares                      issued from Employee Stock Purchase Plan                                                              |   |   | **—**                                                               |   |   | 277                                                                     |   |   | 277 |   |
| **Additional                      paid-in capital**                                                                                                                   |   | **$**  | **166,642**                                                               |   | $      | 159,797                                                                 |   | $ | 164,043 |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |  |   |
|    Deferred                      compensation common shares obligation -       beginning                      balance    |   | **$**  | **1,427**                                                                 |   | $      | 1,200                                                                   |   | $ | 1,200 |   |
|       Shares                      purchased with deferred compensation                                                                  |   |   | **261**                                                                   |   |   | 336                                                                     |   |   | 364 |   |
|       Shares                      purchased with dividends                                                                              |   |   | **11**                                                                    |   |   | 18                                                                      |   |   | 38 |   |
|       Distributions                                                                                                                     |   |   | **(390**                                                                  | **)**  |   | (22                                                                     | )      |   | (175 | ) |
| **Deferred                      compensation common shares obligation**                                                                                               |   | **$**  | **1,309**                                                                 |   | $      | 1,532                                                                   |   | $ | 1,427 |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|    Deferred                      compensation common shares -       beginning                      balance               |   | **$**  | **(1,427**                                                                | **)**  | $      | (1,200                                                                  | )      | $ | (1,200 | ) |
|       Shares                      purchased with deferred compensation and dividends                                                    |   |   | **(272**                                                                  | **)**  |   | (354                                                                    | )      |   | (402 | ) |
|       Distributions                                                                                                                     |   |   | **390**                                                                   |   |   | 22                                                                      |   |   | 175 |   |
| **Deferred                      compensation common shares**                                                                                                          |   | **$**  | **(1,309**                                                                | **)**  | $      | (1,532                                                                  | )      | $ | (1,427 | ) |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|    Retained                      earnings - beginning balance                                                                                          |   | **$**  | **94,482**                                                                |   | $      | 418,927                                                                 |   | $ | 418,927 |   |
|       Net                      (loss) income                                                                                            |   |   | **(65,802**                                                               | **)**  |   | 14,451                                                                  |   |   | (312,713 | ) |
|       Cash                      dividends on common shares                                                                              |   |   | **—**                                                               |   |   | (5,856                                                                  | )      |   | (11,732 | ) |
| **Retained                      earnings**                                                                                                                            |   | **$**  | **28,680**                                                                |   | $      | 427,522                                                                 |   | $ | 94,482 |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|    Accumulated                      other comprehensive (loss) income, net -      beginning                      balance |   | **$**  | **(4,812**                                                                | **)**  | $      | (732                                                                    | )      | $ | (732 | ) |
|       Interest                      rate swap contracts:                                                                                |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|          Unrealized                      gain (loss)                                                                     |   |   | **446**                                                                   |   |   | 3,691                                                                   |   |   | (7,673 | ) |
|             (Taxes)                      tax benefit for unrealized gain (loss)                           |   |   | **(3,266**                                                                | **)**  |   | (1,393                                                                  | )      |   | 2,933 |   |
|       Marketable                      securities:                                                                                       |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
|          Unrealized                      (loss) gain                                                                     |   |   | **(579**                                                                  | **)**  |   | (177                                                                    | )      |   | 1,000 |   |
|             Tax                      benefit (taxes) for unrealized (loss) gain                           |   |   | **197**                                                                   |   |   | 60                                                                      |   |   | (340 | ) |
| **Accumulated                      other comprehensive (loss) income, net**                                                                                           |   | **$**  | **(8,014**                                                                | **)**  | $      | 1,449                                                                   |   | $ | (4,812 | ) |
|                                                                                                                                                                  |   |   |                                                                      |   |   |                                                                    |   |   |   |   |
| **Shareholders’                      Equity**                                                                                                                   |   | **$**  | **187,337**                                                               |   | $      | 588,797                                                                 |   | $ | 253,742 |   |

----

**Building        Materials Holding Corporation**

**Consolidated        Statements of Comprehensive (Loss) Income**

**(thousands)**

**(unaudited)**

|                                                                                                  |   |   | **Six                    Months Ended****June                    30** |   |   | **Year                    Ended****December                    31** |   |
|-------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                                                                                  |   |   | **2008**                                                              |   |   | **2007**                                                            |   |   | **2007** |   |
|                                                                                                  |   |   |                                                                  |   |   |                                                                |   |   |   |   |
| Net                    (loss)                    income                                               |   | **$**  | **(65,802**                                                           | **)**  | $      | 14,451                                                              |   | $ | (312,713 | ) |
|                                                                                                  |   |   |                                                                  |   |   |                                                                |   |   |   |   |
| Unrealized                    gain (loss) on interest rate swap contracts:                            |   |   |                                                                  |   |   |                                                                |   |   |   |   |
|    Unrealized                    gain (loss)                                           |   | **$**  | **446**                                                               |   | $      | 3,691                                                               |   | $ | (7,673 | ) |
|       (Taxes)                    tax benefit for unrealized gain (loss) |   |   | **(3,266**                                                            | **)**  |   | (1,393                                                              | )      |   | 2,933 |   |
|                                                                                                  |   | **$**  | **(2,820**                                                            | **)**  | $      | 2,298                                                               |   | $ | (4,740 | ) |
| Unrealized                    (loss) gain on marketable securities:                                   |   |   |                                                                  |   |   |                                                                |   |   |   |   |
|    Unrealized                    (loss) gain                                           |   | **$**  | **(579**                                                              | **)**  | $      | (177                                                                | )      | $ | 1,000 |   |
|       Tax                    benefit (taxes) for unrealized (loss) gain |   |   | **197**                                                               |   |   | 60                                                                  |   |   | (340 | ) |
|                                                                                                  |   | **$**  | **(382**                                                              | **)**  | $      | (117                                                                | )      | $ | 660 |   |
|                                                                                                  |   |   |                                                                  |   |   |                                                                |   |   |   |   |
| **Comprehensive                    (loss) income**                                                    |   | **$**  | **(69,004**                                                           | **)**  | $      | 16,632                                                              |   | $ | (316,793 | ) |

----

**Building        Materials Holding Corporation**

**Consolidated        Statements of Cash Flows**

**(thousands)**

**(unaudited)**

|                                                                                                                                                                                                                                                     |   | **Six                    Months Ended****June                    30** |        | **Year                    Ended****December                    31** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|-------------|---------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                     |   | **2008**                                                              |        | **2007**                                                            |   | **2007** |   |
| **Operating                    Activities**                                                                                                                                                                                                              |   |                                                             |        |                                                           |   |    |   |
|    Net                    (loss) income                                                                                                                                                                                                   |   | **$**                                                                 | **(65,802** | **)**                                                               | $      | 14,451 |   | $ | (312,713 | ) |
|    Items                    in net (loss) income not using (providing) cash:                                                                                                                                                              |   |                                                                  |        |                                                                |   |   |   |   |   |   |
|       Minority                    interests (loss) income, net                                                                                                                                                             |   |                                                                  | **(63**     | **)**                                                               |   | 376 |   |   | 853 |   |
|       Depreciation                    and amortization                                                                                                                                                                     |   |                                                                  | **20,525**  |                                                                |   | 24,111 |   |   | 48,781 |   |
|       Deferred                    loan cost amortization                                                                                                                                                                   |   |                                                                  | **3,188**   |                                                                |   | 561 |   |   | 1,123 |   |
|       Impairment                    of assets                                                                                                                                                                              |   |                                                                  | **14,681**  |                                                                |   | — |   |   | 337,074 |   |
|       Share-based                    compensation                                                                                                                                                                          |   |                                                                  | **3,267**   |                                                                |   | 4,542 |   |   | 8,944 |   |
|       Gain                    on sale of discontinued operations                                                                                                                                                           |   |                                                                  | **—** |                                                                |   | — |   |   | (20,029 | ) |
|       Gain                    on sale of assets, net                                                                                                                                                                       |   |                                                                  | **(4,778**  | **)**                                                               |   | (8,700 | ) |   | (8,789 | ) |
|       Realized                    (gain) loss on marketable securities                                                                                                                                                     |   |                                                                  | **(419**    | **)**                                                               |   | 7 |   |   | (408 | ) |
|       Deferred                    income taxes                                                                                                                                                                             |   |                                                                  | **19,671**  |                                                                |   | 2,485 |   |   | (19,452 | ) |
|       Accrued                    loss for acquisition purchase obligation                                                                                                                                                  |   |                                                                  | **—** |                                                                |   | — |   |   | 5,500 |   |
|       Changes                    in assets and liabilities, net of effects of acquisitions and                             divestitures                    of business units: |   |                                                                  |        |                                                                |   |   |   |   |   |   |
|             Receivables,                    net                                                                                                                                              |   |                                                                  | **(363**    | **)**                                                               |   | (49,128 | ) |   | 68,385 |   |
|             Inventory                                                                                                                                                                        |   |                                                                  | **11,049**  |                                                                |   | (12,341 | ) |   | 24,599 |   |
|             Unbilled                    receivables                                                                                                                                          |   |                                                                  | **4,526**   |                                                                |   | (28,664 | ) |   | 3,610 |   |
|             Income                    tax receivable                                                                                                                                         |   |                                                                  | **(40,082** | **)**                                                               |   | 674 |   |   | (7,304 | ) |
|             Prepaid                    expenses and other current assets                                                                                                                     |   |                                                                  | **901**     |                                                                |   | (183 | ) |   | (454 | ) |
|             Accounts                    payable                                                                                                                                              |   |                                                                  | **4,047**   |                                                                |   | 27,746 |   |   | (22,621 | ) |
|             Accrued                    compensation                                                                                                                                          |   |                                                                  | **(3,708**  | **)**                                                               |   | (7,827 | ) |   | (16,536 | ) |
|             Insurance                    deductible reserves                                                                                                                                 |   |                                                                  | **(5,202**  | **)**                                                               |   | 2,785 |   |   | 3,557 |   |
|             Other                    accrued liabilities                                                                                                                                     |   |                                                                  | **(3,689**  | **)**                                                               |   | (6,032 | ) |   | (13,033 | ) |
|             Billings                    in excess of costs and estimated earnings                                                                                                            |   |                                                                  | **7,984**   |                                                                |   | 8,211 |   |   | (3,843 | ) |
|             Other                    long-term assets and liabilities                                                                                                                        |   |                                                                  | **17,009**  |                                                                |   | (9,254 | ) |   | (12,560 | ) |
|       Other,                    net                                                                                                                                                                                        |   |                                                                  | **(3,068**  | **)**                                                               |   | (1,332 | ) |   | 2,595 |   |
| **Cash                    flows (used) provided by operating activities**                                                                                                                                                                                |   |                                                                  | **(20,326** | **)**                                                               |   | (37,512 | ) |   | 67,279 |   |
|                                                                                                                                                                                                                                                     |   |                                                                  |        |                                                                |   |   |   |   |   |   |
| **Investing                    Activities**                                                                                                                                                                                                              |   |                                                                  |        |                                                                |   |   |   |   |   |   |
|    Purchases                    of property and equipment                                                                                                                                                                                 |   |                                                                  | **(11,150** | **)**                                                               |   | (15,992 | ) |   | (32,995 | ) |
|    Acquisitions                    and investments in businesses, net of cash acquired                                                                                                                                                    |   |                                                                  | **(2,600**  | **)**                                                               |   | (72,214 | ) |   | (80,961 | ) |
|    Proceeds                    from dispositions of property and equipment                                                                                                                                                                |   |                                                                  | **8,238**   |                                                                |   | 16,154 |   |   | 16,905 |   |
|    Proceeds                    from sale of discontinued operations                                                                                                                                                                       |   |                                                                  | **—** |                                                                |   | — |   |   | 27,176 |   |
|    Purchase                    of marketable securities                                                                                                                                                                                   |   |                                                                  | **(26,691** | **)**                                                               |   | (17,764 | ) |   | (35,239 | ) |
|    Proceeds                    from sales of marketable securities                                                                                                                                                                        |   |                                                                  | **28,696**  |                                                                |   | 17,414 |   |   | 52,650 |   |
|    Other,                    net                                                                                                                                                                                                          |   |                                                                  | **(2,452**  | **)**                                                               |   | (1,509 | ) |   | (628 | ) |
| **Cash                    flows used by investing activities**                                                                                                                                                                                           |   |                                                                  | **(5,959**  | **)**                                                               |   | (73,911 | ) |   | (53,092 | ) |
|                                                                                                                                                                                                                                                     |   |                                                                  |        |                                                                |   |   |   |   |   |   |
| **Financing                    Activities**                                                                                                                                                                                                              |   |                                                                  |        |                                                                |   |   |   |   |   |   |
|    Net                    borrowings under revolver                                                                                                                                                                                       |   |                                                                  | **39,000**  |                                                                |   | 87,000 |   |   | — |   |
|    Principal                    payments on term notes                                                                                                                                                                                    |   |                                                                  | **(5,806**  | **)**                                                               |   | (1,750 | ) |   | (3,500 | ) |
|    Net                    payments on other notes                                                                                                                                                                                         |   |                                                                  | **(988**    | **)**                                                               |   | (4,108 | ) |   | (4,505 | ) |
|    Decrease                    in book overdrafts                                                                                                                                                                                         |   |                                                                  | **(1,678**  | **)**                                                               |   | (1,182 | ) |   | (7,609 | ) |
|    Proceeds                    from share options exercised                                                                                                                                                                               |   |                                                                  | **9**       |                                                                |   | 163 |   |   | 203 |   |
|    (Taxes)                    tax benefit for share-based compensation                                                                                                                                                                    |   |                                                                  | **(792**    | **)**                                                               |   | 253 |   |   | 259 |   |
|    Dividends                    paid                                                                                                                                                                                                      |   |                                                                  | **(2,938**  | **)**                                                               |   | (5,832 | ) |   | (11,709 | ) |
|    Deferred                    financing costs                                                                                                                                                                                            |   |                                                                  | **(4,917**  | **)**                                                               |   | — |   |   | — |   |
|    Distributions                    to minority interests                                                                                                                                                                                 |   |                                                                  | **—** |                                                                |   | (2,203 | ) |   | (1,223 | ) |
|    Other,                    net                                                                                                                                                                                                          |   |                                                                  | **—** |                                                                |   | 211 |   |   | 212 |   |
| **Cash                    flows provided (used) by financing activities**                                                                                                                                                                                |   |                                                                  | **21,890**  |                                                                |   | 72,552 |   |   | (27,872 | ) |
|                                                                                                                                                                                                                                                     |   |                                                                  |        |                                                                |   |   |   |   |   |   |
| **Decrease                    in Cash and Cash Equivalents**                                                                                                                                                                                             |   |                                                                  | **(4,395**  | **)**                                                               |   | (38,871 | ) |   | (13,685 | ) |
|                                                                                                                                                                                                                                                     |   |                                                                  |        |                                                                |   |   |   |   |   |   |
|    Cash                    and cash equivalents, beginning of period                                                                                                                                                                      |   |                                                                  | **60,587**  |                                                                |   | 74,272 |   |   | 74,272 |   |
|    Cash                    and cash equivalents, end of period                                                                                                                                                                            |   | **$**                                                                 | **56,192**  |                                                                | $      | 35,401 |   | $ | 60,587 |   |
|                                                                                                                                                                                                                                                     |   |                                                                  |        |                                                                |   |   |   |   |   |   |
| **Supplemental                    Disclosure of Cash Flow Information**                                                                                                                                                                                  |   |                                                                  |        |                                                                |   |   |   |   |   |   |
|    Accrued                    but unpaid dividends                                                                                                                                                                                        |   | **$**                                                                 | —     |                                                                | $      | 2,939 |   | $ | 2,938 |   |
|    Cash                    paid for interest                                                                                                                                                                                              |   | **$**                                                                 | **17,667**  |                                                                | $      | 16,812 |   | $ | 32,827 |   |
|    Cash                    paid for income taxes                                                                                                                                                                                          |   | **$**                                                                 | **952**     |                                                                | $      | 1,899 |   | $ | 7,233 |   |
|                                                                                                                                                                                                                                                     |   |                                                                  |        |                                                                |   |   |   |   |   |   |
| **Supplemental                    Schedule of Investing Activities**                                                                                                                                                                                     |   |                                                                  |        |                                                                |   |   |   |   |   |   |
|    Fair                    value of assets acquired                                                                                                                                                                                       |   | **$**                                                                 | **—** |                                                                | $      | 9,805 |   | $ | 12,999 |   |
|    Liabilities                    of acquisitions (extinguished)                                                                                                                                                                          |   | **$**                                                                 | **(2,600**  | **)**                                                               | $      | (1,271 | ) | $ | (3,680 | ) |
|    Cash                    paid for acquisitions made this period                                                                                                                                                                         |   | **$**                                                                 | **2,600**   |                                                                | $      | 11,076 |   | $ | 16,679 |   |
|    Cash                    paid for acquisitions made in prior period                                                                                                                                                                     |   | **$**                                                                 | **—** |                                                                | $      | 61,138 |   | $ | 64,282 |   |

