10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 001-33192

www.bmhc.com

Building Materials Holding Corporation

Delaware	91-1834269
(State of incorporation)	(IRS Employer Identification No.)

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

(415) 627-9100

Securities registered pursuant to Section 12(b) of the Act:

	Name of each exchange
Title of each Class	on which registered
Common Stock, $0.001 par value per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨    Accelerated filer þ    Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ¨ No þ

The aggregate market value of common shares held by non-affiliates of the registrant as of June 29, 2007 was $329,429,038. The market value computation excludes 6,173,315 shares held by affiliates such as directors, officers and holders of more than 5% of the common shares outstanding as of June 29, 2007.

The number of common shares outstanding as of March 10, 2008 was 29,381,760. 

Documents Incorporated by Reference

(1) Portions of the Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders on May 6, 2008, are incorporated by reference in Part III of this Form 10-K.

Building Materials Holding Corporation

FORM 10-K

For the Fiscal Year Ended December 31, 2007

INDEX

			Page
PART I
	Item 1.	Business	3
	Item 1A.	Risk Factors	12
	Item 1B.	Unresolved Staff Comments	16
	Item 2.	Properties	17
	Item 3.	Legal Proceedings	18
	Item 4.	Submission of Matters to a Vote of Security Holders	19
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
	Item 6.	Selected Financial Data	22
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	49
	Item 8.	Financial Statements and Supplementary Data	50
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	93
	Item 9A.	Controls and Procedures	93
	Item 9A. (T)	Controls and Procedures	93
	Item 9B.	Other Information	94
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	95
	Item 11.	Executive Compensation	100
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	101
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	102
	Item 14.	Principal Accounting Fees and Services	103
PART IV
	Item 15.	Exhibits, Financial Statement Schedules	104
		Signatures	111

1

Introduction - Risk Factors and Forward-Looking Statements

There are a number of business risks and uncertainties that affect our operations and therefore could cause future results to differ from past financial performance or expected results and ultimately affect the trading price of our common shares. Information regarding these risks and uncertainties is contained in Item 1A of this Form 10-K under the caption Risk Factors.

Certain statements in this Form 10-K including those related to expectations about homebuilding activity in our markets, demographic trends supporting homebuilding and anticipated sales and operating income are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about our expectations, anticipated financial results and future business prospects are forward-looking statements. While these statements represent our current judgment on what the future may hold and we believe these judgments are reasonable, these statements involve risks and uncertainties that are important factors that could cause our actual results to differ materially from those in forward-looking statements. These factors include, but are not limited to, the risks and uncertainties cited in Item 1A of this Form 10-K under the caption Risk Factors. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date of the filing of our 2007 Annual Report on Form 10-K. We undertake no obligation to update forward-looking statements.

2

PART I

ITEM 1. Business

General

Building Materials Holding Corporation is one of the largest providers of residential building products and construction services in the United States, with a focus in the western and southern states. Our two subsidiaries, BMC West and SelectBuild, provide building products and construction services in 14 of the top 25 single-family construction markets. BMC West markets and sells building materials, manufactures building components and provides construction services to professional builders and contractors through a network of 40 distribution facilities and 59 manufacturing facilities. SelectBuild provides integrated construction services to production homebuilders in key growth markets as well as construction services to commerical and multi-family builders. We have increasingly focused on integrating construction services and manufactured building components to our customers.

Incorporated in the state of Delaware in 1987, Building Materials Holding Corporation trades on the NYSE under the ticker symbol BLG and is headquartered in San Francisco, California.

Periodic and current reports are filed with the Securities and Exchange Commission at www.sec.gov and are also available at our website www.bmhc.com.

Industry Overview

The residential building products and construction services industry is dependent on demand for single-family homes. Housing demand is influenced by many factors including the overall condition of the U.S. economy, mortgage and other interest rates, consumer confidence, job formation and demographic trends as well as other factors. The production of single-family homes is therefore variable and cyclical in nature. The U.S. Census Bureau reported a 29% drop in single-family housing starts to 1.0 million units in 2007 compared to 1.5 million in 2006 and the historic high of 1.7 million units in 2005. As of February 2008, single-family housing starts for 2008 are expected to decline to 0.7 million units according to the National Association of Home Builders. The industry is currently reducing the production of new homes in response to slowing demand and a high inventory of unsold homes.

Although the industry remains fragmented, consolidation is expected to continue to occur among homebuilders, building material distributors and construction service providers. We believe this continued consolidation will favor production homebuilders as well as larger established building material distributors and construction service providers.

At BMC West, we market and sell building products, manufacture building components and provide construction services to professional builders and contractors. Products include structural lumber and building materials purchased from manufacturers as well as manufactured building components such as millwork, trusses and wall panels. Construction services include installation of various building products and framing. We serve our customers based on a regional market management approach where strategic locations offer our entire breadth of building products, manufactured building components and construction services to a market area. We currently offer these products and services in major metropolitan markets in Texas, Washington, Colorado, Idaho, Utah, Montana, California, Oregon and Nevada.

3

At SelectBuild, we offer integrated construction services to production homebuilders as well as commercial and multi-family builders. These builders generally outsource framing and other construction services. Our services include wood framing or concrete block masonry, concrete services, plumbing and other services. Construction services include managing labor and construction schedules as well as sourcing materials. We currently offer these services in major metropolitan markets in California, Arizona, Nevada, Florida and Illinois.

Acquisition and Expansion Strategy

Our growth over the past several years has been largely due to acquisitions. We have grown our business through acquisitions as well as strategically expanding the breadth of our building products and construction services offered to professional builders, contractors and production homebuilders. In particular, we believe production homebuilders are seeking quality, reliable and cost effective solutions to meet their construction service needs. The fragmented nature of the building products and construction services industry provides acquisition opportunities. Acquisitions have been evaluated based on their anticipated performance, management depth, cultural fit, industry reputation and long-term potential customer base. We have typically entered a market by purchasing all or part of an existing business and then pursue integration of our products and services to capture market share. We have assigned experienced due diligence teams to review potential acquisition candidates and developed integration plans once we have agreed in principle to the general terms of an acquisition. As we manage our business through the current industry downturn, we do not intend to pursue acquisitions and our focus will be on enhancing existing operations.

Over the past few years, SelectBuild acquired businesses providing construction services to production homebuilders as follows:

2007	2006	2005
·door and molding installation services in Las Vegas, Nevada ·remaining 49% interest in our existing truss manufacturer business in Fort Pierce, Florida ·remaining 33% interest in our existing framing business in Delaware, Maryland and Virginia ·remaining 27% interest in our existing plumbing business in Phoenix and Tucson, Arizona ·concrete services in Fresno, California	·distribution services in Southern California ·remaining 49% interest in our existing concrete business in Arizona ·window installation services in Phoenix, Arizona ·framing services in Southern California ·concrete services in Northern Arizona ·wall panel and truss manufacturer in Palm Springs, California ·remaining 20% interest in our existing concrete block masonry and concrete business in Florida ·framing services in Palm Springs, California and Reno, Nevada	·framing services in San Diego, California ·concrete and plumbing services in Las Vegas, Nevada and Southern California ·additional 20% interest in our existing concrete block masonry and concrete business in Florida ·51% interest in concrete services in Arizona ·73% interest in plumbing services in Phoenix and Tucson, Arizona ·stucco services in Las Vegas, Nevada ·51% interest in framing services in Chicago, Illinois

4

At BMC West, we are expanding our building products, manufactured building components, millwork and construction services to become a full-service provider to homebuilders. To facilitate product and service offerings in key markets, BMC West expanded or acquired operations as follows:

2007	2006	2005
·building materials distribution in Terrell, Texas ·future expansion and consolidation site for building materials distribution and truss manufacturing in Helena, Montana ·future site for building materials distribution in Houston, Texas ·building materials distribution in Burlington, Washington ·building materials distribution in San Antonio, Texas ·expansion in progress for millwork facility in Coppell, Texas	·expansion and consolidation of millwork facility in Englewood, Colorado ·truss manufacturer in El Paso, Texas ·future site for building materials distribution, truss and millwork facilities in Caldwell, Idaho ·building materials distribution and truss manufacturer in Eastern Idaho ·expansion of building materials distribution and truss manufacturing in Hurst, Texas ·building materials distribution and millwork facility in Houston, Texas	·truss manufacturer in McCall, Idaho ·truss manufacturer in Missoula, Montana ·millwork facility in Austin, Texas

Both of our business segments customize their mix of building products and construction services to meet customer needs in their respective markets. Our acquisition and expansion strategy has changed our sales mix as follows:

	2007	2006	2005	2004	2003
Building products	44%	40%	45%	56%	64%
Construction services	56%	60%	55%	44%	36%

Competitive Strengths

Strategically located in growing and diverse markets. Our strategy focuses on offering building products and construction services in large rapidly growing markets. According to single-family housing permit data from the U.S. Census Bureau, in 2007 we had operations in 14 of the top 25 U.S. metropolitan statistical areas. Our operations are geographically diverse and principally located in the western and southern states.

Full offering of manufactured products and other services. We believe we are well known and respected in our markets for the superior quality and breadth of our products and services. Through BMC West, we have increased our sales of manufactured products, which provide us with higher margins and increased opportunities to cross-sell other products to our customers. By supplying professional builders and contractors with manufactured products and other services as well as key building materials, we are able to help them reduce costs and cycle time.

Superior quality turnkey construction services. Through SelectBuild, we provide superior quality, cost effective and reliable construction service solutions to production homebuilders and other builders in our markets. Certifications from the National Association of Home Builders demonstrate our professional credibility, competence, business integrity and solid record of customer satisfaction. Because we provide services to multiple production homebuilders in our markets, we are able to maintain a well-trained workforce to provide our services. We believe our competitively priced services enable homebuilders to increase profitability and reduce cycle time with higher quality construction.

5

Significant economies of scale. Due to the high volume of materials and other building products we purchase, we may be able to negotiate lower prices on materials and further lower costs to our customers. In addition, we have established strong relationships with our suppliers. These strong relationships provide us significant purchasing advantages, including volume rebate programs and preferred customer status when supplies are limited.

Variable cost structure. Our cost of sales and a portion of our selling, general and administrative expenses are variable. Additionally, we can maximize free cash flow during industry downturns by reducing capital expenditures due to the fact that a significant portion of our capital expenditures are discretionary.

Experienced management team. We have a dedicated and experienced management team that combines extensive industry experience, local knowledge in the market areas we serve and experience managing a large, sophisticated enterprise. Our senior management team averages approximately 17 years of industry experience.

Focus on service.Our focus on service is a key factor that distinguishes us from competitors. We employ experienced, service-oriented individuals. Our product knowledge and construction service skills enable customers to rely on our expertise for project implementation and product recommendations. Our quality assurance initiatives limit callbacks on the services and products we provide. Our dedication to providing superior customer service to builders allows our employees to develop consistent relationships and generate repeat and referral business.

Our Customers

Our customers are professional homebuilders engaged in single-family residential construction. We also offer construction services to commercial and multi-family builders. These builders are generally customers with high-volume material and labor needs that require materials procurement, manufactured building components, construction services and on-time job-site delivery. These products and services are not typically offered by retailers selling to do-it-yourselfers, home improvement contractors and trades people.

BMC West customers are local and regional professional homebuilders as well as contractors. SelectBuild customers are principally production homebuilders.

On a consolidated basis, our largest customer accounted for 6% of sales in 2007, while the top five customers represented approximately 20% of consolidated sales. At our business segments, the top five customers accounted for 10% of sales at BMC West and 35% of sales at SelectBuild.

Competition

Our products and construction services compete with similar offerings in the marketplace and our competitors vary in size, management expertise and financial capabilities. Additionally, the markets in each of our business segments are fragmented and highly competitive. Given the fragmented nature of the industry, consolidation continues to occur among building material distributors and construction service providers.

6

BMC West competes with local, regional and national building products distributors. Builders generally select suppliers based on competitive pricing, product availability, reliable delivery, service, trade credit and knowledgeable personnel. SelectBuild competitors range from single-crew operations to large well-managed organizations spanning multiple markets. Also, some production homebuilders perform their own framing and other construction services.

Sales and Marketing

Our operations are located in many of the largest markets for single-family home construction. Economic strength as well as historical population and migration trends have generally supported the growth of residential construction in our markets. According to the U.S. Census Bureau, housing starts have favored the western and southern regions, representing 75% of annual starts over the past three years.

BMC West attracts customers by consistently providing quality building products and dependable customer service. Sales personnel are dedicated to sourcing new business and maintaining customer relationships. Marketing consists of industry-wide brand communications along with an array of regional marketing events and activities to enhance customer relationships.

SelectBuild relies on the value and solid reputation of their construction services to secure and maintain national and regional relationships with production homebuilders.

Cyclicality and Seasonality

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

Because of weather conditions in some of our markets, our financial condition, results of operations of cash flows may be adversely affected by slower construction activity during the first and fourth quarters of the year.

Business Segments

The following information is presented for our business segments and should be read in conjunction with the Consolidated Financial Statements and related notes that appear in Item 8 of this Form 10-K.

Sales to external customers for building products and construction services are as follows (thousands):

	2007		2006		2005
BMC West
Building products	$	987,871	$	1,237,349	$	1,256,346
Construction services		189,840		234,104		228,176
	$	1,177,711	$	1,471,453	$	1,484,522
SelectBuild
Building products	$	13,413	$	39,841	$	35,553
Construction services		1,093,847		1,691,973		1,358,333
	$	1,107,260	$	1,731,814	$	1,393,886
Total	$	2,284,971	$	3,203,267	$	2,878,408

7

Selected financial information is as follows (thousands):

	Sales							(Loss) (1) Income from Continuing Operations Before Taxes and			Depreciation
	Total		Inter- Segment			Trade		Minority Interests			and Amortization		Capital (2) Expenditures		Assets
Year Ended December 31, 2007
BMC West	$	1,179,097	$	(1,386	)	$	1,177,711	$	64,653		$	11,998	$	21,302	$	376,462
SelectBuild		1,107,501		(241	)		1,107,260		(335,279	)		32,172		8,893		326,507
Corporate		—		—			—		(51,697	)		4,471		2,936		171,875
Discontinued    operations		—		—			—		—			—		79		—
	$	2,286,598	$	(1,627	)	$	2,284,971		(322,323	)	$	48,641	$	33,210	$	874,844
Interest expense									33,800
								$	(356,123	)
Year Ended December 31, 2006
BMC West	$	1,473,219	$	(1,766	)	$	1,471,453	$	119,737		$	11,987	$	33,107	$	479,101
SelectBuild		1,744,092		(12,278	)		1,731,814		148,416			30,002		33,409		722,328
Corporate		—		—			—		(75,484	)		3,104		6,174		118,880
Discontinued    operations		—		—			—		—			—		28		8,602
	$	3,217,311	$	(14,044	)	$	3,203,267		192,669		$	45,093	$	72,718	$	1,328,911
Interest expense									29,082
								$	163,587
Year Ended December 31, 2005
BMC West	$	1,486,152	$	(1,630	)	$	1,484,522	$	147,781		$	11,010	$	17,293	$	439,779
SelectBuild		1,395,182		(1,296	)		1,393,886		160,957			13,695		62,611		623,877
Corporate		—		—			—		(72,631	)		2,450		—		79,029
Discontinued    operations		—		—			—		—			—		42		7,840
	$	2,881,334	$	(2,926	)	$	2,878,408		236,107		$	27,155	$	79,946	$	1,150,525
Interest expense									14,420
								$	221,687

⁽¹⁾Includes the following impairments for 2007:

· $330.4 million for the carrying amount of certain customer relationships and goodwill at SelectBuild and

· $6.7 million for the carrying amount of goodwill at BMC West.

Includes the following impairments for 2006:

· $2.2 million for the carrying amount of certain customer relationships and goodwill at SelectBuild.

8

Includes the following impairments for 2005:

· $1.3 million for the carrying amount of certain customer relationships and goodwill at SelectBuild.

⁽²⁾Property and equipment from acquisitions are included as capital expenditures.

Operating Strategy

Our business units operate in specific markets and are organized under the business segments of BMC West and SelectBuild. Each regional manager has substantial autonomy and responsibility to address customer needs specific to their markets. The reputation of a building products distributor or construction services provider is often determined locally, where service, product suitability and knowledgeable customer service are critical. Managers are responsible for optimizing business activities in their markets, including the efficient use of personnel, assessing and maintaining working capital, procuring construction labor and material requirements, identifying potential customers and developing appropriate service and product offerings. Incentive compensation is based on successful growth and operating results tied to specific market areas and regions.

We focus on improving efficiency and productivity at our business units while giving special attention and support to units that are not meeting strategic objectives. When a business unit fails to meet performance criteria, remedies include adjusting the mix of products and services, restructuring management, consolidation or liquidation.

Purchasing

We purchase building products from numerous manufacturers and suppliers. Our largest supplier accounted for approximately 9% of purchases in 2007. Because commodity wood products are available from several manufacturers and suppliers, we believe the loss of any single supplier would not have a material adverse effect on our financial position, results of operations or cash flows.

In order to meet market specific needs and maintain appropriate inventory levels, purchasing decisions are made at the business unit level within the framework of corporate negotiated programs. Large volume purchases are made under company-wide guidelines. In addition, we participate in volume discount and cooperative advertising programs with suppliers.

The prices of commodity wood products, concrete, steel and other building products are volatile and may adversely impact financial condition, results of operations and cash flows when prices rapidly rise or fall. Our information systems allow business unit managers to closely monitor sales and inventory. With this supply and demand information, we generally avoid overstocking commodity wood products. As a result, we turn our commodity wood product inventory on average 13 times per year. Such rapid inventory turnover limits our potential exposure to inventory loss from commodity price fluctuations.

Management Information Systems

We are standardizing software and infrastructure platforms that support the information needs of our organization. Our standardization effort includes job cost and construction information, estimating, inventory management, reporting, project scheduling and human resource management.

9

We have developed a project methodology that allows us to efficiently deploy these information systems to our business units. Our job cost and construction information systems are fully deployed at SelectBuild business units and we expect our inventory management systems to be upgraded by early 2008. At BMC West, our NxTrend point of sale and inventory management systems are operating in approximately 75% of our business units. As we focus on reducing costs during the sharp contraction in the homebuilding industry, future implementations will be limited.

We continue to research, recommend and implement new technology solutions to improve information for decision-making. Remote information technology functions are being consolidated and moved to Boise, Idaho to lower costs and improve efficiencies. We are also pursuing negotiations with our telecommunication vendors to achieve economies on pricing.

Our network infrastructure consists of data centers in Boise, Idaho and Las Vegas, Nevada. This network infrastructure provides redundant services between data centers and allows for a more seamless disaster recovery capability.

Safety and Risk Management

The construction services industry incurs a higher number of accidents and subsequent costs for workers’ compensation claims than typically experienced at building materials distribution facilities. Consequently, we have several programs to enhance safety and reduce the risks encountered by our employees. These programs include instruction and training for truck drivers, construction safety, behavioral safety as well as on-line and instructor led training programs relating to OSHA compliance matters and safety hazards in the workplace.

We maintain comprehensive insurance coverage to mitigate the potential cost of claims. Our estimated cost for automobile, general liability and workers compensation claims is determined by actuarial methods. Claims in excess of certain amounts are insured with third-party insurance carriers. Reserves for claims are recognized based on the estimated costs of these claims as limited by the deductible of the applicable insurance policies.

Employees

Our success is highly dependent on the quality of our employees. Due to competition in attracting and retaining qualified employees, we maintain competitive compensation and benefit programs to attract, motivate and retain top-performers. We also provide extensive product knowledge, customer service and other supervisory or management training programs to achieve our goal of being both the employer and supplier of choice.

Our business is seasonal and in 2007 we employed an average of approximately 18,000 people. Specifically, BMC West employed 5,000, while SelectBuild employed 13,000 employees. Unions represent approximately 700 or less than 5% of these employees. We have not experienced any strikes or other work interruptions and have maintained generally favorable relations with our employees.

10

Executive Officers

Name	Age	Position and Business Experience
Robert E. Mellor	64	Chairman of the Board and Chief Executive Officer Mr. Mellor became Chairman of the Board of Directors in 2002 and has been Chief Executive Officer since 1997. He has been a director since 1991. He was previously Of Counsel with the law firm of Gibson, Dunn & Crutcher LLP from 1990 to 1997. He is on the boards of directors of Coeur d’Alene Mines Corporation and The Ryland Group. He is also on the board of councilors of Save-the-Redwoods League. He does not serve on the audit committee or compensation committee of any of these boards.
William M. Smartt	65	Senior Vice President and Chief Financial Officer Mr. Smartt has been a Senior Vice President and Chief Financial Officer since April 2004. Prior to joining the Company, he was an independent consultant from August 2001 to March 2004. From 1992 to 2001, he was Executive Vice President, Chief Financial and Administrative Officer of DHL Express, a leader in international air express services. His previous experience as a Chief Financial Officer included 10 years with Di Giorgio Corporation, a Fortune 500 Company, whose product lines included the distribution of building materials, prefabricated components and framing services.
Stanley M. Wilson	63	President and Chief Operating Officer Mr. Wilson was appointed President and Chief Operating Officer of Building Materials Holding Corporation in February 2008. Mr. Wilson was appointed President and CEO of BMC West in 2004 and was appointed Senior Vice President in 2003. He was appointed Vice President in 2000 and was General Manager of the Pacific Division of BMC West from 1993 to 2003. Mr. Wilson has been with the company since its beginning in 1987. His previous experience includes 20 years with the building materials distribution business of Boise Cascade Corporation.
Michael D. Mahre	48	Senior Vice President and President Mr. Mahre was appointed Senior Vice President of Building Materials Holding Corporation in 2003 and President and Chief Executive Officer of SelectBuild in 2002. He was appointed Vice President of Corporate Development in 2001. He joined the Company in 1999 as Director of Financial Planning and Analysis. Mr. Mahre was a principal of The Cambria Group, a private equity investment firm, from 1997 to 1998.
Eric R. Beem	38	Vice President and Controller Mr. Beem was appointed Vice President in January 2006 and Controller in April 2005. He joined the Company as Accounting Manager in 1996. Mr. Beem is a Certified Public Accountant and his experience includes 3 years with an international public accounting firm.
Mark R. Kailer	54	Vice President, Treasurer and Investor Relations Mr. Kailer has been Vice President and Treasurer since 2003. He joined the Company in 2000 as Assistant Treasurer. He was previously Senior Manager of Treasury Services at Circle International Group, a publicly-traded global logistics company based in San Francisco, from 1997 to 2000.
Jeffrey F. Lucchesi	54	Senior Vice President, Chief Information Officer Mr. Lucchesi joined the Company in August 2004 as Senior Vice President and Chief Information Officer. From 2000 to 2004, he was Senior Vice President of Worldwide Operations for Corio, Inc., an enterprise application service provider. Mr. Lucchesi also served from 1994 to 2000 as Vice President and Chief Information Officer for DHL Express, a leader in international air express services.
Paul S. Street	59	Senior Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary Mr. Street joined the Company in 1999 as Senior Vice President, General Counsel and Corporate Secretary and has been Chief Administrative Officer since 2001. He previously served as our outside General Counsel & Secretary while a partner of the law firm of Moffatt, Thomas, Barrett, Rock & Fields.

11

ITEM 1A. Risk Factors

Risks Related to Our Business

There are a number of business risks and uncertainties that affect our operations and therefore could cause future results to differ from past performance or expected results. These risks or uncertainties may include, but are not limited to the following factors:

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

The residential building products and construction services industry is highly dependent on demand for single-family homes, which is influenced by several factors. These factors include economic changes nationally and locally, mortgage and other interest rates, consumer confidence, job formation, demographic trends, inflation, building permit activity and availability of credit as well as other factors. The construction of new homes may experience decline due to over supply of home inventory levels, lack of availability of credit, the unavailability and unaffordability of land in attractive metropolitan areas, shortages of qualified tradespeople, shortages of materials and regulations that impose restrictive zoning and density requirements. Also, changes to housing patterns may occur, such as an increase in consumer demand for urban living rather than single-family suburban neighborhoods. All of these factors could limit demand for home construction and may adversely impact our financial condition, results of operations or cash flows.

There are risks associated with our business model.

Our business model seeks the strategic growth of construction services and distribution of building products in an effort to provide a comprehensive solution to builders. Providing these services and products includes the risks of availability and cost of qualified labor and claims for construction defects, product liability and workers’ compensation as well as the timely sourcing and availability of building products. Additionally, there is no guarantee that our efforts to offer these comprehensive solutions will continue to be accepted by the marketplace.

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

When we experience slower periods of homebuilding activity, acquire new businesses or expand existing operations, we may experience inefficiencies in our cost structures. Our evaluation of and changes to expenses in response to declining sales may not be timely, leading to higher costs and lower returns on sales.

Compliance with credit facility covenants is dependent on operating performance and changes in interest expense may adversely impact our operating results.

Our ability to comply with our credit facility covenants depends on our operating performance. Reduced operating performance, organizational changes and other expenses may result in failure to comply with the financial covenants and adversely affect our ability to finance operations or capital needs and could create a default and cause all amounts borrowed to become due and payable immediately. Additionally, the amended credit facility restricts our ability to incur additional indebtedness, pay dividends, repurchase shares, enter into mergers or acquisitions, use proceeds from equity offerings, make capital expenditures and sell assets.

12

Increases in interest rates and the credit risk premium assigned to us as well as changes in the amount of debt will increase our interest expense. Higher interest expense may adversely impact our financial position, results of operations or cash flows for operating needs.

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

As the business models of our customers evolve, our existing building products and construction service offerings may not meet the needs of certain homebuilders. Homebuilders may decide to no longer outsource construction services or may purchase construction services and building products from separate suppliers. If we do not timely assess shifts in customer expectations, preferences and demands, our financial condition, results of operations or cash flows could be adversely affected.

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

Our past growth has been largely due to acquisitions. As we manage our business through the current industry downturn, we do not intend to pursue acquisitions and our focus will be on enhancing existing operations. The integration of previously acquired businesses may not result in anticipated cost savings and revenue synergies being fully realized or may take longer to realize than expected. The management and acquisition of businesses involves substantial risks including:

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

· significant expenses to integrate;

· diversion of management attention;

· departure of key personnel from the acquired business;

· effectively managing entrepreneurial spirit and decision-making;

· integration of different information systems;

· managing new construction service trades;

· unanticipated costs and exposure to unforeseen liabilities; and

· impairment of assets.

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

We are exposed to the risk of loss arising from the failure of a customer. Although amounts due from our customers are typically secured by liens on their construction projects, in the event a customer cannot meet its payment obligations to us, there is a risk that the value of their underlying project will not be sufficient to recover the amounts owed to us. Estimated credit losses are considered in the valuation of amounts due from our customers, however the entire carrying amount is generally at risk.

While economic and regulatory changes seek to reduce excess unsold home inventory, stabilize housing affordability and eliminate overly negative perceptions of the future of the housing market, we may experience losses of and changes in customers. Our 5 largest customers represent 10% of sales for BMC West and 35% of sales for SelectBuild. Additionally, diversification of our sales mix to more products and services for multi-family and light commercial projects may result in changes to our customer mix. The loss of one or more of our significant customers and changes in customer mix may adversely affect our financial condition, results of operations or cash flows.

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

Competition for employees is especially intense in both building products distribution and construction services. In markets with strong housing demand, we may experience shortages in qualified labor and key personnel, which may limit our ability to complete contracts as well as obtain additional contracts with builders. Additional employment and eligibility requirements as well as enhanced and perceived enforcement from state and federal authorities could also limit the availability of qualified labor. We cannot guarantee that we will be successful in recruiting and retaining qualified employees in the future.

13

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.

Prices of commodity wood products, concrete, steel and other building products are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations and periodic delays in delivery. Rapid and significant changes in product prices may affect sales as well as margins due to a limited ability to pass on short-term price changes. We do not use derivative financial instruments to hedge commodity price changes.

We may experience shortages of building products as a result of unexpected demand or production difficulties as well as transportation limitations. Any disruption in our sources of supply for key building products could negatively impact our financial condition, results of operations or cash flows.

Our business is subject to intense competition.

We experience competition across all markets for our building products and construction services. Recently, there has been increased consolidation within the building materials distribution and construction services industry. As the industry consolidates, other building materials distributors, including large retail distributors focused on consumers, may aggressively pursue production homebuilders as well as other professional builders and contractors. These competitive factors may lead to pricing pressures and cause reductions in sales or margins as well as increases in operating costs. Loss of significant market share due to competition could result in the closure of facilities.

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

Our first and fourth quarters historically have been, and are expected to continue to be, adversely affected by weather conditions in some of our markets, causing decreases in operating results due to slower homebuilding activity. In addition, natural catastrophic events may cause our operating results to fluctuate.

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

We are involved in construction defect and product liability claims relating to our various construction trades and the products we distribute and manufacture. We also operate a large fleet of trucks and other vehicles and therefore face some risk of accidents. Although we believe we maintain adequate insurance, we may not be able to maintain such insurance on acceptable terms or such insurance may not provide adequate protection against potential liabilities. Current or future claims may adversely affect our financial condition, results of operations or cash flows.

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

Our operations are dependent upon information for decision-making and the related information systems. A substantial disruption in our information systems for a prolonged period could result in delays in our services and products and adversely affect our ability to complete contracts and fulfill customer demands. Such delays, problems or costs may have an adverse effect on our financial condition, results of operations or cash flows.

14

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

Instability in the economy and financial markets as a result of terrorism or war may impact consumer confidence and result in a decrease in homebuilding in our markets. Terrorist attacks may also directly impact our ability to maintain operations and services and may have an adverse effect on our business.

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

We are subject to various federal, state, local and other regulations, including among other things, 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 and state and local zoning restrictions and building codes. More burdensome regulatory requirements in these or other areas may increase our costs and have an adverse effect on our financial condition, results of operations or cash flows.

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.

Many factors shape the homebuilding industry and our business. In addition to the factors previously cited, there are other matters of a local and regional scale, including those of a political, economic, business, competitive or regulatory nature that may have an adverse effect on our business.

Risks Related to Our Shares

Risks related to our shares may include, however are not limited to:

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

The market price of our shares is subject to significant changes as a result of our operating performance and the other factors discussed above as well as perceptions and events that are beyond our control. Price and trading volume fluctuations for our shares may be unrelated or disproportionate to our operating performance. Additionally, our share price could fluctuate based on the expectations and performance of other publicly traded companies in the construction services and building products distribution industry.

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

Our governing documents and certain provisions of Delaware law that apply to us could make it difficult for another company to acquire control of our company. For example, our certificate of incorporation allows our Board of Directors to issue, at any time and without shareholder approval, preferred shares with such terms as it may determine. Also, our certificate of incorporation provides that during certain types of transactions that could affect control, including the acquisition of 15% or more of our common shares, affiliates of any party to the transaction and persons having a material financial interest in the transaction may not be elected to the Board of Directors. These provisions and others could delay, prevent or allow our Board of Directors to resist an acquisition of our company, even if a majority of our shareholders favored the proposed transaction.

15

ITEM 1B. Unresolved Staff Comments

We have no unresolved comments from the Securities and Exchange Commission.

16

ITEM 2. Properties

We lease our headquarters in San Francisco, California and our administrative service center in Boise, Idaho. Principal properties include distribution centers for building products, millwork fabrication and distribution sites, truss manufacturing plants, sales and administrative offices. Properties are located in growing metropolitan areas and emerging housing markets. Properties for BMC West are 66% owned and 34% leased while at SelectBuild 18% are owned and 82% leased. Our properties are in good operating condition and we believe they provide adequate capacity to meet the needs of our customers. Locations operate under the trade names BMHC, BMC West and SelectBuild as well as other brand names or trademarks. Properties by business segment are as follows:

BMC West		SelectBuild		Corporate
Location	Properties	Location	Properties	Location	Properties
Arizona	1	Arizona	16	California	1
California	6	California	19	Idaho	1
Colorado	14	Florida	8	Nevada	1
Idaho	12	Illinois	1
Montana	7	Nevada	11
Nevada	3	Virginia	1
Oregon	2
Texas	31
Utah	6
Washington	6

17

ITEM 3. Legal Proceedings

We are involved in litigation and other legal matters arising in the normal course of business. In the opinion of management, the recovery or liability, if any, under any of these matters will not have a material effect on our financial position, results of operations or cash flows.

18

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

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year.

19

PART II

ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Shares

Our common shares trade on the NYSE market under the symbol BLG. The high and low share prices as well as cash dividends for each period were as follows:

	2007			2006
	High	Low	Cash Dividends Declared	High	Low	Cash Dividends Declared
First quarter	$25	$18	$0.10	$40	$32	$0.10
Second quarter	$18	$13	$0.10	$38	$25	$0.10
Third quarter	$15	$11	$0.10	$28	$21	$0.10
Fourth quarter	$12	$ 5	$0.10	$28	$24	$0.10

Our credit facility amended in February 2008 prohibits the payment of cash dividends on our common shares. The determination of future dividend payments (cash or shares) will depend on many factors, including credit facility restrictions, financial position, results of operations and cash flows.

As of February 29, 2008, there were approximately 14,100 shareholders of record and the closing price of our shares was $5.78.

Share Performance Graph

The graph below depicts our cumulative total shareholder returns relative to the performance of:

· NYSE Market Index

· Philadelphia Housing Sector Index and

· Peer Group Index

The graph assumes $100 invested at the closing price of our common shares or the applicable index as well as reinvestment of dividends on the date paid. The points of the graph represent year-end index levels based on the last trading day of each year.

Our peer group index is composed of companies that reflect building products and construction services as follows:

·Avatar Holdings Inc.	·Lennar Corp.	·Simpson Manufacturing Co. Inc.
·Beazer Homes USA Inc.	·Masco Corp.	·Standard Pacific Corp.
·Brookfield Homes Corp.	·Meritage Homes Corp.	·Toll Brothers Inc.
·Builders FirstSource Inc.	·MDC Holdings Inc.	·Universal Forest Products, Inc.
·D.R. Horton Inc.	·NVR Inc.	·USG Corp.
·KB Home	·Ryland Group Inc.

20

 

21

ITEM 6. Selected Financial Data

The following selected financial data should be read in conjunction with Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations as well as Item 8 - Financial Statements and Supplementary Data. These items provide further information to understand the comparability of selected financial data.

Selected Financial Data

(thousands, except share data)

	Year Ended December 31
	2007 (1)			2006		2005		2004		2003
Sales (2)
Building products	$	1,001,284		$	1,277,190	$	1,291,899	$	1,156,000	$	892,292
Construction services		1,283,687			1,926,077		1,586,509		904,362		498,052
Total sales	$	2,284,971		$	3,203,267	$	2,878,408	$	2,060,362	$	1,390,344
Impairment of assets	$	337,074		$	2,237	$	1,320	$	2,274	$	829
(Loss) income from operations (3)	$	(322,323	)	$	192,669	$	236,107	$	105,667	$	39,020
Net (loss) income (4)	$	(312,713	)	$	102,074	$	129,507	$	53,910	$	19,929
Net (loss) income per diluted share	$	(10.86	)	$	3.45	$	4.41	$	1.94	$	0.74
Annual cash dividends declared
per share	$0.40			$0.40		$0.24		$0.14		$0.105
Working capital	$	263,180		$	242,800	$	304,459	$	270,437	$	216,898
Total assets	$	874,844		$	1,328,911	$	1,150,525	$	743,044	$	604,199
Long-term debt, net of current portion	$	344,376		$	349,161	$	278,169	$	206,419	$	186,773
Shareholders’ equity	$	253,742		$	572,629	$	470,061	$	327,678	$	271,010
Cash flows provided by operations	$	67,279		$	273,418	$	198,294	$	33,374	$	12,479
Single-family building permits in our markets per U.S. Census Bureau		329,200			502,311		632,447		606,123		528,838

⁽¹⁾ As a result of changes in specific markets, the following impairments were recognized in 2007:

·   $330.4 million for the carrying amount of goodwill and certain customer relationships at SelectBuild and

·   $6.7 million for the carrying amount of goodwill at BMC West.

	2007		2006		2005		2004		2003
(2)Sales from acquisitions were:	$	82,088	$	701,604	$	403,919	$	221,407	$	155,176
(3)       Income (loss) from operations of acquisitions was:	$	7,595	$	55,454	$	31,588	$	2,764	$	(3,628	)

⁽⁴⁾ Income from discontinued operations was $14.6 million or $0.50 per share in 2007. Income from discontinued operations was not significant in prior years.

22

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes that appear in Item 8 of Form 10-K as well as the caption under this item entitled Business Risks and Forward-Looking Statements.

Our Business

We are one of the largest providers of residential building products and construction services in the United States, with a focus in the western and southern states. We provide building products and construction services in 14 of the top 25 single-family residential construction markets through our two subsidiaries, BMC West and SelectBuild. BMC West markets and sells building products, manufactures building components and provides construction services to professional builders and contractors through a network of 40 distribution facilities and 59 manufacturing facilities. SelectBuild provides integrated construction services to production homebuilders in key growth markets as well as construction services to commercial and multi-family builders. We have increasingly focused on integrating construction services and manufactured building components to our customers.

