**FORM      10-Q**

**þQUARTERLY      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**

**INDEX**

|                                                                                                                                                                                                        |   | **Page****Number** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|
|                                                                                                                                                                                                        |   |               |
| **PART                I - FINANCIAL INFORMATION**                                                                                                                                                           |   | 2                  |
|                                                                                                                                                                                                        |   |               |
| ** Item                1**-                Financial                Statements (unaudited)                                                                                                             |   | 2                  |
|                                                                                                                                                                                                        |   |               |
|    Consolidated                Statements of Operations for the Three and Nine Months Ended       September                30, 2008 and 2007                   |   | 2                  |
|                                                                                                                                                                                                        |   |               |
|    Consolidated                Balance Sheets as of September 30, 2008 and December 31,                2007                                                                                  |   | 3                  |
|                                                                                                                                                                                                        |   |               |
|    Consolidated                Statements of Shareholders’ Equity for the Nine Months Ended       September                30, 2008 and 2007             |   | 4                  |
|                                                                                                                                                                                                        |   |               |
|    Consolidated                Statements of Comprehensive (Loss) Income for Nine Months Ended                      September                30, 2008 and 2007 |   | 5                  |
|                                                                                                                                                                                                        |   |               |
|    Consolidated                Statements of Cash Flows for the Nine Months Ended       September                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                         |   | 42                 |
|                                                                                                                                                                                                        |   |               |
|  **Item                3**                -                Quantitative and Qualitative Disclosures about Market Risk                                                                                  |   | 61                 |
|                                                                                                                                                                                                        |   |               |
| ** Item                4**                - Controls                and Procedures                                                                                                                     |   | 62                 |
|                                                                                                                                                                                                        |   |               |
|                                                                                                                                                                                                        |   |               |
| **PART                II - OTHER INFORMATION**                                                                                                                                                              |   | 63                 |
|                                                                                                                                                                                                        |   |               |
| ** Item                1**                - Legal                Proceedings                                                                                                                           |   | 63                 |
|                                                                                                                                                                                                        |   |               |
| ** Item                1A**                - Risk                Factors                                                                                                                               |   | 64                 |
|                                                                                                                                                                                                        |   |               |
| ** Item                2**                -                Unregistered Sales of Equity Securities and Use of                Proceeds                                                                  |   | 69                 |
|                                                                                                                                                                                                        |   |               |
| ** Item                3**                - Defaults                Upon Senior Securities                                                                                                             |   | 70                 |
|                                                                                                                                                                                                        |   |               |
| ** Item                4**                - Submission                of Matters to a Vote of Security Holders                                                                                         |   | 71                 |
|                                                                                                                                                                                                        |   |               |
| ** Item                5**                - Other                Information                                                                                                                           |   | 72                 |
|                                                                                                                                                                                                        |   |               |
| ** Item                6**                -                Exhibits                                                                                                                                    |   | 73                 |
|                                                                                                                                                                                                        |   |               |
| **SIGNATURES**                                                                                                                                                                                              |   | 74                 |

----

**Item      1. **
**Financial      Statements**

**Building      Materials Holding Corporation**

**Consolidated      Statements of Operations**

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

**(unaudited)**

|                                                                                                                                                                |   | **Three                  Months Ended****September                  30** |        | **Nine                  Months****Ended****September                  30** |   | **Year                  EndedDecember 31** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|-------------|----------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                                                                                |   | **2008**                                                                 |        | **2007**                                                                   |   | **2008**                                   |   | **2007** |   | **2007** |   |
| **Sales**                                                                                                                                                           |   |                                                                     |        |                                                                       |   |                                       |   |   |   |   |   |
|    Building                  products                                                                                                                |   | **$**                                                                    | **184,568** |                                                                       | $      | 265,652                                    |   | **$** | **563,116** |   | $ | 785,378 |   | $ | 997,035 |   |
|    Construction                  services                                                                                                            |   |                                                                     | **179,862** |                                                                       |   | 328,387                                    |   |   | **528,882** |   |   | 990,835 |   |   | 1,182,038 |   |
| **      Total                  sales**                                                                                                |   |                                                                     | **364,430** |                                                                       |   | 594,039                                    |   |   | **1,091,998** |   |   | 1,776,213 |   |   | 2,179,073 |   |
|                                                                                                                                                                |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
| **Costs                  and operating expenses**                                                                                                                   |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Cost                  of goods sold                                                                                                               |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
|       Building                  products                                                                                              |   |                                                                     | **139,569** |                                                                       |   | 192,879                                    |   |   | **416,837** |   |   | 569,681 |   |   | 722,786 |   |
|       Construction                  services                                                                                          |   |                                                                     | **162,439** |                                                                       |   | 285,739                                    |   |   | **478,954** |   |   | 853,730 |   |   | 1,027,796 |   |
|    Impairment                  of assets                                                                                                             |   |                                                                     | **3,856**   |                                                                       |   | —                                    |   |   | **12,325** |   |   | — |   |   | 272,152 |   |
|    Selling,                  general and administrative       expenses                                                 |   |                                                                     | **86,850**  |                                                                       |   | 106,227                                    |   |   | **269,799** |   |   | 321,021 |   |   | 422,694 |   |
|    Other                  expense (income), net                                                                                                      |   |                                                                     | **763**     |                                                                       |   | (1,797                                     | )      |   | **(5,953** | **)** |   | (13,839 | ) |   | (9,971 | ) |
|       Total                  costs and operating expenses                                                                             |   |                                                                     | **393,477** |                                                                       |   | 583,048                                    |   |   | **1,171,962** |   |   | 1,730,593 |   |   | 2,435,457 |   |
|                                                                                                                                                                |   |                                                                     |        |                                                                       |   |                                       |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                  income from operations**                                                                                                                  |   |                                                                     | **(29,047** | **)**                                                                      |   | 10,991                                     |   |   | **(79,964** | **)** |   | 45,620 |   |   | (256,384 | ) |
|                                                                                                                                                                |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Interest                  expense                                                                                                                 |   |                                                                     | **16,085**  |                                                                       |   | 8,751                                      |   |   | **36,969** |   |   | 26,470 |   |   | 33,800 |   |
|                                                                                                                                                                |   |                                                                     |        |                                                                       |   |                                       |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                  income from continuing operations****   before                  income taxes and minority****   interests** |   |                                                                     | **(45,132** | **)**                                                                      |   | 2,240                                      |   |   | **(116,933** | **)** |   | 19,150 |   |   | (290,184 | ) |
|                                                                                                                                                                |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Income                  tax (expense) benefit                                                                                                     |   |                                                                     | **(971**    | **)**                                                                      |   | (121                                       | )      |   | **(4,363** | **)** |   | (4,904 | ) |   | 25,670 |   |
|    Minority                  interests (income) loss                                                                                                 |   |                                                                     | **—** |                                                                       |   | (548                                       | )      |   | **63** |   |   | (1,189 | ) |   | (1,253 | ) |
| **(Loss)                  income from continuing operations**                                                                                                       |   |                                                                     | **(46,103** | **)**                                                                      |   | 1,571                                      |   |   | **(121,233** | **)** |   | 13,057 |   |   | (265,767 | ) |
|                                                                                                                                                                |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    (Loss)                  income from discontinued       operations                  prior to sale                    |   |                                                                     | **(4,582**  | **)**                                                                      |   | 457                                        |   |   | **(10,290** | **)** |   | 5,235 |   |   | 2,937 |   |
|    Impairment                  of assets                                                                                                             |   |                                                                     | **873**     |                                                                       |   | —                                    |   |   | **7,085** |   |   | — |   |   | 64,922 |   |
|    Gain                  on sale of discontinued operations                                                                                          |   |                                                                     | **—** |                                                                       |   | 3,722                                      |   |   | **—** |   |   | 3,722 |   |   | 20,029 |   |
|    Income                  tax benefit (expense)                                                                                                     |   |                                                                     | **6,352**   |                                                                       |   | (1,582                                     | )      |   | **27,600** |   |   | (3,395 | ) |   | (4,990 | ) |
| **Income                  (loss) from discontinued****   operations**                                                                                |   |                                                                     | **897**     |                                                                       |   | 2,597                                      |   |   | **10,225** |   |   | 5,562 |   |   | (46,946 | ) |
|                                                                                                                                                                |   |                                                                     |        |                                                                       |   |                                       |   |   |   |   |   |   |   |   |   |   |
| **Net                  (loss) income**                                                                                                                              |   | **$**                                                                    | **(45,206** | **)**                                                                      | $      | 4,168                                      |   | **$** | **(111,008** | **)** | $ | 18,619 |   | $ | (312,713 | ) |
|                                                                                                                                                                |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
| **Net                  (loss) income per share:**                                                                                                                   |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Continuing                  operations                                                                                                            |   |                                                                     | **$(1.58**  | **)**                                                                      |   | $0.05                                      |   |  | **$(4.17** | **)** |   | $0.46 |   |   | $(9.23 | ) |
|    Discontinued                  operations                                                                                                          |   |                                                                     | **0.03**    |                                                                       |   | 0.09                                       |   |   | **0.35** |   |   | 0.19 |   |   | (1.63 | ) |
|       Basic                                                                                                                           |   |                                                                     | **$(1.55**  | **)**                                                                      |   | $0.14                                      |   |   | **$(3.82** | **)** |   | $0.65 |   |   | $(10.86 | ) |
|                                                                                                                                                                |   |                                                                     |             |                                                                       |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Continuing                  operations                                                                                                            |   |                                                                     | **$(1.58**  | **)**                                                                      |   | $0.05                                      |   |   | **$(4.17** | **)** |   | $0.44 |   |   | $(9.23 | ) |
|    Discontinued                  operations                                                                                                          |   |                                                                     | **0.03**    |                                                                       |   | 0.09                                       |   |   | **0.35** |   |   | 0.19 |   |   | (1.63 | ) |
|       Diluted                                                                                                                         |   |                                                                     | **$(1.55**  | **)**                                                                      |   | $0.14                                      |   |   | **$(3.82** | **)** |   | $0.63 |   |   | $(10.86 | ) |