----

***Notes        to Consolidated Financial Statements***

***1.***
***Summary        of Significant Accounting Policies***

*Basis        of Presentation*

| ·   | concrete                  block masonry, concrete services and truss manufacturing in Florida                  (June                  2008), |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | framing                  services in Virginia (March 2008)                  and |
|--------------------|---------------------------------------------------------------------------------|

| ·   | three                  building materials distribution businesses in Western Colorado                  (September                  2007). |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                  operating                  results of these operations are presented separately from continuing                  operations within the caption of discontinued operations                  and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | related                  assets and liabilities are separately classified in the consolidated                  balance sheet. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

*Financial          Covenants*

*Nature        of Operations*

*Principles        of Consolidation*

----

*Use        of Estimates*

*Revenue          Recognition for Construction Services*

*Estimated          Losses on Uncompleted Contracts and Changes in Contract          Estimates*

*Goodwill*

*Insurance          Deductible Reserves*

*  *
*Warranties*

----

*  *
*Share-based            Compensation*

*Cash        and Cash Equivalents*

*Receivables*

*Inventory        Valuation*

*Unbilled        Receivables and Billings in Excess of Costs and Estimated        Earnings*

*Property        and Equipment*

----

*Property        Held for Sale*

|                                                          |   |        | **June                  30** |   |
|---------------------------------------------------------------|--------|-------------|------------------------------|--------|
|                                                          |   |        | **2008**                     |   |
| Property                  and                  equipment      |   |        |                              |   |
|    Land                                        |   | **$**  | **18,852**                   |   |
|    Buildings                  and improvements |   |        | **4,801**                    |   |
|    Equipment                                   |   |        | **315**                      |   |
|                                                          |   | **$**       | **23,968**                   |   |

*Long-lived        Assets*

*Derivative        Instruments and Hedging Activities*

----

*Revenue        Recognition *

*Shipping        and Handling*

*Reclassifications*

*Recent        Accounting Principles*

*The        Hierarchy        of Generally Accepted Accounting Principles*

*Disclosures        about Derivative Instruments and Hedging Activities*

*Noncontrolling        Interests in Consolidated Financial Statements*
*Business        Combinations*

----

*Business        Combinations*

----

| ***2.  *** | ***Restructuring*** |
|----------------------|---------------------|

| ·   | close 19                  underperforming units, |
|--------------------|-------------------------------------------------------|

| ·   | consolidate 9                  underperforming units with other business units and |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | consolidate                    administrative functions of information systems, reporting, accounts                    payable and human resources. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                   |   |   | **Estimated****Charges** |   |   |   |   | **Recognized****Six                  Months****Ended****June                  30****2008** |   |   | **Total****Remaining** |   |
|--------------------------------------------------------|--------|--------|--------------------------|--------|--------|--------|--------|--------------------------------------------------------------------------------------------|--------|--------|------------------------|--------|
| Impairment                  of                  assets |   | **$**  | 1,958                    |   |   |   | **$**  | 1,958                                                                                      |   | **$**  | —                |   |
| Operating                  lease obligations           |   |   | 4,148                    |   |   |   |   | 4,148                                                                                      |   |   | —                |   |
|                                                   |   | **$**  | 6,106                    |   |   |   | **$**  | 6,106                                                                                      |   | **$**  | **—**            |   |

|                                                           |   |   | **Recognized****Six                      Months Ended****June                      30****2008** |   |   | **Cash****Payments** |   |   | **Non-cash****Charges** |   |   | **Reserve****Balance                      at****June                      30****2008** |   |
|----------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------|--------|--------|----------------------|--------|--------|-------------------------|--------|--------|----------------------------------------------------------------------------------------|--------|
| Impairment                      of                      assets |   | **$**  | 1,958                                                                                           |   | **$**  | —              |   | **$**  | 1,958                   |   | **$**  | **—**                                                                            |   |
| Operating                      lease obligations               |   |   | 4,148                                                                                           |   |   | —              |   |   | —                 |   |   | **4,148**                                                                              |   |
|                                                           |   | **$**  | 6,106                                                                                           |   | **$**  | —              |   | **$**  | 1,958                   |   | **$**  | **4,148**                                                                              |   |

----

| ***3.  *** | ***Impairment                  of Assets*** |
|----------------------|---------------------------------------------|

| ·   | $6.2                  million                  for certain customer relationships and covenants not to                  compete, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | $1.3                  million                  for leasehold improvements, |
|--------------------|----------------------------------------------------------------------------|

| ·   | $0.7                  million                  for certain property and equipment held for sale                  and |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | $0.3                  million                  for goodwill. |
|--------------------|--------------------------------------------------------------|

| ·   | $30.0                  million                  for certain customer relationships, |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | $242.0                  million for goodwill and |
|--------------------|--------------------------------------------------|

| ·   | $0.2                  million                  for certain equipment. |
|--------------------|-----------------------------------------------------------------------|

----

***4.***
***Discontinued        Operations***

| ·   | In                  June 2008,                  we discontinued concrete block masonry, concrete services and truss                  manufacturing in Florida. These business units represented approximately                  6% of sales. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                  March                  2008, we discontinued framing services in Virginia. This business                  unit                  represented less than 1% of sales. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                  September                  2007, we sold three building materials distribution businesses                  in Western                  Colorado. The businesses were sold for $11.4 million consisting                  of $9.6                  million cash and a $1.8 million note receivable and resulted in                  recognition of an initial gain of $3.7 million. In December 2007,                  the                  remaining real estate for one of these operations was sold for                  $17.6                  million cash and resulted in recognition of a gain of $16.3 million.                  These                  business units represented approximately 1% of sales. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        |   | **June                    30** |       | **December                    31** |   |
|-------------|--------|--------------------------------|------------|------------------------------------|--------|
|        |   | **2008**                       |       | **2007**                           |   |
| Assets      |   | **$**                          | **16,492** |                               | $      | 25,224 |   |
| Liabilities |   | **$**                          | **7,854**  |                               | $      | 8,533 |   |

|                                                                                               |   | **Three                    Months Ended****June                    30** |       | **Six                    Months Ended****June                      30** |   | **Year                    Ended****December                    31** |   |
|----------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                                                                               |   | **2008**                                                                |       |  **2007**                                                          |   |  **2008**                                                      |   |  **2007** |   | **2007** |   |
| Sales                                                                                              |   |                                                                    |       |                                                               |   |                                                           |   |    |   |    |   |
|    Building                    products                                             |   | **$**                                                                   | **792**    |                                                                    | $      | 12,060                                                              |   | **$** | **1,278** |   | $ | 21,408 |   | $ | 33,955 |   |
|    Construction                    services                                         |   | **$**                                                                   | **13,068** |                                                                    | $      | 28,967                                                              |   | **$** | **25,274** |   | $ | 62,549 |   | $ | 101,649 |   |
|                                                                                               |   |                                                                    |       |                                                                    |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Income                    (loss)                    from discontinued    operations |   | **$**                                                                   | **9,385**  |                                                                    | **$**  | 1,533                                                               |   | **$** | **9,328** |   | $ | 2,965 |   | $ | (46,946 | ) |

