Back to Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

~~EXCHANGE ACT~~For OFthe ~~1934~~quarterly period ended March 31, 2009

For the quarterly period ended June 30, 2006

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

EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 0001-~~19335~~33192

www.bmhc.com

~~BUILDING MATERIALS~~Building ~~HOLDING~~Materials ~~CORPORATION~~Holding Corporation

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

~~Four Embarcadero~~720 ~~Center~~Park Boulevard, Suite ~~3200~~ 200, ~~San Francisco~~Boise, ~~CA 94111~~Idaho 83712

(~~415~~208) ~~627~~ 331-~~9100~~4300

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 x No ¨

Indicate by check mark whether the registrant ishas asubmitted ~~large~~electronically ~~accelerated~~and ~~filer,~~posted anon ~~accelerated~~its ~~filer~~corporate website, if any, every Interactive Data File required to be submitted orand aposted ~~non~~pursuant to Rule 405 of Regulation S-~~accelerated~~T ~~filer~~(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

~~Large accelerated filer þ Accelerated filer~~ Yes ¨ ~~Non-accelerated filer~~ No ¨

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

Large accelerated filer ¨	Non-accelerated filer ¨

Accelerated filer ¨	Smaller reporting company x

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

Yes ¨ No þ x

~~Back~~The number of toshares ~~Table~~outstanding of the registrant’s common stock as of May 14, 2009 was ~~Contents~~29,856,508.

BUILDING MATERIALS HOLDING CORPORATION

FORM 10-Q

For the Period Ended ~~June~~March 3031, ~~2006~~2009

INDEX

	Page Number
PART I - FINANCIAL INFORMATION
PART I – FINANCIAL INFORMATION
Item 1 - Financial Statements (unaudited)
Item 1 – Financial Statements (unaudited)	2
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2006 and 2005	2
Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008	2
Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005	3
Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	3
Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2006 and 2005	4
Consolidated Statements of (Deficit) Equity for the Three Months Ended March 31, 2009 and 2008	4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005	5
Consolidated Statements of Comprehensive Loss for Three Months Ended March 31, 2009 and 2008	5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008	6
Notes to Consolidated Financial Statements	7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3 - Quantitative and Qualitative Disclosures about Market Risk	42
Item 3 – Quantitative and Qualitative Disclosures about Market Risk	66
Item 4 - Controls and Procedures	43
Item 4 – Controls and Procedures	67
PART II - OTHER INFORMATION
PART II – OTHER INFORMATION
Item 1 - Legal Proceedings	44
Item 1 – Legal Proceedings	68
Item 1A - Risk Factors	44
Item 1A – Risk Factors	69
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 3 - Defaults Upon Senior Securities	47
Item 3 – Defaults Upon Senior Securities	78
Item 4 - Submission of Matters to a Vote of Security Holders	47
Item 4 – Submission of Matters to a Vote of Security Holders	79
Item 5 - Other Information	48
Item 5 – Other Information	80
Item 6 - Exhibits	48
Item 6 – Exhibits	81
SIGNATURES	5082

~~Back to~~Item ~~Table~~1. Financial ~~of Contents~~Statements

Item 1 - Financial Statements

Building Materials Holding Corporation

Consolidated Statements of ~~Income~~Operations

(thousands, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended
	Three Months Ended March 31								Year Ended December 31
	June 30						June 30
	2009				2008				2008
	2006			2005			2006			2005
Sales
Sales
Building products	$	99,174			$	179,886			$	693,664
Construction services	$	~~560~~68,~~323~~325		$	~~356,889~~	163,062	$	~~1,109,078~~		$631,015	~~636,934~~
Building products		361,669			344,632			697,471			637,515
Total sales		167,499				342,948				1,324,679
Total sales		921,992			701,521			1,806,549			1,274,449
Costs and operating expenses
Costs and operating expenses
Cost of goods sold
Cost of goods sold
Building products		77,267				130,683				514,222
Construction services		~~452~~66,~~467~~839			~~289,889~~	150,795		~~900,681~~		576,087	~~517,373~~
Building products		264,365			253,779			511,243			469,427
Impairment of assets		365				—				53,015
Impairment of assets		2,237			463			2,237			463
Selling, general and administrative expenses		61,952				84,256				349,417
Selling, general and administrative expenses		139,105			97,349			275,971			187,342
Other income, net		(5,999	)			(4,430	)			(5,059	)
Other income, net		(499	)		(851	)		(2,286	)		(1,356	)
Total costs and operating expenses		200,424				361,304				1,487,682
Total costs and operating expenses		857,675			640,629			1,687,846			1,173,249
Loss from operations		(32,925	)			(18,356	)			(163,003	)
Income from operations		64,317			60,892			118,703			101,200
Interest expense		12,155				11,638				52,925
Interest expense		6,465			3,350			12,055			6,548
Loss from continuing operations before income taxes		(45,080	)			(29,994	)			(215,928	)
Income before income taxes and minority interests		57,852			57,542			106,648			94,652
Income tax benefit (expense)		12				(3,849	)			23,409
Income taxes		20,520			20,420			38,330			33,381
Loss from continuing operations		(45,068	)			(33,843	)			(192,519	)
Minority interests income, net of income taxes		(3,157	)		(3,808	)		(6,074	)		(6,809	)
Loss from discontinued operations		(152	)			(3,513	)			(12,680	)
Net income	$	34,175		$	33,314		$	62,244		$	54,462
Impairment of assets		—				—				(7,813	)
Net income per share:
Income tax benefit (expense)		—				3,456				(1,860	)
Basic	$	1.20		$	1.19		$	2.18		$	1.96
Loss from discontinued operations		(152	)			(57	)			(22,353	)
Diluted	$	1.16		$	1.14		$	2.10		$	1.87
Net loss		(45,220	)			(33,900	)			(214,872	)
Noncontrolling interests loss		—				39				63
Net loss attributable to common shareholders	$	(45,220	)		$	(33,861	)		$	(214,809	)
Net loss per share:
Continuing operations	$	(1.53	)		$	(1.17	)		$	(6.62	)
Discontinued operations		—				—				(0.77	)
Basic	$	(1.53	)		$	(1.17	)		$	(7.39	)
Continuing operations	$	(1.53	)		$	(1.17	)		$	(6.62	)
Discontinued operations		—				—				(0.77	)
Diluted	$	(1.53	)		$	(1.17	)		$	(7.39	)

