**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

| **ý**                                                        |   | **Quarterly  report under Section 13 or 15(d) of the Securities Exchange Act of 1934**        |
|-------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                                              |   |                                                                                          |
| **For the quarterly period ended    March 31, 2003 or** |
|                                                              |   |                                                                                          |
| **o**                                                             |   | **Transition  report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934** |

 

**Forthe transition period from                       to                       **

 

**Commissionfile number 0-19335**

 

**BUILDING MATERIALS HOLDING CORPORATION**

 

| **Delaware**                                                                                                    |   | **91-1834269**                     |
|-----------------------------------------------------------------------------------------------------------------|--------|------------------------------------|
| (State of other jurisdiction  of   incorporation or organization)                                               |   | (IRS Employer  Identification No.) |
|                                                                                                            |   |                               |
| **Building  Materials Holding Corporation  Four Embarcadero Center, Suite 3250, San Francisco, CA  94111** |

 

Telephone:**  (415)627-9100**

 

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

 

Yes  ý  No  o

 

Indicate by check whether the registrant is an accelerated filer (asdefined in Rule 12b_2 of the Exchange Act). Yes  ý  No  o

 

| **Class**                      |   | **Shares Outstanding as  of May 6, 2003:** |
|--------------------------------|--------|--------------------------------------------|
|                           |   |                                       |
| Common stock $0.001 par  value |   | 13,278,140                                 |

 

 

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BUILDING MATERIALSHOLDING CORPORATION

 

INDEX

 
| PART I — FINANCIAL INFORMATION |
|-------------------------------------|
|                                |   |
|                                | Item 1  - Financial Statements |
|                                |   |
|                                | Condensed  Consolidated Statements of Operations for the three months ended March 31,  2003 and 2002 |
|                                |   |
|                                | Condensed Consolidated Balance  Sheets as of March 31, 2003 and December 31, 2002 |
|                                |   |
|                                | Condensed Consolidated  Statements of Cash Flows for the three months ended March 31, 2003 and 2002 |
|                                |   |
|                                | Notes to  Condensed Consolidated Financial Statements |
|                                |   |
|                                | Item 2  - Management’s Discussion and Analysis of Financial Condition and Results of  Operations |
|                                |   |
|                                | Item 4  - Controls and Procedures |
|                                |   |
| PART  II — OTHER INFORMATION   |
|                                |   |
|                                | Item 1 -  Legal Proceedings |
|                                |   |
|                                | Item 6 - Exhibits  and Reports on Form 8-K |
|                                |   |
| SIGNATURES                          |
|                                |   |
| CERTIFICATIONS                      |

 

2

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| Item 1 |   | BUILDING MATERIALS  HOLDING CORPORATION          |
|--------|--------|--------------------------------------------------|
|   |   | CONDENSED  CONSOLIDATED STATEMENTS OF OPERATIONS |
|   |   | (UNAUDITED)                                      |
|   |   | (amounts in thousands,  except per share data)   |

 
|                                                                              |   | **Three  Months Ended  March 31,** |    |
|-----------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                              |   | **2003**                           |    | **2002** |   |
|                                                                              |   |                               |    |   |   |
| Net sales                                                                         |   | $                                  | 276,392 |   | $ | 247,135 |   |
|                                                                              |   |                               |    |   |   |
| Cost of sales                                                                     |   | 201,961                            |    | 175,908 |   |
|                                                                              |   |                               |    |   |   |
| Gross profit                                                                      |   | 74,431                             |    | 71,227 |   |
|                                                                              |   |                               |    |   |   |
| Selling, general  and administrative expense                                      |   | 73,128                             |    | 68,053 |   |
|                                                                              |   |                               |    |   |   |
| Other income,  net                                                                |   | (868                               | )       | (365 | ) |
|                                                                              |   |                               |    |   |   |
| Income from  operations                                                           |   | 2,171                              |    | 3,539 |   |
|                                                                              |   |                               |    |   |   |
| Equity in  earnings of an unconsolidated company, net of amortization             |   | 759                                |    | — |   |
|                                                                              |   |                               |    |   |   |
| Interest expense                                                                  |   | 2,053                              |    | 2,534 |   |
|                                                                              |   |                               |    |   |   |
| Income before  income taxes, minority interest and change in accounting principle |   | 877                                |    | 1,005 |   |
|                                                                              |   |                               |    |   |   |
| Income taxes                                                                      |   | 376                                |    | 387 |   |
|                                                                              |   |                               |    |   |   |
| Income before  minority interest and change in accounting principle               |   | 501                                |    | 618 |   |
|                                                                              |   |                               |    |   |   |
| Minority  interest loss                                                           |   | (85                                | )       | — |   |
|                                                                              |   |                               |    |   |   |
| Income before  change in accounting principle                                     |   | 586                                |    | 618 |   |
|                                                                              |   |                               |    |   |   |
| Change in  accounting principle, net of tax benefit of $6,286                     |   | —                             |    | (11,650 | ) |
|                                                                              |   |                               |    |   |   |
| Net  income/(loss)                                                                |   | $                                  | 586     |   | $ | (11,032 | ) |
|                                                                              |   |                               |    |   |   |
| Income before  change in accounting principle per common share:                   |   |                               |    |   |   |
| Basic                                                                             |   | $                                  | 0.04    |   | $ | 0.05 |   |
|                                                                              |   |                               |    |   |   |
| Diluted                                                                           |   | $                                  | 0.04    |   | $ | 0.05 |   |
|                                                                              |   |                               |    |   |   |
| Change in  accounting principle, net of tax, per common share:                    |   |                               |    |   |   |
| Basic                                                                             |   | $                                  | —  |   | $ | (0.90 | ) |
|                                                                              |   |                               |    |   |   |
| Diluted                                                                           |   | $                                  | —  |   | $ | (0.88 | ) |
|                                                                              |   |                               |    |   |   |
| Net  income/(loss) per common share:                                              |   |                               |    |   |   |
| Basic                                                                             |   | $                                  | 0.04    |   | $ | (0.85 | ) |
|                                                                              |   |                               |    |   |   |
| Diluted                                                                           |   | $                                  | 0.04    |   | $ | (0.84 | ) |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