----

**Building      Materials Holding Corporation**

**Consolidated      Balance Sheets**

**(thousands)**

**(unaudited)**

|                                                                | **September                  30****2008** |                     |  **December                  31****2007** |   |          | **September                  30****2008** |                                                                                               | **December                  31****2007** |
|---------------------------------------------------------------------|-------------------------------------------|------------------------------------|------------------------------------------------|--------|---------------|-------------------------------------------|---------------------------------------------------------------------------------------------------------|------------------------------------------|
| **Assets**                                                          |                                      |                               |                                           |   |          |                                      | **Liabilities,                  Minority Interests and****Shareholders’                  Equity** |                                     |   |   |   |   |
| Cash                  and cash                  equivalents         | **$**                                     | **55,644 **                   |                                           | $      | 60,587   |                                      |                                                                                                    |                                     |   |   |   |   |
| Marketable                  securities                              |                                      | **— **                  |                                           |   | 1,872    |                                      |                                                                                                    |                                     |   |   |   |   |
| Receivables,                  net of allowances                     |                                      |                               |                                           |   |          |                                      | Accounts                  payable                                                                       | **$**                                    | **50,271 ** |   | $ | 74,025  |
|    of                  $12,630 and $4,656            |                                      | **177,634 **                  |                                           |   | 200,995  |                                      | Accrued                  compensation                                                                   |                                     | **32,330 ** |   |   | 31,537  |
| Inventory                                                           |                                      | **90,054 **                   |                                           |   | 115,524  |                                      | Insurance                  deductible reserves                                                          |                                     | **21,603 ** |   |   | 27,189  |
| Unbilled                  receivables                               |                                      | **26,903 **                   |                                           |   | 39,189   |                                      | Other                  accrued                  liabilities                                             |                                     | **34,503 ** |   |   | 28,989  |
| Income                  tax                  receivable             |                                      | **58,942 **                   |                                           |   | 9,812    |                                      | Billings                  in                  excess of costs and estimated                             |                                     |   |   |   |   |
| Deferred                  income taxes                              |                                      | **— **                  |                                           |   | 11,470   |                                      |    earnings                                                                              |                                     | **27,640 ** |   |   | 20,977  |
| Prepaid                  expenses and other                         |                                      | **5,174 **                    |                                           |   | 8,973    |                                      | Current                  portion of long-term debt                                                      |                                     | **68,807 ** |   |   | 4,923  |
| Assets                  of                  discontinued operations |                                      | **12,322 **                   |                                           |   | 10,492   |                                      | Liabilities                  of                  discontinued operations                                |                                     | **4,272 ** |   |   | 8,533  |
| **   Current                  assets**               |                                      | **426,673 **                  |                                           |   | 458,914  |                                      | **   Current                  liabilities**                                              |                                     | **239,426 ** |   |   | 196,173  |
|                                                                |                                      |                               |                                           |   |          |                                      |                                                                                                    |                                     |   |   |   |   |
| Property                  and                  equipment            |                                      |                               |                                           |   |          |                                      | Insurance                  deductible reserves                                                          |                                     | **25,144 ** |   |   | 27,898  |
|    Land                                              |                                      | **35,989 **                   |                                           |   | 60,052   |                                      | Long-term                  debt                                                                         |                                     | **290,120** |   |   | 343,937  |
|    Buildings                  and improvements       |                                      | **134,749 **                  |                                           |   | 135,009  |                                      | Other                  long-term liabilities                                                            |                                     | **34,162 ** |   |   | 44,503  |
|    Equipment                                         |                                      | **165,859 **                  |                                           |   | 185,958  |                                      |                                                                                                    |                                     |   |   |   |   |
|    Construction                  in progress         |                                      | **6,411 **                    |                                           |   | 16,134   |                                      | Minority                  interests                                                                     |                                     | **— ** |   |   | 8,591  |
|    Accumulated                  depreciation         |                                      | **(155,493)**                      |                                           |   | (155,083)     |                                      |                                                                                                    |                                     |   |   |   |   |
| Assets                  held                  for sale              |                                      | **33,861 **                   |                                           |   | —  |                                      | Commitments                  and contingent liabilities                                                 |                                     | **— ** |   |   | —  |
| Marketable                  securities                              |                                      | **— **                  |                                           |   | 40,039   |                                      |                                                                                                    |                                     |   |   |   |   |
| Deferred                  income taxes                              |                                      | **— **                  |                                           |   | 11,269   |                                      | Shareholders’                  equity                                                             |                                     |   |   |   |   |
| Deferred                  loan                  costs               |                                      | **4,871 **                    |                                           |   | 4,358    |                                      |    Common                  shares, $0.001 par value:                                     |                                     |   |   |   |   |
| Other                  long-term assets                             |                                      | **25,274 **                   |                                           |   | 30,956   |                                      |    authorized                  50 million shares; issued and                             |                                     |   |   |   |   |
| Other                  intangibles, net                             |                                      | **44,552 **                   |                                           |   | 58,310   |                                      |    outstanding                  29.5 and 29.2 million shares                             |                                     | **29 ** |   |   | 29  |
| Goodwill                                                            |                                      | **13,750 **                   |                                           |   | 14,196   |                                      |    Additional                  paid-in capital                                           |                                     | **167,849 ** |   |   | 164,043  |
| Assets                  of                  discontinued operations |                                      | **— **                  |                                           |   | 14,732   |                                      |    Deferred                  compensation common shares obligation                       |                                     | **1,308 ** |   |   | 1,427  |
|                                                                | **$**                                     | **736,496 **                  |                                           | $      | 874,844  |                                      |    Deferred                  compensation common shares                                  |                                     | **(1,308)** |   |   | (1,427) |
|                                                                |                                      |                               |                                           |   |          |                                      |    (Accumulated                  deficit) retained earnings                              |                                     | **(16,526)** |   |   | 94,482  |
|                                                                |                                      |                               |                                           |   |          |                                      |    Accumulated                  other comprehensive loss, net                            |                                     | **(3,708)** |   |   | (4,812) |
|                                                                |                                      |                               |                                           |   |          |                                      | **      Shareholders’                  equity**                     |                                     | **147,644 ** |   |   | 253,742  |
|                                                                |                                      |                               |                                           |   |          |                                      |                                                                                                    | **$**                                    | **736,496 ** |   | $ | 874,844  |

----

**Building      Materials Holding Corporation**

**Consolidated      Statements of Shareholders’ Equity**

**(thousands)**

**(unaudited)**

|                                                                                                                                                                 |   | **Nine                  Months Ended****September                  30** |         | **Year                  Ended****December                  31** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------------|-----------------------------------------------------------------|--------|
|                                                                                                                                                                 |   | **2008**                                                                |         | **2007**                                                        |   | **2007** |   |
|    Common                  shares - beginning balance                                                                                                 |   | **$**                                                                   | **29**       |                                                            | $      | 29 |   | $ | 29 |   |
|       Shares                  issued from Incentive and Performance Plans                                                              |   |                                                                    | **—**  |                                                            |   | — |   |   | — |   |
|       Shares                  issued upon exercise of warrants                                                                         |   |                                                                    | **—**  |                                                            |   | — |   |   | — |   |
| **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**        |                                                            |   | 167 |   |   | 203 |   |
|             (Taxes)                  tax benefit for share options exercised                             |   |                                                                    | **(529**     | **)**                                                           |   | 82 |   |   | 29 |   |
|          Restricted                  shares - Management                                                                |   |                                                                    | **1,123**    |                                                            |   | 2,643 |   |   | 2,614 |   |
|             Unearned                  compensation                                                       |   |                                                                    | **(1,123**   | **)**                                                           |   | (2,643 | ) |   | (2,614 | ) |
|             Tax                  benefit for dividends on restricted shares                              |   |                                                                    | **—**  |                                                            |   | — |   |   | 63 |   |
|          Shares                  - Directors                                                                            |   |                                                                    | **402**      |                                                            |   | 405 |   |   | 405 |   |
|       Earned                  compensation                                                                                             |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|          Options                  - Management                                                                          |   |                                                                    | **2,548**    |                                                            |   | 3,928 |   |   | 5,177 |   |
|          Restricted                  shares - Management                                                                |   |                                                                    | **1,287**    |                                                            |   | 2,445 |   |   | 3,317 |   |
|             (Taxes)                  tax benefit for vested restricted shares                            |   |                                                                    | **(723**     | **)**                                                           |   | 167 |   |   | 167 |   |
|       Shares                  issued from Employee Stock Purchase Plan                                                                 |   |                                                                    | **30**       |                                                            |   | 277 |   |   | 277 |   |
|       Warrants                                                                                                                         |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|          Fair                  value of warrants issued                                                                 |   |                                                                    | **782**      |                                                            |   | — |   |   | — |   |
|          Warrants                  exercised                                                                            |   |                                                                    | **—**  |                                                            |   | — |   |   | — |   |
| **Additional                  paid-in capital**                                                                                                                      |   | **$**                                                                   | **167,849**  |                                                            | $      | 161,876 |   | $ | 164,043 |   |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|    Deferred                  compensation common shares obligation -       beginning                  balance           |   | **$**                                                                   | **1,427**    |                                                            | $      | 1,200 |   | $ | 1,200 |   |
|       Shares                  purchased with deferred compensation                                                                     |   |                                                                    | **279**      |                                                            |   | 350 |   |   | 364 |   |
|       Shares                  purchased with dividends                                                                                 |   |                                                                    | **11**       |                                                            |   | 28 |   |   | 38 |   |
|       Distributions                                                                                                                    |   |                                                                    | **(409**     | **)**                                                           |   | (174 | ) |   | (175 | ) |
| **Deferred                  compensation common shares obligation**                                                                                                  |   | **$**                                                                   | **1,308**    |                                                            | $      | 1,404 |   | $ | 1,427 |   |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|    Deferred                  compensation common shares -       beginning                  balance                      |   | **$**                                                                   | **(1,427**   | **)**                                                           | $      | (1,200 | ) | $ | (1,200 | ) |
|       Shares                  purchased with deferred compensation and          dividends |   |                                                                    | **(290**     | **)**                                                           |   | (378 | ) |   | (402 | ) |
|       Distributions                                                                                                                    |   |                                                                    | **409**      |                                                            |   | 174 |   |   | 175 |   |
| **Deferred                  compensation common shares**                                                                                                             |   | **$**                                                                   | **(1,308**   | **)**                                                           | $      | (1,404 | ) | $ | (1,427 | ) |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|    Retained                  earnings - beginning balance                                                                                             |   | **$**                                                                   | **94,482**   |                                                            | $      | 418,927 |   | $ | 418,927 |   |
|       Net                  (loss) income                                                                                               |   |                                                                    | **(111,008** | **)**                                                           |   | 18,619 |   |   | (312,713 | ) |
|       Cash                  dividends on common shares                                                                                 |   |                                                                    | **—**  |                                                            |   | (8,794 | ) |   | (11,732 | ) |
| **(Accumulated                  deficit) retained earnings**                                                                                                         |   | **$**                                                                   | **(16,526**  | **)**                                                           | $      | 428,752 |   | $ | 94,482 |   |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|    Accumulated                  other comprehensive (loss) income, net -      beginning                  balance        |   | **$**                                                                   | **(4,812**   | **)**                                                           | $      | (732 | ) | $ | (732 | ) |
|       Interest                  rate swap contracts - active:                                                                          |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|          Unrealized                  gain (loss)                                                                        |   |                                                                    | **1,836**    |                                                            |   | (1,797 | ) |   | (7,673 | ) |
|          Notional                  reduction settlement payments                                                        |   |                                                                    | **2,591**    |                                                            |   | — |   |   | — |   |
|             (Taxes)                  tax benefit for unrealized gain (loss)                              |   |                                                                    | **(1,696**   | **)**                                                           |   | 678 |   |   | 2,933 |   |
|       Interest                  rate swap contracts - terminated:                                                                      |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|          Notional                  reduction settlement payments                                                        |   |                                                                    | **(2,591**   | **)**                                                           |   | — |   |   | — |   |
|             Amortization                  of notional reduction settlement payments                      |   |                                                                    | **734**      |                                                            |   | — |   |   | — |   |
|             Tax                  benefit (taxes) for unrealized (loss) gain                              |   |                                                                    | **706**      |                                                            |   | — |   |   | — |   |
|       Marketable                  securities:                                                                                          |   |                                                                    |              |                                                            |   |  |   |   |  |   |
|          Unrealized                  (loss) gain                                                                        |   |                                                                    | **(721**     | **)**                                                           |   | 639 |   |   | 1,000 |   |
|             Tax                  benefit (taxes) for unrealized (loss) gain                              |   |                                                                    | **245**      |                                                            |   | (217 | ) |   | (340 | ) |
| **Accumulated                  other comprehensive (loss) income, net**                                                                                              |   | **$**                                                                   | **(3,708**   | **)**                                                           | $      | (1,429 | ) | $ | (4,812 | ) |
|                                                                                                                                                                 |   |                                                                    |              |                                                            |   |  |   |   |  |   |
| **Shareholders’                  Equity**                                                                                                                      |   | **$**                                                                   | **147,644**  |                                                            | $      | 589,228 |   | $ | 253,742 |   |