Our operations are located in metropolitan areas that have historically outpaced U.S. averages for residential building permit activity. With building products and construction services offered in California, Texas, Arizona, Nevada, Washington, Colorado, Idaho, Utah, Florida, Montana, Oregon and Illinois, we believe we are in homebuilding markets supported by positive long-term population growth, household formation and demographic trends.

23

Business Environment and Executive Overview

Single-Family Housing

(000s)

The U.S. homebuilding industry experienced a sharp contraction in the production of single-family homes in 2007. Following a slowdown in production in 2006, the housing market was negatively impacted by an excess inventory of unsold homes, deteriorating consumer confidence, declining affordability, tightening lending standards and economic concerns. Single-family building permits for the U.S. were down 29% for 2007.

In our markets, we experienced a 35% drop in single-family building permits compared to 2006. The decline in homebuilding was widespread across all our markets for both building products and construction services. Lower sales from weakening buyer demand and increased competition for fewer available contracts led to declines in our gross margins, particularly for construction services. We expect market conditions will continue to be challenging in the foreseeable future and may apply further pressure to our sales, gross margins and operating results.

Our efforts are ongoing to implement and maintain cost structures that align with current revenue trends. During 2007 we have reduced our headcount by 18% and continue to pursue opportunities to reduce costs and improve operating efficiencies. Our growth was principally driven by acquisitions in recent years. As we manage our business through the current industry downturn, we do not intend to purse acquisitions and our focus will be on streamlining and strengthening our existing operations.

Acquisition and Expansion Strategy

Historically, acquisitions have strengthened and broadened our construction services and building product capabilities as well as our presence in attractive markets. In particular, we believe production homebuilders are seeking cost effective and reliable solutions to meet their construction services needs. Our services include framing, concrete, plumbing and other construction services as well as building product distribution and manufactured building components including trusses, millwork and wall panels. As we manage our business through the current industry downturn, we do not intend to pursue acquisitions and our focus will be on enhancing existing operations.

24

Over the past few years, SelectBuild acquired businesses providing construction services to production homebuilders as follows:

2007	2006	2005
·door and molding installation services in Las Vegas, Nevada ·remaining 49% interest in our existing truss manufacturer business in Fort Pierce, Florida ·remaining 33% interest in our existing framing business in Delaware, Maryland and Virginia ·remaining 27% interest in our existing plumbing business in Phoenix and Tucson, Arizona ·concrete services in Fresno, California	·distribution services in Southern California ·remaining 49% interest in our existing concrete business in Arizona ·window installation services in Phoenix, Arizona ·framing services in Southern California ·concrete services in Northern Arizona ·wall panel and truss manufacturer in Palm Springs, California ·remaining 20% interest in our existing concrete block masonry and concrete business in Florida ·framing services in Palm Springs, California and Reno, Nevada	·framing services in San Diego, California ·concrete and plumbing services in Las Vegas, Nevada and Southern California ·additional 20% interest in our existing concrete block masonry and concrete business in Florida ·51% interest in concrete services in Arizona ·73% interest in plumbing services in Phoenix and Tucson, Arizona ·stucco services in Las Vegas, Nevada ·51% interest in framing services in Chicago, Illinois

At BMC West, we are expanding our building products, manufactured building components, millwork and construction services to become a full-service provider to homebuilders. To facilitate product and service offerings in key markets, BMC West expanded or acquired operations as follows:

2007	2006	2005
·building materials distribution in Terrell, Texas ·future expansion and consolidation site for building materials distribution and truss manufacturing in Helena, Montana ·future site for building materials distribution in Houston, Texas ·building materials distribution in Burlington, Washington ·building materials distribution in San Antonio, Texas ·expansion in progress for millwork facility in Coppell, Texas	·expansion and consolidation of millwork facility in Englewood, Colorado ·truss manufacturer in El Paso, Texas ·future site for building materials distribution, truss and millwork facilities in Caldwell, Idaho ·building materials distribution and truss manufacturer in Eastern Idaho ·expansion of building materials distribution and truss manufacturing in Hurst, Texas ·building materials distribution and millwork facility in Houston, Texas	·truss manufacturer in McCall, Idaho ·truss manufacturer in Missoula, Montana ·millwork facility in Austin, Texas

25

Performance Measurements

We measure our operating performance and financial condition based on several factors including:

·	Sales	·	Management of working capital
·	Income from operations	·	Return on investment

The discussion of our results of operations and financial condition provides information to assist the reader in understanding our financial statements, changes in key items in those financial statements and the primary factors that accounted for those changes. The discussion of our consolidated financial results is followed by a more detailed review of our business segments.

RESULTS OF OPERATIONS

2007 COMPARED TO 2006

The following table sets forth the amounts and percentage relationship to sales of certain costs, expenses and income items (millions, except per share data):

	Year Ended December 31
	2007					2006
Sales
Building products	$	1,001		43.8	%	$	1,277		39.9	%
Construction services		1,284		56.2			1,926		60.1
Total sales		2,285		100.0			3,203		100.0
Costs and operating expenses
Cost of goods sold
Building products		726		72.5			930		72.8
Construction services		1,117		87.0			1,586		82.3
Impairment of assets		337		14.7			2		—
Selling, general and administrative expenses		438		19.2			496		15.5
Other income, net		(11	)	(0.5	)		(4	)	(0.1	)
Total costs and operating expenses		2,607		114.1			3,010		94.0
(Loss) income from operations		(322	)	(14.1	)		193		6.0
Interest expense		34		1.5			29		0.9
(Loss) income from continuing operations    before income taxes and minority interests		(356	)	(15.6	)		164		5.1
Income tax benefit (expense)		29		1.2			(56	)	(1.7	)
Minority interests income, net of income taxes		(1	)	—			(9	)	(0.3	)
(Loss) income from continuing operations		(328	)	(14.4	)		99		3.1
Income from discontinued operations       prior to sale		4		0.2			5		0.2
Gain on sale of discontinued operations		20		0.9			—		—
Income taxes		(9	)	(0.4	)		(2	)	(0.1	)
Income from discontinued operations		15		0.7			3		0.1
Net (loss) income	$	(313	)	(13.7	)%	$	102		3.2	%
Net (loss) income per share:
Continuing operations	$(11.36		)			$3.35
Discontinued operations		0.50					0.10
Diluted	$(10.86		)			$3.45

26

Consolidated Financial Results

Selected financial results were as follows (millions):

Sales and (Loss) Income from Operations

	2007			2006		% Change
Sales
Building products	$1,001			$1,277			(22)%
Construction services		1,284			1,926		(33)%
	$2,285			$3,203			(29)%
(Loss) income from operations	$(322		)	$193			n/m

Sales decreased 29% or $918 million to $2.3 billion. A sharp contraction in new home construction consistent with the national downturn in homebuilding was responsible for the decline. Single-family building permits in our markets were down 35% whereas the U.S. overall was down 29% compared to 2006. Weak buyer demand and an excess inventory of unsold homes curtailed new home starts by homebuilders. Sales of construction services were particularly lower since these sales are from production homebuilders who significantly reduced new home construction.

Gross margins declined to 19.4% of sales from 21.4% in the prior year. Bidding for construction contracts was more competitive as fewer opportunities were available for builders. As a result, margins for construction services were sharply lower, while margins for building products improved due to a shift in sales mix to manufactured building components.

Intangibles and Goodwill Impairment

Consistent with the overall housing industry, our operating segments suffered from the effects of the sharp contraction in single-family home construction. The reporting units of our SelectBuild operating segment and the Colorado reporting unit of our BMC West segment demonstrated significant declines in operating performance in the later portion of the fourth quarter of 2007.

27

During the later portion of the fourth quarter of 2007, the leading sources of economic and housing data forecasted sharper reductions in housing starts. The rapid deterioration in housing forecasts and our operating performance resulted in significant revisions of our operating expectations underpinning the assumptions of recoverability of the carrying amount of customer relationships and goodwill. Additionally, our enterprise value reflected a significant reduction as investors considered overly negative perceptions of the future of the housing market and depressed the share values of housing related companies. For impairment testing, the fair values were determined based on estimates of enterprise value as well as the present value of estimated future operating cash flows. As a result, we determined the carrying amount of certain customer relationships and goodwill exceeded their respective estimated fair values and recognized the following impairments:

· $30.0 million for certain customer relationships at SelectBuild,

· $300.2 million for goodwill at SelectBuild,

· $6.7 million for goodwill at BMC West and

· $0.2 million for certain equipment at SelectBuild.

In addition, the related tax benefit for these impairments was limited to $24 million based on the estimated realization of tax benefits for current and prior periods. To the extent taxable income is generated in future periods, additional tax benefits related to these impairments may be realized and reduce our future effective tax rate.

Continued deterioration in our markets could result in additional impairments of the carrying amount of intangibles and goodwill.

Loss from operations was $322 million compared to income of $193 million in the prior year. Excluding impairments, income from operations was $15 million. Our results from operations declined due to a sharp reduction in sales volume and lower gross margins for construction services.

Selling, general and administrative expenses decreased 12% or $58 million from 2006 due to reductions in the number of employees and related expenses as well as incentive compensation based on operating performance.

As a percent of sales, selling, general and administrative expenses increased 3.7% to 19.2%. These expenses as a percent of sales were higher as a result of the decline in construction services sales volume as well as:

· a shift in sales mix to building products from construction services,

· decreases in commodity wood product prices and

· the relatively fixed portion of these expenses.

Interest Expense

Interest expense of $34 million increased $5 million from the prior year. The increase was due to a rise in interest rates and higher average borrowings. Borrowings were higher to complete payments for acquisitions made in the prior year and fund seasonal working capital requirements.

Income Taxes

The impairment of goodwill and certain customer relationships resulted in a limited income tax benefit of approximately $24 million. To the extent taxable income is generated in future periods, the tax benefit derived from the impairments will be realized and reduce our future effective tax rate. Our combined federal and state income tax rate was a benefit of 6.2% compared to an expense of 33.7% a year ago.

28

Discontinued Operations

In September 2007, our BMC West business segment sold three building materials distribution businesses in Western Colorado. Gain on the sale of these discontinued operations was $20 million, principally from the December 2007 sale of remaining real estate in Aspen, Colorado. These business units were previously reported as a component of BMC West and were approximately 3% of sales.

Business Segments

Sales and (loss) income from operations by business segment were as follows (millions):

	2007					2006
	Sales		(Loss) Income from Operations			Sales		Income from Operations
BMC West	$	1,178	$	65		$	1,471	$	120
SelectBuild		1,107		(335	)		1,732		148
Corporate		—		(52	)		―		(75	)
	$	2,285	$	(322	)	$	3,203	$	193

BMC West

Selected financial results were as follows (millions):

	2007		2006		% Change
Sales	$	1,178	$	1,471		(20)%
Income from operations	$	65	$	120		(46)%

Sales decreased 20% to $1.2 billion from $1.5 billion in 2006. Consistent with the national downturn in homebuilding, sales were lower in all our regions. Single-family building permits in our markets and the U.S. overall were down 29% compared to 2006. Our commodity wood product prices decreased approximately $93 million relative to a year ago. Adjusting for the impact of commodity wood product prices, our sales declined 14% and were less than the 29% decrease in building permits in our markets.

Income from operations decreased 46% to $65 million from $120 million. Excluding the impairment of $7 million for goodwill at our Colorado operations, income from operations was $72 million or a decrease of 40%. The decrease in income from operations was attributable to lower sales volume. Gross margins improved to 26.3% of sales from 25.9% a year ago. Margins improved due to a shift in sales mix to manufactured building components and improvements in construction services.

Selling, general and administrative expenses decreased 5% or $14 million from a year ago due to reductions in:

· the number of employees and related expenses,

29

· incentive compensation based on operating performance as well as

· delivery and handling.

Due to lower sales and decreases in commodity wood product prices, these expenses as a percent of sales increased to 21.2% from 17.9% a year ago.

SelectBuild

Selected financial results were as follows (millions):

	2007			2006		% Change
Sales	$	1,107		$	1,732		(36)%
(Loss) income from operations	$	(335	)	$	148		n/m

Sales decreased 36% to $1.1 billion from $1.7 billion a year ago. In response to weak demand for new homes and an excess inventory of unsold homes, production homebuilders sharply curtailed construction. As a consequence, our framing starts declined 35% from the prior year. The Southwest and Pacific regions experienced the largest declines in sales volume. We anticipate market conditions in the near term will remain challenging until excess inventory has been absorbed and buyer demand strengthens.

Loss from operations was $335 million compared to income of $148 million. Excluding the impairments of $330 million for goodwill and certain customer relationships, loss from operations was $5 million. The loss from operations was due to lower sales and a decline in gross margins. With fewer contracts available, competitive pressures lowered margins to 12.0% of sales from 17.8% a year ago, a 33% decline. We anticipate margins will continue to be under pressure during the current industry downturn.

Selling, general and administrative expenses declined 16% or $25 million from a year ago. These expenses were lower due to reductions in:

· the number of employees and related expenses,

· incentive compensation based on operating performance and

· an operating performance payment for a recent acquisition.

These expenses were leveraged against lower sales compared to 2006 and were 12.1% of sales compared to 9.1% a year ago.

Corporate

Corporate represents expenses to support the operations of our business segments, BMC West and SelectBuild. These costs include administrative functions for information systems, reporting, accounts payable and human resources, executive and senior management, professional fees for regulatory compliance and certain incentive compensation as well as actuarial adjustments for insurance and medical claims. These costs are not allocated to our business segments.

Selected financial results are as follows (millions):

	2007	2006	% Change
Operating expenses	$52	$75	(31)%

30

Corporate expenses decreased 31% to $52 million from $75 million a year ago. The decrease was due to lower incentive compensation based on operating performance. Corporate expenses were consistent with the prior year at 2.3% of sales.

31

2006 COMPARED TO 2005

The following table sets forth the amounts and percentage relationship to sales of certain costs, expenses and income items (millions, except per share data):

	Year Ended December 31
	2006					2005
Sales
Building products	$	1,277		39.9	%	$	1,292		44.9	%
Construction services		1,926		60.1			1,586		55.1
Total sales		3,203		100.0			2,878		100.0
Costs and operating expenses
Cost of goods sold
Building products		930		72.8			943		73.0
Construction services		1,586		82.3			1,305		82.3
Impairment of assets		2		—			1		—
Selling, general and administrative expenses		496		15.5			396		13.8
Other income, net		(4	)	(0.1	)		(3	)	(0.1	)
Total costs and operating expenses		3,010		94.0			2,642		91.8
Income from operations		193		6.0			236		8.2
Interest expense		29		0.9			14		0.5
Income from continuing operations before    income taxes and minority interests		164		5.1			222		7.7
Income taxes		56		1.7			78		2.7
Minority interests income, net of income taxes		(9	)	(0.3	)		(16	)	(0.6	)
Income from continuing operations		99		3.1			128		4.4
Income from discontinued operations       prior to sale		5		0.2			3		0.1
Income taxes		2		0.1			1		—
Income from discontinued operations		3		0.1			2		0.1
Net income	$	102		3.2	%	$	130		4.5	%
Net income per share:
Continuing operations	$3.35					$4.34
Discontinued operations		0.10					0.07
Diluted	$3.45					$4.41

32

Consolidated Financial Results

Selected financial results were as follows (millions):

Sales and Income from Operations

	2006		2005		% Change
Sales
Building products	$	1,277	$	1,292		(1	)%
Construction services		1,926		1,586		21	%
	$	3,203	$	2,878		11	%
Income from operations	$	193	$	236		(18	)%

Sales of $3.2 billion increased 11% or $325 million. Sales from acquisitions not present in the prior period were $702 million and were partially offset by a decrease in sales from comparable operations of $377 million. The decrease in sales from comparable operations reflects a sharp decline in both housing starts and building permits in the second half of the year, indicative of a nationwide contraction in homebuilding. According to the U.S. Census Bureau, single-family building permits in our markets were down 20% relative to their historic high in 2005.

Income from operations of $193 million decreased 18% or $43 million from $236 million in 2005. For comparable operations, income from operations declined $98 million or 42%. The decrease in income from operations was principally due to lower sales from comparable operations as well as higher selling, general and administrative expenses.

Selling, general and administrative expenses increased 25% or $100 million from 2005. Acquisitions not present in the prior period were $77 million or approximately 75% of the increase. These expenses for comparable operations were higher due to compensation, including the impact of adopting a new accounting principle for share-based compensation, occupancy expenses to support growth and acquisition integration expenses. As a percent of sales, selling, general and administrative expenses were up 1.7% to 15.5% from 13.8% in 2005. The increase in these expenses as a percent of sales, was due to deflation in selling prices, delivery costs to support higher volume and fixed amortization expenses from acquisitions.

Although gross margins for building products and construction services were consistent with the prior year, they decreased overall to 21.4% from 21.9% in 2005. The decrease was due to a higher portion of sales from construction services relative to building products.

33

Interest Expense

Interest expense of $29 million was up $15 million from 2005. The increase was due to greater average borrowings of $356 million in 2006 compared to $225 million in 2005 and higher average interest rates of 6.5% in 2006 compared to 5.7% in 2005.

Income Taxes

In 2006 our combined federal and state income tax rate decreased to 33.7% from 35.5% in 2005. The reduction was due to a refinement of the apportioned taxable income to the states in which we operate.

Business Segments

Sales and income from operations by business segment were as follows (millions):

	2006					2005
	Sales		Income from Operations			Sales		Income from Operations
BMC West	$1,471		$120			$1,484		$148
SelectBuild		1,732		148			1,394		161
Corporate		—		(75	)		―		(73	)
	$3,203		$193			$2,878		$236

BMC West

Selected financial results were as follows (millions):

	2006			2005		% Change
Sales	$	1,471		$	1,484		(1)%
Less: Acquisitions		(58	)		—		—
	$	1,413		$	1,484		(5)%
Income from operations	$	120		$	148		(19)%
Less: Acquisitions		(1	)		―		—
	$	119		$	148		(20)%

Sales of $1.5 billion were approximately the same as 2005. Sales from comparable operations experienced a decrease in commodity wood product prices and were down 5% or $71 million from 2005. Strong sales in the Intermountain and Texas regions were offset by lower sales in our Southwest, Colorado and Northwest regions. Indicative of slower homebuilding activity, single-family building permits declined in the second half of the year and were down 8% from 2005.

Income from operations decreased 19% to $120 million from $148 million. As a percent of sales, gross margins were up 20 basis points over 2005. However, selling, general and administrative expenses as a percent of sales increased 2.1% to 17.9% primarily due to year over year deflation in commodity wood product prices. Total dollars spent in selling, general and administrative expenses were up $28 million as a result of:

34

· compensation expenses for additional personnel to support increased sales volume,

· expenses from acquisitions not present in the prior period and

· higher delivery and occupancy expenses.

SelectBuild

Selected financial results were as follows (millions):

	2006			2005		% Change
Sales	$	1,732		$	1,394		24	%
Less: Acquisitions		(644	)		—		—
	$	1,088		$	1,394		(22	)%
Income from operations	$	148		$	161		(8	)%
Less: Acquisitions		(54	)		—		—
	$	94		$	161		(42	)%

Sales increased 24% to $1.7 billion from $1.4 billion in 2005. The increase was due to $644 million in sales from acquisitions not present in the prior period. Sales from comparable operations declined 22% or $306 million and were particularly weak in our Southwest and Pacific regions. Reflective of the reduction in homebuilding in our markets, both starts and building permits were down sharply.

Income from operations decreased 8% to $148 million from $161 million. For comparable operations, income from operations was down 42% or $67 million. Gross margins were 17.8% of sales and approximately the same as 2005, however selling, general and administrative expenses were 9.1% of sales compared to 6.3% in 2005. These expenses were higher due to:

· reduced operating leverage resulting from a 22% decline in sales from comparable operations,

· compensation and integration expenses associated with a regional operating structure and

· operating expenses and non-cash amortization associated with recent acquisitions.

Corporate

Corporate represents expenses to support the operations of our business segments, BMC West and SelectBuild. These costs include administrative functions for information systems, reporting, accounts payable and human resources, executive and senior management, professional fees for regulatory compliance and certain incentive compensation as well as actuarial adjustments for insurance and medical claims. These costs are not allocated to our business segments.

Selected financial results are as follows (millions):

	2006	2005	% Change
Operating expenses	$75	$73	3%

Corporate expenses increased 3% to $75 million from $73 million in 2005. Higher compensation, including the non-cash impact of share-based compensation from the adoption of a new accounting standard, was partially offset by lower incentive compensation based on operating performance and actuarial adjustments for insurance expense. Corporate expenses at 2.3% of sales were lower than the 2.5% in 2005.

35

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Historically, our primary need for capital resources was to fund working capital and acquisitions as well as finance capital expenditures. In the future we expect to fund working capital requirements, necessary capital expenditures and enhance existing operations with cash flow from operations and seasonal borrowings under our credit facility.

Reduced operating performance, organizational changes and other expenses may result in failure to comply with the financial covenants of our credit facility and adversely affect our ability to finance operations or capital needs and could create a default and cause all amounts borrowed to become due and payable immediately. Additionally, the amended credit facility restricts our ability to incur additional indebtedness, pay dividends, repurchase shares, enter into mergers or acquisitions, use proceeds from equity offerings, make capital expenditures or sell assets.

For 2007, cash provided by operations and proceeds from dispositions were used to complete payments for acquisitions made in the prior year and purchase property and equipment as well as pay dividends. The sections that follow discuss in more detail our operating, investing and financing activities as well as our financing arrangements.

Operations

Cash provided by operating activities was $67 million for 2007 compared to $273 million for 2006. Net income adjusted for non-cash items decreased $126 million due to a significant contraction in construction activity as homebuilders curtailed production in an effort to align home inventory with demand. Consistent with the contraction of construction activity, our working capital requirements were $67 million less than the prior year. Inventory turns and days payable outstanding were consistent with the prior year whereas days sales outstanding increased slightly.

In 2006, cash provided by operating activities was $273 million compared to $198 million for 2005. Net income adjusted for non-cash items decreased $15 million due to slower construction activity as homebuilders curtailed production. Changes in working capital were favorable as requirements were $104 million less than 2005 as the robust pace of housing starts began to deteriorate. Inventory turns and days payable outstanding improved whereas days sales outstanding increased slightly from 2005.

Cash provided by operating activities was $198 million for 2005, a significant increase from $33 million for 2004. Strong home construction activity and improved margins in both our building products and construction services segments resulted in higher net income, providing $76 million of additional operating cash flow over 2004. Also, working capital requirements were lower in 2005 than 2004 due to lower commodity wood product prices as well as improved inventory turns and days sales outstanding. This improved management of working capital resulted in cash used of $1 million compared to $61 million of cash used for 2004.

Capital Investment and Acquisitions

Cash used in investing activities was $53 million for 2007 or $227 million less than $280 million a year ago. Cash used for investing activities reflected a $121 million reduction in acquisition expenditures. Cash use for acquisitions of $81 million was principally for payments on acquisitions made in 2006. Cash of $27 million was provided by the sale of three building material distribution businesses in Western Colorado and relocation of a building materials distribution business in Texas. Cash used for investing activities also included capital expenditures of $33 million or $20 million less than 2006. Capital expenditures were principally for relocation and expansion of materials distribution and component manufacturing facilities as well as routine replacement of operating equipment. Cash of $17 million was provided from the sale of marketable securities pursuant to the statutory funding requirements of our captive insurance subsidiary.

36

In 2006, cash used in investing activities was $280 million or $18 million more than $262 million used in investing activities for 2005. Cash use included $202 million for eight acquisitions and purchase of an additional 20% interest in a concrete block masonry and concrete services business. Cash used for investing activities also included capital expenditures for 2006 of $53 million or $6 million more than $47 million for 2005. Capital expenditures for 2006 were principally for centralization of a millwork facility in Colorado, expansion of distribution facilities in Texas and Idaho, expansion of construction service facilities in Arizona and expansion of our data center as well as construction and human resource information systems. Cash used for investing activities for 2006 also included $25 million for the net purchase of marketable securities pursuant to the statutory funding requirements of our captive insurance subsidiary.

Cash used in investing activities was $262 million for 2005 compared to $58 million for 2004. Cash use included $203 million for seven acquisitions, including the purchase of interests in three businesses, and purchase of an additional 20% interest in a concrete block masonry and concrete services business. Cash used for capital expenditures was $47 million or $19 million more than $28 million for 2004. Capital expenditures were principally for expansion of distribution facilities in Texas and Montana, construction services facilities in Las Vegas and Florida and implementation of distribution and construction information systems. Cash used for investing activities also included $14 million for the net purchase of marketable securities pursuant to the statutory funding requirements of our captive insurance subsidiary.

Financing

Cash used by financing activities was $28 million for 2007 compared to $51 million provided by financing activities a year ago. Payments for acquisitions made in the prior year and capital expenditures as well as working capital requirements were funded by cash from operations, proceeds from dispositions and the sale of three non-strategic building materials distributions businesses in Western Colorado. No additional borrowings were required.

In 2006, cash provided by financing activities was $51 million compared to $74 million for 2005. After cash provided by operating activities, debt was borrowed to complete eight acquisitions and purchase an additional 20% interest in a concrete block masonry and concrete services business as well as expand our facilities and information systems. In November 2006, we amended our revolver and entered into a new $350 million term note. This transaction resulted in proceeds from the $350 million term note which were used to repay our previous term notes and the amount outstanding under the revolver. Remaining borrowings were used to pay dividends and invest in cash equivalents.

Cash provided by financing activities was $74 million for 2005 compared to $25 million for 2004. The primary sources of cash were a $75 million term note and an increase in book overdrafts. In addition to strong operating cash flows, debt was borrowed to complete seven acquisitions, including the purchase of interests in three businesses, and purchase of an additional 20% interest in a concrete block masonry and concrete services business as well as expand facilities and implement construction information systems.

37

Financing Arrangements

Our debt structure consists of a revolver, term note and other borrowings.

Revolver

In November 2006, we entered into an amended $500 million revolver with a group of lenders. The revolver matured in November 2011. The revolver consisted of both LIBOR and Prime based borrowings. These variable interest rates were subject to quarterly adjustment based on operating performance and ranged from LIBOR plus 1.00% to 2.00%, or Prime plus 0.00% to 0.75%. Additionally, a commitment fee for the unused portion of the revolver was subject to quarterly operating performance and ranged from 0.20% to 0.35%. Interest was paid quarterly. As of December 31, 2007, no amount was outstanding under the revolver.

The effective interest rate is based on interest rates for the period as well as the commitment fee for the unused portion of the revolver.

Letters of credit outstanding that guaranteed performance or payment to third parties were $106.7 million as of December 31, 2007 and $97.2 million as of December 31, 2006. These letters of credit reduce borrowing availability under the revolver.

Term Note

In November 2006, we entered into a $350 million term note with a group of lenders. The term note matured in November 2013 and was payable in quarterly installments for the first 7 years in amounts equal to 1% of the initial principal per year and the remaining principal due November 2013. The variable interest rate for the term note was LIBOR plus 2.50%, or Prime plus 1.25%. Interest was paid quarterly. As of December 31, 2007, $345.6 million was outstanding under this term note.

Other

Other long-term debt consists of term notes, equipment notes and capital leases for equipment. Interest rates vary and dates of maturity are through March 2021. As of December 31, 2007, other long-term debt was $3.7 million.

Expansion of Previous Credit Facility, Covenants and Maturities

The credit facility consists of the revolver and term note. The credit facility previously included an expansion ability of up to $250 million. The credit facility was collateralized by tangible and intangible property of our wholly-owned subsidiaries, except the assets of our captive insurance subsidiary.

Financial covenants under the credit facility required the maintenance of a minimum net worth, a minimum fixed charge coverage ratio and a maximum leverage ratio. Due to impairments and operating losses in the fourth quarter, we were not in compliance with the net worth, fixed charge coverage and leverage covenants of the credit facility. A waiver of these covenant violations was obtained in February 2008, which allowed for revolver borrowings of up to $75 million through February 2008.

38

Scheduled maturities of long-term debt are as follows (thousands):

2008	$	4,923
2009		4,251
2010		3,971
2011		3,709
2012		3,572
Thereafter		328,873
	$	349,299

Subsequent to December 2007

On February 29, 2008, we reached an agreement to amend our credit facility. The revolver was reduced to $200 million and the maturity of the term loan was shortened to November 2011. As of February 29, 2008, no amount was outstanding under the revolver. Letters of credit outstanding continue to reduce borrowing availability under the revolver. Borrowings under the revolver are limited to the lesser of:

· $100 million or

· a borrowing base calculated on certain accounts receivable minus 50% of outstanding surety bonds, multiplied by 50%.

39

The amended credit facility continues to require quarterly compliance with financial covenants including minimum net worth, minimum interest coverage ratio and minimum earnings before interest, taxes, depreciation and amortization. Interest rates for the revolver and term note were increased to LIBOR plus 4.50% or Prime plus 2.50%. Additionally, the commitment fee for the unused portion of the revolver is 0.50%. Interest is to be paid quarterly.

The amended credit facility restricts our ability to incur additional indebtedness, pay dividends, repurchase shares, enter into mergers or acquisitions, use proceeds from equity offerings, make capital expenditures and sell assets. The amended credit facility is secured by all assets of our wholly-owned subsidiaries, except the assets of our captive insurance subsidiary.

In connection with the amendment, 60% or $2.4 million of unamortized deferred loan costs related to the revolver will be recognized as interest expense in the first quarter of 2008. We also expect to incur approximately $5.0 million of fees in connection with the amendment and these costs will be amortized over the remaining term of our credit facility.

The ineffective portion of the interest rate swap contracts, if any, is being determined. Other than changes to the maturity, the terms of the term note remain substantially the same and the interest rate swap contracts remain an effective hedge of interest expense.

We expect to be in compliance with these covenants throughout 2008. Reduced operating performance, organizational changes and other expenses as well as significant economic uncertainties, may result in failure to comply with the financial covenants of our credit facility and adversely affect our ability to finance operations or capital needs and could create a default and cause all amounts borrowed to become due and payable immediately. We continue to closely monitor these financing arrangements as well as evaluate other financing options.

Hedging Activities

Derivative and hedging activities are recorded on the balance sheet at their fair values. In November 2006, we entered into interest rate swap contracts that effectively convert $200 million of the variable rate borrowings of the $345.6 million term note to a fixed interest rate of 7.6% through November 2012, thus reducing the impact of increases in interest rates on future interest expense. Approximately 58% of the outstanding variable rate borrowings of the term note as of December 31, 2007 have been hedged through the designation of interest rate swap contracts accounted for as cash flow hedges. After giving effect to the interest rate swap contracts, total borrowings were 58% fixed and 42% variable.

The fair value of derivative instruments is based on pricing models using current market rates. The fair value of the interest rate swap contracts was a long-term liability of $8.6 million and a corresponding deferred tax asset of $3.3 million as of December 31, 2007. The effective portion was recorded in accumulated other comprehensive (loss) income, net, a separate component of shareholders’ equity, and is subsequently reclassified into earnings in the same financial statement line item, interest expense, in the same period during which the hedged transaction is recognized in earnings. The corresponding deferred tax asset was also recorded in accumulated other comprehensive (loss) income, net for the income tax related to the estimated fair value of the interest rate swap contracts. The ineffective portion, if any, of the change in the value of the interest rate swap contracts is immediately recognized as a component of interest expense. Management may choose not to swap variable rates to fixed rates or may terminate a previously executed swap if the variable rate positions are more beneficial.

In June 2004, we entered into interest rate swap contracts that effectively converted $100 million of variable rate borrowings to a fixed interest rate. These swaps were settled in November 2006 and the $1.5 million gain recognized for this settlement was reclassified to Other income, net from Accumulated other comprehensive income, net.

Equity

On February 14, 2006, our Board of Directors approved a two for one split of our outstanding common shares. Shareholders of record as of February 28, 2006 received a stock dividend of one additional common share for every common share they owned. All share and per share information for all periods presented has been adjusted to reflect this share split.

At the annual meeting of shareholders on May 3, 2005, our shareholders voted to increase the number of authorized common shares to 50 million from 20 million. These additional shares may be issued for reasons including but not limited to splits of common shares, financing acquisitions, establishing strategic relationships with corporate partners and providing equity incentives.

In the third quarter of 1998, we filed a shelf registration with the Securities and Exchange Commission to register 4 million common shares. We may issue these shares in connection with future business acquisitions, combinations or mergers. Shares have been issued from this registration statement for a portion of the purchase price for acquisitions. There are approximately 3.7 million shares remaining and available under this shelf registration.

40

Based on our historical ability to generate cash flows from operations and borrowing capacity under our amended credit facility, management believes it will have sufficient capital to meet anticipated needs.

41

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships often referred to as structured finance or special purpose entities which might be established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2007, we are not involved in any transactions with unconsolidated entities.

DISCLOSURES OF CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Contractual obligations as of December 31, 2007 (millions):

	Payments Due by Period
Contractual Obligations	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total			Fair Value
Long-term debt	$	4.7	$	8.2	$	7.3	$	328.9	$	349.1		$	348.2
Capital lease obligations		0.2		—		—		—		0.2			0.2
Interest on long-term debt and capital leases(1)		27.0		53.2		51.1		18.3		149.6			149.6
Operating leases		28.9		43.4		19.4		11.6		103.3			103.3
Unconditional purchase obligations		—		—		—		—		—			—
Other long-term commitments		—		—		—		—		—			—
	$	60.8	$	104.8	$	77.8	$	358.8	$	602.2		$	601.3
Interest rate swap contracts
Notional principal amount of interest rate exchange agreements maturing									$	200.0			8.6
Variable to fixed
Average pay rate										5.09	%
Average receive rate										5.32	%
												$	609.9

⁽¹⁾ Interest paid on all years may differ due to future refinancing of debt. Interest on our variable rate debt was calculated for all years using the rates effective as of December 31, 2007.

Accelerated repayment of our revolver and term note may occur if certain financial conditions or warranties and representations are not met. The credit facility consists of the revolver and term note. The credit facility is collateralized by all tangible and intangible property, except assets of our captive insurance subsidiary. Financial covenants under the credit facility required the maintenance of a minimum net worth, a minimum interest coverage ratio and minimum earnings before interest, taxes, depreciation and amortization. Lack of compliance with these covenants may accelerate the related scheduled maturities.

As part of our revolver, we have $106.7 million in letters of credit outstanding principally for the deductible portion of automobile, general liability and workers’ compensation claims. These obligations are not required to be recorded as liabilities on our balance sheet and renew automatically on their various anniversary dates or until released by their respective beneficiaries.

42

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Inventory Price Risk

Prices of commodity wood products, which are subject to significant volatility, may adversely impact operating income when prices rapidly rise or fall within a relatively short period of time. We do not use derivative financial instruments to hedge commodity wood product prices.

Interest Rate Risk

Changes in interest expense occur when market interest rates change. Changes in the amount of debt could also increase interest rate risks. We use interest rate swap contracts to hedge interest rate risks. Approximately 58% of the outstanding variable rate borrowings of the $345.6 million term note as of December 31, 2007 have been hedged through the designation of interest rate swap contracts accounted for as cash flow hedges. After giving effect to the interest rate swap contracts, total borrowings are 58% fixed and 42% variable. Based on debt outstanding as of December 31, 2007, a 0.25% increase in interest rates would result in approximately $0.4 million of additional interest expense annually.

43

CRITICAL ACCOUNTING ESTIMATES

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions include critical accounting estimates which are defined by the Securities and Exchange Commission as those that are the most important to the portrayal of our financial condition, results of operations or cash flows. These estimates require management’s subjective and complex judgments often as a result of the need to estimate matters that are inherently uncertain. We review the development, selection and disclosure of these estimates with our Audit Committee. Management believes the estimates utilized are reasonable under the circumstances, however actual results could differ from these estimates and may require adjustment in future periods. Our critical accounting estimates are:

·Revenue Recognition for Construction Services

The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of our progress towards completion are made based on a comparison of labor costs incurred to date with total estimated contract costs for labor. The percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials, labor productivity and other cost estimates. We have a history of making reasonable estimates of the extent of progress towards completion, contract revenues and contract completion costs. However, due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and completion costs may vary from estimates. Revisions of contract revenues and cost estimates as well as provisions for estimated losses on uncompleted contracts are recognized in the period such revisions are known.

·Estimated Losses on Uncompleted Contracts and Changes in Contract Estimates

Estimated losses on uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted contracts. Revisions of estimated losses are recognized in the period such revisions are known.

At December 31, 2007, the reserve for these estimated losses was less than $0.1 million for BMC West and $0.3 million for SelectBuild. These reserves are established by assessing estimated costs to complete, change orders and claims. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently uncertain and therefore it is possible that actual completion costs may vary from these estimates. We have a history of making reasonable estimates of the extent of progress towards completion, contract revenue and contract completion costs. However, due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates.

·Goodwill

Goodwill represents the excess of purchase price over the fair values of net tangible and identifiable intangible assets of acquired businesses. An annual assessment for impairment is completed in the fourth quarter and whenever events and circumstances indicate the carrying amount may not be recoverable. An impairment is recognized if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques.