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

Back to Table of Contents

Building Materials Holding Corporation

Consolidated Balance Sheets

(thousands~~, except share data~~)

(unaudited)

	June 30 2006			December 31 2005					June 30 2006			December 31 2005
	March 31				December 31				March 31			December 31
Assets								Liabilities, Minority Interests and Shareholders’ Equity
	2009				2008				2009				2008
Cash and cash equivalents	$	37,885		$	30,078			Accounts payable	$	176,447		$	146,627
Assets								Liabilities and (Deficit) Equity
Marketable securities		1,917			3,645			Accrued compensation		59,086			65,928
Cash and cash equivalents	$	6,323			$	11,484
Receivables, net of allowances of $5,010 and $3,756		404,691			363,527			Insurance deductible reserves		33,075			21,872
Receivables, net of allowances								Accounts payable	$	26,189			$	19,021
Inventory		198,846			168,282			Other accrued liabilities		89,396			51,579
of $14,487 and $12,091		89,703				118,245		Accrued compensation		19,452				17,274
Unbilled receivables		82,695			56,128			Billings in excess of costs and estimated earnings		53,721			33,799
Inventory		70,605				78,676		Insurance deductible reserves		16,788				17,527
Deferred income taxes		6,747			5,768			Current portion of long-term debt		13,804			10,131
Unbilled receivables		10,571				13,112		Other accrued liabilities		24,524				26,981
Prepaid expenses and other		9,731			6,967
Income tax receivable		49,977				50,304		Billings in excess of costs and estimated
Total current assets		742,512			634,395			Total current liabilities		425,529			329,936
Deferred income taxes		—				—		earnings		19,696				24,054
								Deferred income taxes		6,177			6,911
Prepaid expenses and other		4,940				4,864		Current portion of long-term debt		316,309				39,443
Property and equipment								Insurance deductible reserves		22,330			20,753
Assets of discontinued operations		5,073				5,659		Liabilities of discontinued operations		502				773
Land		49,138			47,328			Long-term debt		339,223			278,169
Current assets		237,192				282,344		Current liabilities		423,460				145,073
Buildings and improvements		127,882			118,556			Other long-term liabilities		39,156			30,689
Property and equipment								Insurance deductible reserves		25,466				26,208
Equipment		183,865			166,633			Total liabilities		832,415			666,458
Land		34,188				33,996		Long-term debt		381				287,009
Construction in progress		18,530			9,485
Buildings and improvements		120,727				120,814		Other long-term liabilities		32,007				37,163
Accumulated depreciation		(131,280	)		(121,525	)		Minority interests		11,746			14,006
Equipment		144,385				153,843		Total liabilities		481,314				495,453
Marketable securities		34,724			28,875
Construction in progress		3,444				3,440
Deferred loan costs		4,674			3,616			Commitments and contingent liabilities		—			―
Accumulated depreciation		(144,460	)			(148,032	)	Commitments and contingent liabilities		—				—
Other long-term assets		29,362			20,465
Assets held for sale		41,451				46,300
Other intangibles, net		75,162			55,227			Shareholders’ equity
Deferred income taxes		—				—		(Deficit) equity
Goodwill		244,425			187,470			Common shares, $0.001 par
Deferred loan costs		4,100				4,485		Common shares, $0.001 par value:
Total assets	$	1,378,994		$	1,150,525			value: authorized 50 million
Other long-term assets		20,696				23,303		authorized 50 million shares; issued and
								shares; issued and outstanding 28,995,803 and 28,758,580 shares		29			29
Other intangibles, net		18,425				19,222		outstanding 29.7 and 29.7 million shares		29				29
								Additional paid-in capital		148,398			143,780
Goodwill		—				—		Additional paid-in capital		168,545				169,146
								Unearned compensation		—			(2,698	)
	$	480,148			$	539,715		Deferred compensation common shares obligation		80				878
								Retained earnings		384,914			328,463
								Deferred compensation common shares held		(80	)			(878	)
								Accumulated other comprehensive income, net		1,492			487
								Accumulated deficit		(165,547	)			(120,327	)
								Total shareholders’ equity		534,833			470,061
								Accumulated other comprehensive loss, net		(4,193	)			(4,586	)
								Total liabilities, minority interests and shareholders' equity	$	1,378,994		$	1,150,525
								Shareholders’ (deficit) equity		(1,166	)			44,262
								Noncontrolling interests		—				—
								Total (deficit) equity		(1,166	)			44,262
									$	480,148			$	539,715