----

***5.***
***Net        (Loss) Income Per Share***

|                                                                                                                 |   | **Three                    Months Ended****June                    30** |                                 | **Six                    Months Ended****June                    30** |   | **Year                    Ended****December                    31** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------------------------------------|-----------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                                                                                                 |   | **2008**                                                                |                                 |  **2007**                                                        |   |  **2008**                                                      |   |  **2007** |   | **2007** |   |
| (Loss)                    income                    from continuing operations                                       |   | **$**                                                                   | **(41,326**                          | **)**                                                                 | $      | 17,884                                                              |   | **$** | **(75,130** | **)** | $ | 11,486 |   | $ | (265,767 | ) |
| Income                    (loss)                    from discontinued operations                                     |   |                                                                    | **9,385**                            |                                                                  |   | 1,533                                                               |   |   | **9,328** |   |   | 2,965 |   |   | (46,946 | ) |
|    Net                    (loss) income                                                               |   | **$**                                                                   | **(31,941**                          | **)**                                                                 | $      | 19,417                                                              |   | **$** | **(65,802** | **)** | $ | 14,451 |   | $ | (312,713 | ) |
|                                                                                                                 |   |                                                                    |                                 |                                                                  |   |                                                                     |   |   |   |   |   |   |   |   |   |   |
|    Weighted                    average shares - basic                                                 |   |                                                                    | **29,135**                           |                                                                  |   | 28,807                                                              |   |   | **28,998** |   |   | 28,788 |   |   | 28,807 |   |
|    Effect                    of dilutive:                                                             |   |                                                                    |                                 |                                                                  |   |                                                                |   |   |   |   |   |   |   |   |   |   |
|       Share                    options                                                 |   |                                                                    | **—**                          |                                                                  |   | 574                                                                 |   |   | **—** |   |   | 641 |   |   | — |   |
|       Restricted                    shares                                             |   |                                                                    | **—**                          |                                                                  |   | 135                                                                 |   |   | **—** |   |   | 163 |   |   | — |   |
|    Weighted                    average shares - assuming       dilution |   |                                                                    | **29,135**                           |                                                                  |   | 29,516                                                              |   |   | **28,998** |   |   | 29,592 |   |   | 28,807 |   |
|                                                                                                                 |   |                                                                    |                                 |                                                                  |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Net                    (loss)                    income per share:                                                   |   |                                                                    |                                 |                                                                  |   |                                                                |   |   |   |   |   |   |   |   |   |   |
|    Continuing                    operations                                                           |   |                                                                    | **$(1.42**                           | **)**                                                                 |   | $0.62                                                               |   |   | **$(2.59** | **)** |   | $0.40 |   |   | $                     (9.23 | ) |
|    Discontinued                    operations                                                         |   |                                                                    | **0.32**                             |                                                                  |   | 0.05                                                                |   |   | **0.32** |   |   | 0.10 |   |   | (1.63 | ) |
|       Basic                                                                            |   |                                                                    | **$(1.10**                           | **)**                                                                 |   | $0.67                                                               |   |   | **$(2.27** | **)** |   | $0.50 |   |   | $(10.86 | ) |
|                                                                                                                 |   |                                                                    |                                 |                                                                  |   |                                                                |   |   |   |   |   |   |   |   |   |   |
|    Continuing                    operations                                                           |   |                                                                    | **$(1.42**                           | **)**                                                                 |   | $0.61                                                               |   |   | **$(2.59** | **)** |   | $0.39 |   |   | $                     (9.23 | ) |
|    Discontinued                    operations                                                         |   |                                                                    | **0.32**                             |                                                                  |   | 0.05                                                                |   |   | **0.32** |   |   | 0.10 |   |   | (1.63 | ) |
|       Diluted                                                                          |   |                                                                    | **$(1.10**                           | **)**                                                                 |   | $0.66                                                               |   |   | **$(2.27** | **)** |   | $0.49 |   |   | $(10.86 | ) |
|                                                                                                                 |   |                                                                    |                                 |                                                                  |   |                                                                |   |   |   |   |   |   |   |   |   |   |
| Cash                    dividends                    declared per share                                              |   |                                                                    | **$    —** |                                                                  |   | $0.10                                                               |   |   | **$                       —** |   |   | $0.20 |   |   | $                      0.40 |   |

| ·   | options                  with                  exercise prices greater than the average market value of the common                  shares                  (options out-of-the-money) and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | unrecognized                  compensation expense for restricted shares with after-tax proceeds                  greater                  than the average market value of the common shares. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                     |   |   | **Three                      Months Ended****June                      30** |   |   | **Six                      Months Ended****June                      30** |   |   | **Year                      Ended****December                      31** |   |
|--------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------|--------|
|                                                                     |   |   | **2008**                                                                    |   |   | **2007**                                                                  |   |   | **2008**                                                                |   |   | **2007** |   |   | **2007** |   |
| Average                      market                      value of shares |   |   | **$3**                                                                      |   |   | $15                                                                       |   |   | **$4**                                                                  |   |   | $18 |   |   | $14 |   |
| Share                      options:                                      |   |   |                                                                        |   |   |                                                                      |   |   |                                                                    |   |   |   |   |   |   |   |
|    Exercise                      price range              |   |   | **$5                    to $38**                                            |   |   | $15                      to $38                                           |   |   | **$5                      to $38**                                      |   |   | $15                      to $38 |   |   | $15                      to $38 |   |
|    Not                      dilutive                      |   |   | **2,954**                                                                   |   |   | 1,356                                                                     |   |   | **2,954**                                                               |   |   | 1,356 |   |   | 1,312 |   |
| Restricted                      shares:                                  |   |   |                                                                        |   |   |                                                                      |   |   |                                                                    |   |   |   |   |   |   |   |
|    Grant                      price range                 |   |   | **$15                      to $42**                                         |   |   | $17                      to $42                                           |   |   | **$15                      to $42**                                     |   |   | $34                      to $42 |   |   | $34 |   |
|    Not                      dilutive                      |   |   | **289**                                                                     |   |   | 309                                                                       |   |   | **289**                                                                 |   |   | 137 |   |   | 2 |   |

----

***6.***
***Acquisitions        and Minority Interests***

| ·   | In                  March                  2007, we acquired a concrete services business in Fresno, California                  for                  approximately $0.7 million in cash. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                  June 2008,                  we acquired the remaining 40% interest in SelectBuild Mechanical                  for $0.2                  million in cash. In October 2004, we formed this venture for an                  initial                  60% interest for $0.3 million in cash. SelectBuild Mechanical provides                  heating, ventilation and air conditioning services in Las Vegas,                  Nevada. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                  January                  2008, we were required to purchase the remaining 49% interest in                  SelectBuild Illinois (RCI Construction) for $8.3 million in cash                  of which                  $2.4 million was paid in January 2008 and $5.9 million was paid                  in July                  2008. The fair value of SelectBuild Illinois does not exceed its                  net book                  value. As a result, the $5.5 million excess of the purchase price                  for the                  minority interest over the recorded amount for the minority interest                  in                  SelectBuild Illinois was recognized as an expense in Other income,                  net in                  December 2007. In January 2005, we acquired an initial 51% interest                  for                  $4.9 million in cash. SelectBuild Illinois provides framing services                  to                  production homebuilders in the greater Chicago area. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                  September                  2007, we acquired the remaining 49% interest in SelectBuild Trim                  for $0.5                  million in cash. In January 2007, we formed this venture for an                  initial                  51% interest for $0.5 million in cash. SelectBuild Trim provides                  door and                  molding installation services in Las Vegas,                  Nevada. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                  September                  2007, we acquired the remaining 49% interest in A-1 Building Components,                  LLC (A-1 Truss) for $5.0 million in cash. In September 2004, we                  acquired                  an initial 51% interest for $2.3 million in cash. A-1 Truss manufactures                  trusses in Fort Pierce, Florida. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                  May 2007,                  we acquired the remaining 33% interest in SelectBuild Mid-Atlantic                  (WBC                  Mid-Atlantic) for no consideration pursuant to the operating agreement.                  In                  October 2003, we acquired an initial 67% interest for $5.1 million                  in cash                  and $0.2 million of our common shares. SelectBuild Mid-Atlantic                  provided                  framing services to production homebuilders in Delaware, Maryland                  and                  Virginia. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | In                    April                    2007, we acquired the remaining 27% interest in Riggs Plumbing                    for $10.5                    million in cash. In July 2005, we acquired an additional 13%                    interest for                    $1.4 million in cash and in April 2005, acquired an initial 60%                    interest                    for $17.8 million in cash. Riggs Plumbing provides plumbing services                    to                    production homebuilders in the Phoenix and Tucson markets.  |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   | **June                    30** |   |   | **December                    31** |   |                                                            |   | **June                    30** |   |   | **December                    31** |
|--------------------------------------------------------------|--------|--------------------------------|--------|--------|------------------------------------|--------|-----------------------------------------------------------------|--------|--------------------------------|--------|--------|------------------------------------|
|                                                         |   | **2008**                       |   |   | **2007**                           |   |                                                            |   | **2008**                       |   |   | **2007**                           |
| Receivables                                                  | **$**  | **—**                    |   | $      | (21)                               |   | Other                    accrued                    liabilities | **$**  | **5,928 **                |   | $      | (60,787)                           |
| Prepaid                    expenses and other                |   | **—**                    |   |   | 18                            |   |                                                            |   |                           |   |   |                               |
| **   Current                    assets**      |   | **—**                    |   |   | (3)                                |   | **   Current                    liabilities**    |   | **5,928 **                |   |   | (60,787)                           |
|                                                         |   |                           |   |   |                               |   |                                                            |   |                           |   |   |                               |
| Property                    and                    equipment |   | **—**                    |   |   | 216                           |   | Deferred                    income taxes                        |   | **— **              |   |   | (917)                              |
| Other                    intangibles, net                    |   | **—**                    |   |   | 2,287                         |   | Minority                    interests                           |   | **(8,528)**                    |   |   | (3,680)                            |
| Goodwill                                                     |   | **—**                    |   |   | 13,077                        |   |                                                            |   |                           |   |   |                               |
|                                                         | **$**  | **—**                    |   | $      | 15,577                        |   |                                                            | **$**  | **(2,600)**                    |   | $      | (65,384)                           |

----

***7.***
***Marketable        Securities***

|                                                          |   | **June                    30** |       | **December                    31** |   |
|---------------------------------------------------------------|--------|--------------------------------|------------|------------------------------------|--------|
|                                                          |   | **2008**                       |       | **2007**                           |   |
| U.S.                    government and agencies               |   | **$**                          | **14,548** |                               | $      | 18,380 |   |
| Asset                    backed                    securities |   |                           | **10,975** |                               |   | 9,798 |   |
| Corporate                    securities                       |   |                           | **14,146** |                               |   | 13,733 |   |
|                                                          |   | **$**                          | **39,669** |                               | $      | 41,911 |   |

|                                                      |   | **June                    30** |       | **December                    31** |   |
|-----------------------------------------------------------|--------|--------------------------------|------------|------------------------------------|--------|
|                                                      |   | **2008**                       |       | **2007**                           |   |
| Less                    than 1                    year    |   | **$**                          | **787**    |                               | $      | 1,872 |   |
| Due                    in 1 to 2                    years |   |                           | **10,595** |                               |   | 12,683 |   |
| Due                    in 2 to 5                    years |   |                           | **28,287** |                               |   | 27,356 |   |
|                                                      |   | **$**                          | **39,669** |                               | $      | 41,911 |   |