44

At December 31, 2007, goodwill was $14.2 million for BMC West. The impairment assessment includes determining the estimated fair value of reporting units based on discounting the future operating cash flows using a discount rate reflecting our estimated average cost of funds. Future operating cash flows are derived from our annual plan and forecast information, which includes assumptions of future volumes, pricing of commodity products and labor costs. Prices for commodity products are inherently volatile. Due to the variables associated with prices of commodity products and the effects of changes in circumstances, both the precision and reliability of the estimates of future operating cash flows are subject to uncertainty. As additional information becomes known, we may change our estimates.

·Insurance Deductible Reserves

The estimated cost of automobile liability, general liability and workers’ compensation claims is determined by actuarial methods. Claims in excess of insurance deductibles are insured with third-party insurance carriers. Reserves for claims are recognized based on the estimated costs of these claims as limited by deductibles of the applicable insurance policies. Revisions of estimated claims are recognized in the period such revisions are known.

At December 31, 2007, the reserve for automobile, general liability and workers’ compensation claims was $56.4 million. The actuarial assessment includes determining the estimated cost of claims. The reserve for these claims is susceptible to change based on the estimated cost of the claims. Actual loss experience substantially different than the actuarial assumptions may occur. Future reserves are subject to the nature and frequency of claims, medical cost inflation and changes in the insurance deductibles of the applicable insurance policies.

·Warranties

The estimated cost of warranties for certain construction services is based on the nature and frequency of claims, anticipated claims and cost per claim. Claims in excess of insurance deductibles are insured with third-party insurance carriers. Estimated costs for warranties are recognized when the revenue associated with the service is recognized. Revisions of estimated warranties are recognized in the period such revisions are known.

At December 31, 2007, the reserve for warranties was $6.9 million. Specific terms and conditions for warranties vary from one year to ten years and are based on geographic market and state regulations. The reserve for these claims is susceptible to change based on the estimated cost of the claim. We have a history of making reasonable estimates of warranties. However, due to uncertainties inherent in the estimation process, it is possible that actual warranty costs may vary from estimates. Revisions of estimated warranties are recognized in the period such revisions are known.

45

·Share-based Compensation

Our estimates of the fair values of our share-based payment transactions are based on the modified Black-Scholes-Merton model. In order to meet the fair value measurement objective, we are required to develop estimates regarding expected exercise patterns, share price volatility, forfeiture rates, risk-free interest rate and dividend yield. These assumptions are based principally on historical experience. When circumstances indicate the availability of new or different information that would be useful in estimating these assumptions, revisions will be made and recognized in the periods such revisions are known. Due to uncertainties inherent in these assumptions, it is possible that actual share-based compensation may vary from this estimate.

RECENT ACCOUNTING PRINCIPLES

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations. This accounting principle requires the fundamental requirements of acquisition accounting (purchase accounting) be applied to all business combinations in which control is obtained regardless of consideration and for an acquirer to be identified for each business combination. Additionally, this accounting principle requires acquisition-related costs and restructuring costs at the date of acquisition to be expensed rather than allocated to the assets acquired and the liabilities assumed; minority interests, including goodwill, to be recorded at fair value at the acquisition date; recognition of the fair value of assets and liabilities arising from contractual contingencies and contingent consideration (payments conditioned on the outcome of future events) at the acquisition date; recognition of bargain purchase (acquisition-date fair value exceeds consideration plus any noncontrolling interest) as a gain; and recognition of changes in deferred taxes. This accounting principle will be adopted January 2009. The accounting requirements will be adopted prospectively. Earlier adoption is prohibited. Adoption is not expected to have an impact on consolidated financial position, results of operations or cash flows.

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements. This accounting principle eliminates noncomparable accounting for minority interests. Specifically, minority interests are presented as a component of shareholders’ equity; consolidated net income includes amounts attributable to both the parent and minority interest and is disclosed on the face of the income statement; changes in the ownership interest are accounted for as equity transactions if ownership remains controlling; elimination of purchase accounting for acquisitions of noncontrolling interests and acquisitions of additional interests; and recognition of deconsolidated controlling interest based on fair value consistent with Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations. This accounting principle will be adopted January 2009. The accounting requirements will be adopted prospectively, however presentation and disclosure will be adopted retrospectively for all periods presented. Earlier adoption is prohibited. Adoption is not expected to have an impact on consolidated financial position, results of operations or cash flows.

In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115. This accounting principle expands the use of fair value accounting. Entities may elect to measure eligible items at fair value at specified election dates, however the fair value election is irrevocable and made on an instrument-by-instrument basis. Eligible items include financial assets and liabilities, firm commitments for financial instruments, loan commitments, nonfinancial insurance contracts and warranties (goods or services settled by a third party) and host financial instruments. Upon adoption, unrealized gains and losses for existing items measured at fair value are recorded as a cumulative adjustment to beginning retained earnings and subsequent changes are recognized in earnings at each reporting date. We elected not to adopt the fair value measurement option for eligible items. This accounting principle and related disclosures were adopted effective January 2007 and had no impact on consolidated financial position, results of operations or cash flows.

46

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements. This accounting principle simplifies existing accounting literature by providing a single definition of fair value, a framework for measuring fair value and expanded disclosures about fair value. This accounting principle emphasized that fair value is a market-based measurement of the amount that would be received upon the sale of an asset or paid to transfer a liability (an exit price) and not the price that would be paid to acquire the asset or received to assume the liability (entry price). This accounting principle did not expand the use of fair value. This accounting principle was adopted January 2007 and had no impact on consolidated financial position, results of operations or cash flows.

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes. This accounting principle provides specific guidance for measurement, recognition and disclosure of uncertain tax positions. This accounting principle was adopted January 2007 and had no impact on consolidated financial position, results of operations or cash flows.

BUSINESS RISKS AND FORWARD-LOOKING STATEMENTS

There are a number of business risks and uncertainties that affect our operations and therefore could cause future results to differ from past performance or expected results. Additional information regarding business risks and uncertainties is contained in Item 1A of this Form 10-K. These risks and uncertainties may include, however are not limited to:

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

· our business model;

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

· compliance with credit facility covenants in an uncertain housing market;

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

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

· losses of and changes in customers;

47

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

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

· intense competition;

· weather conditions including natural catastrophic events;

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

· disruptions in our information systems;

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

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

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

Risks related to our shares may include, however are not limited to:

· price for our shares may fluctuate significantly; and

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

Certain statements in the Annual Report to Shareholders including those related to expectations about homebuilding activity in our markets, demographic trends supporting homebuilding and anticipated sales and operating income are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about our expectations, anticipated financial results and future business prospects are forward-looking statements. While these statements represent our current judgment on what the future may hold and we believe these judgments are reasonable, these statements involve risks and uncertainties that are important factors that could cause our actual results to differ materially from those in forward-looking statements. These factors include, however are not limited to the risks and uncertainties cited in the above paragraph. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date of the filing of this Form 10-K. We undertake no obligation to update forward-looking statements.

48

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

Inventory Price Risk

Prices of commodity wood products, which are subject to significant volatility, may adversely impact operating income when prices rapidly rise or fall within a relatively short period of time. We do not use derivative financial instruments to hedge commodity wood product prices.

Interest Rate Risk

Changes in interest expense occur when market interest rates change. Changes in the amount of debt could also increase interest rate risks. Interest rate swap contracts are currently utilized to hedge interest rate risks. Approximately 58% of the outstanding variable rate borrowings of the $345.6 million term note as of December 31, 2007 have been hedged through the designation of interest rate swap contracts accounted for as cash flow hedges. After giving effect to the interest rate swap contracts, total borrowings are 58% fixed and 42% variable. Based on debt outstanding as of December 31, 2007, a 0.25% increase in interest rates would result in approximately $0.4 million of additional interest expense annually.

49

ITEM 8. Financial Statements and Supplementary Data

Building Materials Holding Corporation

Consolidated Statements of Operations

(thousands, except per share data)

	Year Ended December 31
	2007			2006			2005
Sales
Building products	$	1,001,284		$	1,277,190		$	1,291,899
Construction services		1,283,687			1,926,077			1,586,509
Total sales		2,284,971			3,203,267			2,878,408
Costs and operating expenses
Cost of goods sold
Building products		725,847			929,800			942,871
Construction services		1,116,684			1,586,383			1,305,097
Impairment of assets		337,074			2,237			1,320
Selling, general and administrative expenses		438,142			496,459			396,179
Other income, net		(10,453	)		(4,281	)		(3,166	)
Total costs and operating expenses		2,607,294			3,010,598			2,642,301
(Loss) income from operations		(322,323	)		192,669			236,107
Interest expense		33,800			29,082			14,420
(Loss) income from continuing operations    before income taxes and minority interests		(356,123	)		163,587			221,687
Income tax benefit (expense)		29,688			(54,991	)		(78,665	)
Minority interests income, net of income taxes		(853	)		(9,493	)		(15,514	)
(Loss) income from continuing operations		(327,288	)		99,103			127,508
Income from discontinued operations       prior to sale		3,554			4,786			3,249
Gain on sale of discontinued operations		20,029			—			—
Income taxes		(9,008	)		(1,815	)		(1,250	)
Income from discontinued operations		14,575			2,971			1,999
Net (loss) income	$	(312,713	)	$	102,074		$	129,507
Net (loss) income per share:
Continuing operations	$(11.36		)	$3.47			$4.54
Discontinued operations		0.50			0.10			0.07
Basic	$(10.86		)	$3.57			$4.61
Continuing operations	$(11.36		)	$3.35			$4.34
Discontinued operations		0.50			0.10			0.07
Diluted	$(10.86		)	$3.45			$4.41

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

50

Building Materials Holding Corporation

Consolidated Balance Sheets

(thousands)

	December 31					December 31
	2007		2006			2007		2006
Assets					Liabilities, Minority Interests and Shareholders’ Equity
Cash and cash equivalents	$	60,587	$	74,272
Marketable securities		1,872		4,337	Accounts payable	$	77,024	$	109,129
Receivables, net of allowances					Accrued compensation		32,016		48,180
of $5,561 and $4,487		209,355		276,497	Insurance deductible reserves		28,488		24,931
Inventory		116,836		141,457	Other accrued liabilities		29,504		103,145
Unbilled receivables		39,917		43,527	Billings in excess of costs and estimated
Deferred income taxes		11,470		8,914	earnings		23,779		27,622
Prepaid expenses and other		18,877		11,153	Current portion of long-term debt		4,923		8,143
Assets of discontinued operations		—		6,254	Liabilities of discontinued operations		—		2,461
Current assets		458,914		566,411	Current liabilities		195,734		323,611
Property and equipment					Deferred income taxes		—		9,138
Land		62,737		61,217	Insurance deductible reserves		27,898		25,841
Buildings and improvements		138,630		136,659	Long-term debt		344,376		349,161
Equipment		192,653		186,956	Other long-term liabilities		44,503		41,390
Construction in progress		16,215		8,579
Accumulated depreciation		(160,096)		(136,020)	Minority interests		8,591		7,141
Marketable securities		40,039		53,513
Deferred income taxes		11,269		—	Commitments and contingent liabilities		—		—
Deferred loan costs		4,358		5,481
Other long-term assets		30,981		26,975	Shareholders’ equity
Other intangibles, net		64,948		108,792	Common shares, $0.001 par value:
Goodwill		14,196		308,000	authorized 50 million; issued and
Assets of discontinued operations		—		2,348	outstanding 29.4 and 29.2 million shares		29		29
	$	874,844	$	1,328,911	Additional paid-in capital		164,043		154,405
					Deferred compensation common shares obligation		1,427		1,200
					Deferred compensation common shares		(1,427)		(1,200)
					Retained earnings		94,482		418,927
					Accumulated other comprehensive (loss), net		(4,812)		(732)
					Shareholders’ equity		253,742		572,629
						$	874,844	$	1,328,911

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

51

Building Materials Holding Corporation

Consolidated Statements of Shareholders’ Equity

(thousands)

	Year Ended December 31
	2007			2006			2005
Common shares - beginning balance	$	29		$	29		$	28
Shares issued from Incentive and Performance Plans		—			—			1
Common Shares	$	29		$	29		$	29
Additional paid-in capital - beginning balance	$	154,405		$	141,082		$	123,197
Shares issued from Incentive and Performance Plans
Options exercised - Management		203			1,292			4,904
Tax benefit for share options exercised		29			1,457			9,140
Restricted shares - Management		2,614			5,220			2,616
Unearned compensation		(2,614	)		(5,220	)		(2,616	)
Tax benefit for dividends on restricted shares		63			—			—
Shares issued to Directors		405			415			380
Earned compensation
Options - Management		5,177			5,103			—
Restricted shares - Management		3,317			3,107			1,301
Tax benefit for vested restricted shares		167			—			—
Shares issued from Employee Stock Purchase Plan		277			1,949			1,160
Shares issued for an acquisition		—			—			1,000
Additional paid-in capital	$	164,043		$	154,405		$	141,082
Deferred compensation common shares obligation - beginning balance	$	1,200		$	934		$	680
Shares purchased		402			319			272
Distribution and forfeitures		(175	)		(53	)		(18	)
Deferred compensation common shares obligation	$	1,427		$	1,200		$	934
Deferred compensation common shares - beginning balance	$	(1,200	)	$	(934	)	$	(680	)
Shares purchased with deferred compensation		(364	)		(276	)		(253	)
Shares purchased with dividends		(38	)		(43	)		(19	)
Distributions and forfeitures		175			53			18
Deferred compensation common shares	$	(1,427	)	$	(1,200	)	$	(934	)
Retained earnings - beginning balance	$	418,927		$	328,463		$	205,812
Net (loss) income		(312,713	)		102,074			129,507
Cash dividends on common shares		(11,732	)		(11,610	)		(6,856	)
Retained earnings	$	94,482		$	418,927		$	328,463
Accumulated other comprehensive (loss) income, net - beginning balance	$	(732	)	$	487		$	(1,359	)
Interest rate swap contracts:
Unrealized loss		(7,673	)		(880	)		—
Tax benefit for unrealized loss		2,933			332			—
Unrealized gain		—			262			3,412
Taxes for unrealized gain		—			(101	)		(1,314	)
Realized gain		—			(1,459	)		—
Taxes for realized gain		—			562			—
Marketable securities:
Unrealized gain (loss)		1,000			127			(410	)
(Taxes) tax benefit for unrealized gain (loss)		(340	)		(62	)		158
Accumulated other comprehensive (loss) income, net	$	(4,812	)	$	(732	)	$	487
Shareholders’ Equity	$	253,742		$	572,629		$	470,061

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

52

Building Materials Holding Corporation

Consolidated Statements of Comprehensive (Loss) Income

(thousands)

	Year Ended December 31
	2007			2006			2005
Net (loss) income	$	(312,713	)	$	102,074		$	129,507
Unrealized (loss) gain on interest rate swap contracts:
Unrealized loss	$	(7,673	)	$	(880	)	$	—
Tax benefit for unrealized loss		2,933			332			—
Unrealized gain		—			262			3,412
Taxes for unrealized gain		—			(101	)		(1,314	)
Realized gain		—			(1,459	)		—
Taxes for realized gain		—			562			—
	$	(4,740	)	$	(1,284	)	$	2,098
Unrealized gain (loss) on marketable securities:
Unrealized gain (loss)	$	1,000		$	127		$	(410	)
(Taxes) tax benefit for unrealized gain (loss)		(340	)		(62	)		158
	$	660		$	65		$	(252	)
Comprehensive (loss) income	$	(316,793	)	$	100,855		$	131,353

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

53

Building Materials Holding Corporation

Consolidated Statements of Cash Flows

(thousands)

	Year Ended December 31
Operating Activities	2007			2006			2005
Net (loss) income	$	(312,713	)	$	102,074		$	129,507
Items in net (loss) income not using (providing) cash:
Minority interests, net		853			9,493			15,514
Depreciation and amortization		48,781			45,284			27,363
Deferred loan cost amortization		1,123			1,359			704
Impairment of assets		337,074			2,237			1,320
Share-based compensation		8,944			8,917			1,855
Gain on sale of discontinued operations		(20,029	)		—			—
(Gain) loss on sale of assets, net		(8,789	)		207			(194	)
Realized gain on interest rate swap contracts		—			(1,459	)		—
Realized (gain) loss on marketable securities		(408	)		206			—
Deferred income taxes		(19,452	)		(1,125	)		(3,473	)
Accrued loss for acquisition purchase obligation		5,500			—			—
Tax benefit for share options		—			—			9,140
Changes in assets and liabilities, net of effects of acquisitions and           divestitures of business units:
Receivables, net		68,385			128,381			(19,049	)
Inventory		24,599			43,873			(3,332	)
Unbilled receivables		3,610			22,702			(8,378	)
Prepaid expenses and other current assets		(7,758	)		(3,915	)		4,340
Accounts payable		(22,621	)		(43,483	)		1,852
Accrued compensation		(16,536	)		(18,823	)		24,465
Insurance deductible reserves		3,557			3,059			5,777
Other accrued liabilities		(13,033	)		1,483			(4,611	)
Billings in excess of costs and estimated earnings		(3,843	)		(29,734	)		(1,911	)
Other long-term assets and liabilities		(12,560	)		1,588			18,181
Other, net		2,595			1,094			(776	)
Cash flows provided by operating activities		67,279			273,418			198,294
Investing Activities
Purchases of property and equipment		(32,995	)		(52,873	)		(46,540	)
Acquisitions and investments in businesses, net of cash acquired		(80,961	)		(201,754	)		(203,201	)
Proceeds from dispositions of property and equipment		16,905			2,944			1,358
Proceeds from sale of discontinued operations		27,176			—			—
Purchase of marketable securities		(35,239	)		(54,700	)		(20,623	)
Proceeds from sales of marketable securities		52,650			29,270			6,546
Other, net		(628	)		(3,150	)		892
Cash flows used by investing activities		(53,092	)		(280,263	)		(261,568	)
Financing Activities
Net (payments) borrowings under revolver		—			(77,500	)		(3,700	)
Borrowings under term note		—			350,000			75,000
Principal payments on term notes		(3,500	)		(197,750	)		(1,251	)
Net payments on other notes		(4,505	)		(6,109	)		(7,605	)
(Decrease) increase in book overdrafts		(7,609	)		(2,902	)		17,404
Proceeds from share options exercised		203			1,292			4,905
Tax benefit for share options		259			1,457			—
Dividends paid		(11,709	)		(10,853	)		(5,807	)
Deferred financing costs		—			(3,224	)		(2,236	)
Distributions to minority interests		(1,223	)		(5,731	)		(2,792	)
Other, net		212			2,359			(62	)
Cash flows (used) provided by financing activities		(27,872	)		51,039			73,856
(Decrease) Increase in Cash and Cash Equivalents		(13,685	)		44,194			10,582
Cash and cash equivalents, beginning of year		74,272			30,078			19,496
Cash and cash equivalents, end of year	$	60,587		$	74,272		$	30,078
Supplemental Disclosure of Cash Flow Information
Accrued but unpaid dividends	$	2,938		$	2,915		$	2,158
Cash paid for interest	$	32,827		$	28,185		$	13,682
Cash paid for income taxes	$	7,233		$	69,568		$	70,553

Supplemental Schedule of Investing Activities
Fair value of assets acquired	$	12,999		$	265,105	$	336,252
Liabilities assumed	$	(3,680	)	$	82,414	$	133,362
Cash paid for acquisitions made this period	$	16,679		$	182,691	$	202,890
Cash paid for acquisitions made in prior period	$	64,282		$	19,063	$	311

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

54

Notes to Consolidated Financial Statements

1.Summary of Significant Accounting Policies

Nature of Operations

Building Materials Holding Corporation (BMHC) provides building products and construction services to professional homebuilders and contractors in western and southern regions of the United States. We operate through two separately managed and reportable business segments: BMC West and SelectBuild. BMC West distributes building materials, manufactures building components (millwork, floor and roof trusses and wall panels) and provides construction services to professional builders and contractors through a network of 40 distribution facilities and 59 manufacturing facilities. SelectBuild provides framing and other construction services to production homebuilders as well as commercial and multi-family buiders. We provide building products and construction services in 14 of the top 25 single-family construction markets.

Principles of Consolidation

The consolidated financial statements include the accounts of BMHC and its subsidiaries. All significant intercompany balances and transactions are eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements as well as the reported amounts of sales and expenses during the reporting period. Actual amounts may differ materially from those estimates. The following critical accounting estimates require our subjective and complex judgment often as a result of the need to estimate matters that are inherently uncertain:

·Revenue Recognition for Construction Services

The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of our progress towards completion are made based on a comparison of labor costs incurred to date with total estimated contract costs for labor. The percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials, labor productivity and other cost estimates. We have a history of making reasonable estimates of the extent of progress towards completion, contract revenues and contract completion costs. However, due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and completion costs may vary from estimates. Revisions of contract revenues and cost estimates as well as provisions for estimated losses on uncompleted contracts are recognized in the period such revisions are known.

·Estimated Losses on Uncompleted Contracts and Changes in Contract Estimates

Estimated losses on uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted contracts. Revisions of estimated losses are recognized in the period such revisions are known.

55

·Goodwill

Goodwill represents the excess of purchase price over the fair values of net tangible and identifiable intangible assets of acquired businesses. An annual assessment for impairment is completed in the fourth quarter and whenever events and circumstances indicate the carrying amount may not be recoverable. An impairment is recognized if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques.

·Insurance Deductible Reserves

The estimated cost of automobile, general liability and workers’ compensation claims is determined by actuarial methods. Claims in excess of insurance deductibles are insured with third-party insurance carriers. Reserves for claims are recognized based on the estimated costs of these claims as limited by the deductibles of the applicable insurance policies. Revisions of estimated claims are recognized in the period such revisions are known.

·Warranties

The estimated cost of warranties for certain construction services is based on the nature and frequency of claims, anticipated claims and cost per claim. Claims in excess of insurance deductibles are insured with third-party insurance carriers. Estimated costs for warranties are recognized when the revenue associated with the service is recognized. Revisions of estimated warranties are recognized in the period such revisions are known.

·Share-based Compensation

Our estimates of the fair values of our share-based payment transactions are based on the modified Black-Scholes-Merton model. In order to meet the fair value measurement objective, we are required to develop estimates regarding expected exercise patterns, share price volatility, forfeiture rates, risk-free interest rate and dividend yield. These assumptions are based principally on historical experience. When circumstances indicate the availability of new or different information that would be useful in estimating these assumptions, revisions will be made and recognized in the period such revisions are known. Due to uncertainties inherent in these assumptions, it is possible that actual share-based compensation may vary from this estimate.

Cash and Cash Equivalents

Cash and cash equivalents consist of short-term investments that have a maturity of three months or less at the date of purchase. Cash and cash equivalents were $60.6 million at December 31, 2007 and $74.3 million at December 31, 2006.

Receivables

Receivables consist primarily of amounts due from customers and are net of an allowance for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience and other available evidence.

Inventory Valuation

Inventory consists principally of building materials purchased for resale and is valued at the lower of average cost or market. We participate in vendor rebate programs under which rebates are earned by attaining certain purchase volumes. Volume rebates are accrued as earned. These volume rebates are recorded as a reduction in inventory and recognized in cost of goods sold when the related product is sold.

56

Unbilled Receivables and Billings in Excess of Costs and Estimated Earnings

The percentage-of-completion method results in recognizing costs incurred and estimated revenues on uncompleted contracts. Unbilled receivables represent revenues recognized for construction services performed, however not yet billed. Billings in excess of costs and estimated earnings represent billings made in excess of estimated revenues recognized. These billings are deferred until the actual progress towards completion indicates recognition is appropriate. Costs include direct labor and materials as well as equipment costs related to contract performance.

Property and Equipment

Property and equipment are recorded at cost. Cost includes expenditures for major improvements and replacements that extend useful life. Certain costs of software are capitalized provided those costs are not research and development and certain other criteria are met. Capitalized interest was $0.3 million for 2007, $0.1 million for 2006 and $0.2 million for 2005. Expenditures for other maintenance and repairs are expensed as incurred. Gains and losses from sales and retirements are included in income as they occur. Depreciation is calculated using the straight-line method over the economic useful lives of the assets. The estimated useful lives of depreciable assets are generally:

·ten to thirty years for buildings and improvements

·seven to ten years for machinery and fixtures

·three to ten years for handling and delivery equipment

·three to ten years for software development costs

In order to improve financial returns, we periodically evaluate our investments in property and equipment. As a result, property and equipment may be consolidated, leased or sold. For continuing operations, we recognized a gain of $8.8 million for 2007, a loss of $0.2 million for 2006 and a gain of $0.2 million for 2005 from the sales of property and equipment.

Long-lived Assets

Long-lived assets such as property, equipment and intangibles with useful lives are evaluated for impairment whenever events and circumstances indicate the carrying amount may not be recoverable. An impairment is recognized if the carrying amount exceeds its fair value and when the carrying amount is not recoverable based on the estimated future operating cash flows on an undiscounted basis.

Revenue Recognition

Taxes assessed by governmental authorities that are directly imposed on our revenue-producing transactions are excluded from sales. Revenues for building products are recognized when title to the goods and risk of loss pass to the buyer, which is at the time of delivery. The percentage-of-completion method is used to recognize revenue for construction services.

Shipping and Handling

Shipping and handling costs for manufactured building components and construction services are included as a component of cost of goods sold. Shipping and handling costs for building products are included as a component of selling, general and administrative expenses and were $70.7 million for 2007, $77.4 million for 2006 and $65.6 million for 2005.

Reclassifications

Certain reclassifications, none of which affected previously reported consolidated results of operations, cash flows or shareholders’ equity, have been made to amounts reported in prior periods to conform to the current year presentation.

57

SelectBuild identified certain costs of sourcing materials and reclassified these costs to cost of goods sold from selling, general and administrative expenses. Costs reclassified to cost of goods sold from selling, general and administrative expenses were $29.1 million for 2006 and $19.1 million for 2005. These reclassifications, none of which affected previously reported consolidated results of operations, cash flows or shareholders’ equity, have been made to amounts reported in prior periods to conform to the current period presentation.

Recent Accounting Principles

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations. This accounting principle requires the fundamental requirements of acquisition accounting (purchase accounting) be applied to all business combinations in which control is obtained regardless of consideration and for an acquirer to be identified for each business combination. Additionally, this accounting principle requires acquisition-related costs and restructuring costs at the date of acquisition to be expensed rather than allocated to the assets acquired and the liabilities assumed; minority interests, including goodwill, to be recorded at fair value at the acquisition date; recognition of the fair value of assets and liabilities arising from contractual contingencies and contingent consideration (payments conditioned on the outcome of future events) at the acquisition date; recognition of bargain purchase (acquisition-date fair value exceeds consideration plus any noncontrolling interest) as a gain; and recognition of changes in deferred taxes. This accounting principle will be adopted January 2009. The accounting requirements will be adopted prospectively. Earlier adoption is prohibited. Adoption is not expected to have an impact on consolidated financial position, results of operations or cash flows.

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements. This accounting principle eliminates noncomparable accounting for minority interests. Specifically, minority interests are presented as a component of shareholders’ equity; consolidated net income includes amounts attributable to both the parent and minority interest and is disclosed on the face of the income statement; changes in the ownership interest are accounted for as equity transactions if ownership remains controlling; elimination of purchase accounting for acquisitions of noncontrolling interests and acquisitions of additional interests; and recognition of deconsolidated controlling interest based on fair value consistent with Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations. This accounting principle will be adopted January 2009. The accounting requirements will be adopted prospectively, however presentation and disclosure will be adopted retrospectively for all periods presented. Earlier adoption is prohibited. Adoption is not expected to have an impact on consolidated financial position, results of operations or cash flows.

In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115. This accounting principle expands the use of fair value accounting. Entities may elect to measure eligible items at fair value at specified election dates, however the fair value election is irrevocable and made on an instrument-by-instrument basis. Eligible items include financial assets and liabilities, firm commitments for financial instruments, loan commitments, nonfinancial insurance contracts and warranties (goods or services settled by a third party) and host financial instruments. Upon adoption, unrealized gains and losses for existing items measured at fair value are recorded as a cumulative adjustment to beginning retained earnings and subsequent changes are recognized in earnings at each reporting date. We elected not to adopt the fair value measurement option for eligible items. This accounting principle and related disclosures were adopted effective January 2007 and had no impact on consolidated financial position, results of operations or cash flows.

58

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements. This accounting principle simplifies existing accounting literature by providing a single definition of fair value, a framework for measuring fair value and expanded disclosures about fair value. This accounting principle emphasized that fair value is a market-based measurement of the amount that would be received upon the sale of an asset or paid to transfer a liability (an exit price) and not the price that would be paid to acquire the asset or received to assume the liability (entry price). This accounting principle did not expand the use of fair value. This accounting principle was adopted January 2007 and had no impact on consolidated financial position, results of operations or cash flows.

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes. This accounting principle provides specific guidance for measurement, recognition and disclosure of uncertain tax positions. This accounting principle was adopted January 2007 and had no impact on consolidated financial position, results of operations or cash flows.

59

2.   Impairment of Assets

Long-lived assets such as property, equipment and intangibles are evaluated for impairment whenever events and circumstances indicate the carrying amount may not be recoverable. An impairment for these assets is recognized if the carrying amount exceeds its fair value and when the carrying amount is not recoverable based on the estimated future operating cash flows on an undiscounted basis.

Similarly, goodwill is evaluated for impairment in the fourth quarter and whenever events and circumstances indicate the carrying amount may not be recoverable. An impairment for goodwill is recognized if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques.

Consistent with the overall housing industry, our operating segments suffered from the effects of the sharp contraction in single-family home construction. The reporting units of our SelectBuild operating segment and the Colorado reporting unit of our BMC West segment demonstrated significant declines in operating performance in the later portion of the fourth quarter of 2007.

During the later portion of the fourth quarter of 2007, the leading sources of economic and housing data forecasted sharper reductions in housing starts. The rapid deterioration in housing forecasts and our operating performance resulted in significant revisions of our operating expectations underpinning the assumptions of recoverability of the carrying amount of customer relationships and goodwill. Additionally, our enterprise value reflected a significant reduction as investors considered overly negative perceptions of the future of the housing market and depressed the share values of housing related companies. For impairment testing, the fair values were determined based on estimates of enterprise value as well as the present value of estimated future operating cash flows. As a result, we determined the carrying amount of certain customer relationships and goodwill exceeded their respective estimated fair values and recognized the following impairments:

· $30.0 million for certain customer relationships at SelectBuild,

· $300.2 million for goodwill at SelectBuild,

· $6.7 million for goodwill at BMC West and

· $0.2 million for certain equipment at SelectBuild.

In addition, the related tax benefit for these impairments was limited to $24 million based on the estimated realization of tax benefits for current and prior periods. To the extent taxable income is generated in future periods, additional tax benefits related to these impairments may be realized and reduce our future effective tax rate.

Continued deterioration in our markets could result in additional impairments of the carrying amount of intangibles and goodwill.

As a result of changes in specific markets, SelectBuild recognized the following impairments in the second quarter of 2006:

· $0.4 million for the carrying amount of certain customer relationships and

· $1.8 million for the carrying amount of goodwill.

60

As a result of changes in specific markets, SelectBuild recognized the following impairments during 2005:

· $0.5 million for the carrying amount of certain customer relationships in the second quarter and

·  $0.8 million for the carrying amount of goodwill in the fourth quarter.

61

3.Discontinued Operations

The results of operations and financial position of discontinued operations are separately reported for all periods presented.

In September 2007, BMC West 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 were previously reported as a component of BMC West and were approximately 3% of sales.

Assets, liabilities, sales and income for these operations are separately reported from continuing operations and were as follows (thousands):

	December 31
	2007		2006
Assets	$	—	$	8,602
Liabilities	$	—	$	2,461

	Year Ended December 31
	2007		2006		2005
Sales
Building Products	$	29,706	$	41,903	$	33,753
Income from discontinued operations	$	14,575	$	2,971	$	1,999

62

4.Net (Loss) Income Per Share

Net (loss) income per share was determined using the following information (thousands, except per share data):

	Year Ended December 31
	2007			2006		2005
(Loss) income from    continuing operations	$	(327,288	)	$	99,103	$	127,508
Income from discontinued    operations		14,575			2,971		1,999
Net (loss) income	$	(312,713	)	$	102,074	$	129,507
Weighted average       shares - basic		28,807			28,603		28,101
Effect of dilutive:
Share options		—			830		1,153
Restricted shares		—			156		108
Weighted average       shares - assuming       dilution		28,807			29,589		29,362
Net (loss) income per share:
Continuing operations	$(11.36		)	$3.47		$4.54
Discontinued operations		0.50			0.10		0.07
Basic	$(10.86		)	$3.57		$4.61
Continuing operations	$(11.36		)	$3.35		$4.34
Discontinued operations		0.50			0.10		0.07
Diluted	$(10.86		)	$3.45		$4.41
Cash dividends declared    per share	$0.40			$0.40		$0.24

Certain share options and restricted shares are excluded from the computation of diluted earnings per share for:

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

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

Options and restricted shares excluded from the computation of diluted net income per share will change based on additional grants as well as the average market value of the common shares for the period. These options and restricted shares that are not dilutive and therefore excluded from the computation of diluted net income per share were as follows (thousands, except share data):

	Year Ended December 31
	2007		2006		2005
Average market value of     shares	$14		$30		$33
Share options:
Exercise price range	$15 to $38		$23 to $38		$—
Not dilutive		1,312		819		—
Restricted shares:
Grant price range	$34		$—		$42
Not dilutive		2		—		2

63

5.Acquisitions and Minority Interests

Acquisitions are accounted for under the purchase method of accounting. The purchase price is allocated to the assets acquired, including intangible assets, and liabilities assumed based on their estimated fair values at the date of acquisition. Subsequent to the initial allocation of purchase price, adjustments may be made to reflect the fair value of working capital and tangible assets. Any excess of the purchase price over the estimated fair value of the identifiable assets and liabilities acquired is recorded as goodwill. Operating results of acquired businesses are included in the consolidated statements of operations from the date of acquisition.

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

· In December 2006, SelectBuild acquired a distribution services business in Southern California for $1.6 million in cash.

· In August 2006, SelectBuild acquired a window installation business in Arizona for $13.9 million in cash.

· In July 2006, SelectBuild acquired a framing services business in Southern California for $78.6 million in cash. Additional consideration of $3.1 million was paid in the third quarter of 2007 for operating performance through June 2007. Additional cash payments may be required based on operating performance through June 2009.

· In June 2006, BMC West acquired a building materials distribution and truss manufacturing business in Eastern Idaho for $5.1 million in cash.

· In April 2006, SelectBuild acquired a concrete services business in Northern Arizona for $1.5 million in cash.

· In April 2006, SelectBuild acquired a wall panel and truss manufacturing business in Palm Springs, California for $6.7 million in cash.

· In February 2006, BMC West acquired 3 facilities providing building materials distribution and millwork services in Houston, Texas for $20.6 million in cash.

· In January 2006, SelectBuild acquired framing businesses in Palm Springs, California and Reno, Nevada for $57.1 million in cash. Additional cash payments may be required based on operating performance through December 2009.

Minority interests reflects the other owners’ proportionate share in the assets and liabilities of business ventures as of the date of purchase, adjusted by the proportionate share of post-acquisition income or loss. As the operating results of entities with minority interest are consolidated, minority interests income represents the income or loss attributable to the other owners.

· In January 2008, SelectBuild was required to purchase the remaining 49% interest in SelectBuild Illinois (RCI Construction) for $8.4 million in cash which is payable in 2008. As there were no additional tangible or intangible assets, $5.5 million of this put obligation was recognized as an expense in Other income, net for 2007. In January 2005, SelectBuild acquired an initial 51% interest for $4.9 million in cash. SelectBuild Illinois provides framing services to production homebuilders in the greater Chicago area.

64

· In September 2007, SelectBuild acquired the remaining 49% interest in SelectBuild Trim for $0.5 million in cash. In January 2007, SelectBuild 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, SelectBuild acquired the remaining 49% interest in A-1 Building Components, LLC (A-1 Truss) for $5.0 million in cash. In September 2004, SelectBuild acquired an initial 51% interest for $2.3 million in cash. A-1 Truss manufactures trusses in Fort Pierce, Florida.

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

· In April 2007, SelectBuild acquired the remaining 27% interest in Riggs Plumbing for $10.5 million in cash. In July 2005, SelectBuild 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. 

· In November 2006, SelectBuild acquired the remaining 49% interest in BBP Companies for $22.8 million in cash. In July 2005, SelectBuild acquired an initial 51% interest for $9.4 million in cash and $1.0 million of our common shares. BBP Companies provide concrete services to production homebuilders in Arizona.

· In January 2006, SelectBuild acquired the remaining 20% interest in SelectBuild Florida (WBC Construction, LLC) for $36.0 million in cash. In August 2005, SelectBuild acquired an additional 20% interest for $24.8 million in cash and in January 2003, acquired an initial 60% interest for $22.9 million in cash and $1.0 million of our common shares. SelectBuild Florida provides concrete block masonry and concrete services to production homebuilders in Florida.