3

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BUILDING MATERIALSHOLDING CORPORATION

CONDENSEDCONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(amounts in thousands,except share data)

 
|                                                                                                                                  |   | **March 31,  2003** |    | **December  31,  2002** |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|-------------------------|--------|
| ASSETS                                                                                                                                |   |                |    |                    |   |
| Current assets                                                                                                                        |   |                |    |                    |   |
| Cash                                                                                                                                  |   | $                   | 15,323  |                    | $      | 9,217 |   |
| Receivables, net                                                                                                                      |   | 131,302             |    | 132,757                 |   |
| Inventory                                                                                                                             |   | 100,544             |    | 93,748                  |   |
| Deferred income  taxes                                                                                                                |   | 6,477               |    | 5,302                   |   |
| Prepaid expenses  and other current assets                                                                                            |   | 4,471               |    | 7,456                   |   |
|                                                                                                                                  |   |                |    |                    |   |
| Total current  assets                                                                                                                 |   | 258,117             |    | 248,480                 |   |
|                                                                                                                                  |   |                |    |                    |   |
| Property, plant  and equipment, net                                                                                                   |   | 170,390             |    | 178,137                 |   |
| Equity  investment in an unconsolidated company                                                                                       |   | 25,047              |    | —                  |   |
| Goodwill                                                                                                                              |   | 51,036              |    | 52,111                  |   |
| Other  intangibles, net                                                                                                               |   | 12,664              |    | 12,950                  |   |
| Deferred loan  costs                                                                                                                  |   | 2,358               |    | 2,732                   |   |
| Deferred income  taxes                                                                                                                |   | 416                 |    | 529                     |   |
| Other long-term  assets                                                                                                               |   | 8,357               |    | 8,135                   |   |
|                                                                                                                                  |   |                |    |                    |   |
| Total assets                                                                                                                          |   | $                   | 528,385 |                    | $      | 503,074 |   |
|                                                                                                                                  |   |                |    |                    |   |
| LIABILITIES,  MINORITY INTEREST AND SHAREHOLDERS’ EQUITY                                                                         |   |                |    |                    |   |
| Current  liabilities                                                                                                                  |   |                |    |                    |   |
| Accounts payable  and accrued expenses                                                                                                |   | $                   | 80,114  |                    | $      | 77,988 |   |
|                                                                                                                                  |   |                |    |                    |   |
| Total current  liabilities                                                                                                            |   | 80,114              |    | 77,988                  |   |
|                                                                                                                                  |   |                |    |                    |   |
| Long-term debt                                                                                                                        |   | 178,833             |    | 157,375                 |   |
| Other long-term  liabilities                                                                                                          |   | 11,999              |    | 11,428                  |   |
|                                                                                                                                  |   |                |    |                    |   |
| Total liabilities                                                                                                                     |   | 270,946             |    | 246,791                 |   |
|                                                                                                                                  |   |                |    |                    |   |
| Minority  interest                                                                                                                    |   | 4,898               |    | 4,983                   |   |
|                                                                                                                                  |   |                |    |                    |   |
| Shareholders’  equity                                                                                                            |   |                |    |                    |   |
| Common stock,  $0.001 par value, 20,000,000 shares authorized; 13,237,715 and 13,135,562  shares issued and outstanding, respectively |   | 13                  |    | 13                      |   |
| Additional  paid-in capital                                                                                                           |   | 114,025             |    | 112,709                 |   |
| Retained  earnings                                                                                                                    |   | 138,503             |    | 138,578                 |   |
|                                                                                                                                  |   |                |    |                    |   |
| Total  shareholders’ equity                                                                                                      |   | 252,541             |    | 251,300                 |   |
|                                                                                                                                  |   |                |    |                    |   |
| Total  liabilities, minority interest and shareholders’ equity                                                                   |   | $                   | 528,385 |                    | $      | 503,074 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

4

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BUILDINGMATERIALS HOLDING CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)(amounts in thousands)