----

**Building      Materials Holding Corporation**

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

**(thousands)**

**(unaudited)**

|                                                                                                                          |   |   | **Nine                  Months Ended****September                  30** |   |   | **Year                  EndedDecember 31** |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------|--------|--------|--------------------------------------------|--------|
|                                                                                                                          |   |   | **2008**                                                                |   |   | **2007**                                   |   |   | **2007** |   |
|                                                                                                                          |   |   |                                                                    |   |   |                                       |   |   |   |   |
| Net                  (loss)                  income                                                                           |   | **$**  | **(111,008**                                                            | **)**  | $      | 18,619                                     |   | $ | (312,713 | ) |
|                                                                                                                          |   |   |                                                                         |   |   |                                            |   |   |  |   |
| Unrealized                  gain (loss) on interest rate swap contracts:                                                      |   |   |                                                                         |   |   |                                            |   |   |  |   |
|    Interest                  rate swap contracts - active:                                                     |   |   |                                                                         |   |   |                                            |   |   |  |   |
|       Unrealized                  gain (loss)                                                   |   | **$**  | **1,836**                                                               |   | $      | (1,797                                     | )      | $ | (7,673 | ) |
|       Notional                  reduction settlement payments                                   |   |   | **2,591**                                                               |   |   | —                                    |   |   | — |   |
|          (Taxes)                  tax benefit for unrealized gain (loss)         |   |   | **(1,696**                                                              | **)**  |   | 678                                        |   |   | 2,933 |   |
|    Interest                  rate swap contracts - terminated:                                                 |   |   |                                                                         |   |   |                                            |   |   |  |   |
|       Notional                  reduction settlement payments                                   |   |   | **(2,591**                                                              | **)**  |   | —                                    |   |   | — |   |
|          Amortization                  of notional reduction settlement payments |   |   | **734**                                                                 |   |   | —                                    |   |   | — |   |
|          Tax                  benefit (taxes) for unrealized (loss) gain         |   |   | **706**                                                                 |   |   | —                                    |   |   | — |   |
|                                                                                                                          |   | **$**  | **1,580**                                                               |   | $      | (1,119                                     | )      | $ | (4,740 | ) |
| Unrealized                  (loss) gain on marketable securities:                                                             |   |   |                                                                         |   |   |                                            |   |   |  |   |
|    Unrealized                  (loss) gain                                                                     |   | **$**  | **(721**                                                                | **)**  | $      | 639                                        |   | $ | 1,000 |   |
|       Tax                  benefit (taxes) for unrealized (loss) gain                           |   |   | **245**                                                                 |   |   | (217                                       | )      |   | (340 | ) |
|                                                                                                                          |   | **$**  | **(476**                                                                | **)**  | $      | 422                                        |   | $ | 660 |   |
|                                                                                                                          |   |   |                                                                         |   |   |                                            |   |   |  |   |
| **Comprehensive                  (loss) income**                                                                              |   | **$**  | **(109,904**                                                            | **)**  | $      | 17,922                                     |   | $ | (316,793 | ) |

----

**Building      Materials Holding Corporation**

**Consolidated      Statements of Cash Flows**

**(thousands)**

**(unaudited)**

|                                                                                                                                                                                                                             |   | **Nine                  Months Ended****September                  30** |         | **Year                  EndedDecember 31** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------------|--------------------------------------------|--------|
|                                                                                                                                                                                                                             |   | **2008**                                                                |         | **2007**                                   |   | **2007** |   |
| **Operating                  Activities**                                                                                                                                                                                        |   |                                                                    |         |                                       |   |   |   |
|    Net                  (loss) income                                                                                                                                                                             |   | **$**                                                                   | **(111,008** | **)**                                      | $      | 18,619 |   | $ | (312,713 | ) |
|    Items                  in net (loss) income not using (providing) cash:                                                                                                                                        |   |                                                                    |              |                                       |   |  |   |   |  |   |
|       Minority                  interests (loss) income, net                                                                                                                                       |   |                                                                    | **(63**      | **)**                                      |   | 790 |   |   | 853 |   |
|       Depreciation                  and amortization                                                                                                                                               |   |                                                                    | **29,393**   |                                       |   | 36,509 |   |   | 48,781 |   |
|       Deferred                  loan cost amortization                                                                                                                                             |   |                                                                    | **1,235**    |                                       |   | 842 |   |   | 1,123 |   |
|       Deferred                  loan cost write off                                                                                                                                                |   |                                                                    | **6,969**    |                                       |   | — |   |   | — |   |
|       Amortization                  of interest rate swap contracts notional reduction settlement                  payments                                                                        |   |                                                                    | **734**      |                                       |   | — |   |   | — |   |
|       Impairment                  of assets                                                                                                                                                        |   |                                                                    | **19,410**   |                                       |   | — |   |   | 337,074 |   |
|       Share-based                  compensation                                                                                                                                                    |   |                                                                    | **4,178**    |                                       |   | 6,722 |   |   | 8,944 |   |
|       Gain                  on sale of discontinued operations                                                                                                                                     |   |                                                                    | **—**  |                                       |   | (3,722 | ) |   | (20,029 | ) |
|       Gain                  on sale of assets, net                                                                                                                                                 |   |                                                                    | **(2,865**   | **)**                                      |   | (8,738 | ) |   | (8,789 | ) |
|       Realized                  (gain) loss on marketable securities                                                                                                                               |   |                                                                    | **(542**     | **)**                                      |   | 15 |   |   | (408 | ) |
|       Deferred                  income taxes                                                                                                                                                       |   |                                                                    | **21,994**   |                                       |   | 3,649 |   |   | (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                                                                                                                        |   |                                                                    | **20,791**   |                                       |   | (14,498 | ) |   | 68,385 |   |
|             Inventory                                                                                                                                                |   |                                                                    | **26,417**   |                                       |   | 5,482 |   |   | 24,599 |   |
|             Unbilled                  receivables                                                                                                                    |   |                                                                    | **12,007**   |                                       |   | (11,058 | ) |   | 3,610 |   |
|             Income                  tax receivable                                                                                                                   |   |                                                                    | **(49,130**  | **)**                                      |   | (1,404 | ) |   | (7,304 | ) |
|             Prepaid                  expenses and other current assets                                                                                               |   |                                                                    | **3,971**    |                                       |   | (2,542 | ) |   | (454 | ) |
|             Accounts                  payable                                                                                                                        |   |                                                                    | **(9,409**   | **)**                                      |   | 9,543 |   |   | (22,621 | ) |
|             Accrued                  compensation                                                                                                                    |   |                                                                    | **(3,262**   | **)**                                      |   | (6,173 | ) |   | (16,536 | ) |
|             Insurance                  deductible reserves                                                                                                           |   |                                                                    | **(6,577**   | **)**                                      |   | 3,893 |   |   | 3,557 |   |
|             Other                  accrued liabilities                                                                                                               |   |                                                                    | **3,285**    |                                       |   | (10,294 | ) |   | (13,033 | ) |
|             Billings                  in excess of costs and estimated earnings                                                                                      |   |                                                                    | **5,327**    |                                       |   | 2,790 |   |   | (3,843 | ) |
|             Other                  long-term assets and liabilities                                                                                                  |   |                                                                    | **4,023**    |                                       |   | (10,595 | ) |   | (12,560 | ) |
|       Other,                  net                                                                                                                                                                  |   |                                                                    | **(745**     | **)**                                      |   | 461 |   |   | 2,595 |   |
| **Cash                  flows (used) provided by operating activities**                                                                                                                                                          |   |                                                                    | **(23,867**  | **)**                                      |   | 20,291 |   |   | 67,279 |   |
|                                                                                                                                                                                                                             |   |                                                                    |              |                                       |   |  |   |   |  |   |
| **Investing                  Activities**                                                                                                                                                                                        |   |                                                                    |              |                                       |   |  |   |   |  |   |
|    Purchases                  of property and equipment                                                                                                                                                           |   |                                                                    | **(14,342**  | **)**                                      |   | (21,771 | ) |   | (32,995 | ) |
|    Acquisitions                  and investments in businesses, net of cash acquired                                                                                                                              |   |                                                                    | **(8,475**   | **)**                                      |   | (76,440 | ) |   | (80,961 | ) |
|    Proceeds                  from dispositions of property and equipment                                                                                                                                          |   |                                                                    | **12,424**   |                                       |   | 16,325 |   |   | 16,905 |   |
|    Proceeds                  from sale of discontinued operations                                                                                                                                                 |   |                                                                    | **—**  |                                       |   | 9,592 |   |   | 27,176 |   |
|    Purchase                  of marketable securities                                                                                                                                                             |   |                                                                    | **(28,589**  | **)**                                      |   | (26,447 | ) |   | (35,239 | ) |
|    Proceeds                  from sales of marketable securities                                                                                                                                                  |   |                                                                    | **70,221**   |                                       |   | 26,161 |   |   | 52,650 |   |
|    Other,                  net                                                                                                                                                                                    |   |                                                                    | **(2,340**   | **)**                                      |   | (290 | ) |   | (628 | ) |
| **Cash                  flows provided (used) by investing activities**                                                                                                                                                          |   |                                                                    | **28,899**   |                                       |   | (72,870 | ) |   | (53,092 | ) |
|                                                                                                                                                                                                                             |   |                                                                    |              |                                       |   |  |   |   |  |   |
| **Financing                  Activities**                                                                                                                                                                                        |   |                                                                    |              |                                       |   |  |   |   |  |   |
|    Net                  borrowings under revolver                                                                                                                                                                 |   |                                                                    | **29,200**   |                                       |   | 28,700 |   |   | — |   |
|    Principal                  payments on term notes                                                                                                                                                              |   |                                                                    | **(16,681**  | **)**                                      |   | (2,625 | ) |   | (3,500 | ) |
|    Interest                  rate swap contracts notional reduction settlement payments                                                                                                                           |   |                                                                    | **(2,591**   | **)**                                      |   | — |   |   | — |   |
|    Net                  payments on other notes                                                                                                                                                                   |   |                                                                    | **(2,109**   | **)**                                      |   | (4,523 | ) |   | (4,505 | ) |
|    Decrease                  in book overdrafts                                                                                                                                                                   |   |                                                                    | **(5,008**   | **)**                                      |   | (275 | ) |   | (7,609 | ) |
|    Proceeds                  from share options exercised                                                                                                                                                         |   |                                                                    | **9**        |                                       |   | 167 |   |   | 203 |   |
|    (Taxes)                  tax benefit for share-based compensation                                                                                                                                              |   |                                                                    | **(1,252**   | **)**                                      |   | 249 |   |   | 259 |   |
|    Dividends                  paid                                                                                                                                                                                |   |                                                                    | **(2,938**   | **)**                                      |   | (8,771 | ) |   | (11,709 | ) |
|    Deferred                  financing costs                                                                                                                                                                      |   |                                                                    | **(8,717**   | **)**                                      |   | — |   |   | — |   |
|    Distributions                  to minority interests                                                                                                                                                           |   |                                                                    | **—**  |                                       |   | (1,223 | ) |   | (1,223 | ) |
|    Other,                  net                                                                                                                                                                                    |   |                                                                    | **112**      |                                       |   | 212 |   |   | 212 |   |
| **Cash                  flows (used) provided by financing activities**                                                                                                                                                          |   |                                                                    | **(9,975**   | **)**                                      |   | 11,911 |   |   | (27,872 | ) |
|                                                                                                                                                                                                                             |   |                                                                    |         |                                       |   |   |   |   |   |   |
| **Decrease                  in Cash and Cash Equivalents**                                                                                                                                                                       |   |                                                                    | **(4,943**   | **)**                                      |   | (40,668 | ) |   | (13,685 | ) |
|                                                                                                                                                                                                                             |   |                                                                    |              |                                       |   |  |   |   |  |   |
|    Cash                  and cash equivalents, beginning of period                                                                                                                                                |   |                                                                    | **60,587**   |                                       |   | 74,272 |   |   | 74,272 |   |
|    Cash                  and cash equivalents, end of period                                                                                                                                                      |   | **$**                                                                   | **55,644**   |                                       | $      | 33,604 |   | $ | 60,587 |   |
|                                                                                                                                                                                                                             |   |                                                                    |              |                                       |   |  |   |   |  |   |
| **Supplemental                  Disclosure of Cash Flow Information**                                                                                                                                                            |   |                                                                    |              |                                       |   |  |   |   |  |   |
|    Accrued                  but unpaid dividends                                                                                                                                                                  |   | **$**                                                                   | **—**  |                                       | $      | 2,938 |   | $ | 2,938 |   |
|    Cash                  paid for interest                                                                                                                                                                        |   | **$**                                                                   | **28,743**   |                                       | $      | 25,595 |   | $ | 32,827 |   |
|    Cash                  paid for income taxes                                                                                                                                                                    |   | **$**                                                                   | **3,181**    |                                       | $      | 7,569 |   | $ | 7,233 |   |
|                                                                                                                                                                                                                             |   |                                                                    |              |                                       |   |  |   |   |  |   |
| **Supplemental                  Schedule of Investing Activities**                                                                                                                                                               |   |                                                                    |              |                                       |   |  |   |   |  |   |
|    Fair                  value of assets acquired                                                                                                                                                                 |   | **$**                                                                   | **—**  |                                       | $      | 12,999 |   | $ | 12,999 |   |
|    Liabilities                  of acquisitions (extinguished)                                                                                                                                                    |   | **$**                                                                   | **(8,475**   | **)**                                      | $      | 840 |   | $ | (3,680 | ) |
|    Cash                  paid for acquisitions made this period                                                                                                                                                   |   | **$**                                                                   | **8,475**    |                                       | $      | 12,159 |   | $ | 16,679 |   |
|    Cash                  paid for acquisitions made in prior period                                                                                                                                               |   | **$**                                                                   | **—**  |                                       | $      | 64,281 |   | $ | 64,282 |   |
|                                                                                                                                                                                                                             |   |                                                                    |              |                                       |   |  |   |   |  |   |
| **Supplemental                  Schedule of Financing Activities**                                                                                                                                                               |   |                                                                    |              |                                       |   |  |   |   |  |   |
|    Fair                  value of warrants issued                                                                                                                                                                 |   | **$**                                                                   | **782**      |                                       | $      | — |   | $ | — |   |
|    Discount                  on warrants issued                                                                                                                                                                   |   | **$**                                                                   | **(782**     | **)**                                      | $      | — |   | $ | — |   |