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

Back to Table of Contents

Building Materials Holding Corporation

Consolidated Statements of ~~Shareholders’~~ (Deficit) Equity

(thousands)

(unaudited)

														Accumulated Other Comprehensive Income (Loss)
	Three Months Ended March 31							Year Ended December 31
														Net Unrealized Gain (Loss) From
	2009			2008				2008
			Common Shares				Additional Paid-In			Unearned		Retained		Interest Rate Swap			Marketable
Common shares – beginning balance	$	29		$	29			$	29
			Shares		Amount		Capital			Compensation		Earnings			Contracts		Securities			Total
Shares issued from Incentive and Performance Plans		—			—				—
Balance at December 31, 2004			27,705	$	28		$	124,580		$	(1,383)	$	205,812		$	(1,362)	$	3	$	327,678
Shares issued upon exercise of warrants		—			—				—
Net income					—			—			—		54,462			—		—		54,462
Common shares	$	29		$	29			$	29
Unrealized gain					—			—			—		—			834		—		834
Additional paid-in capital – beginning balance	$	169,146		$	164,043			$	164,043
Taxes for unrealized gain					—			—			—		—			(328)		—		(328)
Shares issued from Incentive and Performance Plans
Unrealized loss					—			—			—		—			—		(96)		(96)
Options exercised – Management		—			9				9
Tax benefit for unrealized loss					—			—			—		—			—		37		37
Tax benefit for share options exercised		—			(27	)			—
Comprehensive income																				54,909
Restricted shares – Management		(377	)		(106	)			(2,119	)
Issuance of restricted shares			116		—			2,653			(2,653)		—			—		—		―
Unearned compensation		377			106				2,119
Earned compensation expense					—			—			619		—			—		—		619
Shares – Directors		—			—				402
Share options exercised			575		—			3,167			—		—			—		—		3,167
Earned compensation
Tax benefit for share options exercised					—			4,697			—		—			—		—		4,697
Options – Management		154			998				2,780
Shares issued from Director Plan			14		—			380			—		—			—		—		380
Restricted shares – Management		(19	)		694				1,044
Shares issued from Employee Plan			18		—			432			—		—			—		—		432
Tax benefit for vested restricted shares		—			(704	)			—
Shares issued for acquisition			34		—			1,000			—		—			—		—		1,000
Shares issued from Employee Stock Purchase Plan		46			—				86
Cash dividends on common shares					—			—			—		(2,543)			—		—		(2,543)
Warrants
Balance at June 30, 2005			28,462	$	28		$	136,909		$	(3,417)	$	257,731		$	(856)	$	(56)	$	390,339
Fair value of warrants issued		—			—				782
Balance at December 31, 2005			28,759	$	29		$	143,780		$	(2,698)	$	328,463		$	736	$	(249)	$	470,061
Warrants exercised		—			—				—
Net income					—			—			—		62,244			—		—		62,244
Reclassified to other accrued liabilities		(782	)		—				—
Unrealized gain					—			—			—		—			1,822		—		1,822
Additional paid-in capital	$	168,545		$	165,013			$	169,146
Taxes for unrealized gain					—			—			—		—			(701)		—		(701)
Deferred compensation common shares obligation – beginning balance	$	878		$	1,427			$	1,427
Unrealized loss					—			—			—		—			—		(165)		(165)
Deferred compensation		—			45				292
Tax benefit for unrealized loss					—			—			—		—			—		49		49
Dividends on common shares held		—			11				11
Comprehensive income																				63,249
Distributions		(798	)		(262	)			(852	)
Reclassify unearned compensation - restricted shares					—			(2,698)			2,698		—			—		—		—
Deferred compensation common shares obligation	$	80		$	1,221			$	878
Earned compensation - options					—			3,340			—		—			—		—		3,340
Deferred compensation common shares held – beginning balance	$	(878	)	$	(1,427	)		$	(1,427	)
Earned compensation - restricted shares					—			1,518			—		—			—		—		1,518
Cost of shares purchased with deferred compensation and dividends		—			(56	)			(303	)
Issuance of restricted shares			138		—			—			—		—			—		—
Cost of shares distributed		798			262				852
Share options exercised			62		—			576			—		—			—		—		576
Deferred compensation common shares held	$	(80	)	$	(1,221	)		$	(878	)
Tax benefit for share options exercised					—			605			—		—			—		—		605
(Accumulated deficit) retained earnings – beginning balance	$	(120,327	)	$	94,482			$	94,482
Shares issued from Director Plan			12		—			415			—		—			—		—		415
Net loss attributable to common shareholders		(45,220	)		(33,861	)			(214,809	)
Shares issued from Employee Plan			25		—			862			—		—			—		—		862
Cash dividends on common shares		—			—				—
Cash dividends on common shares					—			—			—		(5,793)			—		—		(5,793)
(Accumulated deficit) retained earnings	$	(165,547	)	$	60,621			$	(120,327	)
Balance at June 30, 2006			28,996	$	29		$	148,398		$	—	$	384,914		$	1,857	$	(365)	$	534,833
Accumulated other comprehensive loss, net – beginning balance	$	(4,586	)	$	(4,812	)		$	(4,812	)
Interest rate swap contracts – active:
Amortization of unrealized loss		384			—				—
Unrealized (loss) gain		—			(8,419	)			226
Notional reduction settlement payments		—			—				3,835
Tax benefit for unrealized loss		(146	)		(3,266	)			(1,556	)
Interest rate swap contracts – terminated:
Notional reduction settlement payments		—			—				(3,835	)
Amortization of payments		250			—				926
(Tax benefit) taxes for unamortized payments		(95	)		—				1,106
Marketable securities:
Unrealized gain (loss)		—			700				(721	)
(Tax benefit) taxes for unrealized (loss) gain		—			(238	)			245
Accumulated other comprehensive loss, net	$	(4,193	)	$	(16,035	)		$	(4,586	)
Noncontrolling interests – beginning balance	$	—		$	8,591			$	8,591
Noncontrolling interests loss		—			(39	)			(63	)
Purchase of noncontrolling interests		—			(8,407	)			(8,528	)
Noncontrolling interests	$	—		$	145			$	—
Total (deficit) equity	$	(1,166	)	$	209,773			$	44,262