----

***8.***
***Intangible        Assets and Goodwill***

|                                                           |   | **June                    30, 2008**            |       |
|----------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                           |   | **Gross****Carrying                    Amount** |       | **Accumulated                    Amortization** |   | **Net                    Carrying****Amount** |   |
| Customer                    relationships                      |   | **$**                                           | **70,481** |   | **$** | **(26,807** | **)** | **$** | **43,674** |   |
| Covenants                    not                    to compete |   |                                            | **9,352**  |   |   | **(6,138** | **)** |   | **3,214** |   |
| Favorable                    leases                            |   |                                            | **780**    |   |   | **(348** | **)** |   | **432** |   |
|                                                           |   | **$**                                           | **80,613** |   | **$** | **(33,293** | **)** | **$** | **47,320** |   |

|                                                           |   | **December                    31, 2007**        |   |
|----------------------------------------------------------------|--------|-------------------------------------------------|--------|
|                                                           |   | **Gross****Carrying                    Amount** |   | **Accumulated                    Amortization** |   | **Net                    Carrying****Amount** |   |
| Customer                    relationships                      |   | $                                               | 80,495 |   | $ | (27,271 | ) | $ | 53,224 |   |
| Covenants                    not                    to compete |   |                                            | 10,611 |   |   | (6,057 | ) |   | 4,554 |   |
| Trade                    names                                 |   |                                            | 204    |   |   | (204 | ) |   | — |   |
| Favorable                    leases                            |   |                                            | 780    |   |   | (248 | ) |   | 532 |   |
|                                                           |   | $                                               | 92,090 |   | $ | (33,780 | ) | $ | 58,310 |   |

|                                                                 |   |   | **June                    30** |   |   | **December                    31** |   |
|----------------------------------------------------------------------|--------|--------|--------------------------------|--------|--------|------------------------------------|--------|
|                                                                 |   |   | **2008**                       |   |   | **2007**                           |   |
| Balance                    at                    beginning of period |   | **$**  | **14,196**                     |   | $      | 308,000                            |   |
|    Purchase                    price adjustment       |   |   | **—**                    |   |   | (182                               | )      |
|    Goodwill                    acquired               |   |   | **—**                    |   |   | 13,259                             |   |
|    Impairment                                         |   |   | **(310**                       | **)**  |   | (306,881                           | )      |
| Balance                    at end                    of period       |   | **$**  | **13,886**                     |   | $      | 14,196                             |   |

----

|                                                                 |   |   | **June                    30** |   |   | **December                    31** |   |
|----------------------------------------------------------------------|--------|--------|--------------------------------|--------|--------|------------------------------------|--------|
|                                                                 |   |   | **2008**                       |   |   | **2007**                           |   |
| Balance                    at                    beginning of period |   | **$**  | **3,460**                      |   | $      | 41,362                             |   |
|    Goodwill                    acquired               |   |   | **—**                    |   |   | (4,656                             | )      |
|    Impairment                                         |   |   | **—**                    |   |   | (33,246                            | )      |
| Balance                    at end                    of period       |   | **$**  | **3,460**                      |   | $      | 3,460                              |   |

----

***9.***
***Debt***

| **As                  of June 30, 2008**            |   |   |        |   |   |                                                                                                                             |   |   | **Notional**                                               |   |   | **Effective                    Interest Rate** |   |
|-----------------------------------------------------|--------|--------|-------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                |   |   | **Balance** |   |   | **Stated                    Interest Rate**                                                                                      |   |   | ** Amount                    of Interest Rate Swaps** |   |   | **Average                    for Quarter**     |   |   | **As                    of****June                    30** |   |
| Revolver                                            |   | **$**  | **39,000**  |   |   | **LIBOR                    plus 4.50% or****Prime                    plus 2.50% and****0.50%                    commitment fee** |   | **$**  | **—**                                                |   |   | **9.9**                                        | **%**  |   | **8.3** | **%** |
|                                                |   |   |        |   |   |                                                                                                                             |   |   |                                                       |   |   |                                           |   |   |   |   |
| Term                    note                        |   |   | **339,819** |   |   | **LIBOR                    plus 4.50% or****Prime                    plus 2.50%**                                                |   |   | **200,000**                                                |   |   | **8.8**                                        | **%**  |   | **8.9** | **%** |
|                                                |   |   |        |   |   |                                                                                                                             |   |   |                                                       |   |   |                                           |   |   |   |   |
| Other                                               |   |   | **2,418**   |   |   | **Various**                                                                                                                      |   |   | **—**                                                |   |   | **—**                                    |   |   | **—** |   |
|                                           |   |   | **381,237** |   |   |                                                                                                                             |   | **$**  | **200,000**                                                |   |   |                                                |   |   |  |   |
|                                                |   |   |        |   |   |                                                                                                                             |   |   |                                                            |   |   |                                                |   |   |  |   |
| Less:  Current                    portion |   |   | **379,991** |   |   |                                                                                                                             |   |   |                                                            |   |   |                                                |   |   |  |   |
|                                           |   | **$**  | **1,246**   |   |   |                                                                                                                             |   |   |                                                            |   |   |                                                |   |   |  |   |

| **As                    of                    December 31, 2007** |   |   |        |   |   |                                                                                                                   |   |   | **Notional**                                         |   |   | **Effective                    Interest Rate** |   |
|-------------------------------------------------------------------|--------|--------|-------------|--------|--------|------------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                              |   |   | **Balance** |   |   | **Stated                    Interest Rate**                                                                            |   |   | **Amount                    of Interest Rate Swaps** |   |   | **Average                    for Year**        |   |   | **As                    of****December                    31** |   |
| Revolver                                                          |   | $      | —     |   |   | LIBOR                    plus 1.50% or Prime                    plus 0.25% and 0.25%                    commitment fee |   | $      | —                                              |   |   | 8.8                                            | %      |   | n/a |   |
|                                                              |   |   |        |   |   |                                                                                                                   |   |   |                                                 |   |   |                                           |   |   |   |   |
| Term                    note                                      |   |   | 345,625     |   |   | LIBOR                    plus 2.50% or Prime                    plus 1.25%                                             |   |   | 200,000                                              |   |   | 7.7                                            | %      |   | 7.5 | % |
|                                                              |   |   |        |   |   |                                                                                                                   |   |   |                                                 |   |   |                                           |   |   |   |   |
| Other                                                             |   |   | 3,235       |   |   | Various                                                                                                                |   |   | —                                              |   |   | —                                        |   |   | — |   |
|                                                         |   |   | 348,860     |   |   |                                                                                                                   |   | $      | 200,000                                              |   |   |                                                |   |   |  |   |
|                                                         |   |   |        |   |   |                                                                                                                   |   |   |                                                      |   |   |                                                |   |   |  |   |
| Less:  Current                    portion               |   |   | 4,923       |   |   |                                                                                                                   |   |   |                                                      |   |   |                                                |   |   |  |   |
|                                                         |   | $      | 343,937     |   |   |                                                                                                                   |   |   |                                                      |   |   |                                                |   |   |  |   |

----

*  *
*Revolver*

| ·   | $100                  million                  or |
|--------------------|---------------------------------------------------|

| ·   | $84.3                  million                  as determined by a borrowing base of certain accounts receivable                  less 50%                  of outstanding surety bonds, multiplied by                  50%. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*  *
*Term          Note*

| ·   | quarterly                  installments of $0.9 million, |
|--------------------|----------------------------------------------------------|

| ·   | any                  net                  proceeds of more than $1 million resulting from certain dispositions                  and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | remaining                  principal due in November 2011. |
|--------------------|------------------------------------------------------------|

*Other*

*Covenants        and Maturities*

----

| 2008       |   | $      | 379,809 |   |
|------------|--------|--------|---------|--------|
| 2009       |   |   | 326     |   |
| 2010       |   |   | 228     |   |
| 2011       |   |   | 62      |   |
| 2012       |   |   | 65      |   |
| Thereafter |   |   | 747     |   |
|       |   | $      | 381,237 |   |

*Hedging        Activities*

----

|                                                                                      |   | **June                    30, 2008**                   |                                         | **December                    31, 2007** |   |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|----------------------------------------------|------------------------------------------|--------|
|                                                                                      |   | **Balance                    sheet****Classification** |                                         | **Fair                    Value**        |   | **Balance                    sheet****Classification** |   | **Fair                    Value** |   |
| Interest                    rate                    swap    contracts |   |                                                   | Other                    accrued liabilities |                                     | **$**  | **8,108** |   |   | Other                    long-term liabilities |   | $ | 8,553 |   |

|                                                                   |   | **Gain                    (Loss) Recognized in Accumulated Other****Comprehensive                    Income (Loss), Net** |      |
|------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                   |   | **Three                    Months Ended****June                    30**                                                   |      | **Six                    Months Ended****June                    30** |   | **Year                    Ended****December                    31** |   |
|                                                                   |   | **2008**                                                                                                                  |      |  **2007** |   |  **2008** |   |  **2007** |   | **2007** |   |
| Cash                    Flow                    Hedging Relationships: |   |                                                                                                                      |      |    |   |    |   |    |   |    |   |
|    Interest                    rate swap contracts      |   | **$**                                                                                                                     | **8,866** |   | $ | 4,542 |   | **$** | **446** |   | $ | 3,691 |   | $ | (7,673 | ) |

|                                                                    |   | **Loss                    (Gain) Reclassified from Accumulated Other****Comprehensive                    Income (Loss), Net** |      |
|-------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                    |   | **Three                    Months Ended****June                    30**                                                       |      | **Six                    Months Ended****June                    30** |   | **Year                    Ended****December                    31** |   |
|                                                                    |   | **2008**                                                                                                                      |      |  **2007** |   |  **2008** |   |  **2007** |   | **2007** |   |
| Statement                    of                    Operations Location: |   |                                                                                                                          |      |    |   |    |   |    |   |    |   |
|                        Interest expense                  |   | **$**                                                                                                                         | **1,208** |   | $ | (134 | ) | **$** | **1,349** |   | $ | (272 | ) | $ | (465 | ) |

----

***10.***
***Shareholders’          Equity***

*Preferred        Shares*

*Common        Shares*

| Employee                  Stock Purchase Plan               |   |   | **1.6                  million** |   |
|-------------------------------------------------------------|--------|--------|----------------------------------|--------|
| 2008                  Stock                  Incentive Plan |   |   | **1.9                  million** |   |

*Dividends*

|                              |   | **2008** |         | **2007** |   |
|-----------------------------------|--------|----------|--------------|----------|--------|
| First                    quarter  |   |     | **$—** |     |   | $0.10 |   |
| Second                    quarter |   |     | **—**  |     |   | 0.10 |   |
| Third                    quarter  |   |     | **—**  |     |   | 0.10 |   |
| Fourth                    quarter |   |     | **—**  |     |   | 0.10 |   |
|                              |   |     | **$—** |     |   | $0.40 |   |

*Repurchase        Program*

----

***11.***
***Employee        Benefit Plans***

*Retirement        Plans*

*Savings        and Retirement Plan*

*Executive        Deferred Compensation*

| ·   | Compensation                  deferred and invested in third-party investment options is recorded                  in                  Other long-term assets and Other long-term liabilities. As the                  investment                  is settled for the value of the underlying investments, changes                  in the                  fair value of the investments are recognized in Other income and                  changes                  in the fair value of the liability are recognized in Selling, general                  and                  administrative expenses. Fair value is based on market quotes.                  The fair                  value of these investments was $8.2 million at June 30, 2008 and                  $13.5                  million at December 31, 2007. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Compensation                  deferred and invested in our common shares is recorded as a component                  of                  shareholders’ equity. As the investment is settled for the fixed number of                  common shares purchased, changes in fair value are not recognized.                  Rather                  purchases and distributions of the common shares are recorded at                  historical cost. The historical cost of these common shares was                  $1.3                  million or 131,976 common shares at June 30, 2008 and $1.4 million                  or                  105,189 common shares at December 31,                  2007. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Supplemental        Retirement*

| ·   | 65%                  of the                  contributions are invested in company-owned life insurance polices                  for                  certain participants. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 35%                  of the                  contributions are made in our common shares and distributed to                  the savings                  and retirement plans of certain participants. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Management        Retention Compensation*