----

***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. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

*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*

----

*Assets      Held for Sale*

|                                                        |   | **September                30****2008** |        |
|-------------------------------------------------------------|--------|-----------------------------------------|-------------|
| Property                and                equipment        |   |                                    |        |
|    Land                                      |   | **$**                                   | **21,600**  |   |
|    Buildings                and improvements |   |                                    | **—** |   |
|    Equipment                                 |   |                                    | **12,261**  |   |
|                                                        |   | **$**                                   | **33,861**  |   |

*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. ***
***Liquidity***

----

***3. ***
***Restructuring***

| ·   | close                34                underperforming units, |
|--------------------|---------------------------------------------------------------|

| ·   | consolidate                12 underperforming units with other business units and |
|--------------------|-----------------------------------------------------------------------------------|

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

|                                               |   |   | **Estimated****Charges** |   |   | **Recognized****Nine                Months****Ended****September                30****2008** |   |   | **Total****Remaining** |   |
|----------------------------------------------------|--------|--------|--------------------------|--------|--------|----------------------------------------------------------------------------------------------|--------|--------|------------------------|--------|
| Impairment                of                assets |   | **$**  | **4,980**                |   | **$**  | **4,980**                                                                                    |   | **$**  | **—**            |   |
| Operating                lease obligations         |   |   | **4,744**                |   |   | **4,744**                                                                                    |   |   | **—**            |   |
|                                               |   | **$**  | **9,724**                |   | **$**  | **9,724**                                                                                    |   | **$**  | **—**            |   |

|                                               |   | **Recognized****Nine                Months Ended****September                30****2008** |      |  **Cash****Payments** |   |  **Non-cash****Charges** |   |  **Liability****Balance                at****September                30****2008** |      |
|----------------------------------------------------|--------|-------------------------------------------------------------------------------------------|-----------|----------------------------|--------|-------------------------------|--------|-----------------------------------------------------------------------------------------|-----------|
| Impairment                of                assets |   | **$**                                                                                     | **4,980** |                       | **$**  | **—**                   |   | **$**                                                                                   | **4,980** |   | **$** | **—** |   |
| Operating                lease obligations         |   |                                                                                      | **4,744** |                       |   | **390**                       |   |                                                                                    | **700**   |   |   | **3,654** |   |
|                                               |   | **$**                                                                                     | **9,724** |                       | **$**  | **390**                       |   | **$**                                                                                   | **5,680** |   | **$** | **3,654** |   |

----

***4. ***
***Impairment        of Assets***

| ·   | $0.7                million                for covenants not to compete, |
|--------------------|--------------------------------------------------------------------------|

| ·   | $3.0                million                for certain property and equipment held for sale                and |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | $0.2                million                for goodwill. |
|--------------------|----------------------------------------------------------|

| ·   | $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. |
|--------------------|-------------------------------------------------------------------|

----

***5. ***
***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. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        |   |   | **September                  30****2008** |   |   | **December                  31****2007** |   |
|-------------|--------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
| Assets      |   | **$**  | **12,322**                                |   | $      | 25,224                                   |   |
| Liabilities |   | **$**  | **4,272**                                 |   | $      | 8,533                                    |   |

|                                                                                           |   | **Three                  Months Ended****September                  30** |       | **Nine                  Months Ended****September                  30** |   | **Year                  EndedDecember 31** |   |
|------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                           |   | **2008**                                                                 |       | **2007**                                                                |   | **2008**                                   |   | **2007** |   | **2007** |   |
| Sales                                                                                          |   |                                                                     |       |                                                                    |   |                                       |   |   |   |   |   |
|    Building                  products                                           |   | **$**                                                                    | **743**    |                                                                    | $      | 11,893                                     |   | **$** | **2,021** |   | $ | 33,391 |   | $ | 33,955 |   |
|    Construction                  services                                       |   | **$**                                                                    | **11,235** |                                                                    | $      | 23,351                                     |   | **$** | **36,509** |   | $ | 85,900 |   | $ | 101,649 |   |
|                                                                                           |   |                                                                     |            |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
| Income                  (loss)                  from discontinued    operations |   | **$**                                                                    | **897**    |                                                                    | **$**  | 2,597                                      |   | **$** | **10,225** |   | $ | 5,562 |   | $ | (46,946 | ) |

----

***6.***
***Net      (Loss) Income Per Share***

|                                                                                                               |   | **Three                  Months Ended****September                  30** |         | **Nine                  Months Ended****September                  30** |   | **Year                  EndedDecember 31** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------------|-------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                               |   | **2008**                                                                 |         | **2007**                                                                |   | **2008**                                   |   | **2007** |   | **2007** |   |
| (Loss)                  income                  from continuing operations                                         |   | **$**                                                                    | **(46,103**  | **)**                                                                   | $      | 1,571                                      |   | **$** | **(121,233** | **)** | $ | 13,057 |   | $ | (265,767 | ) |
| Income                  (loss)                  from discontinued operations                                       |   |                                                                     | **897**      |                                                                    |   | 2,597                                      |   |   | **10,225** |   |   | 5,562 |   |   | (46,946 | ) |
|    Net                  (loss) income                                                               |   | **$**                                                                    | **(45,206**  | **)**                                                                   | $      | 4,168                                      |   | **$** | **(111,008** | **)** | $ | 18,619 |   | $ | (312,713 | ) |
|                                                                                                               |   |                                                                     |              |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Weighted                  average shares - basic                                                 |   |                                                                     | **29,196**   |                                                                    |   | 28,945                                     |   |   | **29,027** |   |   | 28,800 |   |   | 28,807 |   |
|    Effect                  of dilutive:                                                             |   |                                                                     |              |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
|       Share                  options                                                 |   |                                                                     | **—**  |                                                                    |   | 512                                        |   |   | **—** |   |   | 598 |   |   | — |   |
|       Restricted                  shares                                             |   |                                                                     | **—**  |                                                                    |   | 99                                         |   |   | **—** |   |   | 142 |   |   | — |   |
|       Warrants                                                                       |   |                                                                     | **—**  |                                                                    |   | —                                    |   |   | **—** |   |   | — |   |   | — |   |
|    Weighted                  average shares - assuming       dilution |   |                                                                     | **29,196**   |                                                                    |   | 29,556                                     |   |   | **29,027** |   |   | 29,540 |   |   | 28,807 |   |
|                                                                                                               |   |                                                                     |              |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
| Net                  (loss)                  income per share:                                                     |   |                                                                     |              |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Continuing                  operations                                                           |   |                                                                     | **$(1.58**   | **)**                                                                   |        | $0.05                                      |   |   | **$(4.17** | **)** |  | $0.46 |   |   | $(9.23 | ) |
|    Discontinued                  operations                                                         |   |                                                                     | **0.03**     |                                                                    |   | 0.09                                       |   |   | **0.35** |   |   | 0.19 |   |   | (1.63 | ) |
|       Basic                                                                          |   |                                                                     | **$(1.55**   | **)**                                                                   |        | $0.14                                      |   |   | **$(3.82** | **)** |  | $0.65 |   |   | $(10.86 | ) |
|                                                                                                               |   |                                                                     |              |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Continuing                  operations                                                           |   |                                                                          | **$(1.58**   | **)**                                                                   |        | $0.05                                      |   |   | **$(4.17** | **)** |   | $0.44 |   |  | $(9.23 | ) |
|    Discontinued                  operations                                                         |   |                                                                     | **0.03**     |                                                                    |   | 0.09                                       |   |   | **0.35** |   |   | 0.19 |   |   | (1.63 | ) |
|       Diluted                                                                        |   |                                                                     | **$(1.55**   | **)**                                                                   |   | $0.14                                      |   |   | **$(3.82** | **)** |   | $0.63 |   |   | $(10.86 | ) |
|                                                                                                               |   |                                                                     |              |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
| Cash                  dividends                  declared per share                                                |   |                                                                     | **$—** |                                                                    |   | $0.10                                      |   |   | **$—** |   |  | $0.30 |   |   | $0.40 |   |

| ·   | options                and                warrants with exercise prices greater than the average market value                of the                common shares (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****September                  30** |                            | **Nine                  Months Ended****September                  30** |   | **Year                  EndedDecember 31** |   |
|------------------------------------------------------------------|--------|--------------------------------------------------------------------------|---------------------------------|-------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                             |   | **2008**                                                                 |                            | **2007**                                                                |   | **2008**                                   |   | **2007** |   | **2007** |   |
| Average                  market                  value of shares |   |                                                                     | **$2**                          |                                                                    |   | $13                                        |   |   | **$3** |   |   | $17 |   |   | $14 |   |
| Share                  options:                                  |   |                                                                     |                                 |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Exercise                  price range          |   |                                                                     | **$5                  to $38**  |                                                                    |   | $15                  to $38                |   |   | **$5                  to $38** |   |   | $15                  to $38 |   |   | $5                  to $38 |   |
|    Not                  dilutive                  |   |                                                                     | **2,698**                       |                                                                    |   | 1,328                                      |   |   | **2,698** |   |   | 1,328 |   |   | 2,978 |   |
| Restricted                  shares:                              |   |                                                                     |                                 |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Grant                  price range             |   |                                                                     | **$15                  to $42** |                                                                    |        | $17                  to $42                |   |  | **$15                  to $42** |   |   | $34 |   |   | $15                  to $42 |   |
|    Not                  dilutive                  |   |                                                                     | **255**                         |                                                                    |   | 299                                        |   |   | **255** |   |   | 2 |   |   | 410 |   |
| Warrants:                                                        |   |                                                                     |                                 |                                                                    |   |                                            |   |   |  |   |   |  |   |   |  |   |
|    Exercise                  price                |   |                                                                          | **$0.47**                       |                                                                    |        | $—                                   |   |   | **$0.47** |   |   | $— |   |   | $— |   |
|    Not                  dilutive                  |   |                                                                     | **2,825**                       |                                                                    |   | —                                    |   |   | **2,825** |   |   | — |   |   | — |   |