Assets and liabilities acquired in acquisitions made in 2007 and 2006, including payments of amounts retained for settlement periods, were as follows (thousands):

65

	December 31						December 31
	2007			2006			2007			2006
Receivables	$	(21	)	$	44,683	Accounts payable	$	—		$	10,376
Inventory		—			19,957	Accrued compensation		—			1,447
Unbilled receivables		—			10,101	Other accrued liabilities		(60,787	)		50,340
Prepaid expenses and other		18			263	Billings in excess of costs and
						estimated earnings		—			23,557
Current assets		(3	)		75,004	Current liabilities		(60,787	)		85,720
Property and equipment		216			19,845	Deferred income taxes		(917	)		937
Other long-term assets		—			42	Other long-term liabilities		—			8,173
Other intangibles, net		2,287			68,692	Minority interests		(3,680	)		(10,627	)
Goodwill		13,077			122,374
	$	15,577		$	285,957		$	(65,384	)	$	84,203

Had the acquisitions for 2007 taken place as of the beginning of 2006, pro forma results of operations would not have been significantly different from reported amounts.

66

6.Marketable Securities

Investments in marketable securities consist of debt securities held by our captive insurance subsidiary and are considered available-for-sale and recorded at fair value. Fair value is based on market quotes. Realized gains and losses are recognized in Other income, net based on specific identification. Unrealized gains and losses, net of deferred taxes, are recorded as a component of accumulated other comprehensive (loss) income, net, a component of shareholders’ equity. There were no significant unrealized losses.

The fair values of these marketable securities were as follows (thousands):

	December 31
	2007		2006
U.S. government and agencies	$	18,380	$	25,661
Asset backed securities		9,798		18,278
Corporate securities		13,733		13,911
	$	41,911	$	57,850

Contractual maturities were as follows (thousands):

	December 31
	2007		2006
Less than 1 year	$	1,872	$	4,337
Due in 1 to 2 years		12,683		16,648
Due in 2 to 5 years		27,356		36,865
More than 5 years		—		—
	$	41,911	$	57,850

67

7.Intangible Assets and Goodwill

Intangible assets represent the values assigned to customer relationships, covenants not to compete, trade names and favorable leases. Intangible assets are amortized on a straight-line basis over their expected useful lives. Customer relationships are amortized over 3 to 17 years, covenants not to compete over 3 to 5 years and favorable leases over 2 to 5 years. Amortization expense for intangible assets was $16.5 million for 2007, $14.7 million for 2006 and $4.7 million for 2005. Intangible assets consist of the following (thousands):

	December 31, 2007
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	92,424	$	(32,733	)	$	59,691
Covenants not to compete		11,560		(6,835	)		4,725
Trade names		204		(204	)		—
Favorable leases		780		(248	)		532
	$	104,968	$	(40,020	)	$	64,948

	December 31, 2006
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	122,498	$	(22,125	)	$	100,373
Covenants not to compete		13,094		(4,802	)		8,292
Trade names		204		(159	)		45
Favorable leases		146		(64	)		82
	$	135,942	$	(27,150	)	$	108,792

Estimated amortization expense for intangible assets is $11.0 million for 2008, $10.4 million for 2009, $9.6 million for 2010, $8.8 million for 2011, $8.2 million for 2012 and $16.9 million thereafter.

Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses. Adjustments to amounts previously reported as goodwill occur as a result of completing the purchase price allocation to the assets acquired, including intangible assets, and liabilities assumed based on their estimated fair values at the date of acquisition.

An annual assessment for impairment is completed in the fourth quarter and whenever events and circumstances indicate the carrying amount may not be recoverable. An impairment is recognized at the reporting unit if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques.

Changes in the carrying amount of goodwill by business segment were as follows (thousands):

	BMC West			SelectBuild			Total
Balance at December 31, 2005	$	20,202		$	167,268		$	187,470
Purchase price adjustment		(16	)		(1,927	)		(1,943	)
Goodwill acquired		691			123,621			124,312
Impairment		—			(1,839	)		(1,839	)
Balance at December 31, 2006	$	20,877		$	287,123		$	308,000
Purchase price adjustment		—			(182	)		(182	)
Goodwill acquired		—			13,259			13,259
Impairment		(6,681	)		(300,200	)		(306,881	)
Balance at December 31, 2007	$	14,196		$	—		$	14,196

While goodwill is tested for impairment annually and not amortized for financial statement purposes, goodwill may be deductible for income tax purposes. Certain goodwill is non-deductible. Changes to non-deductible goodwill were as follows (thousands):

	BMC West			SelectBuild			Total
Balance at December 31, 2005	$	7,423		$	18,751		$	26,174
Goodwill acquired		—			15,188			15,188
Balance at December 31, 2006	$	7,423		$	33,939		$	41,362
Purchase price adjustment		—			(4,656	)		(4,656	)
Impairment adjustment		(3,963	)		(29,283	)		(33,246	)
Balance at December 31, 2007	$	3,460		$	—		$	3,460

68

8.Debt

Long-term debt consists of the following (thousands):

					Notional Amount of		Effective Interest Rate
As of December 31, 2007	Balance		Stated Interest Rate		Interest Rate Swaps		Average for Year			As of December 31
Revolver	$	—		LIBOR plus 1.50% or Prime plus 0.25% and 0.25% commitment fee	$	—		8.8	%		n/a
Term note		345,625		LIBOR plus 2.50% or Prime plus 1.25 %		200,000		7.7	%		7.5	%
Other		3,674		Various		—		—			—
		349,299			$	200,000
Less:  Current portion		4,923
	$	344,376

					Notional Amount of		Effective Interest Rate
As of December 31, 2006	Balance		Stated Interest Rate		Interest Rate Swaps		Average for Year			As of December 31
Revolver	$	—		LIBOR plus 1.25% or Prime plus 0.00% and 0.225% commitment fee	$	―		6.5	%		n/a
Term note		349,125		LIBOR plus 2.50% or Prime plus 1.25 %		200,000		6.7	%		7.0	%
Other		8,179		Various		—		—			—
		357,304			$	200,000
Less:  Current portion		8,143
	$	349,161

Revolver

In November 2006, we entered into an amended $500 million revolver with a group of lenders. The revolver matured in November 2011. The revolver consisted of both LIBOR and Prime based borrowings. These variable interest rates were subject to quarterly adjustment based on operating performance and ranged from LIBOR plus 1.00% to 2.00%, or Prime plus 0.00% to 0.75%. Additionally, a commitment fee for the unused portion of the revolver was subject to quarterly operating performance and ranged from 0.20% to 0.35%. Interest was paid quarterly. As of December 31, 2007, no amount was outstanding under the revolver.

69

The effective interest rate is based on interest rates for the period as well as the commitment fee for the unused portion of the revolver.

Letters of credit outstanding that guaranteed performance or payment to third parties were $106.7 million as of December 31, 2007 and $97.2 million as of December 31, 2006. These letters of credit reduce borrowing availability under the revolver.

Term Note

In November 2006, we entered into a $350 million term note with a group of lenders. The term note matured in November 2013 and was payable in quarterly installments for the first 7 years in amounts equal to 1% of the initial principal per year and the remaining principal due November 2013. The variable interest rate for the term note was LIBOR plus 2.50%, or Prime plus 1.25%. Interest was paid quarterly. As of December 31, 2007, $345.6 million was outstanding under this term note.

Other

Other long-term debt consists of term notes, equipment notes and capital leases for equipment. Interest rates vary and dates of maturity are through March 2021. As of December 31, 2007, other long-term debt was $3.7 million.

Expansion of  Previous Credit Facility, Covenants and Maturities

The credit facility consists of the revolver and term note. The credit facility previously included an expansion ability of up to $250 million. The credit facility was collateralized by tangible and intangible property of our wholly-owned subsidiaries, except the assets of our captive insurance subsidiary.

Financial covenants under the credit facility required the maintenance of a minimum net worth, a minimum fixed charge coverage ratio and a maximum leverage ratio. Due to impairments and operating losses in the fourth quarter, we were not in compliance with the net worth, fixed charge coverage and leverage covenants of the credit facility. A waiver of these covenant violations was obtained in February 2008, which allowed for revolver borrowings of up to $75 million through February 2008.

Scheduled maturities of long-term debt are as follows (thousands):

2008	$	4,923
2009		4,251
2010		3,971
2011		3,709
2012		3,572
Thereafter		328,873
	$	349,299

70

Subsequent to December 2007

On February 29, 2008, we reached an agreement to amend our credit facility. The revolver was reduced to $200 million and the maturity of the term loan was shortened to November 2011. As of February 29, 2008, no amount was outstanding under the revolver. Letters of credit outstanding continue to reduce borrowing availability under the revolver. Borrowings under the revolver are limited to the lesser of:

· $100 million or

· a borrowing base calculated on certain accounts receivable minus 50% of outstanding surety bonds, multiplied by 50%.

The amended credit facility continues to require quarterly compliance with financial covenants including minimum net worth, minimum interest coverage ratio and minimum earnings before interest, taxes, depreciation and amortization. Interest rates for the revolver and term note were increased to LIBOR plus 4.50% or Prime plus 2.50%. Additionally, the commitment fee for the unused portion of the revolver is 0.50%. Interest is to be paid quarterly.

The amended credit facility restricts our ability to incur additional indebtedness, pay dividends, repurchase shares, enter into mergers or acquisitions, use proceeds from equity offerings, make capital expenditures and sell assets. The amended credit facility is secured by all assets of our wholly-owned subsidiaries, except the assets of our captive insurance subsidiary.

In connection with the amendment, 60% or $2.4 million of unamortized deferred loan costs related to the revolver will be recognized as interest expense in the first quarter of 2008. We also expect to incur approximately $5.0 million of fees in connection with the amendment and these costs will be amortized over the remaining term of our credit facility.

71

The ineffective portion of the interest rate swap contracts, if any, is being determined. Other than changes to the maturity, the terms of the term note remain substantiallly the same and the interest rate swap contracts remain an effective hedge of interest expense.

We expect to be in compliance with these covenants throughout 2008. Reduced operating performance, organizational changes and other expenses as well as significant economic uncertainties, may result in failure to comply with the financial covenants of our credit facility and adversely affect our ability to finance operations or capital needs and could create a default and cause all amounts borrowed to become due and payable immediately. We continue to closely monitor these financing arrangements as well as evaluate other financing options.

Hedging Activities

Derivative and hedging activities are recorded on the balance sheet at their fair values. In November 2006, we entered into interest rate swap contracts that effectively convert $200 million of the variable rate borrowings of the $345.6 million term note to a fixed interest rate of 7.6% through November 2012, thus reducing the impact of increases in interest rates on future interest expense. Approximately 58% of the outstanding variable rate borrowings of the term note as of December 31, 2007 have been hedged through the designation of interest rate swap contracts accounted for as cash flow hedges. After giving effect to the interest rate swap contracts, total borrowings were 58% fixed and 42% variable.

The fair value of derivative instruments is based on pricing models using current market rates. The fair value of the interest rate swap contracts was a long-term liability of $8.6 million and a corresponding deferred tax asset of $3.3 million as of December 31, 2007. The effective portion was recorded in accumulated other comprehensive (loss) income, net, a separate component of shareholders’ equity, and is subsequently reclassified into earnings in the same financial statement line item, interest expense, in the same period during which the hedged transaction is recognized in earnings. The corresponding deferred tax asset was also recorded in accumulated other comprehensive (loss) income, net for the income tax related to the estimated fair value of the interest rate swap contracts. The ineffective portion, if any, of the change in the value of the interest rate swap contracts is immediately recognized as a component of interest expense. Management may choose not to swap variable rates to fixed rates or may terminate a previously executed swap if the variable rate positions are more beneficial.

In June 2004, we entered into interest rate swap contracts that effectively converted $100 million of variable rate borrowings to a fixed interest rate. These swaps were settled in November 2006 and the $1.5 million gain recognized for this settlement was reclassified to Other income, net from Accumulated other comprehensive income, net.

72

9.Shareholders’ Equity

Preferred Shares

We are authorized to issue 2 million preferred shares, however none of these shares are issued. Under the terms of our Restated Certificate of Incorporation, the Board of Directors is authorized to determine or alter the rights, preferences, privileges and restrictions of the preferred shares.

Common Shares

Our common shares have a par value of $0.001. We have 50 million shares authorized of which 29.4 million are issued and outstanding as of December 31, 2007.

Of the unissued shares, 64,765 shares were reserved for the following:

Employee Stock Purchase Plan	4,767
2004 Incentive and Performance Plan	59,998

Dividends

Cash dividends per common share were as follows:

	2007		2006		2005
First quarter	$0.10		$0.10		$0.04
Second quarter		0.10		0.10		0.05
Third quarter		0.10		0.10		0.075
Fourth quarter		0.10		0.10		0.075
	$0.40		$0.40		$0.24

Our credit facility amended in February 2008 prohibits the payment of cash dividends on our common shares. The determination of future dividend payments (cash or shares) will depend on many factors, including credit facility restrictions, financial position, results of operations and cash flows.

Repurchase Program

In March 2007, our Board of Directors authorized the repurchase of up to $25 million of our common shares through March 2008. No common shares were repurchased in the period ended December 31, 2007.

Our credit facility amended in February 2008 prohibits the repurchase of our common shares. The determination of future share repurchases (cash or shares) will depend on many factors, including credit facility restrictions, financial position, results of operations and cash flows.

73

10.Employee Benefit Plans

Retirement Plans

·Savings and Retirement Plan

We provide a savings and retirement plan for salaried and certain hourly employees whereby eligible employees may contribute a percentage of their earnings to a trust. Participants may defer 1% to 50% of their eligible compensation (base salary, annual incentive and long-term incentives) subject to the limitations imposed under the Internal Revenue Code.

Our matching contributions range from 50% of the first 6% to 25% of the first 4% of the participant’s contribution. Matching contributions are established at the discretion of the Compensation Committee of our Board of Directors in February. Vesting in matching contributions occurs at the rate of 20% per year of service or upon reaching age 65, death, disability or under certain circumstances. Matching contributions of $4.7 million for 2007, $4.5 million for 2006 and $3.9 million for 2005 were made to the trusts based on a percentage of the contributions made by participants.

Participants may direct their contributions and matching contributions through any of the investment options offered, including self-directed brokerage accounts. Investment options are reviewed and revised quarterly by an Investment Committee comprised of management and advised by consultants.

·Executive Deferred Compensation

We provide a deferred compensation plan for directors, executives and key employees. The objective of the plan is to provide executives and key employees with an additional opportunity to save for their retirement. Executive and key employee participants may defer up to 80% of their eligible compensation (base salary, annual incentive and long-term incentives). Director participants may defer 100% of their compensation.

There are no minimum or guaranteed returns. Participants may elect distribution upon reaching a specific age, number of years or separation of service. Distributions may be a lump sum payment or monthly installments over 5 to 10 years.

Matching contributions mirror the savings and retirement plan matching contribution percentage. Matching contributions are established at the discretion of the Compensation Committee of our Board of Directors in February. Matching contributions of $0.4 million for 2007, $0.4 million for 2006 and $0.2 million for 2005 were made to the trust based on a percentage of the contributions made by participants.

Investments of the deferred compensation are held in a custodial account and the assets are subject to the claims of general creditors. Participants may elect to invest their deferred compensation through any of the investment options offered, including our common shares. Investment options are reviewed and revised quarterly by an Investment Committee comprised of management and advised by consultants.

· 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 $13.5 million at December 31, 2007 and $10.0 million at December 31, 2006.

74

· 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 $1.4 million or 105,189 common shares at December 31, 2007, $1.2 million or 106,441 shares at December 31, 2006 and $0.9 million or 105,718 shares at December 31, 2005.

·Supplemental Retirement

Additionally, there is a supplemental retirement plan for executives and key employees. The objective of the plan is to provide a meaningful supplemental retirement benefit that enables participants to retire at age 65 with 30 years of service at an income level of at least 60% of pre-retirement base salary after considering deferred compensation, predecessor retirement and social security benefits.

Contributions have typically been 5.5% of net income and are allocated proportionately to participants based on their base salaries.

· 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.

Active participants invested in company-owned life insurance polices receive a guaranteed return of 6 to 7% and inactive participants receive a guaranteed return of 0% to 9% based on their years of service and payment elections. Participants receiving common shares do not receive a guaranteed return.

Contributions and the guaranteed return are established at the discretion of the Compensation Committee of our Board of Directors in February. Participants are immediately vested in the contribution. Contributions, including the guaranteed return, were $2.5 million for 2007, $7.5 million for 2006 and $7.5 million for 2005.

The cash surrender value of the company owned life insurance policies approximates the obligation, however the guaranteed returns, if any, are not fully funded as these returns are dependent upon years of service and payment elections. These life insurance policies fund the obligation to the participants or their beneficiaries over a 5, 10 or 15-year period.

Employee Stock Purchase Plan

In September 2000, our Board of Directors adopted the Employee Stock Purchase Plan, as approved by our shareholders in May 2001. The plan permits eligible employees to purchase common shares through payroll deductions of up to 10% of an employee’s compensation limited to $25,000 each year. The purchase price of the shares is 85% of the market price on the last day of each month. A total of 400,000 shares were initially reserved for this plan with 4,767 remaining for future purchase as of December 2007. Shares are no longer issued due to the number of shares remaining in the plan. Compensation expense recognized was $0.2 million for 2007, $0.3 million for 2006 and $0.2 million for 2005.

75

Incentive and Performance Plans

In February 2004, our Board of Directors adopted the 2004 Incentive and Performance Plan, as approved by our shareholders in May 2004. A total of 2.4 million shares were reserved for issuance under the plan. Employees and non-employee directors are eligible to receive awards at the discretion of the Compensation Committee. Options, appreciation rights, restricted shares, other share-based awards and non-discretionary awards may be granted under this plan. Unissued shares were 59,998 as of December 2007, 736,466 as of December 2006 and 1,281,900 as of December 2005.

Options

·     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.

·     In February 2000, our Board of Directors adopted the 2000 Stock Incentive Plan, as approved by our shareholders in May 2000. 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.

With the adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment, in 2006, compensation expense is recognized over the requisite service period for all share-based awards granted after the date of adoption as well as awards unvested on the date of adoption. Additionally, tax benefits for share-based compensation payments are reported as a financing activity, rather than as an operating cash flow. Prior periods are not revised for comparative purposes. Share-based compensation expense previously included restricted shares and share awards and with the adoption of this accounting principle in 2006 includes the fair value of share options.

Impact of Recognizing Share-Based Payments

The fair value of share-based compensation expense recognized for options for the requisite service period for 2006 was $5.1 million, including $0.3 million for options vested due to early retirement eligibility. As this compensation does not require the payment of cash, this is reflected as a non-cash item in the statement of cash flows.

Share-based compensation expense for options reduced our results of operations as follows (thousands, except per share data):

	Year Ended December 31 2006
Income before income taxes and minority interests	$	5,103
Net income	$	3,383
Net income per share:
Basic	$0.12
Diluted	$0.11

76

Pro Forma Information for the Periods Prior to January 1, 2006

Financial information for prior periods is not required to be revised to reflect this change in accounting principle. The following illustrates the effect on net income and income per share if the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, were applied to share options for 2005 (thousands, except per share data):

	Year Ended December 31
	2005
Net income, as reported	$	129,507
Add: Share-based employee compensation expense determined     under APB 25, net of related tax effects		555
Deduct: Share-based employee compensation expense determined        under fair value method for all awards, net of related tax effects		(2,497	)
Pro forma net income	$	127,565
Basic net income per share:
As reported		$4.61
Pro forma		$4.54
Diluted net income per share:
As reported		$4.41
Pro forma		$4.34

The fair value of each option was estimated on the date of grant using the modified Black-Scholes-Merton model. The following table presents the weighted average assumptions used in the valuation and the resulting fair value:

	Year Ended December 31
	2007			2006			2005
Expected term (years)		5.2			5.6			6.8
Expected volatility		54.5	%		48.6	%		54.2	%
Expected dividend yield		2.0	%		0.7	%		0.8	%
Risk-free interest rate		4.5	%		3.8	%		4.1	%
Exercise price	$18			$38			$23
Weighted average fair value	$8			$18			$12

These assumptions are based principally on historical experience. When circumstances indicate the availability of new or different information that would be useful in estimating these assumptions, revisions will be made and reflected in the period such revisions are determined. Due to uncertainties inherent in these assumptions, it is possible that actual share-based compensation may vary from the estimate of the fair value of these options.

Activity for option awards was as follows (thousands, except per share data):

77

	Year Ended December 31
	2007						2006				2005
	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		2,521		$14		5.1		2,300		$10		2,756		$6
Granted		541		$18				409		$38		424		$23
Exercised		(33	)	$6				(176	)	$7		(861	)	$6
Forfeited		(51	)	$28				(12	)	$22		(19	)	$8
Outstanding at end of the    period		2,978		$15		4.5		2,521		$14		2,300		$10
Exercisable at end    of the period		2,079				4.0		1,658		$8		1,428		$6

	Year Ended December 31
	2007	2006	2005
Weighted average grant-date fair value	$8	$18	$12
Intrinsic value of options exercised	$299	$3,832	$23,749
Fair value of options vested	$4,665	$2,955	$1,367

The intrinsic value (the difference between our share price on the date of exercise and the exercise price) for options exercised represents the value received by option holders that exercised their options.

As of December 31, 2007, option awards outstanding and exercisable were as follows (thousands, except per share data):

	Options Outstanding						Options Exercisable
Exercise Price Range	Shares		Weighted Average Exercise Price		Intrinsic Value	Weighted Average Remaining Contractual Life (years)	Shares		Weighted Average Exercise Price		Intrinsic Value
$4 to $6	534	$5				2.5	534	$5
$6 to $7	333	$7				5.2	333	$7
$7 to $8	467	$7				5.0	467	$7
$8 to $9	332	$9				3.3	332	$9
$14 to $19	526	$18				6.3	5	$18
$22 to $29	411	$23				4.1	277	$23
$37 to $39	375	$38				5.1	131	$38
	2,978						2,079
In-the-money:
Outstanding	534			$321
Exercisable							534			$321

The intrinsic value (the difference between our share price on the last day of trading in December 2007 and the exercise price) for in-the-money options, represents the value that would have been received by option holders had they exercised their options. These values change based on the fair market value of our shares.

The fair value of compensation expense recognized for options was $5.2 million for 2007, and $5.1 million, including $0.3 million for options vested due to early retirement eligibility, for 2006. Options are not included in the calculation of basic income per share, however options are included in the calculation of diluted income per share.

As of December 31, 2007, there was $6.0 million of unrecognized compensation expense related to these options. This is recognized as the requisite services are rendered and is expected to be recognized ratably through March 2011.

78

Options exercised are settled with newly issued common shares.

Restricted Shares

Grants of restricted shares vest 3 years from the date of grant. Under certain circumstances some or all of the restricted shares may vest earlier. The fair value of restricted shares is the closing share price of our common shares on the date of grant. Compensation expense is recognized over the vesting period.

Activity for restricted share awards was as follows (thousands, except per share data):

	Year Ended December 31
	2007		2006		2005
	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	396	$24	258	$16	149	$11
Granted	172	$18	139	$38	118	$23
Vested	(142)	$11	—	$—	—	$—
Forfeited	(16)	$30	(1)	$38	(9)	$13
Nonvested at end of the period	410	$26	396	$24	258	$16

	Year Ended December 31
	2007	2006		2005
Weighted average grant-date fair value	$18	$38		$23
Fair value of shares granted	$3,005	$5,220		$2,702
Fair value of restricted shares vested	$1,556		$—		$—

The fair value of compensation expense recognized for restricted shares was $3.3 million for 2007, $3.1 million for 2006 and $1.3 million for 2005. Restricted shares are not included in the calculation of basic income per share until these shares vest, however restricted shares are included in the calculation of diluted income per share.

As of December 31, 2007, there was $4.1 million of unrecognized compensation expense related to these restricted shares. This is recognized as the requisite services are rendered and is expected to be recognized ratably through March 2010.

Shares

We issue shares to non-employee directors of our Board of Directors for their services. These shares vest immediately, however trading is restricted for 1 year from the date of grant. We issued 27,000 shares in May 2007, 12,000 shares in May 2006 and 14,000 shares in May 2005 and recognized compensation expense of $0.4 million for 2007, $0.4 million for 2006 and $0.3 million for 2005.

The following table summarizes equity compensation information as of December 31, 2007 (thousands, except per share data):

	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 plans approved by security holders	3,389	$13	60
Equity compensation plans not approved by security holders	—	—	—
Total	3,389	$13	60

Share-based compensation expense is included in selling, general and administrative expenses since it is incentive compensation issued primarily to our executives and senior management. Share-based compensation expense for options, restricted shares and share awards was $8.9 million for 2007, $8.9 million for 2006 and $1.9 million for 2005.

79

11.Income Taxes

The asset and liability method is used to account for income taxes. Under this method, deferred tax assets and liabilities are recognized for tax credits and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.

Our income tax compliance is periodically examined by various taxing authorities. Our tax returns for 2006 through 2003 are either under examination or open for future examination. We believe the ultimate results of examinations, if any, will not have an adverse affect on our financial condition, results of operations or cash flows. Revisions of estimated tax liabilities are reflected in the period such revisions are known.

Income tax benefit (expense) consists of the following (thousands):

	Year Ended December 31
Current income taxes	2007			2006			2005
Federal	$	10,801		$	(52,229	)	$	(71,561	)
State		(565	)		(3,887	)		(10,577	)
		10,236			(56,116	)		(82,138	)
Deferred income taxes
Federal		17,832			1,043			3,157
State		1,620			82			316
		19,452			1,125			3,473
	$	29,688		$	(54,991	)	$	(78,665	)

In November 2006, SelectBuild acquired the remaining 49% interest in BBP Companies. Prior to the acquisition, income taxes associated with the other owner’s proportionate interest were $1.7 million for 2006 and $1.2 million for 2005. We were required to recognize income taxes for all of the earnings of this 51% interest due to its C Corporation status. While these income taxes were recognized in income tax expense, the portion of income taxes associated with the other owner’s proportionate share of earnings was eliminated as a reduction to minority interest income.

The tax benefit associated with exercised options and vested restricted shares reduced taxes payable $0.9 million for 2007, $1.5 million for 2006 and $9.1 million for 2005. The tax impact for the difference between the fair value and the exercised value for options exercised and the difference between the grant-date value and vest-date value for vested restricted shares is recognized in additional paid-in capital, a component of shareholders’ equity.

A reconciliation of the differences between the U.S. statutory federal income tax rate and the effective tax rate as provided in the consolidated statements of operations is as follows:

80

	Year Ended December 31
	2007			2006			2005
Statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.3			1.2			3.5
Valuation allowance - intangibles		(26.5	)		—			—
Non-deductible goodwill		(3.6	)		—			—
Non-deductible items		(0.2	)		0.4			0.2
Earnings of minority interests		—			(1.6	)		(2.3	)
Domestic production deduction		0.1			(0.8	)		(0.8	)
Other		0.2			(0.6	)		(0.1	)
		8.3	%		33.6	%		35.5	%

Deferred income taxes are provided using the asset and liability method to reflect temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using presently enacted tax rates and laws. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities were as follows:

	December 31
	2007			2006
Deferred tax assets:
Accounts receivable	$	1,486		$	756
Inventory		2,272			1,594
Goodwill and other intangibles, net		101,491			—
Accrued compensation		9,332			11,645
Insurance deductible reserves		5,440			6,184
Share-based compensation		6,280			3,681
Other accrued liabilities		5,184			2,502
Interest rate swap contracts		3,266			—
State taxes and credits		2,939			2,629
Investment in minority interests		379			2,634
Other		308			437
		138,377			32,062
Less: Valuation allowance		(97,230	)		(1,507	)
		41,147			30,555
Deferred tax liabilities:
Revenue recognition		3,298			2,495
Prepaid expenses and other		762			1,503
Property and equipment		2,792			360
Depreciation		10,998			14,088
Goodwill and other intangibles, net		—			12,333
Other		558			—
		18,408			30,779
Net deferred tax assets (liabilities)	$	22,739		$	(224	)
Classified in the balance sheet as:
Deferred income taxes (current asset)	$	11,470		$	8,914
Deferred income taxes (long-term asset)		11,269			—
Deferred income taxes (long-term liability)		—			(9,138	)
	$	22,739		$	(224	)

As a result of allocating purchase price to the assets acquired and liabilities assumed for acquisitions completed during 2007 and 2006, we recorded a net deferred tax liability of $0.9 million and $0.9 million, respectively.

81

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The scheduled reversal of deferred tax liabilities, loss carryback and carryforward abilities, projected future taxable income and tax planning strategies are considered in making this assessment. Based on historical and future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not these deductible differences, net of the existing valuation allowances, will be realized.

Realizability of the deferred tax assets could change if estimates of future taxable income change. To the extent taxable income is generated in future periods, these tax benefits will be realized and reduce our future effective tax rate.

82

12. Financial Instruments

The estimated fair values of cash and cash equivalents, receivables, unbilled receivables, accounts payable and accruals are the same as their carrying amounts due to their short-term nature. After giving effect to the interest rate swap contracts, the interest for our debt is 58% fixed and 42% variable. The estimated market value of our debt, based on current interest rates for similar obligations with like maturities, was:

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

·    $0.2 million less than the amount of debt reported on the consolidated balance sheet at December 31, 2006.

Changes in interest rates expose us to financial market risk. We currently utilize interest rate swap contracts to hedge interest exposure on our term note. The interest rate swap contracts effectively convert $200 million of the term note to a fixed interest rate of 7.6% through November 2012. Changes in the fair value of the interest rate swap contracts are recorded as accumulated other comprehensive (loss) income, net, a separate component of shareholders’ equity, and are subsequently reclassified into interest expense as interest expense is recognized on the term note.

Derivative financial instruments are not utilized to hedge other risks or for speculative or trading purposes.

83

13.Commitments and Contingencies

Operating Leases

We lease certain real property, vehicles and office equipment under operating leases. Expense for these operating leases was $30.7 million for 2007, $26.6 million for 2006 and $17.2 million for 2005. Certain of these leases are non-cancelable and have minimum lease payment requirements of $28.9 million for 2008, $24.7 million for 2009, $18.7 million for 2010, $12.0 million for 2011, $7.4 million for 2012 and $11.6 million thereafter.

Warranties

We provide limited warranties for certain construction services. Specific terms and conditions for warranties vary from 1 year to 10 years and are based on geographic market and state regulations. Factors for determining estimates of warranties include the nature and frequency of claims, anticipated claims and cost per claim. Estimated costs for warranties are recognized when the revenue associated with the service is recognized. Revisions of estimated warranties are reflected in the period such revisions are determined. Warranty activity is as follows (thousands):

	December 31
	2007			2006			2005
Balance at beginning of the period	$	7,155		$	5,404		$	258
Provision for warranties		657			3,009			2,925
Provision for warranties from acquisitions		—			117			3,345
Warranty charges		(954	)		(1,375	)		(1,124	)
Balance at end of the period	$	6,858		$	7,155		$	5,404

Legal Proceedings

We are involved in litigation and other legal matters arising in the normal course of business. In the opinion of management, the recovery or liability, if any, under any of these matters will not have a material effect on our financial position, results of operations or cash flows.

84

14.Fair Values of Assets and Liabilities

Our assets and liabilities measured at fair value are grouped in three levels. The levels are based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

· 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.

The following assets and liabilities are measured at fair value on a recurring basis during the period:

				Fair Value Measurements at Reporting Date Using
	December 312007			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	)	$	—

Also, from time to time we may be required to measure certain other assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost or market accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis, the following table provides the amount, level of valuation assumptions used to determine each adjustment and the related realized losses:

			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	$	64,948	$	—	$	—	$	64,948	$	(30,007	)
Goodwill		14,196		—		—		14,196		(306,881	)
	$	79,144	$	—	$	—	$	79,144	$	(336,888	)

An impairment is recognized for intangibles with finite useful lives if the carrying amount is not recoverable based on the estimated future operating cash flows on an undiscounted basis. Our intangibles are principally customer relationships. The present value of estimated future operating cash flows is utilized to determine fair value. Retention rates, margins and discount rates are significant inputs for determining the present value of estimated future cash flows.

85

An impairment is recognized for goodwill if the carrying amount is more than the estimated future operating cash flows as measured by fair value techniques. The fair value techniques of enterprise value as well as the present value of estimated future operating cash flows are utilized. Market capitalization based on average common share price, debt and cash are significant inputs for determining enterprise value. An estimate of our weighted average cost of financing sources and future operating cash flows as derived from estimates of revenues, operating expenses and income taxes as well as working capital requirements and capital expenditures are significant inputs for determining the present value of estimated future operating cash flows.

86

15.Segment Information

The consolidated financial statements include operations from our two reportable segments, BMC West and SelectBuild. These segments represent businesses that are managed separately. Each of these businesses requires distinct marketing and operating strategies. Management reviews financial performance based on these operating segments.

BMC West

BMC West markets and sells building products, manufactures building components and provides construction services. Products include structural lumber and building materials purchased from other manufacturers as well as manufactured building components including millwork, trusses and wall panels. Construction services include framing and installation of miscellaneous building products. Building products and construction services are sold principally to professional builders and contractors.

SelectBuild

SelectBuild provides construction services to production homebuilders as well as commercial and multi-family builders. These services include wood framing or concrete block masonry, concrete services, plumbing and other services. Construction services include managing labor and construction schedules as well as sourcing materials.

Corporate

Corporate represents expenses to support the operations of our business segments, BMC West and SelectBuild. These costs include administrative functions for information systems, reporting, accounts payable and human resources, professional fees for regulatory compliance, executive and senior management, certain incentive compensation as well as actuarial adjustments for insurance and medical claims. These costs are not allocated to our business segments.

The financial performance for these reporting segments is based on income from continuing operations before interest expense, income taxes and minority interests. These segments follow the accounting principles described in the Summary of Significant Accounting Policies. Sales between segments are recognized at market prices.

87

Selected financial information by segment is as follows (thousands):

		Sales							(Loss) (1) Income from Continuing Operations Before Taxes and			Depreciation
		Total		Inter- Segment			Trade		Minority Interests			and Amortization		Capital (2) Expenditures		Assets
Year Ended December 31, 2007
BMC West	$	1,179,097	$	(1,386	)	$	1,177,711	$	64,653		$	11,998	$	21,302	$	376,462
SelectBuild		1,107,501		(241	)		1,107,260		(335,279	)		32,172		8,893		326,507
Corporate		—		—			—		(51,697	)		4,471		2,936		171,875
Discontinued    operations		—		—			—		—			—		79		—
	$	2,286,598	$	(1,627	)	$	2,284,971		(322,323	)	$	48,641	$	33,210	$	874,844
Interest expense									33,800
								$	(356,123	)
Year Ended December 31, 2006
BMC West	$	1,473,219	$	(1,766	)	$	1,471,453	$	119,737		$	11,987	$	33,107	$	479,101
SelectBuild		1,744,092		(12,278	)		1,731,814		148,416			30,002		33,409		722,328
Corporate		—		—			—		(75,484	)		3,104		6,174		118,880
Discontinued    operations		—		—			—		—			—		28		8,602
	$	3,217,311	$	(14,044	)	$	3,203,267		192,669		$	45,093	$	72,718	$	1,328,911
Interest expense									29,082
								$	163,587
Year Ended December 31, 2005
BMC West	$	1,486,152	$	(1,630	)	$	1,484,522	$	147,781		$	11,010	$	17,293	$	439,779
SelectBuild		1,395,182		(1,296	)		1,393,886		160,957			13,695		62,611		623,877
Corporate		—		—			—		(72,631	)		2,450		—		79,029
Discontinued    operations		—		—			—		—			—		42		7,840
	$	2,881,334	$	(2,926	)	$	2,878,408		236,107		$	27,155	$	79,946	$	1,150,525
Interest expense									14,420
								$	221,687

⁽¹⁾Includes the following impairments for 2007:

·  $330.4 million for the carrying amount of certain customer relationships and goodwill at SelectBuild and

·  $6.7 million for the carrying amount of goodwill at BMC West.

Includes the following impairments for 2006:

· $2.2 million for the carrying amount of certain customer relationships and goodwill at SelectBuild.

Includes the following impairments for 2005:

· $1.3 million for the carrying amount of certain customer relationships and goodwill at SelectBuild.

⁽²⁾Property and equipment from acquisitions are included as capital expenditures.

88

16.Quarterly Results of Operations (unaudited)

Operating results by quarter for 2007 and 2006 were as follows (thousands, except per share data):

	First			Second			Third		Fourth
2007
Sales	$	561,342		$	686,191		$	618,280	$	419,158
(Loss) income from continuing operations	$	(5,417	)	$	18,601		$	1,118	$	(341,590	)(1)
Income from discontinued operations (2)	$	451		$	816		$	3,050	$	10,258
Net (loss) income	$	(4,966	)	$	19,417		$	4,168	$	(331,332	)
Net (loss) income per share:
Continuing operations	$(0.19		)	$0.63			$0.04		$(11.79		)
Discontinued operations		0.02			0.03			0.10		0.35
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
2006
Sales	$	876,993		$	911,712		$	817,794	$	596,768
Income from continuing operations	$	27,738		$	33,482	(1)	$	34,400	$	3,483
Income from discontinued operations (2)	$	331		$	693		$	948	$	999
Net income	$	28,069		$	34,175		$	35,348	$	4,482
Net income per share:
Continuing operations	$0.94			$1.13			$1.17		$0.12
Discontinued operations		0.01			0.03			0.03		0.03
Diluted	$0.95			$1.16			$1.20		$0.15
Common share prices:
High	$40			$38			$28		$28
Low	$32			$25			$21		$24
Cash dividends declared per share	$0.10			$0.10			$0.10		$0.10

⁽¹⁾Includes the following impairments for 2007:

· $330.4 million for the carrying amount of certain customer relationships and goodwill at SelectBuild and

· $6.7 million for the carrying amount of goodwill at BMC West.