----

*Employee        Stock Purchase Plan*

*Incentive        and Performance Plans*

*Options*

|  | · | Grants                    of                    options under the 2008 Stock Incentive Plan vest ratably over                    a maximum of                    5 years from the date of grant and expire after 10 years if unexercised.                    Under certain circumstances, some or all of the options may vest                    earlier.                    Options are to be awarded with exercise prices equal to the closing                    share                    price of our common shares on the date of grant. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Grants                    of                    options under the 2004 Incentive and Performance Plan vest ratably                    over 3                    to 4 years from the date of grant and expire after 7 years if                    unexercised.                    Under certain circumstances, some or all of the options may vest                    earlier.                    Options were awarded with exercise prices equal to the closing                    share price                    of our common shares on the date of grant. No further grants                    will be made                    under this plan. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Grants                    of                    options under the 2000 Stock Incentive Plan vest ratably through                    the end                    of the fourth year from the date of grant and expire after 10                    years if                    unexercised. Under certain circumstances, some or all of the                    options may                    vest earlier. Options were awarded with exercise prices equal                    to the                    closing share price of our common shares on the date of grant.                    No further                    grants will be made under this plan. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Share-Based        Payment, *

----

|                                                        | **Six                    Months Ended****June                    30** |   | **Year                    Ended December 31** |
|-------------------------------------------------------------|-----------------------------------------------------------------------|--------|-----------------------------------------------|
|                                                        | **2008**                                                              |   | **2007**                                      |   | **2007** |
| Expected                    term                    (years) | **—**                                                           |   | 5.2                                           |   | 5.2 |
| Expected                    volatility                      | **—**                                                           |   |  54.5%                                   |   |  54.5% |
| Expected                    dividend yield                  | **—**                                                           |   |    2.0%                        |   |    2.0% |
| Risk-free                    interest rate                  | **—**                                                           |   |    4.5%                        |   |    4.5% |
| Exercise                    price                           | **—**                                                           |   | $18                                           |   | $18 |
| Weighted                    average fair value              | **—**                                                           |   |   $8                                |   |   $8 |

|                                                                                                                            |   | **Six                      Months Ended****June                      30** |        | **Six                      Months Ended****June                      30** |             | **Year                      Ended****December                      31**      |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|-------------|---------------------------------------------------------------------------|------------------|------------------------------------------------------------------------------|--------|
|                                                                                                                            |   | **2008**                                                                  |        | **2007**                                                                  |             | **2007**                                                                     |   |
|                                                                                                                            |   | **Shares**                                                                |        | **Weighted                      Average Exercise Price**                  |             | **Weighted                      Average Remaining Contractual Term (years)** |   | **Shares** |   | **Weighted                      Average Exercise Price** |   | **Shares** |   | **Weighted                      Average Exercise Price** |   |
| Outstanding                      at                      beginning of                      the                      period |   |                                                                      | **2,978**   |                                                                      | **$****15**      |                                                                         |   | **4.5** |   |   | 2,521 |   | $14 |   |   | 2,521 |   | $14 |   |
|    Granted                                                                                                       |   |                                                                      | **—** |                                                                      | **$****—** |                                                                         |   |   |   |   | 541 |   | $18 |   |   | 541 |   | $18 |   |
|    Exercised                                                                                                     |   |                                                                      | **(1**      | **)**                                                                     | **$****6**       |                                                                         |   |   |   |   | (26 | ) | $6 |   |   | (33 | ) | $6 |   |
|    Forfeited                                                                                                     |   |                                                                      | **(23**     | **)**                                                                     | **$****29**      |                                                                         |   |   |   |   | (5 | ) | $29 |   |   | (51 | ) | $28 |   |
| Outstanding                      at                      end of the   period                                     |   |                                                                      | **2,954**   |                                                                      | **$****15**      |                                                                         |   | **4.0** |   |   | 3,031 |   | $15 |   |   | 2,978 |   | $15 |   |
|                                                                                                                            |   |                                                                      |        |                                                                      |             |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable                      at                      end    of                      the period               |   |                                                                      | **2,454**   |                                                                      | **$****13**      |                                                                         |   | **3.6** |   |   | 2,034 |   | $11 |   |   | 2,079 |   | $11 |   |

|                                                               |   | **Six                    Months Ended****June                    30** |         | **Year                    Ended****December                    31** |   |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------------|---------------------------------------------------------------------|--------|
|                                                               |   | **2008**                                                              |         | **2007**                                                            |   | **2007** |   |
| Weighted                    average grant-date fair value          |   |                                                                  | **$—** |                                                                |   | $8 |   |   | $8 |   |
| Intrinsic                    value of options exercised            |   |                                                                  | **$1**       |                                                                |   | $276 |   |   | $299 |   |
| Fair                    value of                    options vested |   |                                                                  | **$4,505**   |                                                                |   | $4,505 |   |   | $4,665 |   |

----

|                                             |   | **Options                    Outstanding** |        | **Options                    Exercisable**                   |   |
|--------------------------------------------------|--------|--------------------------------------------|-------------|--------------------------------------------------------------|--------|
| **Exercise                    Price**            |   | **Shares**                                 |        | **Weighted****Average****Exercise                    Price** |   | **Intrinsic                    Value** |   | **Weighted****Average****Remaining****Contractual****Life                    (years)** |   | **Shares** |   | **Weighted****Average****Exercise                    Price** |   | **Intrinsic                    Value** |   |
| $5                                               |   |                                       | **534**     |                                                         |   | **$5** |   |   |   |   |   | **2.0** |   |   | **534** |   |   | **$5** |   |   |   |   |
| $7                                               |   |                                       | **597**     |                                                         |   | **$7** |   |   |   |   |   | **4.2** |   |   | **597** |   |   | **$7** |   |   |   |   |
| $8                                               |   |                                       | **200**     |                                                         |   | **$8** |   |   |   |   |   | **5.6** |   |   | **200** |   |   | **$8** |   |   |   |   |
| $9                                               |   |                                       | **332**     |                                                         |   | **$9** |   |   |   |   |   | **2.8** |   |   | **332** |   |   | **$9** |   |   |   |   |
| $17                    to                    $18 |   |                                       | **520**     |                                                         |   | **$18** |   |   |   |   |   | **5.7** |   |   | **135** |   |   | **$18** |   |   |   |   |
| $23                                              |   |                                       | **409**     |                                                         |   | **$23** |   |   |   |   |   | **3.6** |   |   | **409** |   |   | **$23** |   |   |   |   |
| $38                                              |   |                                       | **362**     |                                                         |   | **$38** |   |   |   |   |   | **4.4** |   |   | **247** |   |   | **$38** |   |   |   |   |
|                                             |   |                                       | **2,954**   |                                                         |   | **$15** |   |   |   |   |   |   |   |   | **2,454** |   |   | **$13** |   |   |   |   |
| In-the-money:                                    |   |                                       |        |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Outstanding                    |   |                                       | **—** |                                                         |   |   |   |   | **$—** |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Exercisable                    |   |                                       |        |                                                         |   |   |   |   |   |   |   |   |   |   | **—** |   |   |   |   |   | **$—** |   |

*Restricted        Shares*

|                                                                                                                 |   | **Six                    Months Ended****June                    30** |        | **Year                    Ended****December                    31** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|-------------|---------------------------------------------------------------------|--------|
|                                                                                                                 |   | **2008**                                                              |        | **2007**                                                            |   | **2007** |   |
|                                                                                                                 |   | **Shares**                                                            |        | **Weighted                    Average Grant Date Fair Value**       |   | **Shares** |   | **Weighted                    Average Grant Date Fair Value** |   | **Shares** |   | **Weighted                    Average Grant Date Fair Value** |   |
| Nonvested                    at                    beginning of    the                    period |   |                                                                  | **410**     |                                                                |   | **$26** |   |   | 396 |   |   | $24 |   |   | 396 |   |   | $24 |   |
|    Granted                                                                                            |   |                                                                  | **—** |                                                                |   | **$—** |   |   | 172 |   |   | $18 |   |   | 172 |   |   | $18 |   |
|    Vested                                                                                             |   |                                                                  | **(112**    | **)**                                                               |   | **$23** |   |   | (122 | ) |   | $11 |   |   | (142 | ) |   | $11 |   |
|    Forfeited                                                                                          |   |                                                                  | **(9**      | **)**                                                               |   | **$33** |   |   | (2 | ) |   | $38 |   |   | (16 | ) |   | $30 |   |
| Nonvested                    at                    end of the    period                          |   |                                                                  | **289**     |                                                                |   | **$27** |   |   | 444 |   |   | $25 |   |   | 410 |   |   | $26 |   |

----

|                                                                          |   | **Six                    Months Ended****June                    30** |         | **Year                    Ended December 31** |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------------|-----------------------------------------------|--------|
|                                                                          |   | **2008**                                                              |         | **2007**                                      |   | **2007** |   |
| Weighted                    average grant-date fair value                     |   |                                                                  | **$—** |                                          |   | $18 |   |   | $18 |   |
| Fair                    value of                    restricted shares granted |   |                                                                  | **$—** |                                          |   | $3,087 |   |   | $3,005 |   |
| Fair                    value of                    restricted shares vested  |   |                                                                  | **$2,573**   |                                          |   | $1,316 |   |   | $1,556 |   |

*Shares*

|                                                                                                                |   | **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** |   |
|---------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|-----------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity                    compensation plansapproved                    by                    security holders      |   |                                                                                                                                                     | **3,243**   |                                                                                                                  |   | **$13**                                                                                                                                |   |   | **1,901** |   |
| Equity                    compensation plans not approved                    by                    security holders |   |                                                                                                                                                     | **—** |                                                                                                                  |   | **—**                                                                                                                            |   |   | **—** |   |
|       Total                                                                           |   |                                                                                                                                                     | **3,243**   |                                                                                                                  |   | **$13**                                                                                                                                |   |   | **1,901** |   |

----

***12.***
***Income        Taxes***

|                                                              |   | **Six                    Months Ended****June                    30** |       | **Year                    Ended****December                    31** |   |
|-------------------------------------------------------------------|--------|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------|--------|
|                                                              |   | **2008**                                                              |       | **2007**                                                            |   | **2007** |   |
|                                                              |   |                                                                  |       | **Effective****Rate**                                               |   |   |   | **Effective****Rate** |   |   |   | **Effective****Rate** |   |
| Continuing                    operations:                         |   |                                                                  |       |                                                                |   |    |   |   |   |    |   |   |   |
|    Income                    tax (expense) benefit |   | **$**                                                                 | **(3,392** | **)**                                                               |   | **(4.7** | **)%** | $ | (4,783 | ) |   | (29.4 | )% | $ | 25,670 |   |   | 8.8 | % |
| Discontinued                    operations:                       |   |                                                                  |       |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Income                    tax benefit (expense) |   | **$**                                                                 | **21,248** |                                                                |   | **178.3** | **%** | $ | (1,813 | ) |   | (37.9 | )% | $ | (4,990 | ) |   | (11.9 | )% |

----

***13.***
***Financial Instruments***

| ·   | $7.5                  million                  more than the amount of debt reported on the consolidated balance                  sheet at                  June 30, 2008 and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $7.7                  million                  more than the amount of debt reported on the consolidated balance                  sheet at                  December 31, 2007. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***14.***
***Commitments        and Contingencies***