----

***7. ***
***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 did 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.  |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                     | **September                    30****2008** |        | **December                    31****2007** |   |         | **September                    30****2008** |                                                        | **December                    31****2007** |
|----------------------------------------------------------|---------------------------------------------|-------------|--------------------------------------------|--------|--------------|---------------------------------------------|-------------------------------------------------------------|--------------------------------------------|
| Receivables                                              | **$**                                       | **—** |                                       | $      | (21)         |                                        | Other                  accrued                  liabilities | **$**                                      | **53 ** |   | $ | (60,787) |
| Prepaid                  expenses and other              |                                        | **—** |                                       |   | 18      |                                        |                                                        |                                       |   |   |    |    |
| **   Current                  assets**    |                                        | **—** |                                       |   | (3)          |                                        | **   Current                  liabilities**  |                                       | **53 ** |   |   | (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  |                                        |                                                        | **$**                                      | **(8,475)** |   | $ | (65,384) |

----

***8. ***
***Marketable      Securities***

|                                                      |   | **September                      302008** |        | **December                    312007** |   |
|-----------------------------------------------------------|--------|-------------------------------------------|-------------|----------------------------------------|--------|
| U.S.                  government and agencies             |   | **$**                                     | **—** |                                   | $      | 18,380 |   |
| Asset                  backed                  securities |   |                                      | **—** |                                   |   | 9,798 |   |
| Corporate                  securities                     |   |                                      | **—** |                                   |   | 13,733 |   |
|                                                      |   | **$**                                     | **—** |                                   | $      | 41,911 |   |

|                                                  |   | **September                      30****2008** |    | **December                    31****2007** |   |
|-------------------------------------------------------|--------|-----------------------------------------------|--------------|--------------------------------------------|--------|
| Less                  than 1                  year    |   | **$**                                         | **—**  |                                       | $      | 1,872 |   |
| Due                  in 1 to 2                  years |   |                                          | **—**  |                                       |   | 12,683 |   |
| Due                  in 2 to 5                  years |   |                                          | **—**  |                                       |   | 27,356 |   |
|                                                  |   | **$**                                         | **—**  |                                       | $      | 41,911 |   |

----

***9.***
***Intangible      Assets and Goodwill***

|                                                       |   |   | **September                  30, 2008**       |   |
|------------------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                                                       |   |   | **Gross****Carrying                  Amount** |   |   | **Accumulated                  Amortization** |   |   | **Net                  Carrying Amount** |   |
| Customer                  relationships                    |   | **$**  | **70,481**                                    |   | **$** | **(28,482** | **)** | **$** | **41,999** |   |
| Covenants                  not                  to compete |   |   | **8,602**                                     |   |   | **(6,049** | **)** |   | **2,553** |   |
| Favorable                  leases                          |   |   | **382**                                       |   |   | **(382** | **)** |   | **—** |   |
|                                                       |   | **$**  | **79,465**                                    |   | **$** | **(34,913** | **)** | **$** | **44,552** |   |

|                                                       |   |   | **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 |   |

|                                                             |   |   | **September                    30****2008** |   |   | **December                    31****2007** |   |
|------------------------------------------------------------------|--------|--------|---------------------------------------------|--------|--------|--------------------------------------------|--------|
| Balance                  at                  beginning of period |   | **$**  | **14,196**                                  |   | $      | 308,000                                    |   |
|    Purchase                  price adjustment     |   |   | **—**                                 |   |   | (182                                       | )      |
|    Goodwill                  acquired             |   |   | **—**                                 |   |   | 13,259                                     |   |
|    Impairment                                     |   |   | **(446**                                    | **)**  |   | (306,881                                   | )      |
| Balance                  at end                  of period       |   | **$**  | **13,750**                                  |   | $      | 14,196                                     |   |

----

|                                                             |   |   | **September                    30****2008** |   |   | **December                    31****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                                      |   |

----

***10. ***
***Debt***

| **As                    of September 30, 2008**                                                                          |                           |        |   |                                                                                                                       |   |   | **NotionalAmount                  of InterestRate Swaps** |                                      | **Effective                    Interest Rate** |
|--------------------------------------------------------------------------------------------------------------------------|--------------------------------|-------------|--------|----------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------|-------------------------------------------|------------------------------------------------|
|                                                                                                                     |                      | **Balance** |   | **Stated                    Interest Rate**                                                                                |   |   |                                                      | **Averagefor                    Quarter** |                                      | **As                    of****September                    30** |
| Revolver                                                                                                                 | **$**                          | **29,200**  |   | **LIBOR                  plus 5.25% or****Prime                  plus 3.25% and****0.50%                  commitment fee** |   | **$**  | **—**                                               |                                      | **8.6%**                                       |   | **8.6%** |
|                                                                                                                     |                           |        |   |                                                                                                                       |   |   |                                                      |                                      |                                           |   |   |
| Term                  note                                                                                               |                           | **328,944** |   | **LIBOR                  plus 5.25% or****Prime                  plus 3.25%**                                              |   |   | **150,000**                                               |                                      | **8.5%**                                       |   | **11.75%** |
|                                                                                                                     |                           |        |   |                                                                                                                       |   |   |                                                      |                                      |                                           |   |   |
| Other                                                                                                                    |                           | **1,565**   |   | **Various**                                                                                                                |   |   | **—**                                               |                                      | **—   **                  |   | **—   ** |
|                                                                                                                |                           | **359,709** |   |                                                                                                                       |   | **$**  | **150,000**                                               |                                      |                                           |   |   |
|                                                                                                                     |                           |        |   |                                                                                                                       |   |   |                                                      |                                      |                                           |   |   |
| Less:  Current                  portion                                                                        |                           | **68,807**  |   |                                                                                                                       |   |   |                                                      |                                      |                                           |   |   |
| Less:  Unamortized                             discount |                           | **782**     |   |                                                                                                                       |   |   |                                                      |                                      |                                           |   |   |
|                                                                                                                | **$**                          | **290,120** |   |                                                                                                                       |   |   |                                                      |                                      |                                           |   |   |

| **As                  of                  December 31, 2007** |         |        |   |                                                                                                                                              |         |   | **Notional****Amount                  of Interest****Rate                  Swaps** |                                 | **Effective                  Interest Rate** |
|---------------------------------------------------------------|--------------|-------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------------|--------|------------------------------------------------------------------------------------|--------------------------------------|----------------------------------------------|
|                                                          |    | **Balance** |   | **Stated                  Interest Rate**                                                                                                         |    |   |                                                                               | **Averagefor                  Year** |                                         | **As                  of****December                  31** |
| Revolver                                                      | $            | —     |   | LIBOR                  plus                  1.50% or Prime                  plus                  0.25% and0.25%                  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* |
|--|--------|------------|

| ·   | 70%                of                certain accounts receivable, |
|--------------------|-------------------------------------------------------------------|

| ·   | 50%                of                certain inventory, |
|--------------------|---------------------------------------------------------|

| ·   | 25%                of                certain other inventory, |
|--------------------|---------------------------------------------------------------|

| ·   | approximately                75% of the appraised value of certain property and equipment and |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | 50%                of the                appraised value of real estate. |
|--------------------|--------------------------------------------------------------------------|

|  | · | *Term                  Note* |
|--|--------|------------------------------|

|  | · | *Other* |
|--|--------|---------|

*Covenants      and Maturities*

----

| §   | Proceeds                from                the liquidation of statutory funding requirements of our captive                insurance                subsidiary, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | 30%                of tax                refunds and |
|--------------------|------------------------------------------------------|

| §   | cash                in                excess of $25 million. |
|--------------------|--------------------------------------------------------------|

| §   | Proceeds                from                certain dispositions, |
|--------------------|-------------------------------------------------------------------|

| §   | 70%                of tax                refunds and |
|--------------------|------------------------------------------------------|

| §   | 75%                of excess                cash flow as defined beginning in 2010. |
|--------------------|-------------------------------------------------------------------------------------|

| 2008       |   | $      | 1,018   |   |
|------------|--------|--------|---------|--------|
| 2009       |   |   | 68,730  |   |
| 2010       |   |   | 3,727   |   |
| 2011       |   |   | 285,421 |   |
| 2012       |   |   | 65      |   |
| Thereafter |   |   | 748     |   |
|       |   | $      | 359,709 |   |

*Discount      for Warrants*

----

*Hedging      Activities*

|                                                          |   |   | **September                  30, 2008**              |         |    | **December                  31, 2007** |   |
|---------------------------------------------------------------|--------|--------|------------------------------------------------------|--------------|--------------|----------------------------------------|--------|
|                                                          |   |   | **Balance                  Sheet****Classification** |    |         | **Fair****Value**                      |   |   | **Balance                  Sheet****Classification** |   |   | **Fair****Value** |   |
| Interest                  rate                  swapcontracts |   |   | Other                  long-term liabilities         |         | **$**        | **4,209**                              |   |   | Other                  long-term liabilities |   | $ | 8,553 |   |

|                                                               |   | **Gain                  (Loss) Recognized in Accumulated Other****Comprehensive                  (Loss) Income, Net** |      |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------|-----------|
|                                                               |   | **Three                  Months Ended****September                  30**                                              |      | **Nine                  Months Ended****September                  30** |   | **Year                  EndedDecember 31** |   |
|                                                               |   | **2008**                                                                                                              |      | **2007** |   | **2008** |   | **2007** |   | **2007** |   |
| Cash                  Flow                  Hedging Relationships: |   |                                                                                                                  |      |   |   |   |   |   |   |   |   |
|    Interest                  rate swap contracts    |   | **$**                                                                                                                 | **1,389** |   | $ | (5,488 | ) | **$** | **1,836** |   | $ | (1,797 | ) | $ | (7,673 | ) |

|                                                 |   | **Loss                  (Gain) Reclassified from Accumulated                  Other****Comprehensive (Loss) Income,                  Net** |      |
|------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                 |   | **Three                  Months Ended****September                  30**                                                                   |      | **Nine                  Months Ended****September                  30** |   | **Year                  EndedDecember 31** |   |
|                                                 |   | **2008**                                                                                                                                   |      | **2007** |   | **2008** |   | **2007** |   | **2007** |   |
| Statement                  of Operations Location:   |   |                                                                                                                                       |      |   |   |   |   |   |   |   |   |
|                      Interest expense |   | **$**                                                                                                                                      | **1,624** |   | $ | (137 | ) | **$** | **2,970** |   | $ | (410 | ) | $ | (465 | ) |