 
|                                                                                  |   | **Three  Months Ended  March 31,** |   |
|---------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                  |   | **2003**                           |   | **2002** |   |
| CASH FLOWS FROM  OPERATING ACTIVITIES                                                 |   |                               |   |   |   |
| Net  income/(loss)                                                                    |   | $                                  | 586    |   | $ | (11,032 | ) |
| Adjustments to  reconcile net income/(loss) to cash flows from operating activities   |   |                               |   |   |   |
| Depreciation and  amortization                                                        |   | 5,007                              |   | 4,592 |   |
| Deferred income  taxes                                                                |   | (1,062                             | )      | (75 | ) |
| Net  loss/(gain)on sale of assets                                                     |   | (792                               | )      | 174 |   |
| Equity in  earnings of an unconsolidated company, net of amortization                 |   | (759                               | )      | — |   |
| Change in  accounting principle, net of tax benefit of $6,286                         |   | —                             |   | 11,650 |   |
| Minority  interest loss                                                               |   | (85                                | )      | — |   |
| Changes in  assets and liabilities, net of effects of acquisitions and location sales |   |                               |   |   |   |
| Receivables, net                                                                      |   | 1,455                              |   | (1,477 | ) |
| Inventory                                                                             |   | (8,745                             | )      | (13,356 | ) |
| Prepaid expenses  and other current assets                                            |   | 2,985                              |   | 803 |   |
| Accounts payable  and accrued expenses                                                |   | 982                                |   | 7,306 |   |
| Other long-term  assets and liabilities                                               |   | 2,928                              |   | 1,343 |   |
| Other, net                                                                            |   | 381                                |   | — |   |
|                                                                                  |   |                               |   |   |   |
| Net cash flows  from operating activities                                             |   | 2,881                              |   | (72 | ) |
|                                                                                  |   |                               |   |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES                                                 |   |                               |   |   |   |
| Purchases of  property and equipment                                                  |   | (2,905                             | )      | (4,292 | ) |
| Acquisitions of  businesses                                                           |   | (23,296                            | )      | (1,050 | ) |
| Proceeds from  dispositions of property and equipment                                 |   | 3,583                              |   | 129 |   |
| Proceeds from  sale of business units, net of cash sold                               |   | 6,591                              |   | 2,135 |   |
| Other, net                                                                            |   | (706                               | )      | (644 | ) |
|                                                                                  |   |                               |   |   |   |
| Net cash flows  from investing activities                                             |   | (16,733                            | )      | (3,722 | ) |
|                                                                                  |   |                               |   |   |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES                                                 |   |                               |   |   |   |
| Net change under  revolving credit agreements                                         |   | 26,100                             |   | (1,300 | ) |
| Principal  payments on term note                                                      |   | (4,400                             | )      | — |   |
| Principal  payments on other notes payable                                            |   | —                             |   | (156 | ) |
| Increase/(decrease)  in book overdrafts                                               |   | (1,258                             | )      | 3,000 |   |
| Stock options  exercised                                                              |   | 311                                |   | 612 |   |
| Dividends                                                                             |   | (657                               | )      | — |   |
| Other, net                                                                            |   | (138                               | )      | 177 |   |
|                                                                                  |   |                               |   |   |   |
| Net cash flows  from financing activities                                             |   | 19,958                             |   | 2,333 |   |
|                                                                                  |   |                               |   |   |   |
| Net change in  cash                                                                   |   | 6,106                              |   | (1,461 | ) |
| Cash, beginning  of period                                                            |   | 9,217                              |   | 5,182 |   |
| Cash, end of  period                                                                  |   | $                                  | 15,323 |   | $ | 3,721 |   |
|                                                                                  |   |                               |   |   |   |
| SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION                                     |   |                               |   |   |   |
| Accrued but  unpaid dividends                                                         |   | $                                  | 661    |   | $ | — |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

5

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BUILDING MATERIALSHOLDING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1.  BASIS OF PRESENTATION

 

The condensed consolidated financial statements included herein havebeen prepared by Building Materials Holding Corporation (“BMHC” or the“Company”) on a consolidated basis, without audit, pursuant to the rules andregulations of the Securities and Exchange Commission.  Certain information and footnote disclosuresnormally included in the consolidated financial statements prepared inaccordance with generally accepted accounting principles (“GAAP”) in the UnitedStates of America have been condensed or omitted pursuant to the rules andregulations of the Securities and Exchange Commission.  Although the Company believes that thedisclosures are adequate to make the information presented not misleading,these condensed consolidated financial statements should be read in conjunctionwith the Company’s audited consolidated financial statements and notes theretoincluded in the Company’s 2002 Annual Report. In the opinion of management, all adjustments necessary to present fairlythe results for the periods presented have been included.  The adjustments made were of a normal,recurring nature.

 

Due to the seasonal nature of BMHC’s business, the condensedconsolidated results of operations and resulting cash flows for the periodspresented are not necessarily indicative of the results that might be expectedfor the fiscal year.

 

2.  NET SALES BY PRODUCT (inthousands)

 
|                                           |   | **Three  Months Ended March 31,** |    |
|------------------------------------------------|--------|-----------------------------------|---------|
|                                           |   | **2003**                          |    | **2002** |   |
| Lumber products                                |   | $                                 | 74,360  |   | 26.9 | % | $ | 78,484 |   | 31.8 | % |
| Services and  manufactured building components |   | 162,298                           |    | 58.7 |   | 133,484 |   | 54.0 |   |
| Building  materials and other                  |   | 39,734                            |    | 14.4 |   | 35,167 |   | 14.2 |   |
|                                           |   | $                                 | 276,392 |   | 100.0 | % | $ | 247,135 |   | 100.0 | % |

 

6

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3.  NET INCOME PER COMMON SHARE

 

Net income per common share was determined using the followinginformation (in thousands, except per share data):

 
|                                                                           |   | **Three  Months Ended March 31,** |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                           |   | **2003**                          |   | **2002** |   |
| Income before  change in accounting principle                                  |   | $                                 | 586    |   | $ | 618 |   |
|                                                                           |   |                              |   |   |   |
| Weighted average  shares used to determine basic net income per common share   |   | 13,199                            |   | 13,000 |   |
|                                                                           |   |                              |   |   |   |
| Net effect of dilutive stock options                                           |   | 190                               |   | 175 |   |
|                                                                           |   |                              |   |   |   |
| Weighted average  shares used to determine diluted net income per common share |   | 13,388                            |   | 13,175 |   |
|                                                                           |   |                              |   |   |   |
| Net income per  common share:                                                  |   |                              |   |   |   |
|                                                                           |   |                              |   |   |   |
| Basic                                                                          |   | $                                 | 0.04   |   | $ | 0.05 |   |
| Diluted                                                                        |   | $                                 | 0.04   |   | $ | 0.05 |   |
|                                                                           |   |                              |   |   |   |
| Cash dividends  per share                                                      |   | $                                 | 0.05   | (1) | $ | — |   |

 

----

(1) Cash dividends accrued in the first quarter of 2003 were $661.