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

~~Back~~Building toMaterials ~~Table~~Holding ~~of Contents~~Corporation

Consolidated Statements of ~~Cash~~Comprehensive ~~Flows~~Loss

(thousands)

(unaudited)

	Six Months Ended
		Three Months Ended March 31							Year Ended December 31
	June 30
		2009				2008			2008
Operating Activities	2006			2005
Net loss		$	(45,220	)		$	(33,900	)	$	(214,872	)
Net income	$	62,244		$	54,462
Less: Reclassifications from Accumulated other comprehensive loss, net for:
Items in net income not using (providing) cash:
Unrealized gain (loss) on interest rate swap contracts:
Minority interests, net		6,074			6,809
Interest rate swap contracts – active:
Depreciation and amortization		21,308			11,585
Amortization of unrealized loss		$	384			$	—		$	—
Impairment of assets		2,237			463
Unrealized (loss) gian			—				(8,419	)		226
Share-based compensation		5,401			1,064
Notional reduction settlement payments			—				—			3,835
(Gain) Loss on sale of assets, net		(91)			33
(Taxes) tax benefit for unrealized gain (loss)			(146	)			(3,266	)		(1,556	)
Deferred income taxes		33			(2,401)
Interest rate swap contracts – terminated:
Tax benefit for share options		—			4,697
Notional reduction settlement payments			—				—			(3,835	)
Changes in assets and liabilities, net of effects of acquisitions and sales of business units:
Amortization of payments			250				—			926
Receivables, net		(11,659)			(38,945)
(Taxes) tax benefit for unamortized payments			(95	)			—			1,106
Inventory		(18,096)			(28,650)
		$	393			$	(11,685	)	$	702
Unbilled receivables		(18,784)			(2,942)
Unrealized gain (loss) on marketable securities:
Prepaid expenses and other current assets		(2,549)			4,339
Unrealized gain (loss)		$	—			$	700		$	(721	)
Accounts payable		25,340			29,763
(Taxes) tax benefit for unrealized gain (loss)			—				(238	)		245
Accrued compensation		(8,029)			13,013
		$	—			$	462		$	(476	)
Insurance deductible reserves		11,203			7,557
Comprehensive loss		$	(44,827	)		$	(45,123	)	$	(214,646	)
Other accrued liabilities		13,033			5,687
Noncontrolling interests loss		$	—			$	39		$	63
Billings in excess of costs and estimated earnings		8,842			10,329
Comprehensive loss attributable to common shareholders		$	(44,827	)		$	(45,084	)	$	(214,583	)
Other long-term assets and liabilities		(3,001)			3,566
Other, net		(470)			(100)
Cash flows provided by operating activities		93,036			80,329
Investing Activities
Purchases of property and equipment		(28,731)			(17,202)
Acquisitions and investments in businesses, net of cash acquired		(100,097)			(27,088)
Proceeds from dispositions of property and equipment		738			300
Purchase of marketable securities		(4,410)			(4,224)
Other, net		(3,308)			760
Cash flows used by investing activities		(135,808)			(47,454)
Financing Activities
Net borrowings (payments) under revolver		65,500			(81,200)
Borrowings under term note		—			75,000
Principal payments on term note		(625)			(626)
Net payments on other notes payable		(330)			(4,096)
Decrease in book overdrafts		(5,369)			(4,443)
Proceeds from share options exercised		576			3,167
Tax benefit for share options		605			—
Dividends paid		(5,051)			(2,230)
Deferred financing costs		(1,498)			(2,193)
Distributions to minority interests		(3,221)			(849)
Other, net		(8)			54
Cash flows provided (used) by financing activities		50,579			(17,416)
Increase in Cash and Cash Equivalents		7,807			15,459
Cash and cash equivalents, beginning of period		30,078			19,496
Cash and cash equivalents, end of period	$	37,885		$	34,955
Supplemental Disclosure of Cash Flow Information
Accrued but unpaid dividends	$	2,900		$	1,421
Cash paid for interest	$	11,159		$	6,480
Cash paid for income taxes	$	46,157		$	26,057

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

~~Back~~Building toMaterials ~~Table~~Holding ~~of Contents~~Corporation

Supplemental Disclosure of Non-cash Investing Activities
Fair value of assets acquired	$	149,461	$	52,184
Liabilities assumed	$	49,364	$	25,096
Cash paid for acquisitions and investments in businesses, net of cash acquired	$	100,097	$	27,088