*Legal        Proceedings*

*Operating        Leases*

*Warranties*

|                                                                     |   | **Three                    Months Ended****June                    30** |      | **Six                    Months Ended****June                    30** |   | **Year                    Ended****December                    31** |   |
|--------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|-----------|-----------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                                                     |   | **2008**                                                                |      |  **2007**                                                        |   |  **2008**                                                      |   |  **2007** |   | **2007** |   |
| Balance                    at                    beginning of the period |   | **$**                                                                   | **6,517** |                                                                  | $      | 6,988                                                               |   | **$** | **6,805** |   | $ | 7,081 |   | $ | 7,081 |   |
|    Provision                    for warranties            |   |                                                                    | **157**   |                                                                  |   | 245                                                                 |   |   | **477** |   |   | 347 |   |   | 694 |   |
|    Warranty                    charges                    |   |                                                                    | **(233**  | **)**                                                                 |   | (303                                                                | )      |   | **(841** | **)** |   | (498 | ) |   | (970 | ) |
| Balance                    at end                    of the period       |   | **$**                                                                   | **6,441** |                                                                  | $      | 6,930                                                               |   | **$** | **6,441** |   | $ | 6,930 |   | $ | 6,805 |   |

----

***15.***
***Fair        Values of Assets and Liabilities***

| ·   | Quoted                  Prices                  in Active Markets for Identical Assets - valuations for assets                  and                  liabilities traded in active exchange markets, such as the New                  York Stock                  Exchange. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant                  Other Observable Inputs - valuations for assets and liabilities                  traded in                  less active dealer or broker markets. For example, an interest                  rate swap                  contract is valued based on a model whose inputs are observable                  forward                  interest rate curves. Valuations are obtained from third party                  pricing                  services for identical or comparable assets or                  liabilities. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant                  Unobservable Inputs - valuations for assets and liabilities that                  are                  derived from other valuation methodologies, including discounted                  cash flow                  models and similar techniques, and are not based on market exchange,                  dealer, or broker traded transactions. Valuations incorporate certain                  assumptions and projections in determining fair value assigned                  to such                  assets or liabilities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                               |   |                                        |       | **Fair                    Value Measurements at Reporting Date Using**      |   |
|--------------------------------------------------------------------|--------|----------------------------------------|------------|-----------------------------------------------------------------------------|--------|
|                                                               |   | **June                    30****2008** |       | **Quoted                    Prices in Active Markets for Identical Assets** |   | **Significant                    Other Observable Inputs** |   | **Significant                    Unobservable Inputs** |   |
| Marketable                    securities                           |   | **$**                                  | **39,669** |                                                                        | **$**  | **39,669** |   | **$** | **—** |   | **$** | **—** |   |
| Interest                    rate                    swap contracts |   |                                   | **(8,108** | **)**                                                                       |   | **—** |   |   | **(8,108** | **)** |   | **—** |   |
|                                                               |   | **$**                                  | **31,561** |                                                                        | **$**  | **39,669** |   | **$** | **(8,108** | **)** | **$** | **—** |   |

|                                                               |   |                                       |   | **Fair                    Value Measurements at Reporting Date Using**      |   |
|--------------------------------------------------------------------|--------|--------------------------------------------|--------|-----------------------------------------------------------------------------|--------|
|                                                               |   | **December                    31****2007** |   | **Quoted                    Prices in Active Markets for Identical Assets** |   | **Significant                    Other Observable Inputs** |   | **Significant                    Unobservable Inputs** |   |
| Marketable                    securities                           |   | $                                          | 41,911 |                                                                        | $      | 41,911 |   | $ | — |   | $ | — |   |
| Interest                    rate                    swap contracts |   |                                       | (8,553 | )                                                                           |   | — |   |   | (8,553 | ) |   | — |   |
|                                                               |   | $                                          | 33,358 |                                                                        | $      | 41,911 |   | $ | (8,553 | ) | $ | — |   |

----

|                                      |   |   |                                       |   |   | **Fair                    Value Measurements Using**                        |   |   |                                                       |   |
|-------------------------------------------|--------|--------|--------------------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|--------|------------------------------------------------------------|--------|
|                                      |   |   | **December                    31****2007** |   |   | **Quoted                    Prices in Active Markets for Identical Assets** |   |   | **Significant                    Other Observable Inputs** |   |   | **Significant                    Unobservable Inputs** |   |   | **Year                    Ended December 31****2007****Gains                    (Losses)** |   |
| Other                    intangibles, net |   | $      | 58,310                                     |   | $      | —                                                                     |   | $      | —                                                    |   | $ | 58,310 |   | $ | (30,007 | ) |
| Goodwill                                  |   |   | 14,196                                     |   |   | —                                                                     |   |   | —                                                    |   |   | 14,196 |   |   | (241,958 | ) |
|                                      |   | $      | 72,506                                     |   | $      | —                                                                     |   | $      | —                                                    |   | $ | 72,506 |   | $ | (271,965 | ) |

| ·   | Other                  intangibles with a carrying amount of $88.3 million were written                  down to                  their implied fair value of $58.3 million, resulting in an impairment                  charge of $30.0 million in the fourth quarter of                  2007. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Goodwill                  with                  a carrying amount of $256.2 million was written down to its implied                  fair                  value of $14.2 million, resulting in an impairment charge of $242.0                  million in the fourth quarter of                  2007. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***16.***
***Segment        Information***

----

***17.***
***Quarterly        Results of Operations***

|                                                                                                       |   | **First** |         | **Second** |   | **Third**    |       | **Fourth** |         |
|------------------------------------------------------------------------------------------------------------|--------|-----------|--------------|------------|--------|--------------|------------|------------|--------------|
| **2008**                                                                                                   |   |      |         |       |   |         |       |       |         |
| Sales                                                                                                      |   | **$**     | **342,948**  | ** ** | **$**  | **384,620**  | ** ** | **$**      | **—**  | ** ** | **$** | **—** |   |
|                                                                                                       |   |      |         |       |   |              |       |       |              |   |   |  |   |
| Loss                    from                    continuing operations(1)                                   |   | **$**     | **(33,804**  | **)**      | **$**  | **(41,326**  | **)**      | **$**      | **—**  | ** ** | **$** | **—** |   |
| (Loss)                    income                    from discontinued operations(1)                    (2) |   |      | **(57**      | **)**      |   | **9,385**    |       |       | **—**  |   |   | **—** |   |
|      Net                    loss                                                  |   | **$**     | **(33,861**  | **)**      | **$**  | **(31,941**  | **)**      | **$**      | **—**  | ** ** | **$** | **—** |   |
|                                                                                                       |   |      |         |       |   |         |       |       |         |   |   |   |   |
|    Net                    (loss) income per share:                                          |   |      |         |       |   |         |       |       |         |   |   |   |   |
| Continuing                    operations                                                                   |   |      | **$(1.17**   | **)**      |   | **$(1.42**   | **)**      |       | **$—** |   |   | **$—** |   |
| Discontinued                    operations                                                                 |   |      | **—**  |       |   | **0.32**     |       |       | **—**  |   |   | **—** |   |
| Diluted                                                                                                    |   |      | **$(1.17**   | **)**      |   | **$(1.10**   | **)**      |       | **$—** |   |   | **$—** |   |
|                                                                                                       |   |      |         |       |   |         |       |       |         |   |   |   |   |
| Common                    share                    prices:                                                 |   |      |         |       |   |         |       |       |         |   |   |   |   |
| High                                                                                                       |   |      | **$7**       |       |   | **$5**       |       |       | **$—** |   |   | **$—** |   |
| Low                                                                                                        |   |      | **$4**       |       |   | **$2**       |       |       | **$—** |   |   | **$—** |   |
|                                                                                                       |   |      |         |       |   |         |       |       |         |   |   |   |   |
| Cash                    dividends                    declared per share                                    |   |      | **$—** |       |   | **$—** |       |       | **$—** |   |   | **$—** |   |
|                                                                                                       |   |      |         |       |   |         |       |       |         |   |   |   |   |
| **2007**                                                                                                   |   |      |         |       |   |         |       |       |         |   |   |   |   |
| Sales                                                                                                      |   | $         | 526,174      |       | $      | 656,000      |       | $          | 594,039      |   | $ | 402,860 |   |
|                                                                                                       |   |      |         |       |   |         |       |       |         |   |   |   |   |
| (Loss)                    income                    from continuing operations(1)                          |   | $         | (6,398       | )          | $      | 17,884       |       | $          | 1,571        |   | $ | (278,824 | ) |
| Income                    (loss)                    from discontinued operations(1) (2)               |   |      | 1,432        |       |   | 1,533        |       |       | 2,597        |   |   | (52,508 | ) |
|                        Net (loss) income                                                    |   | $         | (4,966       | )          | $      | 19,417       |       | $          | 4,168        |   | $ | (331,332 | ) |
|                                                                                                       |   |      |         |       |   |         |       |       |         |   |   |   |   |
|    Net                    (loss) income per share:                                          |   |      |         |       |   |         |       |       |         |   |   |   |   |
| Continuing                    operations                                                                   |   |      | $(0.22       | )          |   | $0.61        |       |       | $0.05        |   |   | $(9.63 | ) |
| Discontinued                    operations                                                                 |   |      | 0.05         |       |   | 0.05         |       |       | 0.09         |   |   | (1.81 | ) |
| Diluted                                                                                                    |   |      | $(0.17       | )          |   | $0.66        |       |       | $0.14        |   |   | $(11.44 | ) |
|                                                                                                       |   |      |         |       |   |         |       |       |         |   |   |   |   |
| Common                    share                    prices:                                                 |   |      |         |       |   |         |       |       |         |   |   |   |   |
| High                                                                                                       |   |      | $25          |       |   | $18          |       |       | $15          |   |   | $12 |   |
| Low                                                                                                        |   |      | $18          |       |   | $13          |       |       | $11          |   |   | $5 |   |
|                                                                                                       |   |      |         |       |        |         |       |       |         |   |   |   |   |
| Cash                    dividends                    declared per share                                    |   |      | $0.10        |       |   | $0.10        |       |       | $0.10        |   |   | $0.10 |   |

|                                       |   | **First** |         | **Second** |   | **Third**                            |   | **Fourth** |         |
|--------------------------------------------|--------|-----------|--------------|------------|--------|--------------------------------------|--------|------------|--------------|
| **2008**                                   |   |      |         |       |   |                                 |   |       |         |
| Continuing                    operations   |   |      | **$—** |       |   | **$                     8,469** |   |       | **$—** |   |   | **$—** |   |
| Discontinued                    operations |   |      | **$—** |       |   | **$                     6,212** |   |       | **$—** |   |   | **$—** |   |
| 2007                                       |   |           |         |       |   |                                 |   |            |         |   |   |   |   |
| Continuing                    operations   |   |      | $—     |       |   | $—                             |   |       | $—     |   |   | $272,152 |   |
| Discontinued                    operations |   |      | $—     |       |   | $—                             |   |       | $—     |   |   | $                     64,922 |   |

| ·   | concrete                  block masonry and concrete services in Florida in June                  2008, |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | framing                  services in Virginia in March 2008                  and |
|--------------------|----------------------------------------------------------------------------------|

| ·   | three                  Western                  Colorado building materials distribution businesses sold in September                  2007. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

----

**Item        2.**
**Management’s        Discussion and Analysis of Financial Condition and Results of**
**Operations**

**Our        Business**

**Business        Environment and Executive Overview**

| ·   | appointment                  of a chief operating officer to assume responsibility for the operations                  of our building product and construction service                  offerings, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | streamlining                  of our organizational structure by reducing the previous 13 regions                  into 6                  as well as realigning management                  functions, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | closure                  and                  consolidation of the following underperforming business                  units: |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| o   | discontinued                  framing services in Virginia, |
|---------------|-------------------------------------------------------------|

| o   | discontinued                  block masonry, concrete services and truss manufacturing in                  Florida, |
|---------------|-------------------------------------------------------------------------------------------------------------------------------|

| o   | closure                  of                  millwork and building materials distribution facilities in Merced                  and                  Bakersfield, CA, |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | closure                  of                  concrete and framing services in Tucson,                  AZ, |
|---------------|------------------------------------------------------------------------------------------------------------|

| o   | closure                  of                  various underperforming trades within our operating regions                  and |
|---------------|-------------------------------------------------------------------------------------------------------------------------------|

| o   | exiting                  various facility operating leases. |
|---------------|-------------------------------------------------------------|

| ·   | integration                  and centralization of administrative functions at construction                  services                  facilities into our existing administrative support operations                  and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                  45%                  reduction in employees compared to the same period a year                  ago. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