 

4.  DEBT

 

As of the dates shown in the table, debt consisted of the following (inthousands):

 
|                                                                                         |   | **March 31,  2003** |    | **December  31,  2002** |   |
|----------------------------------------------------------------------------------------------|--------|---------------------|---------|-------------------------|--------|
| Term note                                                                                    |   | $                   | 97,900  |                    | $      | 102,300 |   |
| Revolving credit  facility                                                                   |   | 77,300              |    | 51,200                  |   |
| Non-interest  bearing term note, net of related discounts of $1,447 and $1,339, respectively |   | 2,841               |    | 2,949                   |   |
| Capital leases                                                                               |   | 792                 |    | 926                     |   |
|                                                                                         |   | $                   | 178,833 |                    | $      | 157,375 |   |

 

In connection with a 1999 acquisition, the Company issued a $5.0million non-interest bearing term note to the previous owner as partialconsideration for the purchase.  Underthe terms of the note, a portion of the payments may be due based on operatingresults of the acquired business.  TheCompany’s original discount of the note was based on a 15% effective interestrate and 

 

7

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estimates of the operating results of the acquired business.  Due to the uncertain timing of the payout ofthis term note, the note represents a form of contingent consideration paid forthe acquired business.  As a result, theCompany adjusted its estimates related to the timing of the payout of the termnote, which resulted in recording an additional discount of $0.2 million duringthe first quarter of 2003.

 

The scheduled principal payments of debt at March 31, 2003 are $13.7million in 2003, $162.5 million in 2004, $0.2 million in 2005 and $2.4 millionin 2006.  Principal payments of $18.5million due within the next twelve months are expected to be refinanced throughthe unused portion of the revolving credit facility.  As a result, this amount has been classified as long-term.

 

5.                       ACQUISITIONSAND EQUITY INVESTMENT

 

Effective January 1, 2003, the Company purchased a 60% interest in anewly formed limited liability company, WBC Construction, LLC (“WBC”), forapproximately $23.3 million in cash, net of post closing adjustments and theissuance of 70,053 shares of BMHC common stock.  The other 40% interest is owned by Willard Brothers Construction,Inc. and its owners, A. Bruce Willard and Danny L. Willard.  WBC contracts with residential productionbuilders in Florida to construct the slab and structural shell of homes.

 

Under the purchase agreement, BMHC will have the option to purchase theremaining 40% interest in WBC from January 16, 2006 through January 16, 2009and the principals of Willard Brothers Construction, Inc. have the option torequire BMHC to purchase the remaining 40% of WBC from January 16, 2007 throughJanuary 16, 2009.  The purchase pricefor the remaining 40% will generally be based on a multiple of historicalearnings.  If the fair value of the netassets to be acquired is less than the amount payable under the requiredpurchase option, the Company would record a loss.

 

The Company has accounted for its investment in WBC using the equitymethod of accounting because the minority owners have certain approval andother rights that preclude consolidation.

 

On July 1, 2002, the Company purchased a 51% interest in a newly formedpartnership, KBI Norcal, for approximately $5.8 million in cash, $0.8 million 

 

8

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of assumed debt and the issuance of 34,364 shares of BMHC commonstock.  The other 49% interest is ownedby RJ Norcal, LLC, a limited liability company owned by Robert Garcia and JohnVolkman.  KBI Norcal provides turnkeyframing services in Northern California.

 

Under the purchase agreement, BMHC will have the option to purchase theremaining 49% interest in KBI Norcal from July 1, 2004 through June 30, 2008and the principals of RJ Norcal, LLC have the option to require BMHC to purchasethe remaining 49% of KBI Norcal from July 1, 2006 through June 30, 2008.  The purchase price for the remaining 49%will generally be based on a multiple of historical earnings.  If the fair value of the net assets to beacquired is less than the amount payable under the required purchase option,the Company would record a loss.  As ofMarch 31, 2003, the purchase price would be approximately $7.5 million and noloss was required to be reported.

 

KBI Norcal’s operating results have been included in the consolidatedfinancial statements since July 1, 2002. The impact of the 49% ownership interest of RJ Norcal, LLC is includedin minority interest. 

 

During 2002 the Company made four other acquisitions for aggregateconsideration of approximately $2.3 million.

 

6.  GOODWILL AND OTHERINTANGIBLE ASSETS

 

As of March 31, 2003 and December 31, 2002, intangible assets consistedof the following (in thousands):

 
|                           |   | **March 31,  2003**         |   |
|--------------------------------|--------|-----------------------------|--------|
|                           |   | **Gross  Carrying  Amount** |   | **Accumulated  Amortization** |   | **Net  Carrying  Amount** |   |
| Amortized  intangible assets   |   |                        |   |   |   |   |   |
| Covenants not to  compete      |   | $                           | 1,961  |   | $ | (1,275 | ) | $ | 686 |   |
| Customer  relationships        |   | 2,902                       |   | (218 | ) | 2,684 |   |
| Other amortized  intangibles   |   | 500                         |   | (386 | ) | 114 |   |
|                           |   |                        |   |   |   |   |   |
| Unamortized  intangible assets |   |                        |   |   |   |   |   |
| Customer  relationships        |   | 9,180                       |   | — |   | 9,180 |   |
|                           |   | $                           | 14,543 |   | $ | (1,879 | ) | $ | 12,664 |   |

 

9

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|                           |   | **December  31, 2002**      |   |
|--------------------------------|--------|-----------------------------|--------|
|                           |   | **Gross  Carrying  Amount** |   | **Accumulated  Amortization** |   | **Net  Carrying  Amount** |   |
| Amortized  intangible assets   |   |                        |   |   |   |   |   |
| Covenants not to  compete      |   | $                           | 2,004  |   | $ | (1,139 | ) | $ | 865 |   |
| Customer  relationships        |   | 2,902                       |   | (145 | ) | 2,757 |   |
| Other amortized  intangibles   |   | 500                         |   | (352 | ) | 148 |   |
|                           |   |                        |   |   |   |   |   |
| Unamortized  intangible assets |   |                        |   |   |   |   |   |
| Customer  relationships        |   | 9,180                       |   | — |   | 9,180 |   |
|                           |   | $                           | 14,586 |   | $ | (1,636 | ) | $ | 12,950 |   |

 

The Company evaluates the propriety of not amortizing customerrelationships to determine whether events and circumstances warrantamortization on a prospective basis.  InApril 2003, the Company determined that approximately $2.0 million of theunamortized customer relationship should be amortized over the succeedingtwenty-one months.  This intangibleasset was tested for impairment and no loss was identified.