Includes the following impairments for 2006:

· $2.2 million for the carrying amount of certain customer relationships and goodwill at SelectBuild.

⁽²⁾ Includes discontinued operations from three Western Colorado building materials distribution businesses sold in September 2007.

89

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for the preparation and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles and reflect management’s judgments and estimates concerning events and transactions that are accounted for or disclosed.

Our management is also responsible for establishing and maintaining effective internal control over financial reporting. Our internal control over financial reporting includes those policies and procedures that pertain to our ability to record, process, summarize and report reliable financial data. Management recognizes that there are inherent limitations in the effectiveness of any internal control and effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Additionally, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

In order to ensure that the internal controls over financial reporting are effective, management regularly assesses such controls and did so most recently for its financial reporting as of December 31, 2007. Management’s assessment was based on criteria for effective internal control over financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that as of December 31, 2007 our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with United States generally accepted accounting principles.

KPMG LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this annual report, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2007.

March 10, 2008	/s/ Robert E. Mellor	/s/ William M. Smartt
	Robert E. Mellor Chairman of the Board and Chief Executive Officer	William M. Smartt Senior Vice President and Chief Financial Officer

90

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Building Materials Holding Corporation:

We have audited the accompanying consolidated balance sheets of Building Materials Holding Corporation and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, comprehensive (loss) income, and cash flows for each of the years in the three-year period ended December 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Building Materials Holding Corporation and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Building Materials Holding Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

San Francisco, California

March 10, 2008

91

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Building Materials Holding Corporation:

We have audited Building Materials Holding Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Building Materials Holding Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Building Materials Holding Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Building Materials Holding Corporation and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, comprehensive (loss) income, and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated March 10, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

San Francisco, California

March 10, 2008

92

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

We have had no disagreements with our independent accountants regarding any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

ITEM 9A.Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934. This evaluation was conducted to determine whether the disclosure controls and procedures were effective and timely in bringing material information to the attention of senior management. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring material information required to be disclosed in reports filed under the Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.

Changes in Internal Controls

Our disclosure controls and procedures and internal controls over financial reporting are routinely evaluated and tested for effectiveness. These evaluations are discussed with management and the Audit Committee of the Board of Directors. As a result of these evaluations, revisions and corrective actions are made to ensure the continuing effectiveness of our disclosure controls and procedures and internal controls over financial reporting.

During the period covered by this report, we identified deficiencies in the design or operation of our internal controls, however revisions and corrective actions are being made to ensure the effectiveness of our disclosure controls and procedures and internal controls over financial reporting. None of these deficiencies have been considered a material weakness and there were no changes in the design or operation of our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Refer to management’s report on internal control over financial reporting presented in Item 8 - Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Refer to report of independent registered public accounting firm presented in Item 8 - Financial Statements and Supplementary Data.

ITEM 9A (T). Controls and Procedures

Not applicable.

93

ITEM 9B.Other Information

None.

94

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

Directors

Directors hold office until the annual meeting of shareholders or until election of a successor, resignation, removal or death.

Name	Age	Position and Business Experience
Robert E. Mellor	64	Mr. Mellor became Chairman of the Board of Directors in 2002 and has been Chief Executive Officer since 1997. He has been a director since 1991. He was previously Of Counsel with the law firm of Gibson, Dunn & Crutcher LLP from 1990 to 1997. He is on the boards of directors of Coeur d’Alene Mines Corporation and The Ryland Group. He is also on the board of councilors of Save-the-Redwoods League. He does not serve on the audit committee or compensation committee of any of these boards.
Sara L. Beckman	51	Dr. Beckman has served as a director since 2002. She is a faculty member of the Operations and Information Technology Management faculty at the Haas School of Business at University of California - Berkeley where she has been for nearly 20 years. Her teaching and research focus on operations strategy and innovation management. She also worked in several corporate positions at Hewlett-Packard Company and as a consultant for Booz, Allen and Hamilton. Additionally, she consults with corporate clients on customer-focused design and innovation.
Eric S. Belsky	47	Dr. Belsky will not be standing for re-election and will complete his term as a director in May 2008. Dr. Belsky has served as a director since 2005. He is a specialist in housing finance, economics and policy. He has nearly 20 years experience conducting research on a wide range of housing and urban topics for public and private sector organizations and clients. He currently is the Executive Director of the Joint Center for Housing Studies at Harvard University and has been for over 5 years. Since 2004, he has been a Lecturer in the Harvard Graduate School of Design. He also served as Research Director for the Millennial Housing Commission 2001-2002, a bipartisan commission appointed by the United States Congress. Dr. Belsky also serves as a director of Champion Enterprises, Inc.
James K. Jennings, Jr.	66	Mr. Jennings has served as a director since 2003. Since January 2005, Mr. Jennings has served as Executive Vice President and Secretary of both Ashbrook Simon-Hartley GP, LLC, and Ashbrook Simon-Hartley Operations GP, LLC, the general partners of limited partnerships which own the assets of a manufacturer of waste water treatment equipment with operations in the U.S., U.K. and Chile. Since October 2003, he has been Executive Vice President, Chief Financial Officer and Director of Atreides Capital, LLC, a private equity investment firm that specializes in the acquisition and operation of middle market manufacturing and distribution companies. He previously served as Executive Vice President, Chief Financial Officer and Director of Consolidation Partners, L.L.C., a privately-held merchant banking organization. Prior to that, he served as Executive Vice President and Chief Financial Officer of Loomis, Fargo & Co. and its predecessor organization, both cash-in-transit service providers, from 1994 to January 2003.

95

Norman J. Metcalfe	65	Mr. Metcalfe has served as a director since 2005. For the past 8 years he has managed his own investment and real estate business, Norman Metcalfe Consulting, Inc. He has served as Vice Chairman and Chief Financial Officer of The Irvine Company, one of the nation's largest real estate and community development companies. Mr. Metcalfe also serves on the boards of The Ryland Group and The Tejon Ranch Company.
David M. Moffett	56	Mr. Moffett has served as a director since 2006. In February 2007, Mr. Moffett retired as Vice Chairman and Chief Financial Officer for U.S. Bancorp where he served since 1993. He was also previously the chairman of the U.S. Bancorp Asset Liability Policy Committee and a member of its Managing Committee and Credit Policy Committee. Mr. Moffett serves on the boards of Ebay Inc., E.W. Scripps, Inc., and MBIA.
R. Scott Morrison, Jr.	68	Mr. Morrison has served as a director since 2004. For over 5 years he has been the owner and President of Morrison Properties, a real estate development firm. He is formerly a partner and divisional President for Florida based Arvida Corporation, a real estate firm. Mr. Morrison is also a development principal in the Boca Raton Innovation Center now known as the Florida Atlantic Research Park. Mr. Morrison was also a limited partner in Memphis Prince, L.P., d/b/a Audubon Park Place, which owns a 120 unit apartment building in Memphis, Tennessee, until 2005 when it was sold and he served as the President of the general partner, RSM II, Inc, until 2005 when it was dissolved. The limited partnership filed for protection under Chapter 11 of the federal bankruptcy laws in late 2003 and the court approved a reorganization plan late in 2004.
Peter S. O’Neill	70	Mr. O’Neill has served as a director since 1993. In 1979, he founded O’Neill Enterprises, LLC., a residential development and homebuilding company. Since 2003, he has served as chairman of PON, LLC and related companies, a residential real estate firm. Mr. O’Neill serves on the Board of Trustees and as a member of the Governance Committee for The College of Idaho. He is a member of the Urban Land Institute and is currently serving as a director of IDACORP and Idaho Power Company.

96

Richard G. Reiten	68	Mr. Reiten has served as a director since 2001. He has been a director for Northwest Natural Gas since 1996 and was Chairman of the Board from 2000 to 2005 and recently re-appointed the Chairman of the Board in 2006. Mr. Reiten was also President and CEO from 1997 to 2002 and President and COO in 1996 of Northwest Natural Gas. He is a director of U.S. Bancorp, IDACORP and National Fuel and Gas. Mr. Reiten is past Chairman of the Board for the American Gas Association and serves on the board of the Associated Electric & Gas Insurance Services Limited. He is also a trustee of the Board of The Nature Conservancy of Oregon, the Oregon Business Council and the Oregon Community Foundation.
Norman R. Walker	64	Mr. Walker has served as a director since 2006. Mr. Walker is a retired partner of PricewaterhouseCoopers LLP (PwC), a position held for more than 26 years. He most recently served as a National Risk Management Partner, Audit and Business Advisory Services from 1992 to 2003 with PwC and is currently the Chief Financial Officer of the Diocese of Bridgeport in Connecticut. Mr. Walker’s professional and business activities also include serving as Chairman of the Ethics Division Technical Standards Committee of the American Institute of Certified Public Accountants, President of PricewaterhouseCoopers LLP Foundation and Chair and President of the University of Oregon Foundation Board of Trustees. He is currently an Emeritus Trustee of the University of Oregon Foundation, a member of National Championship Properties, LLC, a wholly owned subsidiary of the University of Oregon Foundation, member of the Business Advisory Council of Lundquist College of Business at the University of Oregon, and a Trustee of the Bank Street College in New York.

Executive Officers

Name	Age	Position and Business Experience
Robert E. Mellor	64	Chairman of the Board and Chief Executive Officer Mr. Mellor became Chairman of the Board of Directors in 2002 and has been Chief Executive Officer since 1997. He has been a director since 1991. He was previously Of Counsel with the law firm of Gibson, Dunn & Crutcher LLP from 1990 to 1997. He is on the board of directors of Coeur d’Alene Mines Corporation and The Ryland Group. He is also on the board of councilors of Save-the-Redwoods League. He does not serve on the audit committee or compensation committee of any of these boards.
William M. Smartt	65	Senior Vice President and Chief Financial Officer Mr. Smartt has been a Senior Vice President and Chief Financial Officer since April 2004. Prior to joining the Company, he was an independent consultant from August 2001 to March 2004. From 1992 to 2001, he was Executive Vice President, Chief Financial and Administrative Officer of DHL Express, a leader in international air express services. His previous experience as a Chief Financial Officer included 10 years with Di Giorgio Corporation, a Fortune 500 Company, whose product lines included the distribution of building materials, prefabricated components and framing services.

97

Stanley M. Wilson	63	President and Chief Operating Officer Mr. Wilson was appointed President and Chief Operating Officer of Building Materials Holding Corporation in February 2008. Mr. Wilson was appointed President and CEO of BMC West in 2004 and was appointed Senior Vice President in 2003. He was appointed Vice President in 2000 and was General Manager of the Pacific Division of BMC West from 1993 to 2003. Mr. Wilson has been with the company since its beginning in 1987. His previous experience includes 19 years with the building materials distribution business of Boise Cascade Corporation.
Michael D. Mahre	48	Senior Vice President Mr. Mahre was appointed Senior Vice President of Building Materials Holding Corporation in 2003 and President and Chief Executive Officer of SelectBuild in 2002. He was appointed Vice President of Corporate Development in 2001. He joined the Company in 1999 as Director of Financial Planning and Analysis. Mr. Mahre was a principal of The Cambria Group, a private equity investment firm, from 1997 to 1998.
Eric R. Beem	38	Vice President and Controller Mr. Beem was appointed Vice President in January 2006 and Controller in April 2005. He joined the Company as Accounting Manager in 1996. Mr. Beem is a Certified Public Accountant and his experience includes 3 years with an international public accounting firm.
Mark R. Kailer	54	Vice President, Treasurer and Investor Relations Mr. Kailer has been Vice President and Treasurer since 2003. He joined the Company in 2000 as Assistant Treasurer. He was previously Senior Manager of Treasury Services at Circle International Group, a publicly-traded global logistics company based in San Francisco, from 1997 to 2000.
Jeffrey F. Lucchesi	54	Senior Vice President, Chief Information Officer Mr. Lucchesi joined the Company in August 2004 as Senior Vice President and Chief Information Officer. From 2000 to 2004, he was Senior Vice President of Worldwide Operations for Corio, Inc., an enterprise application service provider. Mr. Lucchesi also served from 1994 to 2000 as Vice President and Chief Information Officer for DHL Express, a leader in international air express services.

98

Paul S. Street 59 Senior Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary Mr. Street joined the Company in 1999 as Senior Vice President, General Counsel and Corporate Secretary and has been Chief Administrative Officer since 2001. He previously served as our outside General Counsel & Secretary while a partner of the law firm of Moffatt, Thomas, Barrett, Rock & Fields.

Certain Relationships and Legal Proceedings

Christopher Reiten is the son of Richard G. Reiten, a member of our Board of Directors. Christopher is not an officer and his compensation is not approved by the Compensation Committee of the Board of Directors. He received compensation of $412,083, including reimbursement of $115,296 for relocation, as Vice President of Marketing and Purchasing for BMC West in 2007.

During the past five years, there has been no litigation or legal proceeding involving a director or executive officer.

Audit Committee and Financial Expert

The Audit Committee of the Board of Directors consists of Sara L. Beckman, James K. Jennings, Jr., Norman J. Metcalfe and Norman R. Walker. Each member is independent as defined under the NYSE rules. The Board of Directors has determined that each Audit Committee member has sufficient knowledge in financial accounting matters to serve on the Audit Committee. James K. Jennings, Jr. is an audit committee financial expert, as defined by the rules of the Securities and Exchange Commission.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires executive officers, directors and persons owning more than 10% of a registered class of equity securities to file reports of ownership and changes in ownership with the SEC and the New York Stock Exchange. These reporting persons are also required by SEC regulations to furnish us with copies of all ownership forms filed. Based on review of such forms and written representations from reporting persons, we are in compliance with filing requirements as of December 31, 2007, except for one late Form 5 filing for each of the following persons: Robert Mellor, Michael Mahre, Steve Pearson and Stanley Wilson.

Code of Ethics

We have adopted a Code of Ethics and Code of Business Conduct for our directors, chief executive officer, chief financial officer, controller, other officers and employees. Also, we have adopted Corporate Governance Guidelines for our directors. These codes and guidelines require directors, officers and employees to act with honesty and integrity, avoiding actual or apparent conflicts of interest. As we become aware of issues, prompt action is taken. Copies are available free of charge on our website at www.bmhc.com by accessing Investor Information and then Corporate Governance.

99

ITEM 11. Executive Compensation

The information required by this item is included in our Proxy Statement under the following captions and is incorporated herein by reference.

· Compensation Discussion and Analysis

 · Executive Compensation Tables

· Compensation Committee Report

Our Proxy Statement will be filed within 120 days of our year end of December 31, 2007.

100

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information relating to security ownership of certain beneficial owners and management is included in our Proxy Statement under the caption Security Ownership of Certain Beneficial Owners and Management and is incorporated herein by reference.

The information relating to securities authorized for issuance under equity compensation plans is included in our Proxy Statement under the caption Compensation Discussion and Analysis (specifically the subheading of Equity Compensation Plan Information) and is incorporated herein by reference.

101

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information relating to Certain Relationships and Related Transactions is included in our Proxy Statement under the caption Certain Relationships and Related Party Transactions and is incorporated herein by reference.

The information relating to Director Independence is included in our Proxy Statement under the caption Corporate Governance (specifically the subheading of Director Independence) and is incorporated herein by reference.

102

ITEM 14. Principal Accounting Fees and Services

The information required by this item is included in our Proxy Statement under the caption Fees Paid to Independent Registered Public Accountants and is incorporated herein by reference.

103

PART IV

ITEM 15. Exhibits, Financial Statement Schedules

(a)	The following documents are filed as part of this Annual Report on Form 10-K:
	1.	Financial Statements as filed under Item 8 - Financial Statements and Supplementary Data:
		· Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005
		· Consolidated Balance Sheets as of December 31, 2007 and 2006
		· Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2007, 2006 and 2005
		· Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2007, 2006 and 2005
		· Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
		· Notes to Consolidated Financial Statements
		· Management’s Report on Internal Control Over Financial Reporting
		· Reports of Independent Registered Public Accounting Firm
	2.	Financial Statement Schedules:
		· Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2007, 2006 and 2005
		· Report of Independent Registered Public Accounting Firm
		Schedules other than those listed are omitted because they are not applicable or the required information is presented in the financial statements and related disclosures.
	3.	Exhibits:
		A list of the exhibits required to be filed as part of this report are presented in the Exhibit Index.

104

Schedule II

Valuation and Qualifying Accounts

(thousands)

Deductions to Accounts Receivable: Allowance for Returns, Discounts and Doubtful Accounts

Description	Balance at Beginning of Year	Additions Charged to Costs and Expenses	Additions Charged  to Other  Accounts	Deductions (1)	Balance at End of Year
Year Ended December 31, 2007	$4,487	$2,976	$ ―	$1,902	$5,561
Year Ended December 31, 2006	$3,756	$1,181	$ ―	$ 450	$4,487
Year Ended December 31, 2005	$4,367	$   447	$ ―	$1,058	$3,756

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

105

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Building Materials Holding Corporation:

Under date of March 10, 2008, we reported on the consolidated balance sheets of Building Materials Holding Corporation and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, comprehensive (loss) income, and cash flows for each of the years in the three-year period ended December 31, 2007, which report and consolidated financial statements are included in this annual report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule for the years ended December 31, 2007, 2006 and 2005 listed in Item 15(a)(2) of this Form 10-K. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

San Francisco, California

March 10, 2008

106

Exhibit Index Filed with the Annual Report on Form 10-K

For the Year Ended December 31, 2007

		Incorporated by Reference
Exhibit
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
3.50	Amended Certificate of Incorporation Filed with the Delaware Secretary of State on September 23, 1997	8-K12G3	000-23135	3.(i) 1	September 24, 1997
3.50.1	Certificate of Amendment to Certificate of Incorporation of Building Materials Holding Corporation	10-K	000-23135	3.50.1	February 27, 2006
3.60	Amended and Restated By-laws	10-Q	000-23135	3.70	November 14, 2001
10.10	Second Amended and Restated Credit Agreement Dated as of November 10, 2006 among Building Materials Holding Corporation, BMC West Corporation and other Subsidiary Guarantors, Wells Fargo Bank, National Association, as Administrative Agent, Joint Lead Arranger, Joint Book Manager Swingline Lender and L/C Issuer, JPMorgan Chase Bank, N.A., as Document Agent, Suntrust Bank as Joint Lead Arranger and Co-Syndication Agent, BNP Paribas as Joint Lead Arranger and Co-Syndication Agent and other Financial Institutions Party Hereto	8-K	000-23135	10.10	November 14, 2006
10.10.1	First Amendment to Second Amended and Restated Credit Agreement and Waiver Dated as of February 29, 2008 among Building Materials Holding Corporation, BMC West Corporation and other Subsidiary Guarantors, Wells Fargo Bank, National Association, as Administrative Agent, Joint Lead Arranger, Joint Book Manager Swingline Lender and L/C Issuer, JPMorgan Chase Bank, N.A., as Documentation Agent and the other Financial Institutions Party Hereto	8-K	001-33192	10.10.1	March 3, 2008
10.20*	Amended and Restated 1993 Employee Stock Option Plan	10-K	000-23135	10.34	March 28, 1997
10.20.1*	Non-Statutory Stock Option Agreement Pursuant to the Amended and Restated 1993 Employee Stock Option Plan	10-K	000-23135	10.21.1	February 27, 2006

107

		Incorporated by Reference
Exhibit
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
10.21*	Building Materials Holding Corporation 2000 Stock Incentive Plan	S-8	333-44260	4	August 22, 2000
10.21.1*	Non-Statutory Stock Option Agreement Pursuant to the 2000 Stock Incentive Plan	10-K	000-23135	10.23.1	February 27, 2006
10.22*	Building Materials Holding Corporation Employee Stock Purchase Plan	S-8	333-47122	4	October 2, 2000
10.23*	Stock Option Agreement Pursuant to the 2004 Amended Incentive and Performance Plan	10-Q	001-33192	10.25	May 7, 2007
10.23.1*	Stock Option Agreement Pursuant to the 2004 Amended Incentive and Performance Plan	10-K	000-23135	10.25.1	February 27, 2006
10.23.2*	Restricted Stock Agreement Pursuant to the 2004 Amended Incentive and Performance Plan	10-K	001-33192	10.25.2	February 21, 2007
10.24*	Cash Equity Plan	10-K	000-23135	10.26	February 27, 2006
10.40*	Building Materials Holding Corporation 2007 Annual Incentive Program for Certain Employees of BMHC and SelectBuild	10-Q	001-33192	10.40	May 7, 2007
10.41*	Building Materials Holding Corporation 2007 Annual Incentive Program BMC West Officers and Key Staff	10-Q	001-33192	10.41	May 7, 2007
10.46*	Building Materials Holding Corporation General Terms and Conditions BMC West Corporation Key Management 2007 Long-Term Cash Incentive Plan	10-Q	001-33192	10.46	July 31, 2007
10.47*	Building Materials Holding Corporation General Terms and Conditions BMHC Officers and BMHC Key Management 2006 Long-Term Cash Incentive Plan	10-Q	000-23135	10.45	August 1, 2006
10.48*	Building Materials Holding Corporation General Terms and Conditions BMHC Officers and BMHC Key Management 2005 Long-Term Cash Incentive Plan	10-K	000-23135	10.47	February 27, 2006
10.50*	Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors as Amended and Restated 2007				Filed with this Form

108

		Incorporated by Reference
Exhibit
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
10.51*	Building Materials Holding Corporation 1999 Deferred Compensation Plan for Directors	10-K	001-33192	10.44	February 21, 2007
10.52*	Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives as Amended and Restated 2007				Filed with this Form
10.53*	Building Materials Holding Corporation 1999 Deferred Compensation Plan for Executives	10-K	001-33192	10.46	February 21, 2007
10.60*	Building Materials Holding Corporation 2005 Executives Supplemental Retirement Income Plan as Amended and Restated 2007	8-K	001-33192	10.60	November 21, 2007
10.61*	Building Materials Holding Corporation 2002 Executives Supplemental Retirement Income Plan as Amended and Restated December 31, 2002	10-K	000-23135	10.60	February 27, 2006
10.70*	Severance Plan for Certain Executive Officers, Senior Management and Key Employees of the Company and its Subsidiaries as Amended and Restated Effective January 1, 2008				Filed with this Form
10.80	Amended Form of Indemnity Agreement Between Building Materials Holding Corporation and its Officers and Directors	10-K	000-23135	10.7.1	March 26, 2003
10.90*	Amended and Restated Employment Agreement by and Between Robert E. Mellor and Building Materials Holding Corporation as of December 26, 2007				Filed with this Form
10.91*	Employment Agreement by and Between William M. Smartt and Building Materials Holding Corporation as of April 1, 2006	10-Q	000-23135	10.91	August 1, 2006
10.91.1*	First Amendment to Employment Agreement by and Between William M. Smartt and Building Materials Holding Corporation as of February 19, 2008				Filed with this Form
10.92*	Employment Agreement by and Between Stanley M. Wilson and Building Materials Holding Corporation as of February 19, 2008				Filed with this Form
21.0	Subsidiaries of Building Materials Holding Corporation				Filed with this Form
23.1	Consent of KPMG LLP				Filed with this Form
31.1	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				Filed with this Form
31.2	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				Filed with this Form

109

		Incorporated by Reference
Exhibit
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
32.1	CEO and CFO Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Filed with this Form

* Indicates a management contract or compensatory plan

110

SIGNATURES

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

	Building Materials Holding Corporation
Date: March 10, 2008	/s/ Robert E. Mellor
	Robert E. Mellor Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

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

Signature	Title	Date
/s/ Robert E. Mellor	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	March 10, 2008
Robert E. Mellor
/s/ William M. Smartt	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	March 10, 2008
William M. Smartt
/s/ Eric R. Beem	Vice President and Controller (Principal Accounting Officer)	March 10, 2008
Eric R. Beem
/s/ Sara L. Beckman	Director	March 10, 2008
Sara L. Beckman
/s/ Eric S. Belsky	Director	March 10, 2008
Eric S. Belsky
/s/ James K. Jennings, Jr.	Director	March 10, 2008
James K. Jennings, Jr.
/s/ Norman J. Metcalfe	Director	March 10, 2008
Norman J. Metcalfe
/s/ David M. Moffett	Director	March 10, 2008
David M. Moffett
/s/ R. Scott Morrison, Jr.	Director	March 10, 2008
R. Scott Morrison, Jr.
/s/ Peter S. O’Neill	Director	March 10, 2008
Peter S. O’Neill
/s/ Richard G. Reiten	Director	March 10, 2008
Richard G. Reiten
/s/ Norman R. Walker	Director	March 10, 2008
Norman R. Walker

111

List of Exhibits Filed
Exhibit
Number	Exhibit Description
10.50*	Building Materials Holding Corporation 2005 Deferred Compensation Plan for Directors as Amended and Restated 2007
10.52*	Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives as Amended and Restated 2007
10.70*	Severance Plan for Certain Executive Officers, Senior Management and Key Employees of the Company and its Subsidiaries as Amended and Restated Effective January 1, 2008
10.90*	Amended and Restated Employment Agreement by and Between Robert E. Mellor and Building Materials Holding Corporation as of December 26, 2007

10.91.1*	First Amendment to Employment Agreement by and Between William M. Smartt and Building Materials Holding Corporation as of February 19, 2008
10.92*	Employment Agreement by and Between Stanley M. Wilson and Building Materials Holding Corporation as of February 19, 2008

21.0	Subsidiaries of Building Materials Holding Corporation
23.1	Consent of KPMG LLP
31.1	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Indicates a management contract or compensatory plan

112

EX-10.52

Exhibit 10.52

Building Materials Holding Corporation

2005 Deferred Compensation Plan

for Executives

(Amended and Restated 2007, Effective January 1, 2005)

TAX ADVICE DISCLAIMER: Any statements regarding tax matters made herein, including any attachments, cannot be relied upon by any person to avoid tax penalties and are not intended to be used or referred to in any marketing or promotional materials. To the extent this communication contains a tax statement or tax advice, Holme Roberts & Owen LLP does not and will not impose any limitation on disclosure of the tax treatment or tax structure of any transactions to which such tax statement or tax advice relates.

Table of Contents

			Page
ARTICLE 1. DEFINITIONS			1
	1.1	Account	1
	1.2	Base Salary	1
	1.3	Beneficiary	1
	1.4	Board of Directors	1
	1.5	Bonus	1
	1.6	Change in Control	2
	1.7	Code	2
	1.8	Committee	2
	1.9	Company	2
	1.10	Company Contributions	2
	1.11	Deferral	2
	1.12	Disability	3
	1.13	Effective Date	3
	1.14	Eligible Compensation	3
	1.15	ERISA	3
	1.16	Hardship	3
	1.17	Incentive Plan	4
	1.19	Liquidation	4
	1.20	Participant	4
	1.21	Plan	4
	1.22	Plan Year	4
	1.23	Regulations	4
	1.26	Stock	5
	1.27	Trust or Trust Agreement	5
	1.28	Trust Fund	5
	1.29	Trustee	5
ARTICLE 2. ELIGIBILITY			5
	2.1	Eligibility Requirements	5
	2.2	Lapse of Eligibility	5
ARTICLE 3. DEFERRED COMPENSATION			6
	3.1	Deferral Elections	6
	3.2	Vesting	8
ARTICLE 4. PAYMENT OF DEFERRED COMPENSATION			8
	4.1	Election of Timing of Payment	8
	4.2	Election of Method of Payment	9
	4.3	Subsequent Elections	10
	4.4	Payment upon Hardship	11
	4.5	Payment Following a Change in Control	11

Deferred Compensation Plan for Executives

i

4.6	Payment upon Death	11
4.7	Designation of Beneficiary	11
4.8	Administration of Payments	12
4.9	Permitted Acceleration of Payments	12
4.10	Permitted Delay of Payments	13

ARTICLE 5. TRUST AND INVESTMENT			13
	5.1	Accounts	13
	5.2	Participants’ Rights Unsecured	13
	5.3	Trust Agreement	14
	5.4	Crediting and Debiting of Account	14
	5.5	Voting of Stock	15
ARTICLE 6. AMENDMENT AND TERMINATION			15
	6.1	Amendment	15
	6.2	Termination	15
ARTICLE 7. ADMINISTRATION			16
	7.1	Administration	16
	7.2	Applying for Benefits	16
	7.3	Liability of Committee; Indemnification	18
	7.4	Expenses	18
ARTICLE 8. GENERAL AND MISCELLANEOUS			18
	8.1	Rights Against Company	18
	8.2	Assignment or Transfer	18
	8.3	Severability	19
	8.4	Construction	19
	8.5	Governing Law	19
	8.6	Payment Due to Incompetence	19
	8.7	Taxes	19
	8.8	Insurance	19
	8.9	Attorney’s Fees	20
	8.10	Plan Binding on Successors and Assignees	20
Appendix		Acknowledgment

Deferred Compensation Plan for Executives

ii

BUILDING MATERIALS HOLDING CORPORATION

2005 DEFERRED COMPENSATION PLAN

FOR EXECUTIVES

Building Materials Holding Corporation, a Delaware corporation (the “Company”) hereby establishes an unfunded plan for the purpose of providing deferred compensation for a select group of management and highly compensated employees in compliance with Section 409A of the Internal Revenue Code, as amended (the “Code”).

RECITALS

WHEREAS, the Participants identified by the Compensation Committee of the Board of Directors of the Company, or any other committee designated by the Board of Directors of the Company to administer the Plan in accordance with Article 8 of the Plan (the “Committee”), as eligible to participate in the Plan (each a “Participant,” or collectively the “Participants”) provide services to the Company; and

WHEREAS, the Company desires to continue to maintain an unfunded deferred compensation plan and the Participants desire the Company to pay certain deferred compensation and/or related benefits to or for the benefit of the Participants, or a designated Beneficiary, or both;

WHEREAS, the Company established this deferred compensation plan with respect to compensation earned on or after January 1, 2005 to comply with Code Section 409A;

NOW, THEREFORE, the Company hereby amends and restates the Plan for the purpose of complying with the final regulations promulgated under Code Section 409A, which become effective January 1, 2008.

ARTICLE 1.DEFINITIONS

1.1 Account means, collectively, the separate subaccount(s) established under the Plan and the Trust for each Participant. The Company shall furnish each Participant with a statement of his or her Account balance at least annually.

1.2 Base Salary means a Participant’s regular annual compensation for a Plan Year, determined as of the first day of that year, excluding bonuses, commissions, overtime, incentive payments, non-monetary awards, and other special compensation, before reduction for compensation deferred pursuant to all qualified and non-qualified plans of the Company.

1.3 Beneficiary means the beneficiary designated by the Participant to receive the Participant’s deferred compensation benefits in the event of his or her death.

1.4 Board of Directors means the Board of Directors of the Company.

1.5 Bonus means amounts (if any) awarded under the annual bonus policy maintained by the Company, any commissions earned on sales and any payments made under the Company’s bonus programs for performance periods of shorter than 12 months.

Deferred Compensation Plan for Executives

1

1.6 Change in Controlmeans the occurrence of any of the following, limited to the extent any such occurrence is consistent with the definition of a “change in ownership,” “change in effective control,” “change in the ownership of a substantial portion of a corporation’s assets” or similar event described in Code Section 409A or the Regulations:

(a) when any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended (“Exchange Act”) (other than the Company, a Subsidiary or a Company benefit plan, including any trustee of such plan acting as trustee) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities, where such person’s beneficial ownership of the Company’s securities was not initiated by the Company or approved by the Board of Directors; or

(b) the occurrence of a transaction requiring shareholder approval, and involving the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation, where such merger was not initiated by the Company and in which the Company is not the surviving parent entity; or

(c) a change in the composition of the Board of Directors during any 12-month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

1.7 Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to any Code section shall include any successor or comparable provision of the Code or application Regulations.

1.8 Committee means the Compensation Committee of the Board of Directors or any other committee designated by the Board of Directors to administer the Plan in accordance with Article 8.

1.9 Company means Building Materials Holding Corporation, a Delaware Corporation, any successor organization thereto, and any corporation or other entity that must be aggregated with Building Materials Holding Corporation pursuant to the Code or Regulations.

1.10 Company Contributions means the Company’s discretionary contribution, if any, pursuant to Section 3.1(b).

1.11 Deferralrefers to a Participant’s legally binding right during a Plan Year to compensation that, pursuant to the terms of the Plan and in compliance with Code Section 409A and the Regulations, is payable to (or on behalf of) the Participant in a later Plan Year. If an attempted Deferral does not comply with the term of the Plan, Code Section 409A or the Regulation, the Committee may, in its sole discretion, reform or reject the attempted Deferral to avoid the violation of Code Section 409A by the Participant or the Plan.

Deferred Compensation Plan for Executives

2

1.12 Disability means—

(a) the condition of being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(b) by reason of suffering from any medically determinable physical or mental impairment that is expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company

1.13 Effective Date of this amendment and restatement means January 1, 2005, except as otherwise specified.

1.14 Eligible Compensation means projected annual compensation, determined on an annual basis by the Company at or before the beginning of the Plan Year, which may consist of salary, bonus, and/or other cash-based or stock-based incentive payments, but which shall not include any special or non-recurring compensatory payments such as hiring bonuses, moving or relocation bonuses or automobile allowances.

1.15 ERISA means the Employee Retirement Income Security Act of 1974, as amended.

1.16 Hardship refers to a payment made on account of an unforeseeable immediate and heavy financial need of the Participant and that is necessary to satisfy that financial need in accordance with the following:

(a) Amount. The amounts distributed with respect to an emergency cannot exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the payment, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

(b) Circumstances. Whether a Participant has an immediate and heavy financial need shall be determined by the Committee based on all relevant facts and circumstances, and shall refer to a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the Participant; loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

Deferred Compensation Plan for Executives

3

1.17 Incentive Plan means one or more incentive program(s) having a performance period of 12 months or longer, designated by the Company from time to time and as amended from time to time, from which Participants may make Deferrals. Incentive Plan payments shall be subject to the limitations on and requirements for “performance-based compensation” under Code Section 409A and the Regulations.

1.18 Key Employee means an employee of the Company, who is, as determined under Code Section 416(i)—

(a) an officer of the Company having an annual compensation greater than $130,000 (as adjusted),

(b) a 5% owner of the Company, or

(c) a 1% owner of the Company having annual compensation from the Company of more than $150,000,

or as otherwise defined for purposes of Code Section 409A(a)(2)(B), to be effective as of the effective date of such change. For purposes of subsection (a), no more than 50 employees (or, if lesser, the greater of 3 employees or 10% of the employees) shall be treated as officers. The Key Employee identification date shall be January 1 of each Plan Year, and the Key Employee effective date shall be the following May 1.

1.19 Liquidation means any liquidation or dissolution of the Company taxed under Code Section 331 or with approval of a bankruptcy court pursuant to United States Code Title 11, Section 503(b)(1)(A).

1.20 Participant means, as of the date specified by the Committee, each employee of the Company designated by the Company to be entitled to defer compensation pursuant to the Plan, as well as each employee or former employee having an Account under the Plan. The term “Participant” includes a Participant’s Beneficiary where the context so requires.

1.21 Plan means the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives, as amended from time to time.

1.22 Plan Year means the year beginning each January 1 and ending December 31.

1.23 Regulations means the rules, regulations, interpretations and procedures promulgated under Code Section 409A and other relevant sections of the Code, as modified from time to time.

1.24 Separation from Service of a director or independent contractor of the Company has occurred when the Company and the individual reasonably anticipate that no services (as a director, independent contractor or employee) in excess of 49% of the average level of services performed over the immediately preceding 12 months will be performed after that date, regardless of the reason (other than death) for the reduction in services; provided that a “Separation from Service” shall not occur if a Participant is on bona fide leave of absence of up to 6 months and, if longer, has a contractually or statutorily protected right of reemployment. “Separation from Service” shall be interpreted in accordance with the meaning of “separation from service” or similar term under Code Section 409A and the Regulations.

Deferred Compensation Plan for Executives

4

1.25 Service means the Participant’s service with the Company that is not interrupted or terminated based on the facts and circumstances.

1.26 Stock means the Common Stock issuable by the Company to Participants for Service rendered.

1.27 Trust or Trust Agreement means the Trust Agreement applicable to the Plan, as amended from time to time, entered into between the Company and the Trustee to carry out the provisions of the Plan.

1.28 Trust Fund means the cash and other assets and/or properties held and administered by Trustee pursuant to the Trust to carry out the provisions of the Plan.

1.29 Trustee means the designated Trustee acting at any time under the Trust.

ARTICLE 2.ELIGIBILITY

2.1 Eligibility Requirements. Eligibility to participate in the Plan shall be limited to the Participants of the Company who—

(a) are classified as key management employees of the Company who have or are estimated to have Eligible Compensation in excess of $100,000 for the prior or upcoming Plan Year, as applicable,

(b) have been selected by the Committee to participate in the Plan; and

(c) execute a participation agreement in such form and according to such procedures as determined by the Committee or receive an acknowledgement permitting a Participant to participate in the Plan according to such terms as specified by the Committee.