----

*Credit        Facility*

**RESULTS        OF OPERATIONS**

***SECOND        QUARTER OF 2008 COMPARED TO 2007***

|                                                                                                                                               |   | **Three                    Months Ended****June                    30** |        |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|-------------|
|                                                                                                                                               |   | **2008**                                                                |        | **2007** |   |
| **Sales**                                                                                                                                          |   |                                                                    |        |    |   |    |   |    |   |
| Building                    products                                                                                                               |   | **$**                                                                   | **198**     |   |   | **51.4** | **%** | $ | 279 |   |   | 42.5 | % |
| Construction                    services                                                                                                           |   |                                                                    | **187**     |   |   | **48.6** |   |   | 377 |   |   | 57.5 |   |
| **Total                    sales**                                                                                                                 |   |                                                                    | **385**     |   |   | **100.0** |   |   | 656 |   |   | 100.0 |   |
|                                                                                                                                               |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| **Costs                    and operating expenses**                                                                                                |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| Cost                    of goods                    sold                                                                                           |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| Building                    products                                                                                                               |   |                                                                    | **146**     |   |   | **73.7** |   |   | 203 |   |   | 72.8 |   |
| Construction                    services                                                                                                           |   |                                                                    | **167**     |   |   | **89.3** |   |   | 320 |   |   | 84.9 |   |
| Impairment                    of                    assets                                                                                         |   |                                                                    | **8**       |   |   | **2.1** |   |   | — |   |   | — |   |
| Selling,                    general and administrative expenses                                                                                    |   |                                                                    | **99**      |   |   | **25.7** |   |   | 107 |   |   | 16.3 |   |
| Other                    income,                    net                                                                                            |   |                                                                    | **(2**      | **)** |   | **(0.5** | **)** |   | (10 | ) |   | (1.5 | ) |
| Total                    costs                    and operating expenses                                                                           |   |                                                                    | **418**     |   |   | **108.6** |   |   | 620 |   |   | 94.5 |   |
|                                                                                                                                               |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                    income from operations**                                                                                               |   |                                                                    | **(33**     | **)** |   | **(8.6** | **)** |   | 36 |   |   | 5.5 |   |
|                                                                                                                                               |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| Interest                    expense                                                                                                                |   |                                                                    | **9**       |   |   | **2.3** |   |   | 10 |   |   | 1.5 |   |
|                                                                                                                                               |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                    income from continuing operations****   before                    income taxes and minority interests** |   |                                                                    | **(42**     | **)** |   | **(10.9** | **)** |   | 26 |   |   | 4.0 |   |
|                                                                                                                                               |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| Income                    tax                    benefit (expense)                                                                                 |   |                                                                    | **1**       |   |   | **0.3** |   |   | (8 | ) |   | (1.3 | ) |
| Minority                    interests loss                                                                                                         |   |                                                                    | **—** |   |   | **—** |   |   | — |   |   | — |   |
| **(Loss)                    income from continuing operations**                                                                                    |   |                                                                    | **(41**     | **)** |   | **(10.6** | **)** |   | 18 |   |   | 2.7 |   |
|                                                                                                                                               |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| (Loss)                    income                    from discontinued operationsprior                    to                    sale                |   |                                                                    | **(2**      | **)** |   | **(0.5** | **)** |   | 2 |   |   | 0.3 |   |
| Impairment                    of                    assets                                                                                         |   |                                                                    | **6**       |   |   | **1.6** |   |   | — |   |   | — |   |
| Income                    tax                    benefit (expense)                                                                                 |   |                                                                    | **17**      |   |   | **4.4** |   |   | (1 | ) |   | (0.1 | ) |
| **Income                    from discontinued operations**                                                                                         |   |                                                                    | **9**       |   |   | **2.3** |   |   | 1 |   |   | 0.2 |   |
|                                                                                                                                               |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| **Net                    (loss) income**                                                                                                           |   | **$**                                                                   | **(32**     | **)** |   | **(8.3** | **)%** | $ | 19 |   |   | 2.9 | % |
|                                                                                                                                               |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| **Net                    (loss) income per share:**                                                                                                |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| Continuing                    operations                                                                                                           |   |                                                                    | **$(1.42**  | **)** |   |   |   |   | $0.61 |   |   |   |   |
| Discontinued                    operations                                                                                                         |   |                                                                    | **0.32**    |   |   |   |   |   | 0.05 |   |   |   |   |
| Diluted                                                                                                                                            |   |                                                                    | **$(1.10**  | **)** |   |   |   |   | $0.66 |   |   |   |   |

----

***Consolidated        Financial Results***

**Sales          and          (Loss) Income from Operations**

|                                                       |   | **2008** |    |  **2007** |   | **%                    Change** |   |
|------------------------------------------------------------|--------|----------|---------|----------------|--------|---------------------------------|--------|
| **Sales**                                                  |   |     |    |      |   |                            |   |
|    Building                    products     |   | **$**    | **198** |           | $      | 279                             |   |   | (29)% |  |
|    Construction                    services |   |     | **187** |           |   | 377                             |   |   | (50)% |   |
|                                                       |   | **$**    | **385** |           | $      | 656                             |   |   | (41)% |   |
|                                                       |   |     |    |           |   |                            |   |   |   |   |
| **(Loss)                    income from operations**       |   | **$**    | **(33** | **)**          | $      | 36                              |   |   | n/m |   |

----

| ·   | Gross                  margins                  declined to 18.7% of sales from 20.3% in the same quarter a year                  ago.                  Margins for building products were slightly lower, while construction                  services declined 5.0%. Construction services margins were lower                  due to                  competitive market conditions resulting from a sharp decline in                  available                  contracts. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                  recognized                  asset impairments of $8 million for customer relationships and                  leasehold                  improvements associated with the closure and consolidation of                  underperforming business units. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling,                  general and administrative expenses decreased 7% or $8 million                  from the                  same quarter a year ago. These expenses were lower due to a 26%                  reduction                  in employees and related expenses. Also included in selling, general                  and                  administrative expenses were $6 million in costs associated with                  exiting                  certain operating leases and other charges related to the closure                  and                  consolidation of underperforming business units. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | As                  a percent                  of sales, selling, general and administrative expenses increased                  9.4% to                  25.7%. The increase was attributable to a sharp drop in construction                  services sales volume and a change in the sales mix to building                  products                  which carry higher selling, general and administrative expenses                  as well as                  costs associated with exiting certain operating leases and other                  charges                  related to the closure and consolidation of underperforming business                  units. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other                  income                  was $8 million lower than the same quarter a year ago. The second                  quarter                  of 2007 included a pre-tax gain of $8 million for the sale of certain                  real                  estate associated with the relocation of a building materials operation                  in                  Texas. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income        Taxes*

*Discontinued        Operations*

***SIX        MONTHS OF 2008 COMPARED TO 2007***

----

|                                                                                                                                                  |   | **Six                    Months Ended****June                    30** |        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|-------------|
|                                                                                                                                                  |   | **2008**                                                              |        | **2007** |   |
| **Sales**                                                                                                                                             |   |                                                                  |        |    |   |    |   |    |   |
| Building                    products                                                                                                                  |   | **$**                                                                 | **378**     |   |   | **51.9** | **%** | $ | 520 |   |   | 44.0 | % |
| Construction                    services                                                                                                              |   |                                                                  | **350**     |   |   | **48.1** |   |   | 662 |   |   | 56.0 |   |
| **Total                    sales**                                                                                                                    |   |                                                                  | **728**     |   |   | **100.0** |   |   | 1,182 |   |   | 100.0 |   |
|                                                                                                                                                  |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| **Costs                    and operating expenses**                                                                                                   |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| Cost                    of goods                    sold                                                                                              |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| Building                    products                                                                                                                  |   |                                                                  | **277**     |   |   | **73.3** |   |   | 376 |   |   | 72.3 |   |
| Construction                    services                                                                                                              |   |                                                                  | **317**     |   |   | **90.6** |   |   | 568 |   |   | 85.8 |   |
| Impairment                    of                    assets                                                                                            |   |                                                                  | **8**       |   |   | **1.1** |   |   | — |   |   | — |   |
| Selling,                    general and administrative expenses                                                                                       |   |                                                                  | **183**     |   |   | **25.1** |   |   | 215 |   |   | 18.2 |   |
| Other                    income,                    net                                                                                               |   |                                                                  | **(6**      | **)** |   | **(0.8** | **)** |   | (12 | ) |   | (1.0 | ) |
| Total                    costs                    and operating expenses                                                                              |   |                                                                  | **779**     |   |   | **107.0** |   |   | 1,147 |   |   | 97.0 |   |
|                                                                                                                                                  |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                    income from operations**                                                                                                  |   |                                                                  | **(51**     | **)** |   | **(7.0** | **)** |   | 35 |   |   | 3.0 |   |
|                                                                                                                                                  |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| Interest                    expense                                                                                                                   |   |                                                                  | **21**      |   |   | **2.9** |   |   | 18 |   |   | 1.6 |   |
|                                                                                                                                                  |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                    income from continuing operations****   before                    income taxes and minority interests**    |   |                                                                  | **(72**     | **)** |   | **(9.9** | **)** |   | 17 |   |   | 1.4 |   |
|                                                                                                                                                  |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| Income                    tax                    expense                                                                                              |   |                                                                  | **3**       |   |   | **0.4** |   |   | 5 |   |   | 0.4 |   |
| Minority                    interests income                                                                                                          |   |                                                                  | **—** |   |   | **—** |   |   | (1 | ) |   | (0.1 | ) |
| **(Loss)                    income from continuing operations**                                                                                       |   |                                                                  | **(75**     | **)** |   | **(10.3** | **)** |   | 11 |   |   | 0.9 |   |
|                                                                                                                                                  |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| (Loss)                    income                    from discontinued operations       prior                    to sale |   |                                                                  | **(6**      | **)** |   | **(0.8** | **)** |   | 5 |   |   | 0.4 |   |
| Impairment                    of                    assets                                                                                            |   |                                                                  | **6**       |   |   | **0.8** |   |   | — |   |   | — |   |
| Income                    tax                    benefit (expense)                                                                                    |   |                                                                  | **21**      |   |   | **2.8** |   |   | (2 | ) |   | (0.1 | ) |
| **Income                    from discontinued operations**                                                                                            |   |                                                                  | **9**       |   |   | **1.2** |   |   | 3 |   |   | 0.3 |   |
|                                                                                                                                                  |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| **Net                    (loss) income**                                                                                                              |   | **$**                                                                 | **(66**     | **)** |   | **(9.1** | **)%** | $ | 14 |   |   | 1.2 | % |
|                                                                                                                                                  |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| **Net                    (loss) income per share:**                                                                                                   |   |                                                                  |        |   |   |   |   |   |   |   |   |   |   |
| Continuing                    operations                                                                                                              |   |                                                                  | **$(2.59**  | **)** |   |   |   |   | $0.39 |   |   |   |   |
| Discontinued                    operations                                                                                                            |   |                                                                  | **0.32**    |   |   |   |   |   | 0.10 |   |   |   |   |
| Diluted                                                                                                                                               |   |                                                                  | **$(2.27**  | **)** |   |   |   |   | $0.49 |   |   |   |   |