 

Aggregate amortization expense for intangible assets was $0.3 million forthe quarter ended March 31, 2003. Estimated amortization expense for intangible assets is $1.5 million forthe remainder of 2003, $1.7 million in 2004, $0.3 million in 2005, $0.3 millionin 2006, $0.3 million in 2007, $0.3 million in 2008 and $1.1 millionthereafter.

 

The changes in the carrying amount of goodwill for the three monthsended March 31, 2003 are as follows (in thousands):

 
| Balance as of  January 1, 2003       |   | $      | 52,111 |   |
|--------------------------------------|--------|--------|--------|--------|
| Goodwill  acquired during the period |   | 8      |   |
| Goodwill  disposed during the period |   | (1,083 | )      |
| Balance as of  March 31, 2003        |   | $      | 51,036 |   |

 

7.  CHANGE IN ACCOUNTINGPRINCIPLE

 

The Company adopted Statement of Financial Accounting Standards(“SFAS”) No. 142 “Goodwill and Other Intangible Assets” in the first quarter of2002.  The provisions of SFAS 142eliminate the amortization of goodwill and other indefinite lived intangibleassets on a prospective basis beginning with acquisitions completed after June30, 2001, or January 1, 2002 for those completed prior to June 30, 2001.  This standard required the Company tocomplete a transitional impairment analysis of its recorded goodwill and 

 

10

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indefinite lived intangible assets and to record any impairment chargeas a change in accounting principle. The Company completed the transitional impairment analysis in the firstquarter of 2002, which resulted in the following impaired amounts of goodwillas of January 1, 2002 (in thousands):

 
| **Reporting  Unit**   |   | **Goodwill  Impairment** |   | **Goodwill  Impairment,  Net of Tax** |   |
|-----------------------|--------|--------------------------|--------|---------------------------------------|--------|
| Northern Nevada       |   | $                        | 2,257  |                                  | $      | 1,388 |   |
| Utah                  |   | 1,397                    |   | 859                                   |   |
| Spokane               |   | 41                       |   | 25                                    |   |
| San Antonio /  Austin |   | 2,194                    |   | 1,969                                 |   |
| Royal Door            |   | 2,975                    |   | 1,830                                 |   |
| Dallas / Fort  Worth  |   | 1,403                    |   | 863                                   |   |
| Puget Sound           |   | 6,253                    |   | 3,846                                 |   |
| Portland              |   | 1,416                    |   | 870                                   |   |
| Total                 |   | $                        | 17,936 |                                  | $      | 11,650 |   |

 

In the case of each Reporting Unit (as defined by SFAS 142), fair valuewas estimated using the present value of expected future cash flows.  Management’s estimate of future cash flowsused in the present value analysis resulted in estimated fair market valuebeing less than the recorded value of tangible and intangible assets for theReporting Units listed above. A divestiture of any individual business unitthat comprises a Reporting Unit could result in a loss.  After considering the estimated fair marketvalue of tangible assets, including land, an impairment of recorded goodwilloccurred.  Possible reasons for theimpairment could include increased competition, a reduction in residential constructionwithin the geographic markets that these Reporting Units serve, or managementissues.  The Company is required to testacquired goodwill and other indefinite-lived intangible assets for impairmenton an annual basis.  This annual testwill take place during the fourth quarter each year.

 

8.                           STOCK-BASEDCOMPENSATION

 

At March 31, 2003, BMHC had five stock-based employee compensationplans, which are described more fully in Note 12 of the Company’s Annual Reporton Form 10-K.  The Company accounts forthose plans under the recognition and measurement principles of APB Opinion No.25, “Accounting for Stock Issued to Employees”, and relatedInterpretations.  The following tableillustrates the effect on net income and earnings per share if the Company hadapplied the fair value recognition provisions of SFAS No. 123, “Accounting forStock-Based 

 

11

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Compensation”, to stock-based employee compensation (amounts inthousands, except per share data).

 
|                                                                                                                                          |   | **Three  Months Ended March 31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                                                                                          |   | **2003**                          |   | **2002** |   |
| Net  income/(loss), as reported                                                                                                               |   | $                                 | 586    |   | $ | (11,032 | )(1) |
| Add: Total  stock-based employee compensation expense determined under APB 25, net of  related tax effects                                    |   | (226                              | )      | 546 |   |
|                                                                                                                                          |   |                              |   |   |   |
| Deduct: Total  stock-based employee compensation expense determined under fair value based  method for all awards, net of related tax effects |   | 14                                |   | 862 |   |
|                                                                                                                                          |   |                              |   |   |   |
| Pro forma net  income/(loss)                                                                                                                  |   | $                                 | 346    |   | $ | (11,348 | ) |
|                                                                                                                                          |   |                              |   |   |   |
| Earnings/(loss)  per share:                                                                                                                   |   |                              |   |   |   |
| Basic - as  reported                                                                                                                          |   | $                                 | 0.04   |   | $ | (0.84 | ) |
| Basic - pro  forma                                                                                                                            |   | $                                 | 0.03   |   | $ | (0.87 | ) |
|                                                                                                                                          |   |                              |   |   |   |
| Diluted - as  reported                                                                                                                        |   | $                                 | 0.04   |   | $ | (0.84 | ) |
| Diluted - pro  forma                                                                                                                          |   | $                                 | 0.03   |   | $ | (0.86 | ) |

 

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(1) After a charge for change in accounting principle of $11,650, netof tax benefit of $6,286.