----

***11. ***
***Shareholders’        Equity***

*Preferred      Shares*

*Common      Shares*

| Employee                Stock                Purchase Plan |   |   | **1.6                million** |   |
|------------------------------------------------------------|--------|--------|--------------------------------|--------|
| 2008                Stock                Incentive Plan    |   |   | **1.9                million** |   |
| Warrants                                                   |   |   | **2.8                million** |   |

*Warrants*

|                                                |   | **Nine                Months Ended****September                30****2008** |
|-----------------------------------------------------|--------|-----------------------------------------------------------------------------|
| Expected                term                (years) |   | **5.5**                                                                     |
| Expected                volatility                  |   | **64.6%**                                                                   |
| Expected                dividend yield              |   | **0.0%**                                                                    |
| Risk-free                interest rate              |   | **3.0%**                                                                    |
| Exercise                price                       |   | **$0.47**                                                                   |
| Weighted                average fair value          |   | **$0.28**                                                                   |

----

*Dividends*

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

*Repurchase      Program*

----

***12. ***
***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 $5.8 million at September 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 138,733 common shares at September 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, *

----

|                                                    | **Nine                  Months Ended****September                  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 |

|                                                                                                        | **Nine                  Months Ended****September                  30****2008** |                                                    | **Nine                  Months Ended****September                  30****2007** |   | **Year                  Ended****December                  31****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                                                                                 | **(279)**                                                                       | **$19**                                                 |                                                                            |   | (34)                                                                    | $30 |   | (51) | $28 |
| Outstanding                  at                  end of the   period                         | **2,698 **                                                                 | **$14**                                                 | **3.7**                                                                         |   | 3,002                                                              | $15 |   | 2,978  | $15 |
|                                                                                                        |                                                                            |                                                    |                                                                            |   |                                                                    |   |   |   |   |
| Exercisable                  at                  end    of                  the period       | **2,257 **                                                                 | **$13**                                                 | **3.4**                                                                         |   | 2,045                                                              | $11 |   | 2,079  | $11 |

|                                                    |   | **Nine                  Months Ended****September                  30** |         | **Year                  EndedDecember 31** |   |
|---------------------------------------------------------|--------|-------------------------------------------------------------------------|--------------|--------------------------------------------|--------|
|                                                    |   | **2008**                                                                |         | **2007**                                   |   | **2007** |   |
| Weighted                  average grant-date fair value |   |                                                                    | **$—** |                                       |   | $8 |   |   | $8 |   |
| Intrinsic                  value of options exercised   |   |                                                                    | **$1**       |                                       |   | $282 |   |   | $299 |   |
| Fair                  value of options vested           |   |                                                                    | **$3,951**   |                                       |   | $4,613 |   |   | $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**                                       |   |   |   | **1.7** |   | **534** |   | **$5** |   |   |
| $7                                           |   | **573**                                  |   | **$7**                                       |   |   |   | **3.9** |   | **573** |   | **$7** |   |   |
| $8                                           |   | **179**                                  |   | **$8**                                       |   |   |   | **5.4** |   | **179** |   | **$8** |   |   |
| $9                                           |   | **284**                                  |   | **$9**                                       |   |   |   | **2.6** |   | **284** |   | **$9** |   |   |
| $17                  to                  $18 |   | **455**                                  |   | **$18**                                      |   |   |   | **5.5** |   | **120** |   | **$18** |   |   |
| $23                                          |   | **345**                                  |   | **$23**                                      |   |   |   | **3.4** |   | **345** |   | **$23** |   |   |
| $38                                          |   | **328**                                  |   | **$38**                                      |   |   |   | **4.2** |   | **222** |   | **$38** |   |   |
|                                         |   | **2,698**                                |   | **$14**                                      |   |   |   |   |   | **2,257** |   | **$13** |   |   |
| In-the-money:                                |   |                                     |   |                                         |   |   |   |   |   |   |   |   |   |   |
|    Outstanding                |   | **—**                              |   |                                         |   | **$—** |   |   |   |   |   |   |   |   |
|    Exercisable                |   |                                     |   |                                         |   |   |   |   |   | **—** |   |   |   | **$—** |

*Restricted      Shares*

|                                                                                                           | **Nine                  Months Ended****September                  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**                                                                                             |   | (142) |   | $11 |   | (142) |   | $11 |
|    Forfeited                                                                                    | **(43)**                                                                |   | **$26**                                                                                             |   | (14) |   | $31 |   | (16) |   | $30 |
| Nonvested                  at                  end of the    period                        | **255 **                                                           |   | **$27**                                                                                             |   | 412  |   | $26 |   | 410  |   | $26 |

----

|                                                                      |   | **Nine                  Months Ended****September                  30** |         | **Year                  EndedDecember 31** |   |
|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------------|--------------------------------------------|--------|
|                                                                      |   | **2008**                                                                |         | **2007**                                   |   | **2007** |   |
| Weighted                  average grant-date fair value                   |   |                                                                    | **$—** |                                       |   | $18 |   |   | $18 |   |
| Fair                  value of                  restricted shares granted |   |                                                                    | **$—** |                                       |   | $3,034 |   |   | $3,005 |   |
| Fair                  value of                  restricted shares vested  |   |                                                                    | **$2,573**   |                                       |   | $1,556 |   |   | $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      |   |                                                                                                                                               | **2,953** |                                                                                                              |   | **$13.23**                                                                                                                         |   |   | **1,901** |   |
| Equity                  compensation plans not approved                  by                  security holders |   |                                                                                                                                               | **2,825** |                                                                                                              |   | **$0.47**                                                                                                                          |   |   | **—** |   |
| Total                                                                                                         |   |                                                                                                                                               | **5,778** |                                                                                                              |   | **$6.76**                                                                                                                          |   |   | **1,901** |   |

----

***13. ***
***Income      Taxes***

|                                                            |   | **Nine                  Months Ended****September                  30** |       | **Year                  Ended****December                  31** |   |
|-----------------------------------------------------------------|--------|-------------------------------------------------------------------------|------------|-----------------------------------------------------------------|--------|
|                                                            |   | **2008**                                                                |       | **2007**                                                        |   | **2007** |   |
|                                                            |   |                                                                    |       | **Effective****Rate**                                           |   |   |   | **Effective****Rate** |   |   |   | **Effective****Rate** |   |
| Continuing                  operations:                         |   |                                                                    |       |                                                            |   |   |   |   |   |   |   |   |   |
|    Income                  tax (expense) benefit |   | **$**                                                                   | **(4,363** | **)**                                                           |   | **(3.7** | **)%** | $ | (4,904 | ) |   | (25.6 | )% | $ | 25,670 |   |   | 8.8 | % |
| Discontinued                  operations:                       |   |                                                                    |            |                                                            |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
|    Income                  tax benefit (expense) |   | **$**                                                                   | **27,600** |                                                            |   | **158.8** | **%** | $ | (3,395 | ) |   | (37.9 | )% | $ | (4,990 | ) |   | (11.9 | )% |

----

***14. ***
***Financial      Instruments***

| ·   | $3.7                million                more than the amount of debt reported on the consolidated balance                sheet at                September 30, 2008 and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

***15.***
***Commitments      and Contingencies***

*Legal      Proceedings*

*Operating      Leases*

*Warranties*

|                                                                 |   | **Three                  Months Ended****September                  30** |      | **Nine                  Months Ended****September                  30** |   | **Year                  EndedDecember 31** |   |
|----------------------------------------------------------------------|--------|--------------------------------------------------------------------------|-----------|-------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                 |   | **2008**                                                                 |      | **2007**                                                                |   | **2008**                                   |   | **2007** |   | **2007** |   |
| Balance                  at                  beginning of the period |   | **$**                                                                    | **6,441** |                                                                    | $      | 6,930                                      |   | **$** | **6,805** |   | $ | 7,081 |   | $ | 7,081 |   |
|    Provision                  for warranties          |   |                                                                     | **163**   |                                                                    |   | 720                                        |   |   | **640** |   |   | 1,067 |   |   | 694 |   |
|    Warranty                  charges                  |   |                                                                     | **(198**  | **)**                                                                   |   | (519                                       | )      |   | **(1,039** | **)** |   | (1,017 | ) |   | (970 | ) |
| Balance                  at end                  of the period       |   | **$**                                                                    | **6,406** |                                                                    | $      | 7,131                                      |   | **$** | **6,406** |   | $ | 7,131 |   | $ | 6,805 |   |

----

***16.***
***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**                          |   |
|----------------------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------|--------|
|                                                           |   |   | **September                  30****2008** |   |   | **Quoted                  Prices in****Active                  Markets for Identical Assets** |   |   | **Significant                  Other Observable Inputs** |   |   | **Significant****Unobservable****Inputs** |   |
| Marketable                  securities                         |   | **$**  | **—**                               |   | **$**  | **—**                                                                                   |   | **$** | **—** |   | **$** | **—** |   |
| Interest                  rate                  swap contracts |   |   | **(4,209**                                | **)**  |   | **—**                                                                                   |   |   | **(4,209** | **)** |   | **—** |   |
|                                                           |   | **$**  | **(4,209**                                | **)**  | **$**  | **—**                                                                                   |   | **$** | **(4,209** | **)** | **$** | **—** |   |

|                                                           |   |   |                                     |   |   | **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. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***17.***
***Segment      Information***

----

***18.***
***Quarterly      Results of Operations***

|                                                                                                 |   | **First** |         | **Second** |   | **Third**    |       | **Fourth** |         |
|------------------------------------------------------------------------------------------------------|--------|-----------|--------------|------------|--------|--------------|------------|------------|--------------|
| **2008**                                                                                             |   |      |         |       |   |         |       |       |         |
| Sales                                                                                                |   | **$**     | **342,948**  | ** ** | **$**  | **384,620**  | ** ** | **$**      | **364,430**  | ** ** | **$** | **—** |   |
|                                                                                                 |   |      |              |       |   |              |       |       |              |   |   |  |   |
| Loss                  from                  continuing operations(1)                                 |   | **$**     | **(33,804**  | **)**      | **$**  | **(41,326**  | **)**      | **$**      | **(46,103**  | **)** | **$** | **—** |   |
| (Loss)                  income                  from discontinued operations(1)                  (2) |   |      | **(57**      | **)**      |   | **9,385**    |       |       | **897**      |   |   | **—** |   |
|          Net                  loss                      |   | **$**     | **(33,861**  | **)**      | **$**  | **(31,941**  | **)**      | **$**      | **(45,206**  | **)** | **$** | **—** |   |
|                                                                                                 |   |      |              |       |   |              |       |       |              |   |   |  |   |
|    Net                  (loss) income per share:                                      |   |      |              |       |   |              |       |       |              |   |   |  |   |
|       Continuing                  operations                           |   |      | **$(1.17**   | **)**      |   | **$(1.42**   | **)**      |       | **$(1.58**   | **)** |   | **$—** |   |
|       Discontinued                  operations                         |   |      | **—**  |       |   | **0.32**     |       |       | **0.03**     |   |   | **—** |   |
|          Diluted                                        |   |      | **$(1.17**   | **)**      |   | **$(1.10**   | **)**      |       | **$(1.55**   | **)** |   | **$—** |   |
|                                                                                                 |   |      |              |       |   |              |       |       |              |   |   |  |   |
| Common                  share                  prices:                                               |   |      |              |       |   |              |       |       |              |   |   |  |   |
| High                                                                                                 |   |      | **$7**       |       |   | **$5**       |       |       | **$3**       |   |   | **$—** |   |
| Low                                                                                                  |   |      | **$4**       |       |   | **$2**       |       |       | **$0.47**    |   |   | **$—** |   |
|                                                                                                 |   |      |              |       |   |              |       |       |              |   |  |  |   |
| 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** |   |       | **$                  3,856**                 |   |   | **$—** |   |
| Discontinued                  operations |   |      | **$—** |       |   | **$                  6,212** |   |       | **$                     873** |   |   | **$—** |   |
| **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**

| ·   | homebuyer                perceptions that the market has not reached                bottom, |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | excess                inventory of unsold homes aided by rising                foreclosures, |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | weakening                consumer confidence and |
|--------------------|--------------------------------------------------|

| ·   | stricter                lending standards. |
|--------------------|--------------------------------------------|