----

***Consolidated        Financial Results***

**Sales          and          (Loss) Income from Operations**

|                                                       |   | **2008** |    |  **2007** |   | **%                    Change** |   |
|------------------------------------------------------------|--------|----------|---------|----------------|--------|---------------------------------|--------|
| **Sales**                                                  |   |     |    |      |   |                            |   |
|    Building                    products     |   | **$**    | **378** |           | $      | 520                             |   |   | (27)% |   |
|    Construction                    services |   |     | **350** |           |   | 662                             |   |   | (47)% |  |
|                                                       |   | **$**    | **728** |           | $      | 1,182                           |   |   | (38)% |   |
|                                                       |   |     |    |           |   |                            |   |   |   |   |
| **(Loss)                    income from operations**       |   | **$**    | **(51** | **)**          | $      | 35                              |   |   | n/m |   |

| ·   | Gross                  margins                  declined to 18.4% of sales from 20.1% in the same period a year                  ago. Lower                  gross margins resulted from competitive market conditions as construction                  services margins declined 5.2%. Building product margins were slightly                  lower than the same period a year ago. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                  recognized                  asset impairments of $8 million for customer relationships and                  leasehold                  improvements associated with the closure and consolidation of                  underperforming business units. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Partially                  offsetting lower gross margins, selling, general and administrative                  expenses decreased 15% or $32 million from the same period a year                  ago.                  These expenses were lower due to reductions in employees and related                  expenses, including incentives. Also included in selling, general                  and                  administrative expenses were $6 million in costs associated with                  exiting                  certain operating leases and other charges related to the closure                  and                  consolidation of underperforming business units. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | As                  a percent                  of sales, selling, general and administrative expenses increased                  6.9% to                  25.1%. The increase was a result of a substantial decline in sales                  volume                  and a change in the sales mix to building products which carry                  higher                  selling, general and administrative expenses as well as costs associated                  with exiting certain operating leases and other charges related                  to the                  closure and consolidation of underperforming business                  units. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Interest        Expense*

*Income        Taxes*

*Discontinued        Operations*

----

**LIQUIDITY        AND CAPITAL RESOURCES**

*Operations*

*Capital        Investment and Acquisitions*

*Financing*

----

*  *
*Revolver*

| ·   | $100                  million                  or |
|--------------------|---------------------------------------------------|

| ·   | $84.3                  million                  as determined by a borrowing base of certain accounts receivable                  less 50%                  of outstanding surety bonds, multiplied by                  50%. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*  *
*Term          Note*

| ·   | quarterly                  installments of $0.9 million, |
|--------------------|----------------------------------------------------------|

| ·   | any                  net                  proceeds of more than $1 million resulting from certain dispositions                  and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | remaining                  principal due in November 2011. |
|--------------------|------------------------------------------------------------|

*Other*

*Covenants        and Maturities*

----

| 2008       |   | $      | 379,809 |   |
|------------|--------|--------|---------|--------|
| 2009       |   |   | 326     |   |
| 2010       |   |   | 228     |   |
| 2011       |   |   | 62      |   |
| 2012       |   |   | 65      |   |
| Thereafter |   |   | 747     |   |
|       |   | $      | 381,237 |   |

*Hedging        Activities*

----

*Repurchase        Program*

----

**OFF-BALANCE        SHEET ARRANGEMENTS**

**DISCLOSURES        OF CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS**

----

**CRITICAL      ACCOUNTING ESTIMATES **

*Revenue      Recognition for Construction Services*

*  *
*Estimated        Losses on Uncompleted Contracts and Changes in Contract        Estimates*

*         *
*Goodwill*

----

*Insurance      Deductible Reserves*

*Warranties*

*Share-based      Compensation*

----

**RECENT      ACCOUNTING PRINCIPLES**

*The      Hierarchy      of Generally Accepted Accounting Principles*

*Disclosures      about Derivative Instruments and Hedging Activities*

*Noncontrolling      Interests in Consolidated Financial Statements*
*Business      Combinations*

*Business      Combinations*

----

**BUSINESS      RISKS AND FORWARD-LOOKING STATEMENTS**

| ·   | demand                for                and supply of single-family homes which is influenced by changes                in the                overall condition of the U.S. economy, including interest rates,                consumer                confidence, job formation and other important                factors; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                business                model; |
|--------------------|---------------------------------------------------|

| ·   | our                ability                to implement and maintain cost structures that align with revenue                trends; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                  liquidity                  is dependent on operating performance, compliance with financial                  covenants and cash resources; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes                in                the business models of our customers may limit our ability to provide                building products and construction services required by our                customers; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                integration of acquired businesses may not result in anticipated                cost                savings and revenue synergies being fully realized or may take longer                to                realize than expected; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | losses                of and                changes in customers; |
|--------------------|-------------------------------------------------------------------|

| ·   | availability                of and our ability to attract, train and retain qualified                individuals; |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | fluctuations                in our costs and availability of sourcing channels for commodity                wood                products, concrete, steel and other building                materials; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | intense                competition; |
|--------------------|-------------------------------------|

| ·   | weather                conditions including natural catastrophic                events; |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | exposure                to                construction defect and product liability claims as well as other                legal                proceedings; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | disruptions                in our information systems; |
|--------------------|--------------------------------------------------------|

| ·   | actual                and                perceived vulnerabilities as a result of terrorist activities and                armed                conflict; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | costs                and/or                restrictions associated with federal, state and other regulations;                and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | numerous                other matters of a local and regional scale, including those of a                political, economic, business, competitive or regulatory                nature. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | price                for our                shares may fluctuate significantly;                and |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | anti-takeover                defenses and certain provisions could prevent an acquisition of our                company or limit share price. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

**Item      3.**
**Quantitative      and Qualitative Disclosures About Market Risk**

*Inventory      Price Risk*

*Interest      Rate Risk*

----

**Item      4.**
**Controls      and Procedures**

*Evaluation      of Disclosure Controls and Procedures*

*Changes      in Internal Controls Over Financial Reporting*

----

**PART      II - OTHER INFORMATION**

**Item      1.**
**Legal      Proceedings**

----

**Item      1A.**
**Risk      Factors **

*Risks      Related to Our Business*

*Our      business is dependent on demand for and supply of single-family homes which      is      influenced by changes in the overall condition of the U.S. economy, including      interest rates, consumer confidence, job formation and other important      factors.*

*There      are risks associated with our business model.*

*An      inability to implement and maintain cost structures that align with revenue      trends may have an adverse impact on our operating results.*

----

*Our      liquidity is dependent on operating performance, compliance with financial      covenants and cash resources.*

*Changes      in the business models of customers may limit our ability to provide building      products and construction services required by our customers.*

*The      integration of acquired businesses may not result in anticipated cost savings      and revenue synergies being fully realized or may take longer to realize than      expected.*

| ·   | the                uncertainty that an acquired business will achieve anticipated operating                results; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | significant                expenses to integrate; |
|--------------------|---------------------------------------------------|

| ·   | diversion                of                management attention; |
|--------------------|------------------------------------------------------------------|

| ·   | departure                of                key personnel from the acquired                business; |
|--------------------|-----------------------------------------------------------------------------------------------------|

----

| ·   | effectively                managing entrepreneurial spirit and                decision-making; |
|--------------------|------------------------------------------------------------------------------------------------|

| ·   | integration                of different information systems; |
|--------------------|--------------------------------------------------------------|

| ·   | managing                new                construction service trades; |
|--------------------|-------------------------------------------------------------------------|

| ·   | unanticipated                costs and exposure to unforeseen liabilities;                and |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | impairment                of                assets. |
|--------------------|-----------------------------------------------------|

*Losses      of and changes in customers may have an adverse impact on our operating      results.*

*Our      success is dependent upon the availability of and our ability to attract, train      and retain qualified individuals.*

*Our      operating results are affected by fluctuations in our costs and the availability      of sourcing channels for commodity wood products, concrete, steel and other      building products.*

*Our      business is subject to intense competition.*

----

*Weather      conditions, including natural catastrophic events, may cause our operating      results to fluctuate each quarter.*

*The      nature of our business exposes us to construction defect and product liability      claims as well as other legal proceedings.*

*We      may be adversely affected by disruptions in our information      systems.*

*Actual      and perceived vulnerabilities as a result of terrorist activities and armed      conflict may adversely impact consumer confidence and our      business.*

*Federal,      state and other regulations could impose substantial costs and/or restrictions      on our business.*

----

*Numerous      other matters of a local and regional scale, including those of a political,      economic, business, competitive or regulatory nature may have an adverse impact      on our business. *

*Risks      Related to Our Shares*

*Our      share price may fluctuate significantly, which may make it difficult for      shareholders to trade*
*our      shares when desired or at attractive prices.*

*Anti-takeover      defenses in our governing documents and certain provisions under Delaware law      could*
*prevent      an acquisition of our company or limit the price that investors might be willing      to pay for our shares.*

----

**Item      2.**
**Unregistered      Sales of Equity Securities and Use of Proceeds**

----

**Item      3.**
**Defaults      Upon Senior Securities**

----

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

*Election      of Board of Directors*

|                                                 |   | **For**    |   | **Withheld** |
|------------------------------------------------------|--------|------------|--------|--------------|
| Robert                E.                Mellor       |   | 22,111,446 |   | 3,063,387    |
| Sara                L.                Beckman        |   | 22,143,078 |   | 3,031,755    |
| James                K.                Jennings, Jr. |   | 22,149,511 |   | 3,025,322    |
| Norman                J.                Metcalfe     |   | 22,158,058 |   | 3,016,775    |
| David                M.                Moffett       |   | 22,156,502 |   | 3,018,331    |
| R.                Scott                Morrison, Jr. |   | 22,143,628 |   | 3,031,205    |
| Peter                S.                O’Neill |   | 22,139,095 |   | 3,035,738    |
| Richard                G.                Reiten      |   | 22,166,545 |   | 3,008,288    |
| Norman                R.                Walker       |   | 22,153,011 |   | 3,021,822    |

*2008      Stock Incentive Plan*

| **For**    |   | **Withheld** |   | **Abstain** |   | **Not                Voted** |
|------------|--------|--------------|--------|-------------|--------|------------------------------|
| 10,428,254 |   | 3,380,120    |   | 112,825     |   | 11,253,634                   |

*Amended      and Restated Employee Stock Purchase Plan*

----

| **For**    |   | **Withheld** |   | **Abstain** |   | **Not                Voted** |
|------------|--------|--------------|--------|-------------|--------|------------------------------|
| 11,063,205 |   | 2,780,860    |   | 77,134      |   | 11,253,634                   |

*Ratification      of Independent Registered Public Accountants*

| **For**    |   | **Withheld** |   | **Abstain** |   | **Not                Voted** |
|------------|--------|--------------|--------|-------------|--------|------------------------------|
| 22,875,750 |   | 2,178,008    |   | 121,075     |   | 0                            |

----

**Item      5.**
**Other      Information**

----

**Item      6.**
**Exhibits**

| (a)    |   | Exhibits   |   |                                                                   |
|--------|--------|------------|--------|------------------------------------------------------------------------|
|   |   |       |   |                                                                   |
|   |   | **Number** |   | **Description**                                                        |
|   |   |       |   |                                                                   |
|   |   | 10.10.2    |   | Limited                Waiver Agreement Dated as of xMonth xDate, 2008 |
|   |   |       |   |                                                                   |
|   |   | 31.1       |   | Section                302                Certification                |
|   |   |       |   |                                                                   |
|   |   | 31.2       |   | Section                302                Certification                |
|   |   |       |   |                                                                   |
|   |   | 32.0       |   | Section                906                Certifications               |

----

**SIGNATURES**

|                                                | BUILDING                MATERIALS HOLDING CORPORATION                                                                                                                  |
|-----------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Date:                August                14, 2008 | */s/                Robert E. Mellor*                                                                                                                                       |   |
|                                                | Robert                E.                MellorChairman                of                the Board and Chief Executive Officer(Principal                Executive Officer)   |
|                                                |                                                                                                                                                                        |
| Date:                August                14, 2008 | */s/                William M. Smartt*                                                                                                                                      |   |
|                                                | William                M.                SmarttSenior                Vice                President and Chief Financial Officer (Principal                Financial Officer) |

----