 

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| Item 2 |   | BUILDING MATERIALS  HOLDING CORPORATION  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

 

FORWARD-LOOKING STATEMENTS AND CRITICAL ACCOUNTINGESTIMATES

 

Certain statements made in this Form 10-Q may constitute“forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995.  Suchforward-looking statements involve known and unknown risks, uncertainties andother factors that may cause our actual results, performance or achievements,or industry results, to be materially different from any future results,performance or achievements expressed or implied by such forward-lookingstatements.  Such factors are discussedin detail in Building Materials Holding Corporation’s Form 10-K for the fiscalyear ended December 31, 2002.  Giventhese uncertainties, investors are cautioned not to place undue reliance onsuch forward-looking statements.  Wedisclaim any obligation to update any such factors or to announce publicly theresults of any revisions to any of the forward-looking statements contained inthe Annual Report on Form 10-K or this Form 10-Q except as required bylaw.  See “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” in our Annual Reportto Shareholders for information regarding our critical accounting policies andestimates.

 

The following table sets forth for the periods indicated the amounts aswell as percentage relationship to net sales of certain costs, expenses andincome items.  The table and subsequentdiscussion should be read in conjunction with the consolidated financialstatements and the related notes appearing elsewhere in this document and inthe Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

 
| **(amounts  in millions)**                       |   | **For the  three months ended  March 31,** |   |
|--------------------------------------------------|--------|--------------------------------------------|--------|
|                                             |   | **2003**                                   |   | **2002** |   |
| Net sales                                        |   | $                                          | 276.4  |   | 100.0 | % | $ | 247.1 |   | 100.0 | % |
| Gross profit                                     |   | 74.4                                       |   | 26.9 |   | 71.2 |   | 28.8 |   |
| Selling, general  and administrative expense     |   | 73.1                                       |   | 26.4 |   | 68.1 |   | 27.5 |   |
| Other income,  net                               |   | (0.9                                       | )      | (0.3 | ) | (0.4 | ) | (0.1 | ) |
| Income from  operations                          |   | 2.2                                        |   | 0.8 |   | 3.5 |   | 1.4 |   |
| Equity in  earnings of an unconsolidated company |   | 0.8                                        |   | 0.3 |   | — |   | — |   |
| Interest expense                                 |   | 2.1                                        |   | 0.8 |   | 2.5 |   | 1.0 |   |
| Income taxes                                     |   | 0.4                                        |   | 0.1 |   | 0.4 |   | 0.1 |   |
| Minority  interest loss                          |   | (0.1                                       | )      | 0.0 |   | — |   | — |   |
| Income before  change in accounting principle    |   | $                                          | 0.6    |   | 0.2 | % | $ | 0.6 |   | 0.3 | % |

 

13

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### FIRSTQUARTER OF 2003 COMPARED TO THE FIRST QUARTER OF 2002

 

Net sales for the three months ended March 31, 2003 were $276.4million, an increase of $29.3 million or 11.8% from the first quarter of 2002when sales were $247.1 million.  Thegrowth in net sales resulted primarily from the consolidation of KBI Norcal,which was acquired in July 2002 and was not included in BMHC’s results for thefirst quarter of 2002.  Comparable salesfrom reporting units that operated in the first quarter of both 2003 and 2002increased 3.2%.  Construction servicesand manufactured building components accounted for $162.3 million, or 58.7% ofnet sales for the first quarter of 2003, an increase of 21.6% from $133.5million, or 54.0% of net sales for the first quarter of 2002.  

 

Gross profit as a percentage of sales decreased to 26.9% in the firstquarter of 2003 from 28.8% in the first quarter of 2002.  The decrease is primarily the result of theCompany’s continued development and integration of lumber and trussmanufacturing operations at KBI Norcal. Rapid sales growth at KBI Norcal has also contributed to lower grossmargins as new contracts for large residential construction projects, whichgenerally carry higher than average costs due to inefficiencies in the earlystages, continued to represent a larger proportion of KBI Norcal’s businesscompared to BMHC’s established construction services businesses and resulted inan operating loss for the quarter at KBI Norcal.

 

Selling, general and administrative (SG&A) expense was $73.1million, or 26.4% of net sales in the first quarter of 2003 as compared to$68.1 million, or 27.5% of net sales in the first quarter of 2002.  The Company attributes most of this dollarincrease to the consolidation of KBI Norcal, while the improvement in SG&Aexpense as a percentage of sales was due to cost reduction efforts throughoutthe Company, primarily at the Company’s BMC West operations. Other income was$0.9 million for the period compared to $0.4 million for the first quarter of2002 and included a gain of $0.6 million from the sale of various assetsrelated to the Company’s consolidation activities.

 

Equity in earnings of an unconsolidated company in the first quarter of2003 included income of $0.8 million from the Company’s 60% equity interest inWBC Construction, LLC, a Florida construction services business acquired inmid-January 2003 and whose earnings are included in the Company’s results 

 

14

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effective January 1.  There wereno comparable equity earnings in the first quarter of 2002.

 

Interest expense decreased to $2.1 million from $2.5 million during thefirst three months of 2003 and 2002, respectively, primarily due to a reductionin the weighted average interest rate to 3.8% from 5.0% between the twoperiods.  The impact of the reduced interestrate was partially offset by an increase in the weighted average debtoutstanding to $184.1 million during the first quarter of 2003 from $169.2million during the same period of 2002. The increase in the average debt outstanding is primarily due to cashused in the acquisition of WBC and working capital needs at KBI Norcal.

 

Net income for the first quarter of 2003 was $0.6 million, or $0.04 perdiluted share, compared to $0.05 per diluted share in 2002, excluding a chargefor change in accounting principle.  Inthe first quarter of 2002, a net loss of $11.0 million, or $0.84 per dilutedshare was recorded, which included a charge of $11.6 million, net of tax, or$0.88 per diluted share as a change in accounting principle, in accordance withStatement of Financial Accounting Standards No. 142 “Goodwill and OtherIntangible Assets.”

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company’s primary need for capital resources is to fund futuregrowth, capital expenditures and acquisitions, as well as to finance workingcapital needs, which have been increasing as the Company has grown in recentyears.  Capital resources have primarilyconsisted of cash flows from operations and the incurrence of debt.

 

## *Operations*

In the first three months of 2003 and 2002, net cash provided and(used) by operations was $2.9 million and $(0.1) million, respectively.  Working capital increased to $178.0 millionat March 31, 2003 from $161.6 million at March 31, 2002. 