Consolidated Statements of Cash Flows

(thousands)

(unaudited)

	Three Months Ended March 31						Year Ended December 31
	2009			2008			2008
Operating Activities
Net loss attributable to common shareholders	$	(45,220	)	$	(33,861	)	$	(214,809	)
Noncontrolling interests loss, net		—			(39	)		(63	)
Net loss		(45,220	)		(33,900	)		(214,872	)
Items in net loss not using (providing) cash:
Depreciation and amortization		6,141			10,522			37,611
Deferred loan cost amortization		385			2,739			1,621
Deferred loan cost write off		—			—			7,099
Amortization of unrealized loss related to interest rate swap contracts previously accounted for as cash flow hedge		384			—			—
Amortization of terminated interest rate swap contracts notional reduction settlement payments		250			—			926
Unrealized ineffective portion of interest rate swap contracts		—			—			3,022
Amortization of warrant discount		62			—			62
Impairment of assets		365			—			60,828
Share-based compensation		249			1,846			4,276
Gain on sale of assets, net		(5,338	)		(3,435	)		(2,225	)
Realized gain on marketable securities		—			(186	)		(542	)
Deferred income tax (benefit) expense		(241	)		13,896			22,534
Changes in assets and liabilities, net of effects of acquisitions and divestitures of business units:
Receivables, net		29,155			15,435			85,424
Inventory		8,042			7,670			38,190
Unbilled receivables		2,541			8,271			26,804
Income tax receivable		327			—			(40,492	)
Prepaid expenses and other current assets		(73	)		(7,276	)		4,298
Accounts payable		6,951			4,909			(32,836	)
Accrued compensation		(258	)		(3,306	)		(14,724	)
Insurance deductible reserves		(739	)		(1,756	)		(10,961	)
Other accrued liabilities		(1,852	)		(2,540	)		(8,028	)
Billings in excess of costs and estimated earnings		(4,358	)		1,434			275
Other long-term assets and liabilities		(3,343	)		(2,610	)		8,789
Other, net		(241	)		(3,504	)		(205	)
Cash flows (used) provided by operating activities		(6,811	)		8,209			(23,126	)

Investing Activities
Purchases of property and equipment		(570	)		(7,176	)		(16,509	)
Acquisitions and investments in businesses, net of cash acquired		—			(2,450	)		(8,575	)
Proceeds from dispositions of property and equipment		10,828			5,187			14,871
Purchase of marketable securities		—			(13,854	)		(28,589	)
Proceeds from sales of marketable securities		—			10,339			70,221
Other, net		(26	)		(2,797	)		(2,123	)
Cash flows provided (used) by investing activities		10,232			(10,751	)		29,296

Financing Activities
Net borrowings under revolver		2,300			—			—
Principal payments on term notes		(11,986	)		(3,522	)		(19,866	)
Interest rate swap contracts notional reduction settlement payments		(1,220	)		—			(3,835	)
Net payments on other notes		(138	)		(418	)		(2,261	)
Increase (decrease) in book overdrafts		2,418			(4,413	)		(17,616	)
Proceeds from share options exercised		—			9			8
Income tax benefit for share-based compensation		—			(731	)		—
Dividends paid		—			(2,938	)		(2,938	)
Deferred financing costs		—			(4,927	)		(8,847	)
Other, net		44			—			82
Cash flows used by financing activities		(8,582	)		(16,940	)		(55,273	)

Decrease in Cash and Cash Equivalents		(5,161	)		(19,482	)		(49,103	)

Cash and cash equivalents, beginning of period		11,484			60,587			60,587
Cash and cash equivalents, end of period	$	6,323		$	41,105		$	11,484



Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	8,407		$	8,876		$	41,863
Cash paid for income taxes	$	9		$	78		$	3,141

Supplemental Schedule of Investing Activities
Liabilities of acquisitions (extinguished)	$	—		$	(2,450	)	$	(8,525	)
Cash paid for acquisitions made this period	$	—		$	2,450		$	8,525
Cash paid for acquisitions made in prior period	$	—		$	—		$	50

Supplemental Schedule of Financing Activities
Fair value of warrants issued	$	—		$	—		$	782
Discount on term note for warrants issued	$	—		$	—		$	(782	)

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

~~Back~~Notes to ~~Table~~Unaudited ~~of Contents~~Consolidated Financial Statements

~~Notes to~~1. Summary ~~Consolidated~~of ~~Financial~~Significant ~~Statements~~Accounting Policies

1.Nature ~~Basis~~ of ~~Presentation~~Operations

~~These~~Building Materials ~~consolidated financial~~Holding ~~statements~~Corporation ~~have~~(BMHC) ~~been~~provides ~~prepared~~building ~~pursuant~~products and construction services to ~~the~~professional ~~rules~~homebuilders and ~~regulations~~contractors in western and southern regions of the ~~Securities~~United ~~and~~States. We ~~Exchange~~distribute building ~~Commission.~~products, ~~Certain~~manufacture ~~information~~building components (millwork, floor and ~~disclosures~~roof ~~normally~~trusses ~~included~~and inwall ~~financial~~panels) ~~statements~~and ~~prepared~~provide inconstruction ~~accordance~~services ~~with~~to ~~accounting~~professional ~~principles~~builders ~~generally~~and ~~accepted~~contractors inthrough ~~the~~a ~~United~~network ~~States~~of ~~have~~31 ~~been~~distribution ~~condensed~~facilities, or43 ~~omitted~~manufacturing ~~pursuant~~facilities toand ~~those~~5 ~~rules~~regional ~~and~~construction ~~regulations~~services facilities. Based ~~These~~on ~~consolidated~~National ~~financial statements~~Association ~~should~~of beHome ~~read~~Builders inbuilding permit ~~conjunction~~activity, ~~with~~we ~~the~~provide ~~consolidated~~building ~~financial statements~~products and ~~the~~construction ~~accompanying~~services ~~notes included~~ in ~~our~~9 ~~Annual Report on Form~~of ~~10-K for~~ the ~~year~~top ~~ended~~25 ~~December~~single-family ~~31,~~construction ~~2005~~markets.