Deferral of Eligible Compensation under the Plan shall not commence until the Participant has complied with the election procedures set forth in Article 3. Nothing in the Plan or in the Acknowledgment should be construed to require any contributions to the Plan on behalf of the Participant by the Company.

2.2 Lapse of Eligibility. To the extent that the number of Participants eligible to participate in the Plan exceeds 2% of the Company’s total employee population, those eligible to be Participants who have the lowest Eligible Compensation in the prior Plan Year shall not be eligible for the following Plan Year. Notwithstanding the foregoing, in the event the Committee determines, in its sole discretion, that any Participant shall no longer be eligible to participate in the Plan, or no longer qualifies as a member of a select group of management or highly compensated employees of the Company, then the Participant shall cease active participation in the Plan and all contributions made on the Participant’s behalf shall cease as of the date determined by the Committee.

Deferred Compensation Plan for Executives

5

ARTICLE 3.DEFERRED COMPENSATION

3.1 Deferral Elections.

(a) Election to Defer Compensation. Each eligible Participant may elect to defer annually the receipt of a portion of the Eligible Compensation for Service otherwise payable to him or her by the Company during each Plan Year or portion of a Plan Year that the Participant is in Service. Any Participant’s election to defer Eligible Compensation must satisfy the following conditions:

(1) Newly Eligible Participants. A Participant shall have 30 days from the date of first becoming a Participant to submit the required Deferral election documents for the then-current Plan Year.

(2) Plan Year Elections. Each other Deferral election must be made no later than the day prior to the beginning of the Plan Year during which the Eligible Compensation to be deferred is earned or such later date as may be permitted under Code Section 409A.

(3) Minimum and Maximum Deferrals. The minimum annual Deferral amount, which must be withheld from Base Salary or Bonus, is $5,000. The maximum Deferral percentage is 80% of Eligible Compensation.

(4) Stock. The number of shares of Stock deferred by a Participant shall be credited to the Account, including fractional shares. The credit for deferred Stock shall be entered on the Company’s books of account as soon as practicable. Dividends payable on Stock may be used to purchase additional Stock, as determined in the sole discretion of the Trustee.

(5) Conditions of Election. Any Deferral election must be made in such form as required by the Committee, then completed by the Participant and delivered to the Company, together with all other documents required by the Committee. Each Deferral election shall be irrevocable with respect to any Eligible Compensation covered by the election, including Eligible Compensation payable in the Plan Year in which the election suspending or modifying the prior Deferral election is delivered to the Company.

(6) Evergreen Election. Each election or discontinuance of an election will continue in force for each successive Plan Year until or unless suspended or modified by the filing of a new election with the Company by the Participant in accordance with subsection (a)(2).

(7) Transition Period Elections. Deferral elections for the 2005 Plan Year shall be made no later than March 15, 2005. Prior to January 1, 2006, a Participant shall be permitted to terminate participation in the Plan or cancel a Deferral election for the 2005 Plan Year, causing the amounts subject to such termination or cancellation to be includible in the Participant’s current income.

Deferred Compensation Plan for Executives

6

(b) Company Contributions. The Company shall not be obligated to make any other contribution to the Plan on behalf of any Participant at any time. The Company may make Company Contributions to the Plan on behalf of one or more the Participants. Company Contributions, if any, made to Participant Accounts shall be determined in the sole and absolute discretion of the Company, and may be made without regard to whether the Participant to whose Account such contribution is credited has made, or is making, Deferrals. The Company shall not be bound or obligated to apply any specific formula or basis for calculating the amount of any Company Contributions, and the Company shall have sole and absolute discretion as to the allocation of Company Contributions among Participants’ Accounts. The use of any particular formula or basis for making a Company Contribution in one year shall not bind or obligate the Company to use such formula or basis in any other year. As of the date of adoption of this restatement of the Plan, the Company is matching 50% of up to the first 6% of Deferrals (or, in the case of SelectBuild, 25% of the first 4%), including Bonus and/or Incentive Plan payments.

(c) Incentive Plan.

(1) Deferral Election. Participants who are eligible for the Incentive Plan, and who are in Service from the beginning of the Incentive Plan’s performance period through the date of a Deferral election, may elect to defer Bonuses under the Plan according to procedures established by the Committee. Deferral of a Bonus must be made no later than the date that is 6 months before the end of the performance period, but before the date that the fact of receipt or the amount of such Bonus becomes readily ascertainable. The election procedures for the Deferral of Bonuses shall be determined and, as necessary, supplemented by the Committee from time to time.

(2) Conversion to Stock. The Committee may require that any Deferral election under this subsection specify the percentage or amount, if any, of the Bonus that the Participant elects to convert to Company common stock. Any payment converted to stock shall be issued in the Participant’s name for the number of shares based on the market price on the day that the payment is made. The conversion election must be made prior to the final Company fiscal year of the Incentive Plan performance period. One Deferral election must apply to the entire amount of stock converted for that Plan Year and provide for at least one year of Deferral.

(d) Administration of Deferral Elections. The Company shall withhold the amount or percentage of Base Salary specified to be deferred in equal amounts for each payroll period and shall withhold the amount or percentage of Bonus specified to be deferred at the time or times such Bonus is or otherwise would be paid to the Participant. The amount or percentage of Base Salary that a Participant elects to defer will remain constant for the Plan Year of the election and shall not be subject to change during the Plan Year. A Bonus election may be changed only according to subsection (c).

Deferred Compensation Plan for Executives

7

3.2 Vesting. All Deferrals from Eligible Compensation elected by the Participant shall be fully vested at all times. Notwithstanding any provision of the Plan to the contrary, Company Contributions, if any, may be subject to a substantial risk of forfeiture in accordance with the terms of a vesting schedule, which may be determined by the Company in its sole discretion. As of the date of adoption of this restatement of the Plan, Company Contributions vest according to the schedule applied to the tax-qualified Code Section 401(k) plan sponsored by the Company (20% for each plan year of service in which a minimum of 1,000 hours is credited), which vesting schedule may be waived by the Committee in its sole discretion. In the event of a Change in Control, all Company Contributions will become immediately 100% vested. Service with predecessor companies shall be credited for purposes of vesting.

ARTICLE 4. PAYMENT OF DEFERRED COMPENSATION

4.1 Election of Timing of Payment.

(a) Affirmative Election. Each Participant who makes a Deferral election for a Plan Year under Section 3.1 shall submit an election of the timing of payment applicable to that Deferral. Any Participant’s election of the timing of payment must satisfy the following conditions:

(1) Newly Eligible Participants. A Participant shall have 30 days from the date of first becoming a Participant to submit the required election for the then-current Plan Year.

(2) Plan Year Elections. Each other election must be made no later than the day prior to the beginning of the Plan Year during which the Eligible Compensation to be deferred is earned or such later date as may be permitted under Code Section 409A.

(3) Transition Period Elections. On or before December 31, 2008, a Participant shall be permitted to revoke or revise his designated time of payment in accordance with the procedures established by the Committee. The revised election shall designate a time of payment described in subsection (b) according to procedures established by the Committee, provided that no change in the timing of payment shall result in acceleration of any payment to the year in which the revised election is made or delay of any payment otherwise payable in the year in which the election is made.

(b) Timing. Participants may choose among the following times for payment in accordance with the procedures established by the Committee:

(1) upon the Participant’s reaching a specified age,

Deferred Compensation Plan for Executives

8

(2) upon the Participant’s Separation from Service, or

(3) upon either—

(A) the earlier to occur of the events in subsections (b)(1) and (b)(2), or

(B) the later to occur of the events in subsections (b)(1) and (b)(2).

Notwithstanding any provision to the contrary, a Participant may choose a specific date as the time of payment, or as an alternate time of payment if the election specifies “the earlier of” or “the later of” the specific date and another permissible event (i.e., specified age or Separation from Service), at such times and in accordance with the procedures established by the Committee.

In the case of a Key Employee, any payment made on account of a Separation from Service shall not be made until a date that is 6 months after the date of Separation from Service. The initial payment shall be equal to the payments that would have been paid to the Key Employee had no 6-month delay applied, together with any earnings on such amount as applied in the sole discretion of the Committee.

(c) Default Elections. In the event the Participant fails properly to designate the timing of payment, subject to a subsequent election made under Section 4.3, such amounts shall be payable upon the Participant’s Separation from Service.

(d) Other Payment Events. Notwithstanding the Participant’s elected timing of payment, the Company shall commence payment upon the earliest to occur of the following events:

(1) the Participant’s Hardship as provided in Section 4.4;

(2) a Change in Control of the Company as provided in Section 4.5;

(3) the Participant’s Disability, as determined by the Committee in its sole discretion, according to the Participant’s elected method of payment; or

(4) the Participant’s death, according to the Participant’s elected method of payment.

4.2 Election of Method of Payment.

(a) Affirmative Election. Each Participant who makes a Deferral election for a Plan Year under Section 3.1 shall submit an election of the method of payment applicable to that Deferral. Any Participant’s election of the timing of payment must satisfy the following conditions:

(1) Newly Eligible Participants. A Participant shall have 30 days from the date of first becoming a Participant to submit the required election for the then-current Plan Year.

Deferred Compensation Plan for Executives

9

(2) Plan Year Elections. Each other election must be made no later than the day prior to the beginning of the Plan Year during which the Eligible Compensation to be deferred is earned or such later date as may be permitted under Code Section 409A.

(3) Transition Period Elections. On or before December 31, 2008, a Participant shall be permitted to revoke or revise his designated method of payment in accordance with the procedures established by the Committee. The revised election shall designate a method of payment described in subsection (b) according to procedures established by the Committee, provided that no change in the method of payment shall result in acceleration of any payment to the year in which the revised election is made or delay of any payment otherwise payable in the year in which the election is made.

(b) Methods. Participants may choose among the following methods of payment in accordance with the procedures established by the Committee:

(1) with respect to cash amounts—

(A) a single lump sum payment,

(B) monthly installments over a designated period of 60 months, which installments shall each be treated as a separate payment, subject to the procedures established under Section 4.3, or

(C) monthly installments over a designated period of 120 months, which installments shall each be treated as a separate payment, subject to the procedures established under Section 4.3; and

(2) with respect to Stock—

(A) a single lump sum issuance, or

(B) annual installments over a designated period of 5 years, which installments shall each be treated as a separate payment, subject to the procedures established under Section 4.3.

(c) Default Elections. In the event the Participant fails properly to designate the method of payment, subject to a subsequent election made under Section 4.3, such amounts shall be payable in the form of a lump sum.

4.3 Subsequent Elections. Subject to Sections 4.1, 4.2, 4.9 and 4.10, a Participant may not accelerate the timing or method of any payment under the Plan, except as provided in the Regulations. Any change to an election regarding the timing or method of payment must satisfy the following conditions:

(a) the subsequent election to delay a payment must be made no later than 12 months prior to the date of the first scheduled payment; and

Deferred Compensation Plan for Executives

10

(b) the first payment must be deferred for a period of at least 5 years from the date the payment would otherwise have been made.

In the case of a subsequent election to change the timing of monthly installments, each subsequent election will apply to the installments to be made over a 12-month period, starting with the first installment designated by the Participant’s subsequent election.

If such subsequent election does not satisfy the conditions specified in this section, the prior election shall be used to determine the method and timing of payment. The last effective election accepted and acknowledged by the Committee shall govern the payment of the applicable portion of the Participant’s Account. Elections under this subsection will not affect the method or timing of payments made on account of Hardship, Disability or death except as otherwise provided in this article.

4.4 Payment upon Hardship. A Participant may apply for payment from his or her Account to the extent that the Participant demonstrates to the reasonable satisfaction of the Committee that he or she needs the specified funds due to Hardship. The Committee may deny or approve all or any portion of a payment upon Hardship upon terms permitted under the Code and Regulations, as determined in its sole discretion.

4.5 Payment Following a Change in Control.

(a) Payment Following a Change in Control. Notwithstanding any other provisions of the Plan, in the event a Participant has not experienced an elected payment event at the time of a Change in Control, then the Participant shall be entitled to receive payment of his or her Account balance in a lump sum payment within 30 days of a Change in Control.

(b) Payments Commenced. Following a Change in Control, any Participant (or Beneficiary thereof) already receiving payments under the Plan shall continue to receive the balance of the Participant’s Account paid according to the method elected by the Participant, subject to the acceleration of payment pursuant to a termination and liquidation of the Plan pursuant to Section 4.11(e).

4.6 Payment upon Death. Upon a Participant’s death, the Participant’s Beneficiary will be entitled to receive the balance of the future payments of the Participant’s Account according to the method of payment elected by the Participant. If the Participant has received all of the scheduled payments prior to his or her death, no further benefits shall be due under the Plan.

4.7 Designation of Beneficiary. The Participant may designate a Beneficiary or Beneficiaries to receive any amount due hereunder by the Participant by written notice thereof to the Company at any time prior to his or her death and may revoke or change the Beneficiary so designated without the Beneficiary’s consent by written notice delivered to the Company at any time and from time to time prior to the Participant’s death. If the Participant is married and a resident of a community property state, one half of any amount due under the Plan which is the result of an amount contributed to the Plan during the Participant’s marriage is the community property of the Participant’s spouse and the Participant may designate a Beneficiary or Beneficiaries to receive only the Participant’s one-half interest. If the Participant shall have failed to designate a Beneficiary, or if no such Beneficiary shall survive him or her, then such amount shall be paid to his or her estate. To be effective, Beneficiary designations must be completed according to procedures established by the Committee.

Deferred Compensation Plan for Executives

11

4.8 Administration of Payments. Payment of the lump sum or the first of a series of installments shall be made or commence within 90 days following the date of the payment event or identification of the Beneficiary, if later, as applicable, but in no event later than the end of the 2½ month period following the Plan Year in which occurs the payment event. Subsequent installments, if any, shall be made on the first day of each month following the first installment as determined by the Company. The amount of each installment shall be calculated by dividing the Account balance as of the date of the payment by the number of installments remaining pursuant to the Participant’s payment election.

4.9 Permitted Acceleration of Payments. To the extent permitted by Code Section 409A and the Regulations, the Company shall commence or accelerate payment to Participant, Participant’s Beneficiary or other appropriate payee the portion of Participant’s Account authorized for payment in accordance with Code Section 409A and the Regulations, including the following:

(a) amounts payable to an individual other than the Participant to the extent necessary to fulfill a domestic relations order approved by the Committee in its sole discretion;

(b) de minimis cashout payments that result in the termination of the entirety of a Participant’s interest in the Plan, a Deferred Compensation Plan maintained by the Company and any other arrangement that is aggregated with the Plan under the Regulations, if the payment is not greater than the dollar amount applicable under Code Section 402(g)(1)(B) ($15,500 in 2007);

(c) payment to Participant to pay the Federal Insurance Contributions Act tax imposed under Code Section 3101 and 3121(v)(2) on Eligible Compensation deferred under the Plan, grossed up as permitted under the Regulations;

(d) in the event the Plan with respect to that Participant fails to meet the requirements of Code Section 409A and the Regulations, payment to Participant in an amount not to exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A and the Regulations;

(e) payment upon termination and liquidation of the Plan within 12 months following a Liquidation, provided that payment is included in the Participant’s income in the tax year in which occurs the latest of the Plan termination, lapse of any substantial risk of forfeiture, or payment becomes administratively practicable;

(f) payment upon termination and liquidation of the Plan pursuant to irrevocable action taken by the Company within 30 days preceding or 12 months following a Change in Control, provided that any other arrangement that is aggregated with the Plan under the Regulations is also terminated and liquidated with respect to each Participant that experienced the Change in Control; and

Deferred Compensation Plan for Executives

12

(g) payment upon termination and liquidation of the Plan, provided that (i) Plan termination and liquidation does not occur proximate to a downturn in the Company’s financial health, (ii) any other arrangement that is aggregated with the Plan under the Regulations is also terminated and liquidated with respect to each Participant that experienced the Change in Control, (iii) no Plan liquidation payments are made within 12 months following the date the Company takes all necessary irrevocable action to terminate and liquidate the Plan (the “termination date”) (other than payments payable for reasons other than Plan liquidation), (iv) all payments are made within 24 months of the termination date; and (v) the Company does not adopt a new plan that would be aggregated with any terminated and liquidated plan if the same Participant participated in both plans, at any time within 3 years following the termination date.

4.10 Permitted Delay of Payments. To the extent permitted by Code Section 409A and the Regulations, the Company shall delay payment to Participant, Participant’s Beneficiary or other appropriate payee the portion of Participant’s vested Plan Benefit authorized for payment—

(a) to the extent that the Committee reasonably anticipates that the Company’s deduction with respect to such payment otherwise would be limited or eliminated by application of Code Section 162(m);

(b) to the extent that the Committee reasonably anticipates that the making of the payment will violate federal securities laws or other applicable law; or

(c) upon such other events and conditions as may be permitted under the Code and the Regulations;

provided that the payment shall be made at the earliest date at which the Committee reasonably anticipates that the applicable circumstance specified above is of no further force or effect.

ARTICLE 5.TRUST AND INVESTMENT

5.1 Accounts. The Company shall establish separate Accounts for each Participant who participates in the Plan. No special fund shall be established nor shall any note or security be issued by the Company with respect to a Participant’s Accounts.

5.2 Participants’ Rights Unsecured. The right of the Participant or his or her Beneficiary to receive a payment hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his or her Beneficiary shall have any rights in or against any amount credited to his or her Account or any other specific assets of the Company, except as otherwise provided in the Trust. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Plan and the Company or any other person.

Deferred Compensation Plan for Executives

13

5.3 Trust Agreement. The Company may establish the Trust for the purpose of retaining assets set aside by the Company pursuant to the Trust Agreement for payment of all or a portion of the amounts payable pursuant to the Plan. Any benefits not paid from the Trust shall be paid solely from the Company’s general funds, and any benefits paid from the Trust shall be credited against and reduced by a corresponding amount the Company’s liability to the Participants under the Plan. No special or separate fund, other than the Trust Agreement, shall be established and no other segregation of assets shall be made to assure the payment of any benefits hereunder. All Trust Funds shall be subject to the claims of general creditors of the Company in the event the Company is insolvent (as that term is defined in the Trust Agreement). The obligations of the Company to pay benefits under the Plan constitute an unfunded, unsecured promise to pay and Participants shall have no greater rights than general creditors of the Company. Trust assets shall not, at any time, be located outside of the United States or be transferred outside of the United States, whether or not such assets are available to satisfy claims of general creditors.

5.4 Crediting and Debiting of Account. In accordance with and subject to the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant’s Account in accordance with the following rules:

(a) Measurement Funds. The Committee shall select from time to time certain mutual funds, insurance company separate accounts, indexed rates or other methods (the “measurement funds”) for purposes of crediting or debiting additional amounts to Participants’ Account. The Committee may discontinue, substitute or add a measurement fund; provided however, that (1) any decision to retain, discontinue or substitute a measurement fund shall be made in good faith, and (2) there shall at all times be a minimum of 4 measurement funds of materially different risk and return characteristics.

(b) Election of Measurement Funds. A Participant shall elect, according to procedures establish by the Committee, one or more measurement fund(s) to be used to determine the amounts to be credited or debited to his or her Account. If a Participant does not elect any of the measurement funds as described in the previous sentence, the Participant’s Account Balance may automatically be allocated into a default measurement fund which is selected by the Committee. A Participant may elect to change his or her measurement funds and/or allocations among measurement funds from time to time according to procedures established by the Committee. Each election shall be implemented according to procedures established by the Committee and shall continue thereafter for each subsequent day in which the Participant has an Account. The Committee may, in its sole discretion, determine that an election is void, shall not be applied or shall be substituted with the Trustee’s choice of measurement funds. The Committee may also provide that a change shall not take effect for a specified period of time following the Committee’s receipt of such an election.

Deferred Compensation Plan for Executives

14

(c) Crediting or Debiting Method. The performance of each elected measurement fund (either positive or negative) will be determined by the Committee based on the performance of the measurement funds themselves. A Participant’s Account shall be credited or debited not less frequently than on a monthly basis based on the performance of each selected measurement fund for the corresponding period of time.

(d) No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the measurement funds are to be used for measurement purposes only, and a Participant’s election of any such measurement fund, the allocation of his or her Account thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant’s Account shall not be considered or construed in any manner as an actual investment of his or her Account in any such measurement fund. In the event that the Company or the Trustee, in its own discretion, decides to invest funds in any or all of the investments on which the measurement funds are based, no Participant shall have any rights in or to such investments themselves.

5.5 Voting of Stock . As determined by the Trustee, the Participant may be provided the right to direct the proxy holder as to the manner in which the proxy holder is to vote the Stock credited to the Participant’s Account. The Trustee, in its sole discretion, shall have the right to vote shares for which it has received no directions from the Participant. With respect to all rights other than the right to vote, the Company shall follow the directions of the Committee.

ARTICLE 6.AMENDMENT AND TERMINATION

6.1 Amendment. The Committee shall have the right to amend the Plan at any time and from time to time, including by retroactive amendment. Any such amendment shall become effective upon the date stated therein, and shall be binding on all Participants, except as otherwise provided in such amendment; provided, however, that said amendment shall not adversely affect benefits previously accrued to the affected Participant without the Participant’s written approval. Benefits accruing to a Participant pursuant to any employment agreement in effect between the Company and the Participant that entitles the Participant to participate in and to certain rights under the Plan shall not be affected by an amendment of the Plan except as required by Code Section 409A and the Regulations.

6.2 Termination. The Committee shall have the right to terminate and liquidate the Plan to the fullest extent permitted by Code Section 409A, including (a) termination of the Plan within 12 months following a Liquidation, or (b) within 30 days preceding or 12 months following a Change in Control, provided that such termination following a Change in Control shall not result in a diminution of benefits accrued under the Plan, or (c) the termination covers all arrangements sponsored by the Company that would be aggregated with the Plan and cover any Participant of the Plan, the termination does not occur proximate to a downturn in the financial health of the Company, and payments are made after 12 months, but within 24 months, following the termination.

Deferred Compensation Plan for Executives

15

ARTICLE 7.ADMINISTRATION

7.1 Administration. The Committee shall administer and interpret the Plan in accordance with the provisions of the Plan and the Trust Agreement. Any determination or decision by the Committee shall be conclusive and binding on all persons who at any time have or claim to have any interest whatever under the Plan. To the extent required to avoid penalties, the Committee intends to interpret and operate the Plan in all respects in compliance with Code Section 409A and the Regulations.

7.2 Applying for Benefits. The following claims procedures are generally applicable to claims filed under the Plan. To the extent required by law and to the extent the Committee is ruling on a claim for benefits on account of a disability, the Plan will follow, with respect to that claim, claims procedures required by law for plans providing disability benefits.

(a) General Procedures. Subject to the provisions of subsection (b), the following procedures shall apply in the determination of claims under the Plan.

(1) Filing a Claim. All applications and claims for benefits shall be filed in writing by the Participant, his or her Beneficiary, or the authorized representative of the claimant, by completing the procedures required by the Committee. The procedures shall be reasonable and may include the completion of forms and the submission of documents and additional information.

(2) Review of Claim. The Committee shall review all applications and claims for benefits and shall decide whether to approve or deny the claim in whole or in part. If a claim is denied in whole or in part, the Committee shall provide written notice of denial to the claimant within a reasonable period of time no later than 90 days after the Committee receives the claim, unless special circumstances require an extension of time for processing the claim. If an extension is required, the Committee shall notify the claimant in writing (including by electronic media) by the end of the initial 90-day period and indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render a decision on the claim. The extension shall not exceed an additional 90 days. The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:

(A) specific reasons for the denial;

(B) specific references to pertinent Plan provisions;

(C) description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary; and

(D) appropriate information as to the steps the claimant should take if he or she wishes to submit the denied claim for review, including any applicable time limits and including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following a denied claim on review.

Deferred Compensation Plan for Executives

16

(3) Appealing a Claims Denial. If the claimant wishes a review of the denied claim, he or she shall notify the Committee in writing within 60 days of the claimant’s receipt of notification of the denied claim. The claimant or the claimant’s representative may review pertinent Plan documents and may submit issues or comments to the Committee in writing. The claimant or the claimant’s representative may provide the Committee with a written statement of the claimant’s position and with written materials in support of his or her position, including documents, records and other information relating to the claim. The claimant or the claimant’s representative may have, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim. A document, record or other information shall be considered relevant to the claim if such document, record or other information (A) was relied upon in making the benefit determination, (B) was submitted, considered or generated in the course of making the benefit determination, without regard to whether such document, record or other information was relied upon in making the benefit determination, or (C) demonstrates compliance with the administrative processes and safeguards designed to ensure and verify that benefit claim determinations are made in accordance with the Plan and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants.

(4) Review of Appeal. The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chairman of the Committee promptly after receipt. The Committee shall make its decision on review solely on the basis of the written record, including documents and written materials submitted by the claimant and/or the claimant’s representative. The Committee shall make a decision on review within a reasonable period of time, not later than 60 days after the Committee receives the claimant’s written request for review unless special circumstances require additional time for review of the claim. If the Committee needs an extension of time to review the claim, it shall notify the claimant in writing before the end of the initial 60-day period, and shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination on review. The extension shall not be longer than an additional 60 days. The decision on review will be written in a manner calculated to be understood by the claimant. If the claim is denied, the written noticed shall include specific reasons for the decision as well as specific references to pertinent Plan provisions on which the decision is based, a statement of the claimant’s right to bring an action under ERISA Section 502(a) and a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits, with “relevant” defined as provided in the previous subsection.

Deferred Compensation Plan for Executives

17

(b) Determination of Disability. To the extent the Committee is determining a claims for benefits under the Plan on account of a Disability, the above procedures shall be modified as necessary to comply with ERISA Section 503 and Department of Labor Regulations Section 2560.503-1(d).

7.3 Liability of Committee; Indemnification. To the extent permitted by law, the Committee shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his or her own bad faith or willful misconduct. The Committee may employ legal counsel, consultants, actuaries and agents as they may deem desirable in the administration of the Plan and may rely on the opinion of such counsel or the computations of such consultant or other agent. The Committee shall provide for the keeping of detailed written minutes of its actions hereunder, which shall be reviewed by the legal counsel or the consultant engaged by the Committee prior to their finalization.

7.4 Expenses. The costs of the establishment of the Plan and the adoption of the Plan by the Company, including but not limited to legal and accounting fees, shall be borne by the Company. The expenses of administering the Plan shall be borne by the Trust; provided, however, that the Company shall bear, and shall not be reimbursed by, the Trust for any tax liability of the Company associated with the investment of assets by the Trust. All taxes associated with participation in the Plan, including any tax liability under Code Section 409A, shall be borne by the Participant.

ARTICLE 8.GENERAL AND MISCELLANEOUS

8.1 Rights Against the Company. Except as expressly provided by the Plan, the establishment of the Plan shall not be construed as giving to any Participant or to any person whomsoever, any legal, equitable or other rights against the Company, or against its officers, directors, agents or shareholders, or as giving to any Participant or Beneficiary any equity or other interest in the assets, business or shares of the Company or giving any Participant the right to be retained in the employment of the Company. The services of any Participant shall be subject to termination (with or without cause) to the same extent they would have been if the Plan had never been adopted. The rights of a Participant hereunder shall be solely those of an unsecured general creditor of the Company. Neither the Plan nor any action taken hereunder shall be construed as giving to any Participant the right to continue rendering services to or for the benefit of the Company or as affecting the right of the Company to dismiss any Participant. Any benefit payable under the Plan shall not be deemed salary or other compensation for the purpose of computing benefits under any Participant benefit plan or other arrangement of the Company for the benefit of its Participants.

8.2 Assignment or Transfer. No right, title or interest of any kind in the Plan shall be transferable or assignable by any Participant or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Participant or Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void.

Deferred Compensation Plan for Executives

18

8.3 Severability. If any provision of the Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of the Plan but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.

8.4 Construction. The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of the Plan. Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. When used herein, the masculine gender includes the feminine gender.

8.5 Governing Law. The validity and effect of the Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Delaware unless superseded by federal law, which shall govern correspondingly.

8.6 Payment Due to Incompetence. If the Committee receives evidence that a Participant or Beneficiary entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment, the Committee may, in its sole and absolute discretion, direct the payment to any other person or trust which has been legally appointed by the courts or to any other person determined by the Company to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper. Any such payment shall be in complete discharge of the Company’s obligations under the Plan.

8.7 Taxes. All amounts payable hereunder shall be reduced by any and all federal, state, and local taxes imposed upon Participant or his or her Beneficiary, which are required to be paid or withheld by the Company. The determination of the Company regarding applicable income and employment tax withholding requirements shall be final and binding on Participant.

8.8 Insurance. In the event that any Participant elects, in his or her discretion, to independently purchase an insurance policy covering the inability of the Plan or the Trust to make any payments to which Participant is entitled under the Plan or the Trust, the Company shall use its best efforts to facilitate the payment by Participant of any applicable excise taxes which become due as the result of the payment of premiums under such policy. Nothing contained herein shall be construed as an endorsement by the Company of the purchase of such a policy or a recommendation by the Company that the purchase of such a policy is necessary or desirable as the result of Participant’s participation in the Plan. In the event that such insurance would result in adverse tax consequences to the Participant, the Participant shall terminate such insurance.

Deferred Compensation Plan for Executives

19

8.9 Attorney’s Fees. The Company shall pay the reasonable attorney’s fees incurred by any Participant in an action brought against the Company to enforce Participant’s rights under the Plan, provided that such fees shall only be payable in the event that the Participant prevails in such action.

8.10 Plan Binding on Successors and Assignees. The Plan shall be binding upon and inure to the benefit of the Company and its successor and assigns and the Participant and the Participant’s designee and estate.

Deferred Compensation Plan for Executives

20

Acknowledgment

The undersigned Participant hereby acknowledges that the Company has selected him or her as a participant in the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives, as amended from time to time, subject to all terms and conditions of the Plan, a copy of which has been received, read, and understood by the Participant in conjunction with executing this Acknowledgment. The Participant acknowledges that he or she has had satisfactory opportunity to ask questions regarding his or her participation in the Plan and has received satisfactory answers to any questions asked. The Participant also acknowledges that he or she has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of participation in the Plan. The Participant understands that his or her participation in the Plan shall not begin until this Acknowledgment has been signed by the Participant and returned to the Company.

Building Materials Holding Corporation	Participant
By:	Signature:
Title:	Name:
Date:	Date:

 

Deferred Compensation Plan for Executives

EX-10.70

Exhibit 10.70

BUILDING MATERIALS HOLDING CORPORATION

Severance Plan for Certain Executive Officers,

Senior Management and Key Employees of the

Company and its Subsidiaries

Amended and Restated effective January 1, 2008

This Severance Plan (the "Plan") was adopted by the Board of Directors of BMC West Corporation, a Delaware corporation, on July 20, 1993 and was assumed by Building Materials Holding Corporation, a Delaware corporation (together with its predecessor, the "Company") as of September 23, 1997, for the benefit of certain executive officers, senior management and key employees of the Company and its Subsidiaries. The Plan, as previously amended and restated, was confirmed by the Board of Directors on February 17, 2000, May 7, 2003, May 3, 2004, May 1, 2006 and June 28, 2006. This Amendment and Restatement, effective January 1, 2008, is intended to comply with Section 409A of the Code and the Treasury regulations and applicable guidance thereunder.

On August 27, 2007, the Compensation Committee resolved to terminate the Severance Plan effective as of May 1, 2008 pursuant to Section 10(a) hereof, but only in the event that the Board of Directors or the Compensation Committee adopts resolutions prior to that date establishing a successor to the Severance Plan.

1. Purpose

The Company, on behalf of itself and its stockholders, desires to continue to attract and retain well-qualified executive and key personnel who are an integral part of the management of the Company, such as the Designated Employees, and to assure itself of continuity of management. The principal purposes of the Plan are to (i) provide an incentive to the Designated Employees to remain in the employ of the Company, notwithstanding any uncertainty and job insecurity which may be created by an actual or prospective Change in Control, (ii) encourage the Designated Employees' full attention and dedication to the Company currently and in the event of any actual or prospective Change in Control, and (iii) provide an incentive for the Designated Employees to be objective concerning any potential Change in Control and to fully support any Change in Control transaction approved by the Board of Directors.

2. Definitions

Terms not otherwise defined in the Plan shall have the meanings set forth in this Section 2.

(a)        Cash Compensation. "Cash Compensation" shall mean the sum of (i) the higher of the Designated Employee's annual base salary (x) at the time the Notice of Termination provided for in Section 4(c) of the Plan is given or (y) immediately prior to a Change in Control, and (ii) an amount equal to the highest cash bonus paid to the Designated Employee under the Company's bonus program for any of such prior three years, and (iii) the highest amount contributed as a Company matching or profit-sharing contribution on behalf of the Designated Employee under the Company's 401(k) plan (or any successor plan) for any of the three fiscal years immediately preceding the year in which the Date of Termination occurs, and (iv) the highest amount allocated or accrued (whether or not funded) as a Company contribution on behalf of the Designated Employee under the Company's supplemental executive retirement plan (or any successor plan) for any of the three fiscal years immediately preceding the year in which the Date of Termination occurs.

(b)        Cause. For purposes of the Plan and any agreements entered into pursuant to the Plan only, "Cause" shall mean: (i) the conviction by a court of competent jurisdiction of, or entry of a plea of guilty or of no contest to, any felony involving moral turpitude of dishonesty, (ii) a willful dereliction of duty or intentional and malicious conduct contrary to the best interests of the Company or its business if such dereliction of duty or misconduct is not corrected within thirty (30) days after written notice thereof from the Company, or (iii) a refusal to perform reasonable services customarily performed by such Designated Employee (other than by reason of a Disability) if such refusal is not corrected within thirty (30) days after written notice thereof from the Company; provided, however, that the Designated Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Designated Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Company's Board of Directors at a meeting of the Board called and held for the purpose (after reasonable notice to the Designated Employee and an opportunity for the Designated Employee, together with the Designated Employee's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Designated Employee was guilty of the conduct set forth above and specifying the particulars thereof in detail. Notwithstanding the foregoing, the Designated Employee shall have the right to contest his termination for Cause (for purposes of this Agreement) by arbitration in accordance with the provisions of the Plan.

(c)        Change in Control. A "Change in Control" of the Company shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation, merger or similar reorganization or other transaction involving the Company, other than a transaction in which the holders of the Company's Common Stock immediately prior to the transaction have the same proportionate ownership of common stock of the Company or other surviving corporation in the transaction immediately after the transaction, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and/or assets of the Company, or (ii) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including any group), shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty-five (35%) percent or more of the Company's outstanding Common Stock, or (iv) if for any reason a majority of the Board is not comprised of "Continuing Directors," where a "Continuing Director" of the Corporation as of any date means a member of the Board who (x) was a member of the Board two years prior to such date and at all times through such date or (y) was nominated for election or elected to the Board with the affirmative vote of at least two-thirds (2/3rds) of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that no individual initially elected or nominated as a director of the Corporation as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be a Continuing Director.

2

(d)        Code. "Code" shall refer to the Internal Revenue Code of 1986 and the regulations promulgated thereunder, as amended from time to time.

(e)        Designated Employees. "Designated Employees"' shall refer to those employees of the Company and its Subsidiaries who are designated on Schedule A attached hereto and incorporated herein by reference ("Schedule A"), and such other employees of the Company and its Subsidiaries as the Board of Directors of the Company shall designate from time to time. The Designated Employees may be divided into certain categories for purposes of the Plan as set forth on Schedule A.

(f)        Good Reason. A Designated Employee's termination of employment with the Company shall be deemed for "Good Reason" if any of the following events occur without the Designated Employee's express written consent and the Designated Employee provides his Notice of Termination upon or within one hundred eighty (180) days after such event occurring, provided, however, that the Designated Employee must provide written notice to the Company within ninety (90) days after the occurrence of the event allegedly constituting Good Reason, and the Company shall have thirty (30) days after such notice is given to cure:

(i)        The assignment to the Designated Employee by the Company of duties materially inconsistent with, or a material alteration in the nature or status of, the Designated Employee's responsibilities immediately prior to a Change in Control of the Company (or thereafter if such duties and responsibilities change following a Change in Control with the Designated Employee’s consent) other than any such alteration primarily attributable to the fact that the Company's securities are no longer publicly traded;

(ii)        A material reduction by the Company in the Designated Employee's annual base salary or annual cash bonus opportunity as in effect on the date of a Change in Control of the Company or as in effect thereafter if such base salary and/or bonus opportunity has been increased;

(iii)       Any failure by the Company to continue in effect without material change any compensation, incentive, welfare or retirement benefit plan or arrangement, as well as any plan or arrangement whereby the Designated Employee may acquire securities of the Company or its publicly traded parent, in which the Designated Employee is participating at the time of a Change in Control of the Company (or any other plans providing the Designated Employee with substantially similar benefits) (hereinafter referred to as "Benefit Plans"), or the taking of any action by the Company which would materially adversely affect, either as to the past or prospectively, the Designated Employee's participation in or materially reduce or deprive the Designated Employee of the Designated Employee's benefits that were provided under any such Benefit Plan at the time of a Change in Control of the Company; unless an equitable substitute arrangement (embodied in an ongoing substitute or alternative Benefit Plan) has been made for the benefit of the Designated Employee with respect to the Benefit Plan in question; provided that for purposes of the foregoing, "Benefit Plans" shall include, but not be limited to, the Company's stock option plans, 401(k) plan, annual bonus plan, long-term incentive plan, or any other plan or arrangement to receive and exercise stock options or stock appreciation rights, supplemental pension plan, insured medical reimbursement plan, automobile benefits, executive financial planning, group life insurance plan, personal catastrophe liability insurance, medical, dental, accident and disability plans;

3

(iv)       Relocation to any place more than twenty-five (25) miles from the office regularly occupied by the Designated Employee prior to the time of a Change in Control, except for required travel by the Designated Employee on the Company's business to an extent substantially consistent with the Designated Employee's business travel obligations at the time of a Change in Control of the Company; or

(v)        Any material breach by the Company of any provision of the Plan or of any agreement entered into pursuant to the Plan or any other material agreement between the Company or any subsidiary and the Designated Employee.