 

## *Capital Investment and Acquisitions*

Net cash used for investing activities was $16.7 million and $3.7 millionin the first quarter of 2003 and 2002, respectively.  The acquisition in mid-January 2003 of WBC Construction, LLC, aFlorida construction services 

 

15

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business, accounted for $23.3 million in invested capital.  Capital expenditures were $2.9 million inthe first three months of 2003 and were incurred to acquire additional propertyas well as expand and remodel existing facilities.**** Proceeds from the sale of a non-strategic business unit (GreatFalls, Montana) and surplus real estate (Emmett, Idaho and Denver, Colorado),net of cash sold, were $6.6 million during the first three months of 2003.

 

In the first quarter of 2003, the Company experienced a fire at itsfacility in Idaho Falls, Idaho.  Anticipatedinsurance proceeds are adequate to recover the loss of property and the eventis not expected to have a material impact on the Company.

 

*Financing*

Net cash provided by financing activities was $20.0 million and $2.3million in the first three months of 2003 and 2002, respectively.  The increase in cash provided by financingwas primarily due to additional borrowings under the revolving creditagreements during the first quarter of 2003, largely necessitated by theacquisition of WBC.

 

At March 31, 2003 the Company’s existing senior credit facilityprovided for borrowings of up to $287.9 million, which includes $97.9 millionprovided for by the term loan all of which was outstanding at March 31, 2003,and $190.0 million provided for by the revolving credit facility, $77.3 millionof which was outstanding at March 31, 2003. Revolver borrowings are limited by a borrowing base equal to 60% ofinventory plus 80% of trade accounts receivable.  The borrowing base is calculated monthly and was $163.6 millionat March 31, 2003, resulting in revolver availability of $73.4 million, net of$12.9 million in outstanding letters of credit.  Borrowings under the facility bear interest at prime plus 0.50%to 1.50%, or Offshore Rate plus 2.0% to 3.0%. The agreement expires on December 1, 2004.

 

In the third quarter of 1998, a shelf registration was filed with theSecurities and Exchange Commission to register 2,000,000 shares of commonstock.  The Company may issue theseshares from time to time in connection with future business combinations,mergers and/or acquisitions.  As part ofthe WBC acquisition in January 2003, the Company issued 70,053 shares of BMHCcommon stock from this registration (see Note 5).  The Company also issued 34,364 shares of stock from this registrationwith the acquisition of KBI 

 

16

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Norcal on July 1, 2002 (see Note 5).

 

Based on the Company’s ability to generate cash flows from operations,its borrowing capacity under the revolver and its access to debt and equitymarkets, the Company believes it will have sufficient capital to meet itsanticipated needs.

 

## *Disclosures of Certain Market Risks*

The Company experiences changes in interest expense when marketinterest rates change or changes are made to its debt structure.  Previously, the Company has managed itsexposure to market interest rate changes through periodic refinancing of itsvariable rate debt with fixed rate term debt obligations.  Based on debt outstanding at March 31, 2003,a 25 basis point increase in interest rates would result in approximately$438,000 of additional annual interest costs.

 

Commodity wood products, including lumber and panel products, accountedfor approximately 26.9% and 31.8% of net sales in the first three months of2003 and 2002, respectively.  Prices ofcommodity wood products, which are subject to significant volatility, directlyaffect net sales and cost of sales and could affect net income.  The Company does not utilize any derivativefinancial instruments.

 

The Company has a cash equity incentive plan that is partially based onchanges in the Company’s stock price. Under the plan, a $1.00 increase or decrease in the Company’s stockprice after March 31, 2003 would result in an increase or decrease incompensation expense of approximately $135,000.

 

Quarterly Results and Seasonality

The Company’s first and fourth quarters historically have been, and areexpected to continue to be, adversely affected by weather patterns in some ofthe Company’s markets, causing decreases in levels of residential constructionactivity.  In the first quarter of 2003,BMC West operations were impacted by unusually harsh weather in Colorado andTexas, which caused the Company to shut down some of these large units or limitoperations for periods of time ranging from a few days to more than a week insome cases.

 

17

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## *Item 4*          Controlsand Procedures

## * *

Within the 90 daysprior to the date of this report, the Company carried out an evaluation, underthe supervision and with the participation of the Company’s management,including the Company’s Chief Executive Officer and Senior Vice President,Finance and Treasurer, of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures pursuant to Exchange Act Rule13a-14.

 

Disclosure controls are procedures designed with the objective ofensuring that information we are required to disclose in our periodic reportsfiled with the Securities and Exchange Commission (“SEC”) is recorded,processed, summarized and reported timely. Disclosure controls also are designed with the objective of ensuringthat such information is communicated to our management, as appropriate, toallow timely judgments concerning required disclosure.  Internal controls are procedures designedwith the objective of providing reasonable assurance that (i) transactions areproperly authorized; (ii) assets are safeguarded against unauthorized orimproper use and (iii) transactions are properly recorded and reported, inorder to permit the preparation of our financial statements in accordance withgenerally accepted accounting principles in the United States of America.

 

A control system, even if well conceived and implemented can onlyprovide reasonable assurance rather than absolute assurance that the goals ofthe control system are met.  There areinherent limitations in all control systems due to resource constraints andother factors, such as assumptions regarding the likelihood of future events andnew business conditions, the fact that judgments may, with the benefit ofhindsight, prove to be incorrect, and the fact that breakdowns can occurbecause of a simple error or mistake, as well as a result of fraudulentactivity.  As a result of these limitations,it is not possible to ensure that misstatements due to error or fraud may occurand not be detected.

 

The evaluation of our disclosure controls and internal controlsincluded a review of the design and objectives and implementation throughout theCompany.  Our management seeks toidentify errors, control problems or instances of fraud and to confirm thatappropriate corrective action is implemented as appropriate.  Our internal controls are also reviewed onan ongoing basis by 

 

18

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our internal audit department, in connection with their audit andreview activities.