~~These consolidated financial~~Principles ~~statements have not been audited by independent registered public accountants. However, in the opinion~~ of ~~management, all adjustments necessary,~~ including those of a normal and recurring nature, to present fairly the results for the periods have been included. The preparation of these consolidated financial statements required estimates and assumptions. Actual results may differ from those estimates.Consolidation

The ~~term~~ ~~quarter~~consolidated ~~refers~~financial tostatements ~~the~~include ~~three month period whereas period refers to~~ the ~~six~~accounts ~~month~~of ~~period. Certain~~BMHC ~~reclassifications~~and ~~have been made to amounts reported in prior periods,~~its ~~none~~subsidiaries. All ofsignificant ~~which~~intercompany ~~affected~~balances ~~financial~~and ~~position, results of operations or cash~~transactions ~~flows~~are eliminated.

~~Common Share~~Basis ~~Split~~of Presentation

Interim consolidated financial statements

These consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes included in our most recent Annual Report on Form 10-K.

These consolidated financial statements have not been audited by independent registered public accountants. However, in the opinion of management, all adjustments, including those of a normal and recurring nature, necessary to present fairly the results for the periods have been included. The preparation of these consolidated financial statements required estimates and assumptions. Actual results may differ from those estimates.

Uncertainty regarding Liquidity and Going Concern

Our consolidated financial statements were prepared assuming we will continue as a going concern which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.

Beginning with the fourth quarter of 2007 and continuing through the first quarter of 2009, we have incurred losses from operations and, during 2008 and the first quarter of 2009, restructuring costs as we downsized our business to match the current environment. We have managed our liquidity during this time with closure and consolidation of underperforming business units and cost reduction initiatives as well as sales of assets. However, the downturn in the housing industry has been deepened by an increase in home foreclosures and reduced consumer confidence from tightened lending standards and rising unemployment, which have created a difficult business environment for homebuilders generally. Our operating performance and liquidity were negatively affected by these economic and industry conditions, which are beyond our control.

These business conditions have not improved during 2009. As of March 2009, single-family housing starts for the U.S. as a whole fell to an annualized rate below 0.4 million and single-family permits in our markets remained at a depressed annualized rate of 0.1 million. We do not believe these business conditions will improve significantly during 2009.

~~Back~~Our actions to align our cost structure with anticipated sales may not be sufficient to ~~Table~~fund our operating costs, restructuring costs and debt service requirements. When funds from operations are insufficient, our primary source of funding has been the revolver component of our credit ~~Contents~~facility. Our amended credit facility provides a $200 million revolver and a $340 million term note maturing in November 2011. Our revolver is subject to borrowing base limitations based on certain accounts receivable, inventory, property and equipment and real estate and may not provide adequate liquidity. As of March 31, 2009, there were $2.3 million borrowings outstanding under the revolver and $313.8 million was outstanding under the term note.

2Our credit agreement requires monthly compliance with financial covenants, including minimum liquidity and adjusted earnings before interest, taxes, depreciation and amortization (monthly Adjusted EBITDA). Operating ~~Net~~results, particularly ~~Income~~income ~~Per~~from ~~Share~~continuing operations, are a primary factor for these covenants, and our ability to comply with these covenants depends on our operating performance. Lack of compliance with these covenants would constitute an event of default under the credit agreement which, absent any waiver, forbearance or modification, would enable the lenders under our credit agreement to cause all amounts borrowed to become due and payable immediately and to prohibit further borrowings by us under the revolver.

~~Net~~Based on ~~income~~financial information ~~per~~for February 2009, we were not in compliance with the ~~share~~monthly ~~was~~Adjusted ~~determined~~EBITDA ~~using~~requirement of our credit agreement. In March 2009, we obtained a limited waiver through April 15, 2009 for lack of compliance with the ~~following~~monthly ~~information~~Adjusted ~~(thousands~~EBITDA requirement and we preserved access to limited liquidity permitting us to borrow up to $20 million under the revolver. Previously, ~~except~~we ~~per~~had obtained ~~share~~waivers ~~data):~~for financial covenants due to lower than planned operating performance as of both June 2008 and December 2007.