*Restructuring*

----

*First      Quarter*

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

| ·   | discontinued                framing services in Virginia. |
|--------------------|-----------------------------------------------------------|

*Second      Quarter*

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

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

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

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

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

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

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

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

*Third      Quarter*

| ·   | closure                and                relocation of millwork operations in Reno, Nevada and building                distribution and truss operations in Minden, Nevada to our existing                facility in Sparks, Nevada, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | relocation                and consolidation of millwork operations in Boise, Idaho to our existing                building distribution and truss facility in Boise, Idaho                and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | closure                and                relocation of millwork operations in Salt Lake City, Utah to our                existing                facility in Orem, Utah. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Fourth      Quarter*

| ·   | negotiating                the sale of our concrete business and lumber distribution reload                facility                in Southern California, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | closure                of a                concrete business in Northern                California, |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | closure                and                relocation of building distribution operations in Kent, Washington                to our                existing facilities in the Puget Sound area of Washington                and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | closure                and                relocation of millwork operations in Fort Collins, Colorado to our                existing facility in Greeley,                Colorado. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Credit      Facility*

----

*Insurance      Coverage*

----

**RESULTS      OF OPERATIONS**

***THIRD      QUARTER OF 2008 COMPARED TO 2007***

|                                                                                                                                           |   | **Three                  Months Ended****September                  30** |         |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------------|
|                                                                                                                                           |   | **2008**                                                                 |         | **2007** |   |
| **Sales**                                                                                                                                      |   |                                                                     |         |   |   |   |   |   |   |
| Building                  products                                                                                                             |   | **$**                                                                    | **184**      |   |   | **50.5** | **%** | $ | 266 |   |   | 44.8 | % |
| Construction                  services                                                                                                         |   |                                                                     | **180**      |   |   | **49.5** |   |   | 328 |   |   | 55.2 |   |
| **Total                  sales**                                                                                                               |   |                                                                     | **364**      |   |   | **100.0** |   |   | 594 |   |   | 100.0 |   |
|                                                                                                                                           |   |                                                                     |              |   |   |  |   |   |  |   |   |  |   |
| **Costs                  and operating expenses**                                                                                              |   |                                                                     |              |   |   |  |   |   |  |   |   |  |   |
| Cost                  of goods                  sold                                                                                           |   |                                                                     |              |   |   |  |   |   |  |   |   |  |   |
| Building                  products                                                                                                             |   |                                                                     | **139**      |   |   | **75.5** |   |   | 193 |   |   | 72.6 |   |
| Construction                  services                                                                                                         |   |                                                                     | **162**      |   |   | **90.0** |   |   | 286 |   |   | 87.2 |   |
| Impairment                  of                  assets                                                                                         |   |                                                                     | **4**        |   |   | **1.1** |   |   | — |   |   | — |   |
| Selling,                  general and administrative expenses                                                                                  |   |                                                                     | **87**       |   |   | **23.9** |   |   | 106 |   |   | 17.8 |   |
| Other                  expense                  (income), net                                                                                  |   |                                                                     | **1**        |   |   | **0.3** |   |   | (2 | ) |   | (0.3 | ) |
| Total                  costs                  and operating expenses                                                                           |   |                                                                     | **393**      |   |   | **108.0** |   |   | 583 |   |   | 98.1 |   |
|                                                                                                                                           |   |                                                                     |    |   |   |    |   |   |   |   |   |   |   |
| **(Loss)                  income from operations**                                                                                             |   |                                                                     | **(29**      | **)** |   | **(8.0** | **)** |   | 11 |   |   | 1.9 |   |
|                                                                                                                                           |   |                                                                     |              |   |   |  |   |   |  |   |   |  |   |
| Interest                  expense                                                                                                              |   |                                                                     | **16**       |   |   | **4.4** |   |   | 9 |   |   | 1.5 |   |
|                                                                                                                                           |   |                                                                     |              |   |   |  |   |   |  |   |   |  |   |
| **(Loss)                  income from continuing operations****   before                  income taxes and minority interests** |   |                                                                     | **(45**      | **)** |   | **(12.4** | **)** |   | 2 |   |   | 0.4 |   |
|                                                                                                                                           |   |                                                                     |              |   |   |  |   |   |  |   |   |  |   |
| Income                  tax                  expense                                                                                           |   |                                                                     | **(1**       | **)** |   | **(0.3** | **)** |   | — |   |   | — |   |
| Minority                  interests income                                                                                                     |   |                                                                     | **—**  |   |   | **—** |   |   | (1 | ) |   | (0.2 | ) |
| **(Loss)                  income from continuing operations**                                                                                  |   |                                                                     | **(46**      | **)** |   | **(12.7** | **)** |   | 1 |   |   | 0.2 |   |
|                                                                                                                                           |   |                                                                     |              |   |   |  |   |   |  |   |   |  |   |
| Loss                  from                  discontinued operations     prior                  to sale                     |   |                                                                     | **(4**       | **)** |   | **(1.1** | **)** |   | — |   |   | — |   |
| Impairment                  of                  assets                                                                                         |   |                                                                     | **1**        |   |   | **0.3** |   |   | — |   |   | — |   |
| Gain                  on sale                  of discontinued operations                                                                      |   |                                                                     | **—**  |   |   | **—** |   |   | 4 |   |   | 0.7 |   |
| Income                  tax                  benefit (expense)                                                                                 |   |                                                                     | **6**        |   |   | **1.7** |   |   | (1 | ) |   | (0.2 | ) |
| **Income                  from discontinued operations**                                                                                       |   |                                                                     | **1**        |   |   | **0.3** |   |   | 3 |   |   | 0.5 |   |
|                                                                                                                                           |   |                                                                     |         |   |   |   |   |   |   |   |   |   |   |
| **Net                  (loss) income**                                                                                                         |   | **$**                                                                    | **(45**      | **)** |   | **(12.4** | **)%** | $ | 4 |   |   | 0.7 | % |
|                                                                                                                                           |   |                                                                     |              |   |   |  |   |   |  |   |   |  |   |

| **Net                  (loss) income per share:** |   |   |       |   |   |   |   |   |   |
|---------------------------------------------------|--------|--------|------------|--------|--------|--------|--------|--------|--------|
| Continuing                  operations            |   |   | **$(1.58** | **)**  |   |        |   |   | $0.05  |   |   |  |   |
| Discontinued                  operations          |   |   | **0.03**   |   |   |        |   |   | 0.09   |   |   |   |   |
|     Diluted                   |   |   | **$(1.55** | **)**  |   |        |   |   | $0.14  |   |   |  |   |

----

***Consolidated      Financial Results***

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

|   |  **2008     ** | **                           2007** |   |
|--------|----------------------------------------------|----------------------------------------------------------------------------------|--------|
|   |                                         |                                                                             |
|   |                                              |                                                                             |

|                                                     |   | **2008** |    | **2007** |    | **%                  Change** |   |
|----------------------------------------------------------|--------|----------|---------|----------|--------------|-------------------------------|--------|
| **Sales**                                                |   |     |    |     |         |                          |   |
|    Building                  products     |   | **$**    | **184** |     | $            | 266                           |   |   | (31)% |  |
|    Construction                  services |   |     | **180** |     |         | 328                           |   |   | (45)% |   |
|                                                     |   | **$**    | **364** |     | $            | 594                           |   |   | (39)% |   |
|                                                     |   |     |         |     |         |                               |   |   |  |   |
| **(Loss)                  income from operations**       |   | **$**    | **(29** | **)**    | $            | 11                            |   |   | n/m |   |

| ·   | Gross                margins                declined to 17.3% of sales from 19.4% in the same quarter a year                ago.                Margins for both building products and construction services declined.                Costs                for building products increased due to changes in vendor terms and                prices                as a result of perceived credit and liquidity concerns.                Margins                for                construction services continued to contract from increasingly competitive                market conditions as a result of a sharp decline in available                contracts. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                recognized                asset impairments of $4 million primarily for assets held for sale                associated with the closure and consolidation of underperforming                business                units. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling,                general and administrative expenses decreased 18% or $19 million                from the                same quarter a year ago. These expenses were lower due to a 28% reduction                in employees and related expenses. Also included in selling, general                and                administrative expenses were $2 million in costs associated with                the                closure and consolidation of underperforming business units. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | As                a percent                of sales, selling, general and administrative expenses increased                6.1% to                23.9%. The increase was attributable to a sharp drop in sales volume,                particularly for construction services, as well as a change in the                sales                mix to building products which carry higher selling, general and                administrative expenses. Our restructuring efforts are ongoing to                align                these expenses with current sales                trends. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other                expense                was $1 million compared to other income of $2 million in the same                quarter                a year ago. Other expense for the quarter was due to losses on the                sale of                fixed assets associated with the closure and consolidation of                underperforming business units and a decrease in the market value                of                executive deferred compensation                investments. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Interest      Expense*

| ·   | $1                million in                costs to obtain a temporary waiver for our credit facility in August                2008, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $3                million                expense recognized for unamortized deferred loan costs from                the February 2008 amendment to our credit facility                and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $2                million in                costs for the September 2008 amendment to our credit                facility. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