(g)        Independent Director. "Independent Director" shall have the meaning ascribed to such term in the Company's Rights Plan as initially adopted by the Board of Directors.

(h)        Specified Employee. "Specified Employee" shall have the meaning ascribed to such term in Section 409A of the Code.

3. Beneficiaries

Each of the Designated Employees shall be a beneficiary of the Plan and entitled to receive the Benefits set forth herein. The Company and each of the Designated Employees will execute an agreement reiterating or incorporating the obligations and benefits which arise from the Plan.

4. Termination in Connection with Change in Control

(a)        Termination of Employment. If a Change in Control of the Company shall have occurred while the Designated Employee is still an employee of the Company, the Designated Employee shall be entitled to the compensation provided in Section 5 upon the subsequent termination, within three years of such Change in Control, of the Designated Employee's employment with the Company unless such termination is as a result of (i) the Designated Employee's death; (ii) the Designated Employee's Disability (as defined in Section 4(b) below); (iii) the Designated Employee's retirement in accordance with the Company's retirement policies; (iv) the Designated Employee's termination by the Company for Cause; or (v) the Designated Employee's decision to terminate his employment with the Company other than for Good Reason.In addition, if, prior to a Change in Control, the Designated Employee's employment with the Company shall be terminated other than as a result of one of the circumstances enumerated in Section 4(a)(i) through (v), and, within three (3) months following the date of such termination of employment, a Change in Control shall occur, the Designated Employee shall be entitled to the compensation provided in Section 5, determined as if the Designated Employee’s employment had so terminated following a Change in Control, which compensation shall be reduced by any other severance compensation previously paid to the Designated Employee in respect of such termination of employment.

4

(b)        Disability. If, as a result of the Designated Employee's incapacity due to physical or mental illness, the Designated Employee shall have been absent from his duties with the Company on a full-time basis for six (6) months and the Company thereafter gives the Designated Employee thirty (30) day's written notice of its intention to terminate his employment, upon the expiration of such thirty (30) day period the Company may terminate the Designated Employee's employment for "Disability" if the Designated Employee shall not have returned to the full-time performance of the Designated Employee's duties.

(c)        Notice of Termination. Any purported termination of the Designated Employee's employment by the Company or the Designated Employee hereunder shall be communicated by a Notice of Termination given to the other party in accordance with the terms of the agreement entered into pursuant to the Plan. For purposes of the Plan and any agreement entered into pursuant hereto, a "Notice of Termination" shall mean a written notice which shall indicate whether or not the termination is as a result of any of the situations enumerated in Section 4(a) above and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for asserting that the termination of the Designated Employee's employment is or is not under the provision so indicated.

(d)        Date of Termination. "Date of Termination" shall mean (i) if the Designated Employee is terminated by the Company for Disability, thirty (30) days after the Notice of Termination is given to the Designated Employee (provided that the Designated Employee shall not have returned to the performance of the Designated Employee's duties on a full-time basis during such thirty (30) day period) or (ii) if the Designated Employee's employment is terminated by the Company for any other reason or by the Designated Employee, the date on which a Notice of Termination is given.

5. Severance Compensation upon Termination of Employment

If the Designated Employee's employment with the Company shall be terminated within three months before or within three years after a Change in Control, other than as a result of one of the circumstances enumerated in Section 4(a)(i) through (v) of the Plan, then the Company shall, subject to the execution and non-revocation of a mutual release of claims by the Designated Employee in the form set forth on Exhibit A hereto:

(a)        Pay to the Designated Employee as severance pay in a lump sum, in cash, on or before the tenth day following the Date of Termination, an amount equal to the multiple specified on Schedule A times the Designated Employee's Cash Compensation;

(b)        Effective May 1, 2008, arrange to provide the Designated Employee for a period of eighteen (18) months with health and life insurance substantially similar to those insurance benefits which the Designated Employee is receiving immediately prior to either (A) the Change in Control or (B) the Notice of Termination, as elected by the Designated Employee. Benefits otherwise receivable by the Designated Employee pursuant to this Section 5(b) shall be reduced to the extent comparable benefits are actually received by the Designated Employee during such eighteen (18) month period following his termination from a subsequent employer or through self-employment, and any such benefits actually received by the Designated Employee shall be reported by him to the Company;

5

(c)        Pay to the Designated Employee a single lump sum payment, on or before the tenth day following the Date of Termination, equal to the excess of (x) over (y), where (x) is equal to the lump sum present value of the pension benefit that the Designated Employee would receive under any pension plan which is or has been maintained by the Company and in which the Designated Employee is or was a participant (the "Pension Plan"), at his earliest benefit commencement date under the Pension Plan computed by increasing his actual number of years of credited service performed as of the date of his termination of employment, or, if earlier, the termination of the Pension Plan, by the number of years specified on Schedule A, and (y) is equal to the lump sum present value of the pension benefit actually payable to the Designated Employee on his earliest benefit commencement date under the Pension Plan based on the actual number of years of credited service performed as of the Designated Employee's Date of Termination, or, if earlier, the termination of the Pension Plan. The foregoing lump sum present value amounts shall be computed using the actuarial factors under the Pension Plan in effect on the Designated Employee's Date of Termination or, if earlier, the termination of the Pension Plan;

(d)        Pay to the Designated Employee, on or before the tenth (10th) day following the Date of Termination, an amount equal to the Designated Employee’s target or base bonus opportunity for the year in which the Date of Termination occurs under the Company’s annual cash-based incentive compensation plan, prorated by multiplying such amount by a fraction, the numerator of which shall be the actual number of days that have elapsed during such year prior to the Date of Termination, and the denominator of which shall be three hundred sixty-five (365); and

(e)        Pay to the Designated Employee, on or before the tenth (10th) day following the Date of Termination, any gross-up amounts as calculated under Section 6 of the Plan.

Notwithstanding the foregoing, in the event that the multiples set forth on Schedule A for any Designated Employee are greater than the number of full years remaining until such Designated Employee's agreed upon retirement date or normal retirement age of sixty-five (65), the multiples shall be automatically reduced to the number of years and/or partial years (measured by months) remaining until said Designated Employee's retirement date. In addition, following the expiration of the health insurance benefits continuation provided under Section 5(b), each Designated Employee who, at the time of his termination of employment, was an officer of the Company shall be eligible to participate in the Company's health care plan, either on an individual basis or family basis to include his dependent spouse, until such time as he becomes eligible to participate in the BMHC Retirement Health Care Plan ("Retiree Health Care Plan"), subject to such Designated Employee's payment of one-half of the applicable COBRA premiums. If a Designated Employee who, at the time of his termination of employment, was an officer of the Company shall be eligible and elects to participate in the Retiree Health Care Plan in accordance with its terms and conditions, such Designated Employee shall only be required to pay one-half of the applicable premium under the Retiree Health Care Plan.

6

It is the Company's intention that each of the payments or benefits provided under Sections 5(a), 5(c), 5(d) and 5(e) be paid on or before March 15th of the year after the year in which they are earned (i.e., the short-term deferral period described in Treasury regulations section 1.409A-1(b)(4)). However, notwithstanding anything herein to the contrary, to the extent that the Board of Directors of the Company determines, in its sole discretion, that any payments or benefits to be provided hereunder to or for the benefit of a Designated Employee who is also a Specified Employee would be subject to the additional tax imposed under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code or a successor or comparable provision (the "Section 409A Taxes"), the commencement of such payments and/or benefits shall be delayed until the date that is six months following the Date of Termination or such earlier date that, as determined by the Company, is sufficient to avoid the imposition of Section 409A Taxes (such date is referred to herein as the "Distribution Date"). In the event that the Board of Directors determines that the commencement of any of the benefits to be provided under Section 5(b) are to be delayed pursuant to the preceding sentence, the Company shall require the Designated Employee to bear the full cost of such benefits until the Distribution Date at which time the Company shall reimburse the Designated Employee for all such costs. If any payments or benefits are delayed pursuant to this paragraph, such delayed payments or benefits, when paid or reimbursed, shall be increased by an amount equal to interest on such payments or reimbursements for the period between the Date of Termination and the applicable Distribution Date at a rate equal to the prime rate in effect as of the Date of Termination plus one point (for this purpose, the prime rate will be based on the rate published from time to time in The Wall Street Journal).

6. Gross-up Payments

(a)        Gross-up in Benefits For "Parachute Payment". In the event that, as a result of payments in the nature of compensation to or for the benefit of a Designated Employee under this Plan or otherwise in connection with a Change in Control, any state, local or federal taxing authority imposes any taxes on the Designated Employee that would not be imposed but for the occurrence of a Change in Control, including any excise tax under Section 4999 of the Code and any successor or comparable provision (other than ordinary income and employment taxes imposed on such payments), then, in addition to the benefits provided for under Sections 5(a) through (d) or otherwise (including Section 6(b)), the Company (including any successor to the Company) shall pay to the Designated Employee at the time any such amounts are paid an amount equal to the amount of any such tax imposed or to be imposed on the Designated Employee (the amount of any such payment, the "Parachute Tax Reimbursement"). In addition, the Company (including any successor to the Company) shall "gross up" such Parachute Tax Reimbursement by paying to the Designated Employee at the same time an additional amount equal to the aggregate amount of any additional taxes (whether income taxes, excise taxes, special taxes, additional taxes, employment taxes or otherwise) that are or will be payable by the Designated Employee as a result of the Parachute Tax Reimbursement being paid or payable to the Designated Employee and/or as a result of the additional amounts paid or payable to the Designated Employee pursuant to this sentence, such that after payment of such additional taxes the Designated Employee shall have been paid on an after-tax basis an amount equal to the Parachute Tax Reimbursement. It is the intention of the Company that payment of the Parachute Tax Reimbursement be made within the time period specified in Treasury regulations section 1.409A-3(i)(1)(v).

7

(b)        Gross-up in Benefits For Additional Taxes under Section 409A of the Code. In the event that, as a result of payments to or for the benefit of a Designated Employee under this Plan, the Designated Employee is subject to the Section 409A Taxes, then, in addition to the benefits provided for under Sections 5(a) through (d) or otherwise (including Section 6(a)), the Company (including any successor to the Company) shall pay to the Designated Employee at the time any such amounts are paid an amount equal to the amount of any such Section 409A Tax imposed or to be imposed on the Designated Employee (the amount of any such payment, the "Section 409A Tax Reimbursement"). In addition, the Company (including any successor to the Company) shall "gross up" such Section 409A Tax Reimbursement by paying to the Designated Employee at the same time an additional amount equal to the aggregate amount of any additional taxes (whether income taxes, excise taxes, special taxes, additional taxes, employment taxes or otherwise) that are or will be payable by the Designated Employee as a result of the Section 409A Tax Reimbursement being paid or payable to the Designated Employee and/or as a result of the additional amounts paid or payable to the Designated Employee pursuant to this sentence, such that after payment of such additional taxes the Designated Employee shall have been paid on an after-tax basis an amount equal to the Section 409A Tax Reimbursement.

7. Arbitration

The Company and, by accepting participation in the Plan, each Designated Employee agree that any and all disputes or controversies arising out of or relating to the Plan, including, without limitation, any claim of fraud, any agreement entered into between the parties pursuant to the Plan or the general validity or enforceability of either, shall be governed by the laws of the State of Delaware, without giving effect to its conflict of laws provisions, and shall be submitted to binding arbitration in accordance with the employment arbitration rules of Judicial Arbitration and Mediation Services ("JAMS") by a single impartial arbitrator experienced in employment law selected as follows: if the Company and the applicable Designated Employee are unable to agree upon an impartial arbitrator within ten (10) days of a request for arbitration, the parties shall request a panel of employment arbitrators from JAMS and alternative strike names until a single arbitrator remains. The arbitration shall be conducted in the city where the Designated Employee's principal office was maintained prior to his termination of employment, applying the laws of the State of Delaware, and the Company and, by accepting participation in the Plan, each Designated Employee agree to submit to the jurisdiction of the arbitrator selected in accordance with JAMS' rules and procedures. All fees and expenses of any arbitration, including the Designated Employee's reasonable legal fees and costs, are to be advanced by the Company. The Company and, by accepting participation in the Plan, each Designated Employee further agree that arbitration as provided in this Section 7 shall be the exclusive and binding remedy for any such dispute and will be used instead of any court action, which is hereby expressly waived, except for any request by either party hereto for temporary or preliminary injunctive relief pending arbitration in accordance with applicable law, or an administrative claim with an administrative agency, and that the award of the arbitrator, which shall include a determination based on relative success on the merits as to whom shall bear the Designated Employee's legal fees, shall be final and binding on both parties, and nonappealable. The arbitrator shall have discretion to award monetary and other damages, or no damages, and to fashion such other relief as the arbitrator deems appropriate. The Company will be responsible for paying any filing fees and costs of the arbitration proceeding itself (for example, arbitrators' fees, conference room, transcripts), but, except as set forth in this Section 7, each party shall be responsible for its own attorneys' fees. THE COMPANY AND EACH DESIGNATED EMPLOYEE ACKNOWLEDGE AND AGREE THAT BY AGREEING TO ARBITRATE, THEY ARE WAIVING ANY RIGHT TO BRING AN ACTION AGAINST THE OTHER IN A COURT OF LAW, EITHER STATE OR FEDERAL, AND ARE WAIVING THE RIGHT TO HAVE CLAIMS AND DAMAGES, IF ANY, DETERMINED BY A JURY.

8

8. Mitigation of Damages; Effect of Plan

(a)        The Designated Employee shall not be required to mitigate damages or the amount of any payment provided for under the Plan by seeking other employment or otherwise, nor shall the amount of any payment provided for under the Plan be reduced by any compensation earned by the Designated Employee as a result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise, except to the extent provided in Section 5(b) above.

(b)        The provisions of the Plan, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Designated Employee's then existing rights, or rights which would accrue solely as a result of the passage of time, under any Benefit Plan, employment agreement or other contract, plan or arrangement.

9. Funding Upon Change in Control

(a)        Immediately prior to the occurrence of a Change in Control, the Board of Directors of the Company shall have the discretion to direct the Company to fund, to the extent it has not done so, a sum equal to the present value on the date of the Change in Control (determined using an interest rate equal to the short-term applicable federal rate (with annual compounding) established under Section 1274(d) of the Code for the month in which the Change in Control occurs) of any amounts that are or would reasonably be expected to become payable to the Designated Employees under the Plan (including a good faith estimate of expenses of the trust in the event that the Company does not timely pay such expenses) by establishing and irrevocably funding a trust for the benefit of the Designated Employees. The trustee of such trust shall be instructed to pay out any such amounts as and to the extent such amounts become payable in accordance with the terms of the Plan.

(b)        The trust established under this Section 9 shall be a grantor trust described in Section 671 of the Code. The Company shall be solely responsible for and shall directly pay all fees and expenses of the trust; provided, however, in the event that the Company does not pay all of the fees and expenses of the trust, the trustee shall have the authority to pay such fees from the assets of the trust.

(c)        Any payments of severance or other benefits by the trust established pursuant to this Section 9 shall, to the extent thereof, discharge the Company’s obligation to pay severance and other benefits under the Plan, it being the intent of the Company that the assets in such trust be held for the purpose of discharging any obligation of the Company to pay severance and other benefits under the Plan.

9

(d)        The trust established under this Section 9 shall not terminate until the date on which all payments and benefits to be funded out of the trust have been satisfied and discharged in full. Upon termination of the trust any assets remaining in the trust shall be returned to the Company.

10. Term; Amendments; No Effect on Employment Prior to Change in Control; Agreements Incorporated by Reference

(a)        The Plan shall have successive two-year terms which shall be automatically renewed unless prior to a Change in Control and prior to the applicable automatic renewal date action is taken by the Board of Directors of the Company to terminate the Plan effective as of a renewal date. The Plan may also be amended from time to time by the Board of Directors of the Company; provided, however, that such amendments (other than amendments that are (i) intended to ensure compliance with applicable law or (ii) are favorable to the Designated Employees) may only be adopted prior to a Change in Control and shall only be effective on and after the applicable renewal date, in both cases unless agreed to and approved by the Designated Employee. Notwithstanding the foregoing, the Plan shall terminate three years from the date of a Change in Control and shall terminate as to any Designated Employee participating in the Plan upon the termination of the Designated Employee's employment with the Company based on death, Disability (as defined in Section 3(b)), mandatory retirement or Cause (as defined in Section 1(b)) or by the Designated Employee other than for Good Reason (as defined in Section 1(e)). Termination or amendment of the Plan shall not affect any obligation of the Company under the Plan which has accrued and is unpaid as of the effective date of the termination or amendment. Unless and until a Change in Control shall have occurred, a Designated Employee shall not have any vested rights under the Plan or any agreement entered into pursuant to the Plan.

(b)        Nothing in the Plan or any agreement entered into pursuant to the Plan shall confer upon the Designated Employee any right to continue in the employ of the Company prior to a Change in Control of the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge the Designated Employee at any time prior to the date of a Change in Control of the Company for any reason whatsoever, with or without cause.

(c)        Notwithstanding anything herein or in any agreement entered into pursuant to the Plan to the contrary, the Board of Directors of the Company may, in its sole discretion, amend the Plan (which amendment shall be effective upon its adoption or at such other time designated by the Board of Directors) at any time prior to a Change in Control as may be necessary to avoid the imposition of the additional tax under Section 409A(a)(1)(B) of the Code; provided, however, that any such amendment shall be implemented in such a manner as to preserve, to the greatest extent possible, the terms and conditions of the Plan as in existence immediately prior to any such amendment.

10

(d)        Any agreement entered into by the Company and a Designated Employee, including any employment agreement, that either (i) explicitly makes reference to this Plan or (ii) confers rights or provides benefits to a Designated Employee upon such Designated Employee’s termination of employment with the Company (a “Designated Employee Agreement”) shall be incorporated herein by reference to the extent that the terms of such Designated Employee Agreement pertain to this Plan and/or the circumstances under which payments and/or benefits are provided under this Plan. To the extent that such Designated Employee Agreement provides for rights or benefits to the Designated Employee under this Plan that are more favorable than the rights or benefits actually provided for hereunder, the terms of such Designated Employee Agreement shall govern.

(e)        In the event that any Designated Employee Agreement confers rights or provides benefits that are of the same type as the rights or benefits conferred or provided for under this Plan (without giving effect to Section 10(d) hereof) and, but for the provisions of this Section 10(e) would also be provided under this Plan (without giving effect to Section 10(d) hereof) such that the conferral of such rights or the provision of such benefits pursuant to both the Designated Employee Agreement and this Plan (without giving effect to Section 10(d) hereof)would result in the Designated Employee receiving rights or benefits that are duplicative in nature (the “Duplicative Rights”), then the Duplicative Rights provided for under the Designated Employee Agreement will offset any Duplicative Rights that would otherwise be provided hereunder.

11

SCHEDULE A
Effective August 24, 2007
Expires May 1, 2008
Category		Multiple for Cash Compensation Under Section 5(a)	Years for Pension Benefit  Under Section 5(c)
I	Senior Executive Officers * and Certain Executives	3	3
II		3	3
III	BMC West and SelectBuild Vice Presidents - Administrative	2	2
IV	Building Materials Holding Corporation, BMC West and SelectBuild Key Operating Personnel	1	1
V	BMHC Key Corporate Administrative Employees whose total annual compensation exceeds $100,000	minimum of 1	minimum of 1
* Plan benefits for certain Senior Executive Officers are subject to Employment Agreements

EX-10.90

Exhibit 10.90

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into as of June 1, 2002 (the “Effective Date”), and amended February 23, 2004, June 16, 2005, June 28, 2006, and December 26, 2007, by and between Robert E. Mellor (“Executive”), and Building Materials Holding Corporation, a Delaware corporation (the “Company”).

This Agreement is further amended and restated on February 19, 2008, in order to extend the term of the Agreement and to make certain other changes, all as set forth herein as follows:

WITNESSETH

WHEREAS, Executive is currently employed by the Company as its Chairman and Chief Executive Officer;

WHEREAS, Executive participates in the Severance Plan for Certain Executive Officers, Senior Management and Key Employees of the Company and its Subsidiaries, as amended from time to time (the “Severance Plan”); and

WHEREAS, the Company wishes to extend the duration of Executive's services and further clarify the terms and conditions of his employment by entering into this Agreement with Executive and Executive is willing to commit his services to the Company, on the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, Executive and the Company hereto agree as follows:

1. Term

This Agreement commenced on the Effective Date, and shall continue in effect for a period ending December 31, 2010, or, if this Agreement is extended, such later date as mutually agreed upon (the “Employment Term”).

2. Employment

2.1Engagement. The Company hereby employs Executive and Executive hereby agrees to be employed by the Company, subject to the terms and conditions herein set forth. During the Employment Term, Executive shall be employed as Chairman and Chief Executive Officer of the Company, and shall be responsible for the duties normally and customarily attendant to such offices. Executive shall render such other services and duties of an executive nature consistent with the duties of a senior executive officer of the Company as may from time to time be designated by the Board of Directors (the “Board”).

2.2Exclusive Employment. During the Employment Term, Executive shall devote his full business time to his duties and responsibilities set forth in Section 2.1. Without limiting the generality of the foregoing, Executive shall not, without the prior written approval of the Board, during the Employment Term, render services of a business, professional or commercial nature to any other person, firm or corporation, whether for compensation or otherwise, except that Executive may engage in civic, philanthropic and community service activities so long as such activities do not materially interfere with Executive’s ability to comply with this Agreement and are not otherwise in conflict with the policies or interest of the Company, and Executive may serve on the board of directors of two companies without Company approval.

1

3. Compensation and General Benefits

3.1Base Salary. During the term of this Agreement, the Company shall pay Executive a base salary in an annualized amount equal to eight hundred fifty thousand dollars ($850,000) (“Base Salary”) payable pro rata on the Company's regular payday, and subject to adjustment as hereinafter provided.

3.2Salary Reviews. Executive's Base Salary shall be reviewed annually by the Compensation Committee of the Board for the purpose of considering increases thereof. In conducting this review, the Compensation Committee of the Board shall consider appropriate factors, including, without limitation, Executive's performance, the Company's financial condition and compensation afforded to senior executives of comparable corporations. The Base Salary shall not be decreased without the written consent of Executive.

3.3Bonus.

(a)During the Employment Term, in addition to the Base Salary provided by Section 3.1, Executive will participate in the Company's Annual CEO Incentive Plan (the “Annual Bonus Plan”), pursuant to which Executive shall be eligible to receive additional incentive compensation on an annual basis based upon meeting targeted objectives as determined annually by the Compensation Committee of the Board. The range of the annual base bonus shall be 0% to 200% of Base Salary with the base bonus set at 100% of Base Salary if Executive meets the targeted objectives.

(b)During the Employment Term, in addition to the Base Salary and Annual Bonus Plan, Executive shall participate in the Company's Long-Term Incentive Plan (the “LTIP”) pursuant to which Executive shall be eligible to receive additional incentive compensation under the LTIP of from 0% to 160% of Base Salary based upon meeting targeted objectives determined for each three-year period in the LTIP and in accordance with its terms, with such participation set at 80% of Base Salary if the targeted objectives under the LTIP are met. Payments of awards under the LTIP shall be made in accordance with the terms set forth in the LTIP as amended from time to time.

3.4Vacation. Executive shall be entitled to four weeks paid vacation in any fiscal year during the Employment Term in accordance with Company vacation and leave policies. Vacation time shall be planned and taken consistent with Executive's duties and obligations hereunder.

3.5Other Benefits. During the Employment Term, Executive (and his spouse and dependents) shall be entitled to participate in the Company's executive perquisite plan, supplemental retirement plan, liability insurance, life insurance, disability insurance, dental insurance, hospitalization insurance, medical, accident, and other employee benefit plans from time to time adopted by the Company. The Company shall have the right to change insurance carriers and benefit plans as may be appropriate in light of future market conditions and shall have the right to purchase individual policies covering Executive if necessary.

2

3.6Stock Incentive Plans. Executive shall also be eligible to receive additional incentive compensation in the form of stock option or restricted stock grants. Review for any such grant shall be concurrent with Executive's annual salary review and shall be in the sole discretion of the Compensation Committee of the Board. For the avoidance of any doubt, the vesting of any stock option or restricted stock grant shall be governed by the award agreement pursuant to which such stock option or restricted stock grant was granted.

3.7Reimbursement of Expenses. Upon submission of appropriate documentation in accordance with Company policy, the Company will promptly reimburse Executive for all reasonable business expenses incurred by Executive in pursuing the business of the Company, including, without limitation, expenditures for entertainment and travel.

4. Confidential Information

During the term of this Agreement and forever thereafter, Executive agrees to keep confidential all information provided by the Company, excepting any such information as is already known to the public, and including any such information and material relating to any customer, vendor, licensor, licensee, or other party transacting business with the Company, and not to release, use, or disclose the same, except with the prior written permission of the Company (collectively, “Confidential Information”). Executive further covenants and agrees that every document, computer disk, computer software program, notation, record, diary, memorandum, development, investigation, or the like, and any method or manner of doing business, of the Company (or containing any Confidential Information) made or acquired by Executive during his employment, is and shall be the sole and exclusive property of the Company.

5. Covenants of Executive.

5.1Non-Compete. Executive agrees that, during the Employment Term he will not, directly or indirectly, engage in any business or activity competitive with the business activities of the Company. The foregoing shall not apply to passive investments by Executive of up to 5% of the outstanding stock of any publicly traded company or to service by Executive on boards of directors of companies as permitted under this Agreement, regardless of whether such company competes with the Company.

5.2Solicitation of Employees. During the Employment Term and for a period of one year following a termination of employment for any reason, he shall not, directly or indirectly, individually, or together through any other person, firm, corporation or entity, solicit, recruit or encourage any employee of the Company to leave his or her employment with the Company and/or accept a position with another company, provided, however, that general solicitations not targeted to Company employees shall not be deemed to violate this Section 5.2.

3

5.3Solicitation of Customers and Suppliers. Executive agrees that, during the Employment Term and for a period of one year following a termination of employment for any reason, he shall not, directly or indirectly, individually, or together through any other person, firm, corporation or entity, use Confidential Information to (i) solicit the business of any material customers of or suppliers to the Company, or (ii) discourage any person or entity which is a customer of the Company from continuing its existing business or contractual relationship with the Company.

5.4Compliance with Company Policies. Executive agrees that, during the Employment Term, he shall comply with the Company's employee manual and other policies and procedures reasonably established by the Company from time to time concerning matters such as management, supervision, recruiting, diversity, and sexual harassment.

5.5Cooperation. For a period of one year following his termination of employment under this Agreement, Executive shall, upon Company’s reasonable request and in good faith and with his best efforts, subject to his reasonable availability, cooperate and assist Company in any dispute, controversy, or litigation in which Company may be involved and with respect to which Executive obtained knowledge while employed by the Company or any of its affiliates, successors, or assigns, including, but not limited to, his participation in any court or arbitration proceedings, giving of testimony, signing of affidavits, or such other personal cooperation as counsel for the Company shall request. Any such activities shall be scheduled, to the extent reasonably possible, to accommodate Executive’s business and personal obligations at the time. The Company shall pay Executive’s reasonable travel and incidental out-of-pocket expenses incurred in connection with any such cooperation, as well as the reasonable costs of an attorney Executive engages to advise him in connection with the foregoing.

5.6Return of Business Records and Equipment. Upon termination of Executive's employment hereunder, Executive shall promptly return to the Company: (i) all documents, records, procedures, books, notebooks, and any other documentation in any form whatsoever, including but not limited to written, audio, video or electronic, containing any information pertaining to the Company which includes confidential information, including any and all copies of such documentation then in Executive's possession or control regardless of whether such documentation was prepared or compiled by Executive, Company, other employees of the Company, representatives, agents, or independent contractors, and (ii) all equipment or tangible personal property entrusted to Executive by the Company. Executive acknowledges that all such documentation, copies of such documentation, equipment, and tangible personal property are and shall at all times remain the sole and exclusive property of the Company.

6. Covenants of the Company

6.1Indemnification. In the event Executive is made, or threatened to be made, a party to any legal action or proceeding, by reason of the fact that Executive is or was an employee, director or officer of the Company or serves or served any other entity in any capacity at the Company's request, Executive shall be indemnified by the Company, and the Company shall pay Executive's related expenses when and as incurred, including but not limited to attorney fees, all to the fullest extent permitted by law.

4

6.2Change in Control. During the Employment Term, the Company shall continue in full force and effect with respect to Executive, the Severance Plan (or an applicable successor plan), as amended from time to time in accordance with the terms thereof. The Severance Plan shall control the compensation and benefits to be received by Executive in the event of a Change in Control (as defined in the Severance Plan). For the avoidance of any doubt, the vesting of any stock option or restricted stock grant shall be governed by the award agreement pursuant to which such stock option or restricted stock grant was granted.

6.3Supplemental Retirement Program. The Company shall establish for Executive and make contributions to fund an additional defined contribution supplemental retirement program (the “SRIP”), designed to provide Executive with a retirement annuity, at age 65, in an amount, taken together with other pension, retirement and social security benefits to which Executive may be entitled at age 65, equal to the greater of: (i) 35% of his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65, or (ii) 40% of his average compensation from Base Salary and Annual Bonus for the three years prior to December 31, 2010 (which average shall in no event be less than his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65). The SRIP shall be based on the assumptions set forth on Schedule 1 to this Agreement. The annual contribution shall be calculated each year, and Executive acknowledges that the amount of the contribution will likely be different from the amounts shown in Schedule 1. Executive further acknowledges that the contribution will vary based on the performance of the Company and whether Executive meets or exceeds targeted bonus levels under the Annual Bonus Plan. LTIP participation shall not be included in calculating average compensation above.

7. Compensation and Benefits Upon Termination.

7.1Termination Upon Death. If Executive dies prior to the expiration of the Employment Term, the Company shall pay to Executive's estate, or other designated beneficiary(s) as shown in the records of the Company, any earned but unpaid Base Salary, a pro-rata amount of the annual bonus that Executive would be eligible to receive under the Company's Annual Bonus Plan for the year in which Executive's death occurs, LTIP benefits in accordance with the terms of the LTIP, accrued benefits under the SRIP and any other benefits that Executive is entitled to receive as of the Date of Termination under applicable benefit plans of the Company, less standard withholdings for tax and social security purposes. Except as required by law, after the Date of Termination, the Company shall have no obligation to make any other payment, including severance or other compensation, of any kind to Executive’s estate upon a termination of employment by death.

7.2Termination Upon Disability. The Company may terminate Executive's employment in the event Executive suffers a Disability. In the event that Executive's employment is terminated pursuant to this Section 7.2, Executive shall receive payment for any earned and unpaid Base Salary, a pro-rata amount of the annual bonus that Executive would be eligible to receive under the Company's Annual Bonus Plan for the year in which such termination occurs, LTIP benefits in accordance with the terms of the LTIP, accrued benefits under the SRIP, and any other benefits that Executive is then entitled to receive under applicable benefit plans of the Company, less standard withholdings for tax and social security purposes. Except as required by law, after the Date of Termination, no other compensation of any kind or severance or other payment of any kind or payment in lieu of notice shall be payable by the Company to Executive upon a termination of employment for Disability.

5

7.3Voluntary Termination. Executive may voluntarily terminate his employment with the Company at any time upon 90 days' prior written notice. The Company may accelerate the termination of Executive's employment and the right to any further compensation to a date prior to the 90th day upon written notice thereof being delivered to Executive by the Company. In the event that Executive's employment is terminated under this Section 7.3, Executive shall receive payment for any earned and unpaid Base Salary, and benefits the Executive is entitled to receive under the employee benefit plans of the Company, but excluding bonuses otherwise payable under the Company's Annual Bonus Plan, less standard withholdings for tax and social security purposes, through the Date of Termination. Except as required by law, after the Date of Termination the Company shall have no further obligation to pay any compensation of any kind or severance payment of any kind nor to make any further payment in lieu of notice to Executive.

7.4Termination for Cause. The Board may terminate Executive's employment with the Company at any time for Cause. In the event that Executive's employment is terminated under this Section 7.4, Executive shall receive payment for all earned but unpaid Base Salary, and benefits the Executive is then entitled to receive under the employee benefit plans of the Company, but excluding bonuses otherwise payable under the Company's Annual Bonus Plan, less standard withholdings for tax and social security purposes, through the Date of Termination. Except as required by law, after the Date of Termination the Company shall have no further obligation to pay any severance or compensation of any kind nor to make any payment in lieu of notice to Executive. Except as required by law, all benefits provided by the Company to Executive under this Agreement or otherwise shall cease as of the Date of Termination.

7.5Termination Without Cause. The Company may, at any time and without prior written notice, terminate Executive without Cause. In the event that Executive's employment with the Company is terminated without Cause, Executive shall receive payment for all earned but unpaid Base Salary, and benefits the Executive is then entitled to receive under benefit plans of the Company, if any, less standard withholdings for tax and social security purposes, through the Date of Termination. In addition, provided that Executive executes a release of claims against the Company (in a form reasonably satisfactory to the Company) and such release becomes effective, Executive shall receive (i) within 75 days payment in a lump sum of an amount equal to the then current Base Salary through December 31, 2010; (ii) payment of the amount of the Annual Bonus that Executive would be eligible to receive under the Company's Bonus Plan for the year in which the termination occurs; (iii) payment of amounts accrued under the LTIP in accordance with the terms of the LTIP; (iv) assuming Executive is eligible and elects COBRA, payment on Executive's behalf of monthly continuation premiums for health insurance under Federal or State COBRA for a period of 18 months following the Date of Termination; (v) acceleration of the vesting of a portion of any unvested stock options in the amount thatwould have become vested on or before December 31, 2010; (vi) payment to Executive’s account under the SRIP of the annual contribution to the SRIP for the calendar year in which the termination occurs; and (vii) payment of an additional contribution to the SRIP in an amount necessary to ensure that the anticipated target benefit provided to Executive under the SRIP (i.e. the greater of 35% of his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65 or 40% of his average compensation from Base Salary and Annual Bonus for the last three years prior to December 31, 2010 (which average compensation shall in no event be less than his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65)) is fully funded as of the date of such termination. No other compensation of any kind or severance or other payment of any kind shall be payable by the Company to Executive after such Date of Termination. Except as specifically provided in this Section 7.5 and except as required by law, all benefits provided by the Company to Executive under this Agreement or otherwise shall cease as of the Date of Termination.

6

7.6Termination for Good Reason. Notwithstanding anything in this Section 7 to the contrary, Executive may voluntarily terminate his employment with the Company and receive the benefits detailed in Section 7.5 (as if there had been a termination by the Company without Cause) upon or within 180 days following the occurrence of an event constituting Good Reason, subject to, as applicable, Executive’s execution of the effective release of claims described in Section 7.5.

7.7Termination Following a Change in Control. If the employment of Executive is terminated within the period commencing 3 months prior to a Change in Control and ending 3 years following a Change in Control, the provisions of this Section 7 shall not apply and all payments shall be made in accordance with the provisions of the Severance Plan, except that in the event such termination occurs as a result of a termination of employment by the Company without Cause or by Executive for Good Reason, provided that Executive executes a release of claims against the Company (in a form reasonably satisfactory to the Company) and such release becomes effective, Executive shall also be entitled to (i) payment of the annual contribution to the SRIP for the calendar year in which the termination occurs and (ii) payment of an additional contribution to the SRIP in an amount necessary to ensure that the anticipated target benefit provided to Executive under the SRIP (i.e. the greater of 35% of his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65 or 40% of his average compensation from Base Salary and Annual Bonus for the last three years prior to December 31, 2010 (which average compensation shall in no event be less than his average compensation from Base Salary and Annual Bonus for the three years prior to Executive reaching age 65)) is fully funded as of the date of such termination. For the avoidance of any doubt, the vesting of any stock option or restricted stock grant shall be governed by the award agreement pursuant to which such stock option or restricted stock grant was granted.

7.8Certain Definitions. For purposes of this Agreement, the following term shall have the meanings set forth below.