	Three Months Ended June 30				Six Months Ended June 30
		2006		2005		2006		2005
Net income	$	34,175	$	33,314	$	62,244	$	54,462
Weighted average shares used to determine basic net income per share		28,578		27,995		28,551		27,813
Net effect of dilutive stock options and restricted stock (1)		1,004		1,297		1,027		1,246
Weighted average shares used to determine diluted net income per share		29,582		29,252		29,578		29,059
Net income per share:
Basic		$1.20		$1.19		$2.18		$1.96
Diluted		$1.16		$1.14		$2.10		$1.87
Cash dividends declared per share for the period		$0.10		$0.05		$0.20		$0.09

Due to the difficulty of reliably projecting our operating results within the depressed business conditions of the homebuilding industry, we believe that it is likely that we will not be able to meet the financial covenants of our credit agreement during 2009. Also, our independent registered public accounting firm included a going concern explanatory paragraph in their report on our financial statements for 2008, citing among other things, the uncertainty that we would remain in compliance with these financial covenants. The going concern explanatory paragraph constitutes a default under our credit agreement. In April 2009, we obtained a waiver for the going concern explanatory paragraph.

~~(1)~~In ~~Options~~April to2009, ~~purchase~~our ~~shares~~lenders ofalso ~~405,100~~agreed to ~~for~~extend the ~~second~~limited ~~quarter~~waiver ofthrough ~~2006~~June as1, ~~well~~2009. In asMay ~~405~~2009,~~100~~ ~~and~~the limited 4waiver was extended through June 29,~~000~~ ~~for~~2009. This ~~the~~limited waiver ~~six~~continues ~~months~~to ~~ended~~waive ~~June~~compliance ~~30,~~with ~~2006~~the monthly Adjusted EBITDA, forecast and ~~2005~~projection ~~respectively~~requirements ~~were~~of ~~not~~our ~~dilutive~~credit ~~and~~agreement. The ~~therefore~~limited waiver ~~excluded~~limits ~~from~~borrowings under the ~~computation~~revolver ofto ~~net~~$20 ~~income~~million ~~per~~and ~~diluted~~limits ~~share~~capital expenditures to $0.1 ~~Options~~million ~~categorized~~from asthe ~~not~~date ~~dilutive~~of ~~were~~the ~~defined~~extended onlimited waiver. Lenders ~~the~~approving ~~basis~~each of the ~~exercise~~March, April ~~price~~and ~~being~~May ~~greater~~2009 ~~than~~limited ~~the~~waivers ~~average~~were ~~market~~paid ~~value~~a fee of ~~the~~0.10% ~~common~~of ~~shares~~their inrevolver commitment and their portion of the ~~periods~~outstanding ~~presented~~principal amount of the term note.

~~Back~~For March 2009, we towere ~~Table~~not in compliance with the monthly Adjusted EBITDA requirement of our ~~Contents~~credit agreement. Additionally, as the limited waiver for these financial covenants is less than a year, it is probable we will not be in compliance with these financial covenants within the next year and given there is no amendment or other financing agreement currently in place, the revolver and term note are classified as a current liability in the consolidated balance sheet.

3We are anticipating tax refunds of $56 million as a result of net operating losses for 2008. These ~~Accounting~~refunds will be applied to reduce the amount outstanding under our term loan facility to approximately $275 million. The remaining portion of the tax refund will be available for ~~Share~~working capital needs after payment of any borrowings under the revolver. We filed for our federal tax refund in April 2009 and our professional advisors have advised us that receipt of the refund is anticipated in mid-~~Based~~ ~~Compensation~~to late May 2009.

~~On January~~We 1,are ~~2006,~~currently wenegotiating ~~adopted~~with ~~the~~our lenders ~~fair~~to ~~value~~develop ~~recognition~~debt ~~provisions~~and ofcapital ~~Statement of~~structures ~~Financial~~to ~~Accounting~~support ~~Standards~~our ~~No. 123 (Revised 2004), Share~~long-~~Based~~term ~~Payment. This~~strategic ~~statement required~~plan ~~the~~and ~~measurement~~business ~~and~~objectives. We ~~recognition~~expect ofthat ~~share-based~~these negotiations ~~payments~~may lead to ~~employees at fair~~a ~~value.~~bankruptcy ~~Compensation~~filing ~~cost~~which iswe ~~based~~anticipate onwould reflect the ~~fair~~agreement ~~value~~ of ~~those~~our ~~shares on~~lenders ~~the grant~~and ~~date.~~would ~~Compensation~~provide ~~cost~~ for ~~share-based~~the ~~awards~~payment isin ~~recognized~~full asof ~~the~~all ~~requisite~~amounts ~~service~~owing isto ~~rendered~~key invendors and the ~~same~~uninterrupted ~~financial~~supply ~~statement~~of ~~line~~goods asand ~~cash~~services ~~compensation~~to our customers. Equity ~~Additionally,~~holders ~~tax~~may ~~benefits~~be ~~for~~substantially ~~share-based~~diluted ~~compensation~~or ~~payments~~be ~~are~~eliminated ~~reported~~in as a ~~financing~~bankruptcy ~~activity, rather than as an operating cash flow~~filing.