*Income      Taxes*

*Discontinued      Operations*

----

***NINE      MONTHS OF 2008 COMPARED TO 2007***

|                                                                                                                                           |   | **Nine                  Months Ended****September                  30** |        |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|-------------|
|                                                                                                                                           |   | **2008**                                                                |        | **2007** |   |
| **Sales**                                                                                                                                      |   |                                                                    |        |   |   |   |   |   |   |
| Building                  products                                                                                                             |   | **$**                                                                   | **563**     |   |   | **51.6** | **%** | $ | 785 |   |   | 44.2 | % |
| Construction                  services                                                                                                         |   |                                                                    | **529**     |   |   | **48.4** |   |   | 991 |   |   | 55.8 |   |
| **Total                  sales**                                                                                                               |   |                                                                    | **1,092**   |   |   | **100.0** |   |   | 1,776 |   |   | 100.0 |   |
|                                                                                                                                           |   |                                                                    |             |   |   |  |   |   |  |   |   |  |   |
| **Costs                  and operating expenses**                                                                                              |   |                                                                    |             |   |   |  |   |   |  |   |   |  |   |
| Cost                  of goods                  sold                                                                                           |   |                                                                    |             |   |   |  |   |   |  |   |   |  |   |
| Building                  products                                                                                                             |   |                                                                    | **417**     |   |   | **74.1** |   |   | 569 |   |   | 72.5 |   |
| Construction                  services                                                                                                         |   |                                                                    | **479**     |   |   | **90.5** |   |   | 854 |   |   | 86.2 |   |
| Impairment                  of                  assets                                                                                         |   |                                                                    | **12**      |   |   | **1.1** |   |   | — |   |   | — |   |
| Selling,                  general and administrative expenses                                                                                  |   |                                                                    | **270**     |   |   | **24.7** |   |   | 321 |   |   | 18.1 |   |
| Other                  income,                  net                                                                                            |   |                                                                    | **(6**      | **)** |   | **(0.5** | **)** |   | (14 | ) |   | (0.8 | ) |
| Total                  costs                  and operating expenses                                                                           |   |                                                                    | **1,172**   |   |   | **107.3** |   |   | 1,730 |   |   | 97.4 |   |
|                                                                                                                                           |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| **(Loss)                  income from operations**                                                                                             |   |                                                                    | **(80**     | **)** |   | **(7.3** | **)** |   | 46 |   |   | 2.6 |   |
|                                                                                                                                           |   |                                                                    |             |   |   |  |   |   |  |   |   |  |   |
| Interest                  expense                                                                                                              |   |                                                                    | **37**      |   |   | **3.4** |   |   | 27 |   |   | 1.5 |   |
|                                                                                                                                           |   |                                                                    |             |   |   |  |   |   |  |   |   |  |   |
| **(Loss)                  income from continuing operations****   before                  income taxes and minority interests** |   |                                                                    | **(117**    | **)** |   | **(10.7** | **)** |   | 19 |   |   | 1.1 |   |
|                                                                                                                                           |   |                                                                    |             |   |   |  |   |   |  |   |   |  |   |
| Income                  tax                  expense                                                                                           |   |                                                                    | **(4**      | **)** |   | **(0.4** | **)** |   | (5 | ) |   | (0.3 | ) |
| Minority                  interests income                                                                                                     |   |                                                                    | **—** |   |   | **—** |   |   | (1 | ) |   | (0.1 | ) |
| **(Loss)                  income from continuing operations**                                                                                  |   |                                                                    | **(121**    | **)** |   | **(11.1** | **)** |   | 13 |   |   | 0.7 |   |
|                                                                                                                                           |   |                                                                    |             |   |   |  |   |   |  |   |   |  |   |
| (Loss)                  income                  from discontinued operations     prior                  to sale            |   |                                                                    | **(10**     | **)** |   | **(0.9** | **)** |   | 5 |   |   | 0.3 |   |
| Impairment                  of                  assets                                                                                         |   |                                                                    | **7**       |   |   | **0.6** |   |   | — |   |   | — |   |
| Gain                  on sale                  of discontinued operations                                                                      |   |                                                                    | **—** |   |   | **—** |   |   | 4 |   |   | 0.2 |   |
| Income                  tax                  benefit (expense)                                                                                 |   |                                                                    | **27**      |   |   | **2.4** |   |   | (3 | ) |   | (0.1 | ) |
| **Income                  from discontinued operations**                                                                                       |   |                                                                    | **10**      |   |   | **0.9** |   |   | 6 |   |   | 0.4 |   |
|                                                                                                                                           |   |                                                                    |        |   |   |   |   |   |   |   |   |   |   |
| **Net                  (loss) income**                                                                                                         |   | **$**                                                                   | **(111**    | **)** |   | **(10.2** | **)%** | $ | 19 |   |   | 1.1 | % |
|                                                                                                                                           |   |                                                                    |             |   |   |  |   |   |  |   |   |  |   |

| **Net                  (loss) income per share:** |   |   |       |   |   |   |   |   |   |
|---------------------------------------------------|--------|--------|------------|--------|--------|--------|--------|--------|--------|
| Continuing                  operations            |   |   | **$(4.17** | **)**  |   |        |   |   | $0.44  |   |   |  |   |
| Discontinued                  operations          |   |   | **0.35**   |   |   |   |   |   | 0.19   |   |   |   |   |
| Diluted                                           |   |   | **$(3.82** | **)**  |   |        |   |   | $0.63  |   |   |  |   |

----

***Consolidated      Financial Results***

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

|   |  **2008     ** | **                       2007** |   |
|--------|----------------------------------------------|--------------------------------------------------------------------|--------|
|   |                                         |                                                               |
|   |                                              |                                                               |

|                                                       |   | **2008** |      | **2007** |   | **%                    Change** |   |
|------------------------------------------------------------|--------|----------|-----------|----------|--------|---------------------------------|--------|
| **Sales**                                                  |   |     |      |     |   |                            |   |
|    Building                    products     |   | **$**    | **563**   |     | $      | 785                             |   |   | (28)% |   |
|    Construction                    services |   |     | **529**   |     |   | 991                             |   |   | (47)% |   |
|                                                       |   | **$**    | **1,092** |     | $      | 1,776                           |   |   | (39)% |   |
|                                                       |   |     |           |     |   |                                 |   |   |  |   |
| **(Loss)                    income from operations**       |   | **$**    | **(80**   | **)**    | $      | 46                              |   |   | n/m |   |

| ·   | Gross                margins                declined to 17.9% of sales from 19.9% in the same period a year ago.                Lower                gross margins resulted from increasingly competitive market conditions                as                construction services margins declined 4.3% and margins for building                products were 1.6% lower than the same period a year ago. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                recognized                asset impairments of $12 million for customer relationships, assets                held                for sale and leasehold improvements associated with the closure and                consolidation of underperforming business units. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Partially                offsetting lower gross margins, selling, general and administrative                expenses decreased 16% or $51 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: |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | $8                million in                costs associated with exiting certain operating leases and other                charges                related to the closure and consolidation of underperforming business                units                and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | $10                million                in customer bad debt. |
|--------------------|-----------------------------------------------------------------|

| ·   | As                a percent                of sales, selling, general and administrative expenses increased                6.6% to                24.7%. The increase was a result                of: |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | a                substantial                decline in sales volume, particularly construction                services, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

| §   | a                change in                the sales mix to building products which carry higher selling, general                and                administrative expenses, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | one-time                costs associated with exiting certain operating leases and other                charges                related to the closure and consolidation of underperforming business                units. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other                income                was $6 million compared to other income of $14 million in the same                period                a year ago. The change was due to a 2007 gain on the sale of certain                real                estate associated with the relocation of a building materials operation                in                Texas as well as higher market values for executive deferred compensation                investments in 2007. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Interest      Expense*

| ·   | costs                associated with amending our credit facility in February and September                2008, |
|--------------------|------------------------------------------------------------------------------------------------------------------|
| ·   | expensing                of                unamortized loan costs from the February 2008 amendment of our credit                facility and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | higher                interest rates. |
|--------------------|---------------------------------------|

*Income      Taxes*

*Discontinued      Operations*

----

**LIQUIDITY      AND CAPITAL RESOURCES**

*Operations*

*Capital      Investment and Acquisitions*

----

*Financing*

|  | · | *Revolver* |
|--|--------|------------|

| ·   | 70%                of                certain accounts receivable, |
|--------------------|-------------------------------------------------------------------|

| ·   | 50%                of                certain inventory, |
|--------------------|---------------------------------------------------------|

| ·   | 25%                of                certain other inventory, |
|--------------------|---------------------------------------------------------------|

| ·   | approximately                75% of the appraised value of certain property and equipment and |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | 50%                of the                appraised value of real estate. |
|--------------------|--------------------------------------------------------------------------|

|  | · | *Term                  Note* |
|--|--------|------------------------------|

----

|  | · | *Other* |
|--|--------|---------|

*Covenants      and Maturities*

| §   | Proceeds                from                the liquidation of statutory funding requirements of our captive                insurance                subsidiary, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | 30%                of tax                refunds and |
|--------------------|------------------------------------------------------|

| §   | cash                in                excess of $25 million. |
|--------------------|--------------------------------------------------------------|

| §   | Proceeds                from                certain dispositions, |
|--------------------|-------------------------------------------------------------------|

| §   | 70%                of tax                refunds and |
|--------------------|------------------------------------------------------|

| §   | 75%                of excess                cash flow as defined beginning in 2010. |
|--------------------|-------------------------------------------------------------------------------------|

----

| 2008       |   | $      | 1,018   |   |
|------------|--------|--------|---------|--------|
| 2009       |   |   | 68,730  |   |
| 2010       |   |   | 3,727   |   |
| 2011       |   |   | 285,421 |   |
| 2012       |   |   | 65      |   |
| Thereafter |   |   | 748     |   |
|       |   | $      | 359,709 |   |

*Discount        for Warrants*

*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, availability of credit and other important                factors; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                ability                to maintain adequate liquidity, reduce operating costs and increase                market                shares in an industry that has experienced and continues to experience                a                significant reduction in average annual housing                starts; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | § | our                  liquidity                  is dependent on operating performance, an efficient cash conversion                  cycle                  and compliance with financial                  covenants; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | § | our                  ability                  to implement and maintain cost structures that align with sales                  trends                  and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

| ·   | 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; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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 widespread credit and liquidity                concerns,* *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; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | our                shares                may be less attractive as they are not traded on a large, more well-known                exchange 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, availability of credit        and        other important factors.*

*Our        ability to preserve liquidity, reduce operating costs and increase market        share        in an industry experiencing a 51% reduction in average annual housing starts        may        not be fully realized or may take longer to realize than expected.*

----

| §   | *Our                liquidity is dependent on operating performance, an efficient cash                conversion cycle and compliance with financial                covenant.* |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| §*  * | *An                inability to implement and maintain cost structures that align with                sales                trends may have an adverse impact on our operating results or may                not be                fully realized or may take longer to realize than expected.* |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §*  * | *Losses                  of customers as well as changes in the business models of customers                  may                  have an adverse impact on our operating results.* |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Our          business is subject to intense competition. *

*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.*

*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 widespread credit and liquidity            concerns, 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.*

| §   | work                    safety                    regulations promulgated by the Department of Labor’s Occupational Safety                    and Health Administration, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| §   | transportation                    regulations promulgated by the Department of Transportation,                    employment                    regulations promulgated by the Department of Homeland Security                    and the                    United States Equal Employment Opportunity Commission as well                    as |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| §   | state                    and                    local zoning restrictions and building codes. |
|--------------------|-----------------------------------------------------------------------------------------------|

----

*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.* |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| §*  * | *Our                shares may be less attractive as they are not traded on a large,                well-known exchange.* |
|----------------------|---------------------------------------------------------------------------------------------------------------------------|
| §*  * | *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.* |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

*Warrants*

|                                                    |   | **Nine                    Months Ended****September                    30****2008** |
|---------------------------------------------------------|--------|-------------------------------------------------------------------------------------|
| Expected                  term                  (years) |   | **5.5**                                                                             |
| Expected                  volatility                    |   | **64.6%**                                                                           |
| Expected                  dividend yield                |   | **0.0%**                                                                            |
| Risk-free                  interest rate                |   | **3.0%**                                                                            |
| Exercise                  price                         |   | **$0.47**                                                                           |
| Weighted                  average fair value            |   | **$0.28**                                                                           |

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

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

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

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

| (a)    |   | Exhibits   |   |                                                     |
|--------|--------|------------|--------|----------------------------------------------------------|
|   |   |       |   |                                                     |
|   |   | **Number** |   | **Description**                                          |
|   |   |       |   |                                                     |
|   |   | 31.1       |   | Section                302                Certification  |
|   |   |       |   |                                                     |
|   |   | 31.2       |   | Section                302                Certification  |
|   |   |       |   |                                                     |
|   |   | 32.0       |   | Section                906                Certifications |

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**SIGNATURES**

|                                    | BUILDING                MATERIALS HOLDING CORPORATION                                                                                                                      |
|-----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Date:                November 6, 2008   | */s/                Robert E. Mellor*                                                                                                                                           |   |
|                                    | Robert                E.                MellorChairman                of                the Board and Chief Executive Officer(Principal                Executive Officer)  |
| Date:                  November 6, 2008 | */s/                William M. Smartt*                                                                                                                                          |   |
|                                    | William                M.                SmarttSenior                Vice                President and Chief Financial Officer (Principal                Financial Officer)     |

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