(a)“Cause” shall mean that Executive shall: (i) commit an act of fraud, embezzlement or misappropriation involving the Company; (ii) be convicted by a court of competent jurisdiction of, or enter a plea of guilty of no contest to, any felony involving moral turpitude or dishonesty; (iii) commit an act, or fail to commit an act, involving the Company which amounts to, or with the passage of time would amount to, willful misconduct, gross negligence or a breach of this Agreement and which results or will result in material harm to the Company, if such act is not corrected within 30 days following receipt written notice thereof from the Company; or (iv) willfully fail to perform the responsibilities and duties specified herein for a period of 30 days following receipt of written notice from the Company which specifically describes past instances of willful failure of performance; provided that in the case of (iv) above, during the 30-day period following receipt of such notice, Executive shall be given the opportunity to take reasonable steps to cure any such claimed past failure of performance; provided, however, that Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive, together with Executive 's counsel, to be heard before the Board), finding that in the good faith opinion of the Board Executive was guilty of the conduct set forth above and specifying the particulars thereof in detail. Notwithstanding the foregoing, Executive shall have the right to contest his termination for Cause (for purposes of this Agreement) by arbitration in accordance with the provisions of this Agreement.

7

(b)“Date of Termination” shall mean (i) if Executive is terminated by the Company for Disability, thirty (30) days after written notice of such termination is given to Executive (provided that Executive shall not have returned to the performance of his duties on a full-time basis during such 30-day period); (ii) if Executive's employment is terminated by the Company for any other reason, the date on which a written notice of termination is given, provided that, in the case of a termination for Cause, Executive shall not have cured the matter or matters stated in the notice of termination within the 30-day notice period provided in Section 7.8(a) above; (iii) if Executive terminates employment for Good Reason, the date of Executive's resignation, provided that the notice and cure provisions in Section 7.8(d) have been complied with; (iv) if Executive terminates employment for other than Good Reason, the date specified in Executive's notice in compliance with Section 7.3; or (v) in the event of Executive's death, the date of death.

(c)“Disability” shall mean a physical or mental disability that renders Executive unable, as determined in good faith by a licensed physician, to perform the essential functions of his position, even with reasonable accommodation, for 180 days within any 12-month period. The Company and Executive or his legal representative shall use their best efforts to agree on the physician to determine disability. If they cannot agree within ten (10) days after the first party makes a written proposal stating the name of a physician, then the other party shall select a physician within 10 days and within 10 days thereafter the two physicians shall select a third physician. All such physicians must be board certified in the medical area giving rise to the alleged disability. The determination of the third physician shall be final and binding. If one party fails to select a physician within the 10-day period, the physician named by the other party shall make the determination of disability.

8

(d)“Good Reason” shall mean Executive's resignation from employment within 180 days after the occurrence of one of the following events enumerated in this Section 7.8(d) without Executive’s express written consent, provided, however, that Executive must provide written notice to the Company within ninety (90) days after the occurrence of the event allegedly constituting Good Reason, and the Company shall have thirty (30) days after such notice is given to cure:

(i) a change of Executive's title as Chairman and Chief Executive Officer or a material reduction in Executive's responsibilities or the assignment to Executive by the Company of duties inconsistent with his position as Chairman and Chief Executive Officer;

(ii) a material reduction in his Base Salary or target bonus opportunity under the Annual Bonus Plan or a material reduction in the benefits provided under other employee benefit plans described in this Agreement;

(iii) a relocation to any place more than twenty-five (25) miles from the office regularly occupied by Executive, except for reasonably required travel by Executive on the Company's business;

(iv) any material breach by the Company of any provision of this Agreement or any other material agreement between the Company or any subsidiary and Executive; or

(v) the failure by the Company or by any successor or assign of the Company (whether by operation of law or otherwise, including any surviving company in a merger or similar transaction involving the Company), within ten business days following a Change in Control, to deliver to Executive an agreement expressly reaffirming its obligations under or agreeing to assume and comply with the obligations of the Company under this Agreement.

7.9Code Section 409A. Notwithstanding anything herein to the contrary, to the extent that the Board determines, in its sole discretion, (a) at the time of Executive’s termination of employment with the Company, he is a “specified employee” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and (b) that any payment or benefit to be provided under Section 7 to or for the benefit of Executive would be subject to the additional tax imposed under Section 409A(a)(1)(B) of the Code or a successor or comparable provision if paid at the time such payments and benefits are otherwise required under this Agreement, the commencement of such payments and/or benefits shall be delayed until the earlier of (i) the date that is six months following the Date of Termination or (ii) the date of Executive's death; provided, however, that an amount equal to the lesser of two times (x) annual compensation or (y) the limit under Code Section 401(a)(17) shall not be subject to the delay described in the previous clause and instead shall be paid out as otherwise scheduled.

8.         Warranties and Representations. Executive hereby represents and warrants to the Company that he is not now under any obligation of a contractual or quasi-contractual nature known to him that is inconsistent or in conflict with this Agreement or that would prevent, limit or impair the performance by Executive of his obligations hereunder; and has been or has had the opportunity to be represented by legal counsel in the preparation, negotiation, execution and delivery of this Agreement and understands fully the terms and provisions hereof.

9

9. Notices

All notices required or permitted to be given by either party hereunder shall be in writing and shall be deemed sufficiently given if mailed by registered or certified mail, or personally delivered to the party entitled thereto at the address stated below, or to such changed address as the addressee may have given by a similar notice:

To the Company:	Building Materials Holding Corporation Four Embarcadero Center, Suite 3200 San Francisco, California 94111 Attn: Chairman of the Compensation Committee Fax: (415) 627-9119
With a Copy to:	Building Materials Holding Corporation 720 Park Blvd., Suite 200 P.O. Box 7006 Boise, Idaho, 83707 Fax: (208) 331-4477 Attention: Paul Street, Esq.
To Executive:	Robert E. Mellor Building Materials Holding Corporation Four Embarcadero Center, Suite 3200 San Francisco, California 94111 Telecopier: (415) 627-9119

10. General Provisions

10.1Waiver. No waiver by any party hereto of any failure of any other party to keep or perform any covenant or condition of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same, or any other covenant or condition.

10.2Amendments. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver shall be agreed to in writing and signed by Executive and a duly authorized officer of the Company.

10.3Severability. The provisions of this Agreement are severable and in the event that a court of competent jurisdiction determines that any provision of this Agreement is in violation of any law or public policy, in whole or in part, only the portions of this Agreement that violate such law or public policy shall be stricken. All portions of this Agreement that do not violate any statute or public policy shall not be affected thereby and shall continue in full force and effect. Further, any court order striking any portion of this Agreement shall modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties under this Agreement.

10

10.4Assignment. No right to or interest in any payments shall be assignable by either party; provided; however, that this provision shall not preclude Executive from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude his executor or administrator from assigning any right hereunder to the person or persons entitled hereto. Further, the Company may assign this Agreement: (a) to an affiliate so long as such affiliate assumes the Company's obligations hereunder, or (b) in connection with a merger or consolidation involving the Company or a sale of substantially all its assets or shares to the surviving corporation or purchaser as the case may be so long as such assignee assumes the Company's obligations hereunder.

10.5Successors and Assigns. This Agreement and the obligations of the Company and Executive hereunder shall be binding upon and shall be assumed by their respective successors including, without limitation, any corporation or corporations acquiring the Company, whether by merger, consolidation, sale or otherwise.

10.6Governing Law. The validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California without regard to the principles of conflict of laws thereof.

10.7Attorney's Fees and Costs. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and necessary disbursements in addition to any other relief to which that party may be entitled. This provision shall be construed as applicable to the entire contract.

10.8No Representation. No officer, employee or representative of the Company has any authority to make any representation or promise in connection with this Agreement or the subject matter hereto which is not contained herein, and Executive agrees that he has not executed this Agreement in reliance upon any such representation or promise.

10.9Interpretation of Agreement. Each of the parties has been represented by counsel in the negotiation and preparation of this Agreement. The parties agree that this Agreement is to be construed as jointly drafted. Accordingly, this Agreement will be construed according to the fair meaning of its language, and the rule of construction that ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement.

10.10Headings. The headings of sections and subsections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

10.11Entire Agreement. This document constitutes the entire understanding and Agreement of the parties with respect to the subject matter of this Agreement, and any and all prior agreements, understandings and representations are hereby terminated and cancelled in their entirety and are of no further force or effect.

11

10.12Counterparts. This Agreement may be executed in two or more counterparts with the same effect as if the signatures to all such counterparts was upon the same instrument, and all such counterparts shall constitute but one instrument.

10.13No Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by retirement benefits after the Date of Termination, except as specifically provided hereunder. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's then existing rights, or rights which would accrue solely as a result of the passage of time, under any Company benefit plan or other contract, plan or arrangement.

10.14Dispute Resolution and Binding Arbitration. Executive and the Company agree that in the event a dispute arises concerning or relating to Executive's employment with the Company, or any termination therefrom, such dispute shall be submitted to binding arbitration in accordance with the employment arbitration rules of Judicial Arbitration and Mediation Services (“JAMS”) by a single impartial arbitrator experienced in employment law selected as follows: if the Company and Executive are unable to agree upon an impartial arbitrator within ten (10) days of a request for arbitration, the parties shall request a panel of employment arbitrators from JAMS and alternatively strike names until a single arbitrator remains. The arbitration shall take place in San Francisco, California, and both Executive and the Company agree to submit to the jurisdiction of the arbitrator selected in accordance with JAMS' rules and procedures. Executive and the Company further agree that arbitration as provided for in this section will be the exclusive and binding remedy for any such dispute and will be used instead of any court action, which is hereby expressly waived, except for any request by either party hereto for temporary or preliminary injunctive relief pending arbitration in accordance with applicable law, or an administrative claim with an administrative agency. The parties further agree that the award of the arbitrator shall be final and binding on both parties. The arbitrator shall have discretion to award monetary and other damages, or no damages, and to fashion such other relief as the arbitrator deems appropriate. The Company will be responsible for paying any filing fees and costs of the arbitration proceeding itself (for example, arbitrators' fees, conference room, transcripts), but each party shall be responsible for its own attorneys' fees. THE COMPANY AND EXECUTIVE ACKNOWLEDGE AND AGREE THAT BY AGREEING TO ARBITRATE, THEY ARE WAIVING ANY RIGHT TO BRING AN ACTION AGAINST THE OTHER IN A COURT OF LAW, EITHER STATE OR FEDERAL, AND ARE WAIVING THE RIGHT TO HAVE CLAIMS AND DAMAGES, IF ANY, DETERMINED BY A JURY.

12

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year set forth below.

	BUILDING MATERIALS HOLDING CORPORATION
Robert E. Mellor
	By:
	Title:
Date:	Date:

13

EX-10.91.1

EX-10.92

Exhibit 10.92

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is made and entered into as of this day of February 19, 2008, by and between Stanley M. Wilson ("Executive"), and Building Materials Holding Corporation, a Delaware corporation (the "Company").

WITNESSETH

WHEREAS, Executive is currently employed by the Company as Senior Vice President; and President and Chief Executive Officer of BMC West Corporation;

WHEREAS, Executive and the Company are parties to an Amended and Restated Senior Management and Key Employee Severance Agreement (the "Severance Agreement"); and

WHEREAS, the Company wishes to extend the duration of Executive's services, promote the Executive to the position of President and Chief Operating Officer of the Company and clarify the terms and conditions of his employment by entering into this Agreement with Executive and Executive is willing to commit his services to the Company, on the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, Executive and the Company hereto agree as follows:

1. Term

This Agreement shall commence on the date hereof, and shall continue in effect for a period ending December 31, 2010, or, if this Agreement is extended, such later date as mutually agreed upon (the "Employment Term").

2. Employment

2.1Engagement. The Company hereby employs Executive and Executive hereby agrees to be employed by the Company, subject to the terms and conditions herein set forth. During the Employment Term, Executive shall be employed as President and Chief Operating Officer of the Company, and shall be responsible for the duties normally and customarily attendant to such offices. Executive shall report to the Chairman and Chief Executive Officer of the Company. Executive shall render such other services and duties of an executive nature consistent with the duties of a senior executive officer of the Company as may from time to time be designated by the Chairman and Chief Executive Officer of the Company.

2.2Exclusive Employment. During the Employment Term, Executive shall devote his full business time to his duties and responsibilities set forth in Section 2.1. Without limiting the generality of the foregoing, Executive shall not, without the prior written approval of the Board, during the Employment Term, render services of a business, professional or commercial nature to any other person, firm or corporation, whether for compensation or otherwise, except that Executive may engage in civic, philanthropic and community service activities so long as such activities do not materially interfere with Executive’s ability to comply with this Agreement and are not otherwise in conflict with the policies or interest of the Company, and Executive may serve on the board of directors of two companies without Company approval.

1

3. Compensation and General Benefits

3.1Base Salary. During the term of this Agreement, the Company shall pay Executive a base salary in an annualized amount equal to Six Hundred Thousand Dollars ($600,000) ("Base Salary") payable pro rata on the Company's regular payday, and subject to adjustment as hereinafter provided.

3.2Salary Reviews. Executive's Base Salary shall be reviewed annually by the Chairman and Chief Executive Officer of the Company and the Compensation Committee of the Company for the purpose of considering increases thereof. In conducting this review, the following factors shall be considered: Executive's performance, the Company's financial condition and compensation afforded to senior executives of comparable corporations and such other factors that the Chairman and Chief Executive Officer of the Company deems appropriate. The Base Salary shall not be decreased without the written consent of Executive.

3.3Bonus.During the Employment Term, in addition to the Base Salary provided by Section 3.1, Executive will participate in the Company's Annual Incentive Plan (the "Annual Bonus Plan"), pursuant to which Executive shall be eligible to receive additional incentive compensation on an annual basis based upon meeting targeted objectives as determined annually by the Compensation Committee of the Company.

3.4Vacation. Executive shall be entitled to four weeks paid vacation in any fiscal year during the Employment Term in accordance with Company vacation and leave policies. Vacation time shall be planned and taken consistent with Executive's duties and obligations hereunder.

3.5Other Benefits. During the Employment Term, Executive (and his spouse and dependents) shall be entitled to participate in the Company's executive perquisite plan, supplemental retirement plan, liability insurance, life insurance, disability insurance, dental insurance, hospitalization insurance, medical, accident, and other employee benefit plans from time to time adopted by the Company and made available to other senior executives. The Company shall have the right to change insurance carriers and benefit plans as may be appropriate in light of future market conditions and shall have the right to purchase individual policies covering Executive if necessary.

3.6Stock Incentive Plans. Executive shall also be eligible to receive additional incentive compensation in the form of stock option or restricted stock grants. Review for any such grant shall be concurrent with Executive's annual salary review and shall be in the sole discretion of the Compensation Committee of the Company.

3.7Reimbursement of Expenses. Upon submission of appropriate documentation in accordance with Company policy, the Company will promptly reimburse Executive for all reasonable business expenses incurred by Executive in pursuing the business of the Company, including, without limitation, expenditures for entertainment and travel.

2

4. Confidential Information

During the term of this Agreement and forever thereafter, Executive agrees to keep confidential all information provided by the Company, excepting any such information as is already known to the public, and including any such information and material relating to any customer, vendor, licensor, licensee, or other party transacting business with the Company, and not to release, use, or disclose the same, except with the prior written permission of the Company (collectively, “Confidential Information”). Executive further covenants and agrees that every document, computer disk, computer software program, notation, record, diary, memorandum, development, investigation, or the like, and any method or manner of doing business, of the Company (or containing any Confidential Information) made or acquired by Executive during his employment, is and shall be the sole and exclusive property of the Company.

5. Covenants of Executive.

5.1Non-Compete. Executive agrees that, during the Employment Term, he will not, directly or indirectly, engage in any business or activity competitive with the business activities of the Company. The foregoing shall not apply to passive investments by Executive of up to 5% of the outstanding stock of any publicly traded company or to service by Executive on boards of directors of companies as permitted under this Agreement, regardless of whether such company competes with the Company.

5.2Solicitation of Employees. During the Employment Term and for a period of one year following a termination of employment for any reason (i) he shall not, directly or indirectly, individually, or together through any other person, firm, corporation or entity, solicit, recruit or encourage any employee of the Company to leave his or her employment with the Company and/or accept a position with another Company, provided, however, that general solicitations not targeted to Company employees shall not be deemed to violate this Section 5.2.

5.3Solicitation of Customers and Suppliers. Executive agrees that, during the Employment Term and for a period of one year following a termination of employment for any reason, he shall not, directly or indirectly, individually, or together through any other person, firm, corporation or entity, (i) use the Company's Confidential Information to solicit the business of any customers of or suppliers to the Company, or (ii) discourage any person or entity which is a customer of the Company from continuing its existing business or contractual relationship with the Company.

5.4Compliance with Company Policies. Executive agrees that, during the Employment Term, he shall comply with the Company's employee manual and other policies and procedures reasonably established by the Company from time to time concerning matters such as management, supervision, recruiting, diversity, and sexual harassment.

5.5Cooperation. For a period of one year following his termination of employment for any reason under this Agreement, Executive shall, upon Company’s reasonable request and in good faith and with his best efforts, subject to his reasonable availability, cooperate and assist Company in any dispute, controversy, or litigation in which Company may be involved and with respect to which Executive obtained knowledge while employed by the Company or any of its affiliates, successors, or assigns, including, but not limited to, his participation in any court or arbitration proceedings, giving of testimony, signing of affidavits, or such other personal cooperation as counsel for the Company shall request. Any such activities shall be scheduled, to the extent reasonably possible, to accommodate Executive’s business and personal obligations at the time. The Company shall pay Executive’s reasonable travel and incidental out-of-pocket expenses incurred in connection with any such cooperation, as well as the reasonable costs of an attorney Executive engages to advise him in connection with the foregoing.

3

5.6Return of Business Records and Equipment. Upon termination of Executive's employment hereunder, Executive shall promptly return to the Company: (i) all documents, records, procedures, books, notebooks, and any other documentation in any form whatsoever, including but not limited to written, audio, video or electronic, containing any information pertaining to the Company which includes confidential information, including any and all copies of such documentation then in Executive's possession or control regardless of whether such documentation was prepared or compiled by Executive, Company, other employees of the Company, representatives, agents, or independent contractors, and (ii) all equipment or tangible personal property entrusted to Executive by the Company. Executive acknowledges that all such documentation, copies of such documentation, equipment, and tangible personal property are and shall at all times remain the sole and exclusive property of the Company.

6. Covenants of the Company

6.1Indemnification. In the event Executive is made, or threatened to be made, a party to any legal action or proceeding, by reason of the fact that Executive is or was an employee, director or officer of the Company or serves or served any other entity in any capacity at the Company's request, Executive shall be indemnified by the Company, and the Company shall pay Executive's related expenses when and as incurred, including but not limited to attorney fees, all to the fullest extent permitted by law.

6.2Change in Control. During the Employment Term, the Company shall continue in full force and effect with respect to Executive, the Severance Agreement, as amended from time to time in accordance with the terms thereof. The Severance Agreement shall control the compensation and benefits to be received by Executive in the event of a Change in Control (as defined in the Severance Agreement).

7. Compensation and Benefits Upon Termination Other than in Connection with a Change in Control.

7.1Termination Upon Death. If Executive dies prior to the expiration of the Employment Term, the Company shall pay to Executive's estate, or other designated beneficiary(s) as shown in the records of the Company, any earned but unpaid Base Salary, a pro-rata amount of the annual bonus that Executive would be eligible to receive under the Company's Annual Bonus Plan for the year in which Executive's death occurs, LTIP benefits in accordance with the terms of the LTIP, accrued benefits under the SERP and any other benefits that Executive is entitled to receive as of the Date of Termination under applicable benefit plans of the Company, less standard withholdings for tax and social security purposes. Except as required by law, after the Date of Termination, the Company shall have no obligation to make any other payment, including severance or other compensation, of any kind to Executive’s estate upon a termination of employment by death.

7.2Termination Upon Disability. The Company may terminate Executive's employment in the event Executive suffers a Disability. In the event that Executive's employment is terminated pursuant to this Section 7.2, Executive shall receive payment for any earned and unpaid Base Salary, a pro-rata amount of the annual bonus that Executive would be eligible to receive under the Company's Annual Bonus Plan for the year in which such termination occurs, LTIP benefits in accordance with the terms of the LTIP, accrued benefits under the SERP, and any other benefits that Executive is then entitled to receive under applicable benefit plans of the Company, less standard withholdings for tax and social security purposes. Except as required by law, after the Date of Termination, no other compensation of any kind or severance or other payment of any kind or payment in lieu of notice shall be payable by the Company to Executive upon a termination of employment for Disability.

4

7.3Voluntary Termination. Executive may voluntarily terminate his employment with the Company at any time upon 90 days' prior written notice. The Company may accelerate the termination of Executive's employment and the right to any further compensation to a date prior to the 90th day upon written notice thereof being delivered to Executive by the Company. In the event that Executive's employment is terminated under this Section 7.3, Executive shall receive payment for any earned and unpaid Base Salary, and benefits the Executive is entitled to receive under the employee benefit plans of the Company, but excluding bonuses otherwise payable under the Company's Annual Bonus Plan, less standard withholdings for tax and social security purposes, through the Date of Termination. Except as required by law, after the Date of Termination the Company shall have no further obligation to pay any compensation of any kind or severance payment of any kind nor to make any further payment in lieu of notice to Executive.

7.4Termination for Cause. The Board may terminate Executive's employment with the Company at any time for Cause. In the event that Executive's employment is terminated under this Section 7.4, Executive shall receive payment for all earned but unpaid Base Salary, and benefits the Executive is then entitled to receive under the employee benefit plans of the Company, but excluding bonuses otherwise payable under the Company's Annual Bonus Plan, less standard withholdings for tax and social security purposes, through the Date of Termination. Except as required by law, after the Date of Termination the Company shall have no further obligation to pay any severance or compensation of any kind nor to make any payment in lieu of notice to Executive. Except as required by law, all benefits provided by the Company to Executive under this Agreement or otherwise shall cease as of the Date of Termination.

7.5Termination Without Cause. The Company may, at any time and without prior written notice, terminate Executive without Cause. In the event that Executive's employment with the Company is terminated without Cause, Executive shall receive payment for all earned but unpaid Base Salary, and benefits the Executive is then entitled to receive under benefit plans of the Company, if any, less standard withholdings for tax and social security purposes, through the Date of Termination. In addition, provided that Executive executes a release of claims against the Company in a form reasonably satisfactory to the Company and such release becomes effective, Executive shall receive (i) within 75 days payment in a lump sum of an amount equal to the then current Base Salary for the period commencing on the Date of Termination and ending on the last day of the Employment Term, subject to tax withholding requirements; (ii) payment of the amount of the Annual Bonus that Executive would be eligible to receive under the Company's Bonus Plan for the year in which the termination occurs; (iii) payment of amounts accrued under the LTIP in accordance with the terms of the LTIP; (iv) payment on Executive's behalf of monthly continuation premiums for health insurance under Federal or State COBRA for a period of 18 months following the Date of Termination; (v) acceleration of the vesting of a portion of any unvested stock options in the amount thatwould have become vested at the end of the calendar year in which the termination occurred; and (vi) payment to Executive’s account under the SERP of the annual contribution to the SERP for the calendar year in which the termination occurs. No other compensation of any kind or severance or other payment of any kind shall be payable by the Company to Executive after such Date of Termination. Except as specifically provided in this Section 7.5 and except as required by law, all benefits provided by the Company to Executive under this Agreement or otherwise shall cease as of the Date of Termination.

5

7.6Termination for Good Reason. Notwithstanding anything in this Section 7 to the contrary, Executive may voluntarily terminate his employment with the Company and receive the benefits detailed in Section 7.5 upon or within 180 days following the occurrence of an event constituting Good Reason, subject to, as applicable, Executive’s execution of the effective release of claims described in Section 7.5.

7.7Termination Following a Change in Control. If the employment of Executive is terminated within the period commencing 3 months prior to a Change in Control and ending 3 years following a Change in Control, the provisions of this Section 7 shall not apply and all payments shall be made in accordance with the provisions of the Severance Agreement.

7.8Certain Definitions. For purposes of this Agreement, the following term shall have the meanings set forth below.

(a)"Cause" shall mean that Executive shall: (i) commit an act of fraud, embezzlement or misappropriation involving the Company; (ii) be convicted by a court of competent jurisdiction of, or enter a plea of guilty of no contest to, any felony involving moral turpitude or dishonesty; (iii) commit an act, or fail to commit an act, involving the Company which amounts to, or with the passage of time would amount to, willful misconduct, gross negligence or a breach of this Agreement and which results or will result in material harm to the Company, if such act is not corrected within 30 days following receipt written notice thereof from the Company; or (iv) willfully fail to perform the responsibilities and duties specified herein for a period of 30 days following receipt of written notice from the Company which specifically describes past instances of willful failure of performance; provided that in the case of (iv) above, during the 30-day period following receipt of such notice, Executive shall be given the opportunity to take reasonable steps to cure any such claimed past failure of performance;

(b)"Date of Termination" shall mean (i) if Executive is terminated by the Company for Disability, 30 days after written notice of termination is given to Executive (provided that Executive shall not have returned to the performance of his duties on a full-time basis during such 30-day period) or (ii) if Executive's employment is terminated by the Company for any other reason or by Executive, the date on which a written notice of termination, specifying in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment is given; provided that, in the case of a termination for Cause, Executive shall not have cured the matter or matters stated in the notice of termination within the 10-day notice period provided in Section 7.8(a) above.

(c)"Disability" shall mean a physical or mental disability that renders Executive unable, as determined in good faith by a licensed physician, to perform the essential functions of his position, even with reasonable accommodation, for 180 days within any 12-month period. The Company and Executive or his legal representative shall use their best efforts to agree on the physician to determine disability. If they cannot agree within ten days after the first party makes a written proposal stating the name of a physician, then the other party shall select a physician within ten days and within ten days thereafter the two physicians shall select a third physician. All such physicians must be board certified in the medical area giving rise to the alleged disability. The determination of the third physician shall be final and binding. If one party fails to select a physician within the ten-day period, the physician named by the other party shall make the determination of disability.

6

(d)"Good Reason" shall mean Executive's resignation from employment within 180 days after the occurrence of one of the following events without Executive’s express written consent, provided, however, that Executive must provide written notice to the Company within ninety days after the occurrence of the event allegedly constituting Good Reason, and the Company shall have thirty days after such notice is given to cure;

(i) a material reduction in Executive's responsibilities or the assignment to Executive by the Company of duties materially inconsistent with his position as President and Chief Operating Officer;

(ii) a material reduction in his Base Salary or target bonus opportunity for reasons not related to the economic performance of the Company under the Annual Bonus Plan or a material reduction in the benefits provided under other employee benefit plans described in this Agreement;

(iii) a relocation to any place more than 25 miles from the office regularly occupied by Executive, except for reasonably required travel by Executive on the Company's business;

(iv) any material breach by the Company of any provision of this Agreement or any other material agreement between the Company or any subsidiary and Executive; or

(v) the failure by the Company or by any successor or assign of the Company (whether by operation of law or otherwise, including any surviving company in a merger or similar transaction involving the Company), within ten business days following a Change in Control, to deliver to Executive an agreement expressly reaffirming its obligations under or agreeing to assume and comply with the obligations of the Company under this Agreement.

7.9Section 409A. Notwithstanding anything herein to the contrary, to the extent that the Board determines, in its sole discretion, that (a) at the time of the Executive’s termination of employment with the Company, he is a “specified employee” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and (b) any payment or benefit to be provided under Section 7 to or for the benefit of Executive would be subject to the additional tax imposed under Section 409A(a)(1)(B) of the Internal Revenue Code or a successor or comparable provision if paid at the time such payments and benefits are otherwise required under this Agreement, the commencement of such payments and/or benefits shall be delayed until the earlier of (i) the date that is six months following the Date of Termination or (ii) the date of Executive's death; provided, however, that an amount equal to the lesser of two times (x) annual compensation or (y) the limit under Internal Revenue Code Section 401(a)(17) shall not be subject to the delay described in the previous clause and instead shall be paid out as otherwise scheduled.

7

8.         Warranties and Representations. Executive hereby represents and warrants to the Company that he is not now under any obligation of a contractual or quasi-contractual nature known to him that is inconsistent or in conflict with this Agreement or that would prevent, limit or impair the performance by Executive of his obligations hereunder; and has been or has had the opportunity to be represented by legal counsel in the preparation, negotiation, execution and delivery of this Agreement and understands fully the terms and provisions hereof.

9. Notices

All notices required or permitted to be given by either party hereunder shall be in writing and shall be deemed sufficiently given if mailed by registered or certified mail, or personally delivered to the party entitled thereto at the address stated below, or to such changed address as the addressee may have given by a similar notice:

To the Company:	Building Materials Holding Corporation Four Embarcadero Center, Suite 3200 San Francisco, California 94111 Attn: Chairman of the Compensation Committee Fax: (415) 627-9119
With a Copy to:	Building Materials Holding Corporation 720 Park Blvd., Suite 200 P.O. Box 7006 Boise, Idaho, 83707 Fax: (208) 331-4477 Attention: Paul Street, Esq.
To Executive:	Stanley M. Wilson BMC West Corporation 5210 E. Lake Sammamish Parkway SE Issaquah, Washington 98029

10. General Provisions

10.1Waiver. No waiver by any party hereto of any failure of any other party to keep or perform any covenant or condition of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same, or any other covenant or condition.

10.2Amendments. No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver shall be agreed to in writing and signed by Executive and a duly authorized officer of the Company.

8

10.3Severability. The provisions of this Agreement are severable and in the event that a court of competent jurisdiction determines that any provision of this Agreement is in violation of any law or public policy, in whole or in part, only the portions of this Agreement that violate such law or public policy shall be stricken. All portions of this Agreement that do not violate any statute or public policy shall not be affected thereby and shall continue in full force and effect. Further, any court order striking any portion of this Agreement shall modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties under this Agreement.

10.4Assignment. No right to or interest in any payments shall be assignable by either party; provided; however, that this provision shall not preclude Executive from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude his executor or administrator from assigning any right hereunder to the person or persons entitled hereto. Further, the Company may assign this Agreement: (a) to an affiliate so long as such affiliate assumes the Company's obligations hereunder, or (b) in connection with a merger or consolidation involving the Company or a sale of substantially all its assets or shares to the surviving corporation or purchaser as the case may be so long as such assignee assumes the Company's obligations hereunder.

10.5Successors and Assigns. This Agreement and the obligations of the Company and Executive hereunder shall be binding upon and shall be assumed by their respective successors including, without limitation, any corporation or corporations acquiring the Company, whether by merger, consolidation, sale or otherwise.

10.6Governing Law. The validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California without regard to the principles of conflict of laws thereof.

10.7Attorney's Fees and Costs. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and necessary disbursements in addition to any other relief to which that party may be entitled. This provision shall be construed as applicable to the entire contract.

10.8No Representation. No officer, employee or representative of the Company has any authority to make any representation or promise in connection with this Agreement or the subject matter hereto which is not contained herein, and Executive agrees that he has not executed this Agreement in reliance upon any such representation or promise.

10.9Interpretation of Agreement. Each of the parties has been represented by counsel in the negotiation and preparation of this Agreement. The parties agree that this Agreement is to be construed as jointly drafted. Accordingly, this Agreement will be construed according to the fair meaning of its language, and the rule of construction that ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement.

10.10Headings. The headings of sections and subsections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

9

10.11Entire Agreement. This document constitutes the entire understanding and Agreement of the parties with respect to the subject matter of this Agreement, and any and all prior agreements, understandings and representations are hereby terminated and cancelled in their entirety and are of no further force or effect.

10.12Counterparts. This Agreement may be executed in two or more counterparts with the same effect as if the signatures to all such counterparts were upon the same instrument, and all such counterparts shall constitute but one instrument.

10.13No Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by retirement benefits after the Date of Termination, except as specifically provided hereunder. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's then existing rights, or rights which would accrue solely as a result of the passage of time, under any Company benefit plan or other contract, plan or arrangement.

10

10.14Dispute Resolution and Binding Arbitration. Executive and the Company agree that in the event a dispute arises concerning or relating to Executive's employment with the Company, or any termination therefrom, such dispute shall be submitted to binding arbitration in accordance with the employment arbitration rules of Judicial Arbitration and Mediation Services ("JAMS") by a single impartial arbitrator experienced in employment law selected as follows: if the Company and Executive are unable to agree upon an impartial arbitrator within ten days of a request for arbitration, the parties shall request a panel of employment arbitrators from JAMS and alternatively strike names until a single arbitrator remains. The arbitration shall take place in San Francisco, California, and both Executive and the Company agree to submit to the jurisdiction of the arbitrator selected in accordance with JAMS' rules and procedures. Executive and the Company further agree that arbitration as provided for in this section will be the exclusive and binding remedy for any such dispute and will be used instead of any court action, which is hereby expressly waived, except for any request by either party hereto for temporary or preliminary injunctive relief pending arbitration in accordance with applicable law, or an administrative claim with an administrative agency. The parties further agree that the award of the arbitrator shall be final and binding on both parties. The arbitrator shall have discretion to award monetary and other damages, or no damages, and to fashion such other relief as the arbitrator deems appropriate. The Company will be responsible for paying any filing fees and costs of the arbitration proceeding itself (for example, arbitrators' fees, conference room, transcripts), but each party shall be responsible for its own attorneys' fees. THE COMPANY AND EXECUTIVE ACKNOWLEDGE AND AGREE THAT BY AGREEING TO ARBITRATE, THEY ARE WAIVING ANY RIGHT TO BRING AN ACTION AGAINST THE OTHER IN A COURT OF LAW, EITHER STATE OR FEDERAL, AND ARE WAIVING THE RIGHT TO HAVE CLAIMS AND DAMAGES, IF ANY, DETERMINED BY A JURY.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

	BUILDING MATERIALS HOLDING CORPORATION
Stanley M. Wilson	By: Robert E. Mellor
	Chairman and Chief Executive Officer

11

EX-21

Exhibit 21.0

Subsidiaries of Building Materials Holding Corporation

Unless otherwise indicated, subsidiaries are 100% owned by Building Materials Holding Corporation or the subsidiaries listed below. We operate principally under the trade names of BMHC, SelectBuild and BMC West.

	State of
	Incorporation
	or Organization
Building Materials Holding Corporation	Delaware
SelectBuild Construction, Inc.	Delaware
Pacific Region
SelectBuild Distribution, Inc.	Delaware
SelectBuild, L.P. (99% ownership by SelectBuild Construction, Inc. and 1% BMHC)	California
SelectBuild Northern California, Inc.	Delaware
SelectBuild Southern California, Inc.	Delaware
C Construction, Inc.	Delaware
H.N.R. Framing Systems, Inc.	California
TWF Construction, Inc.	Delaware
Southwest Region
SelectBuild Arizona, LLC	Delaware
SelectBuild Nevada, Inc.	Delaware
SelectBuild Mechanical, LLC (60% ownership)	Delaware
SelectBuild Trim, LLC (remaining 49% interest acquired in September 2007)	Delaware
KBI Stucco, Inc.	Delaware
KBI Windows, Inc.	Delaware
Riggs Plumbing, LLC (remaining 27% interest acquired in April 2007)	Arizona
Midwest Region
SelectBuild Illinois, LLC (51% ownership)	Delaware
Mid-Atlantic Region
SelectBuild Mid-Atlantic, LLC (remaining 33% interest acquired in May 2007)	Delaware
Southeast Region
SelectBuild Florida, LLC	Delaware
A-1 Building Components, LLC (remaining 49% acquired in September 2007)	Delaware
BMC West Corporation	Delaware
BMC Insurance, Inc.	Hawaii

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Building Materials Holding Corporation:

We consent to the incorporation by reference in the registration statements Nos. 333-36387 and 333-61221 on Form S-4; 333-47122, 333-44260, 333-117237, and 333-136632 on Form S-8; and 33-52478-99 and 33-80952-99 on Form S-8/A of Building Materials Holding Corporation of our reports dated March 10, 2008, with respect to the consolidated balance sheets of Building Materials Holding Corporation as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, comprehensive (loss) income, and cash flows for each of the years in the three-year period ended December 31, 2007, and the related financial statement schedule, and our report dated March 10, 2008 with respect to the Company’s internal control over financial reporting as of December 31, 2007, which reports appear in the December 31, 2007, annual report on Form 10-K of Building Materials Holding Corporation.

/s/ KPMG LLP

San Francisco, California

March 10, 2008

EX-31.1

Exhibit 31.1

CEO CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Robert E. Mellor, certify that:

1. I have reviewed this annual report on Form 10-K of Building Materials Holding Corporation (Registrant);

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

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  March 10, 2008	/s/ Robert E. Mellor
	Robert E. Mellor Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CFO CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, William M. Smartt, certify that:

1.I have reviewed this annual report on Form 10-K of Building Materials Holding Corporation (Registrant);

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

3.Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  March 10, 2008	/s/ William M. Smartt
	William M. Smartt Senior Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CEO AND CFO CERTIFICATIONS PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, in his capacity as an officer of Building Materials Holding Corporation, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

· the annual report on Form 10-K for the period ended December 31, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

· the information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations.

Date:  March 10, 2008	/s/ Robert E. Mellor
	Robert E. Mellor Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

The undersigned hereby certifies, in his capacity as an officer of Building Materials Holding Corporation, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

·   the annual report on Form 10-K for the period ended December 31, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

·   the information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations.

Date:  March 10, 2008	/s/ William M. Smartt
	William M. Smartt Senior Vice President and Chief Financial Officer (Principal Financial Officer)