 

In accordance with SEC requirements, the Chief Executive Officer andthe Senior Vice President, Finance and Treasurer advised the Company that,since the date of their evaluation, there have been no significant changes ininternal controls or other factors that could significantly affect the internalcontrols.

 

Based on their evaluation, the Chief Executive Officer and Senior VicePresident Finance and Treasurer have concluded that, subject to the abovelimitations, the Company’s disclosure controls are effective to ensure thatmaterial information relating to the Company and its subsidiaries iscommunicated to management, and that the Company’s internal controls areeffective to provide reasonable assurance that our financial statements arefairly presented in accordance with generally accepted accounting principles inthe United States of America.

## * *

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PART II— OTHER INFORMATION

 
| Item  1 |                                                                                                                                                                                                                                                                                                   | Legal Proceedings                                                                                                                                                                                                                                                                                                                          |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                                                                                                                                                                   | The Company is involved in litigation and other  legal matters arising in the normal course of business.  In the opinion of management, the  Company’s recovery or liability, if any, under any of these matters will not  have a material effect on the Company’s financial position, liquidity or  results of operations. |
|    |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                       |
| Item  6 |                                                                                                                                                                                                                                                                                                   | Exhibits and Reports on Form 8-K                                                                                                                                                                                                                                                                                                           |
|    |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                       |
| (a)     | Exhibits                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                       |
|    |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                       |
|    | Exhibit #                                                                                                                                                                                                                                                                                              | Description                                                                                                                                                                                                                                                                                                                                |
|    | 11.0                                                                                                                                                                                                                                                                                                   | Statement regarding computation of earnings per  share (see Note 3)                                                                                                                                                                                                                                                                        |
|    |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                       |
|    | 99.1                                                                                                                                                                                                                                                                                                   | Certification of Chief Executive Officer pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                                                                                                                                                                        |
|    |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                       |
|    | 99.2                                                                                                                                                                                                                                                                                                   | Certification of Principal Financial Officer pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                                                                                                                                                                    |
|    |                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                       |
| (b)     | Reports on Form 8-K                                                                                                                                                                                                                                                                                    |
|    | On January 14, 2003, Building Materials Holding  Corporation, Registrant, filed a Form 8-K with the Securities and Exchange Commission  announcing the signing of a definitive agreement to establish a 60% owned  joint venture construction business with Willard Brothers Construction,  Inc.  |
|    |                                                                                                                                                                                                                                                                                                   |
|    | On March 26, 2003, Building Materials Holding  Corporation, Registrant, filed a Form 8-K with the Securities and Exchange  Commission declaring the filing of its Annual Report on Form 10-K for the  fiscal year ended December 31, 2002.                                                             |
|         |                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                            |  |  |

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|                      | BUILDING MATERIALS HOLDING CORPORATION                                                                            |
|---------------------------|-------------------------------------------------------------------------------------------------------------------|
|                      |                                                                                                              |
|                      |                                                                                                              |
| Date:  May  13, 2003 | /s/ Robert E. Mellor                                                                                              |
|                      | Robert E. Mellor   Chairman of the Board, President and   Chief Executive Officer   (Principal Executive Officer) |
|                      |                                                                                                              |
|                      |                                                                                                              |
| Date:  May  13, 2003 | /s/ Ellis C. Goebel                                                                                               |
|                      | Ellis C. Goebel   Senior Vice President - Finance   (Principal Financial Officer)                                 |

 

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CERTIFICATIONS

 

I, Robert E.Mellor, certify that:

 

1.  I have reviewed this quarterly report onForm 10-Q of Building Materials Holding Corporation (“Registrant”);

 

2.  Based on my knowledge, this quarterly reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.  Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the Registrant as of, and for, the periodspresented in this quarterly report;

 

4.  The Registrant’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theRegistrant and we have:

 

(a)  designedsuch disclosure controls and procedures to ensure that material informationrelating to the Registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

(b)  evaluatedthe effectiveness of the Registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

(c)  presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.  The Registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the Registrant’sauditors and the audit committee of Registrant’s board of directors (or personsperforming the equivalent function):

 

(a)  allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the Registrant’s ability to record, process, summarizeand report financial data and have identified for the Registrant’s auditors anymaterial weaknesses in internal controls; and

 

(b)  any fraud,whether or not material, that involves management or other employees who have asignificant role in the Registrant’s internal controls; and

 

6.  The Registrant’s other certifying officersand I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

Date: May 13, 2003

 
|   /s/ Robert E. Mellor                                                                                                                                  |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   Robert E. Mellor     Chairman of the Board, President and     Chief Executive Officer     (Principal Executive Officer) |

 

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I, Ellis C. Goebelcertify that:

 

1.  I have reviewed this quarterly report on Form10-Q of Building Materials Holding Corporation (“Registrant”);

 

2.  Based on my knowledge, this quarterly reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.  Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the Registrant as of, and for, the periodspresented in this quarterly report;

 

4.  The Registrant’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theRegistrant and we have:

 

(a)  designedsuch disclosure controls and procedures to ensure that material informationrelating to the Registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

(b)  evaluatedthe effectiveness of the Registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

(c)  presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.  The Registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the Registrant’sauditors and the audit committee of Registrant’s board of directors (or personsperforming the equivalent function):

 

(a)  allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the Registrant’s ability to record, process, summarizeand report financial data and have identified for the Registrant’s auditors anymaterial weaknesses in internal controls; and

 

(b)  any fraud,whether or not material, that involves management or other employees who have asignificant role in the Registrant’s internal controls; and

 

6.  The Registrant’s other certifying officersand I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

Date: May 13, 2003

 
|   /s/ Ellis C. Goebel                                                                                     |   |
|---------------------------------------------------------------------------------------------------------------------|--------|
|   Ellis C. Goebel    Senior Vice President - Finance    (Principal Financial Officer) |

 

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