~~Previously, we~~There ~~did not~~can ~~recognize~~be ~~expense~~no ~~for~~assurance ~~grants~~these negotiations ofwill ~~share~~result ~~options~~in ifdebt ~~the~~and ~~exercise~~capital ~~price~~structures ~~was at least~~acceptable ~~equal~~ to ~~the~~us ~~fair~~and ~~value~~the lenders ofor ~~the~~an ~~shares~~agreement onthat ~~the~~would ~~date~~achieve ofour ~~grant~~goals. If ~~In accordance~~these ~~with~~negotiations ~~the~~fail, ~~modified~~we ~~prospective~~would ~~method~~not ofbe ~~transition,~~able ~~compensation~~to ~~expense is recognized~~continue ~~over~~as ~~the~~a ~~requisite~~going ~~service~~concern ~~period~~and ~~for all share-based compensation~~would ~~granted~~be ~~after~~forced ~~the~~to ~~date~~seek ofrelief ~~adoption~~through asbankruptcy ~~well~~filing aswithout ~~grants~~an ~~unvested~~agreement onof ~~the date~~our ~~of adoption~~lenders. We ~~Prior~~also ~~periods~~continue ~~are~~to ~~not~~pursue ~~revised~~alternative ~~for comparative purposes. Share-based~~financing ~~compensation~~arrangements ~~expense~~as ~~included~~well ~~restricted~~as ~~shares~~evaluate ~~and~~other ~~share~~financing ~~awards and will now include share~~ options.

~~The~~We ~~fair~~may ~~value~~not ofbe able to meet near-term working capital and scheduled interest and ~~compensation~~debt ~~expense~~payment ~~recognized~~requirements ~~for~~if ~~vested~~cash ~~options~~flows ~~was~~are ~~$2.8~~inadequate ~~million~~from ~~whereas~~our reduced operating activities or if our access to the revolver portion of our credit ~~compensation~~facility ~~expense~~is ~~for~~restricted ~~non-vested~~because ~~options~~we ~~due~~are unable to ~~early~~reach ~~retirement~~an ~~eligibility was~~agreement $0with our lenders.6 Absent ~~million~~any ~~for~~waiver, ~~the~~forbearance ~~period~~or ~~ended~~modification ~~June~~to 30our current credit agreement, ~~2006.~~we Asbelieve ~~this~~our ~~compensation~~recurring losses from operations, ~~does not~~interest ~~require~~and ~~the~~debt ~~payment~~burden ofamid ~~cash,~~declining ~~this~~sales isand ~~reflected~~potential asinability ato generate ~~non-~~sufficient cash ~~item~~flow into meet our obligations and sustain our operations ~~the statement~~raise ofsubstantial ~~cash~~doubt ~~flows.~~about our ability to continue as a going concern.

~~Share-based~~Additionally, our ~~compensation~~long-term ~~expense~~future is ~~included~~dependent inon ~~selling,~~more ~~general~~normal ~~and~~levels ~~administrative~~of ~~since~~single-family housing ~~it is~~starts ~~incentive~~and ~~compensation~~our ~~issued~~ability ~~primarily~~ to ~~our~~implement ~~executives.~~and ~~Share-based compensation~~maintain ~~expense~~cost ~~for options~~structures, ~~restricted~~including reduced ~~shares~~interest and ~~share~~debt ~~awards~~that ~~was~~align with single-family housing $4trends.~~8 million~~ If ~~for~~this ~~the~~fails ~~period~~to ~~ended~~transpire ~~June~~or ~~30,~~if ~~2006.~~we ~~Share-based~~cannot ~~compensation~~obtain ~~expense~~a waiver, ~~for restricted~~forbearance ~~shares~~or ~~and~~modification ~~share~~to ~~awards~~our ~~was~~current ~~$0.9~~credit ~~million~~agreement ~~for~~or ~~the~~other ~~period ended~~financing ~~June 30~~options, ~~2005~~we may not be able to continue as a going concern and ~~$1.6~~may ~~million~~be ~~for~~forced ~~2005~~to seek relief through a bankruptcy filing.

~~As of~~· ~~June~~Discontinued 30, 2006 there was $15.6 million of unrecognized compensation expense related to non-vested share-based compensation arrangements granted under our plans. This expense will be recognized as the requisite services are rendered and is expected to be recognized over the next 5 years. operations

~~Pro~~These consolidated ~~Forma~~financial ~~Information~~statements ~~for~~present separately the ~~Period~~financial ~~Prior~~information tofor discontinued ~~January~~operations 1,as ~~2006~~follows:

~~Financial information~~· ~~for~~concrete ~~prior~~block ~~periods~~masonry, ~~has~~concrete ~~not~~services ~~been~~and ~~restated~~truss tomanufacturing ~~reflect this change~~ in ~~accounting~~ ~~principle.~~Florida The following table 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 the prior period (~~thousands,~~June ~~except per share data~~2008): and

	Three Months Ended		Six Months Ended
	June 30		June 30
	2005		2005
Net income, as reported	$	33,314	$	54,462
Add: Share-based employee compensation expense determined under APB 25, net of related tax effects		208		346

framing services in Virginia (March 2008).

As a result of these transactions:

these operations are presented separately from continuing operations within the caption of discontinued operations and

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

~~Back to~~Use ~~Table~~ of ~~Contents~~Estimates

Deduct: Share-based employee compensation expense determined under fair value method for all awards, net of related tax effects		(746)		(1,321)
Pro forma net income	$	32,758	$	53,487
Diluted net income per share:
As reported		$1.14		$1.87
Pro forma		$1.12		$1.84

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 as of 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 often require our subjective and complex judgment 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.

Realizability of Net Deferred Tax Asset

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 recognized to reduce the carrying amount of deferred tax assets to the amount that is more likely than not to be realized. If it is later determined it is more likely than not that deferred tax assets will be realized, the valuation allowance will be adjusted. Revisions of the valuation allowance are recognized in the period such revisions are known.

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.

~~Back to~~· ~~Table~~Insurance ~~of Contents~~Deductible Reserves

4The estimated cost of automobile, general liability and workers’ compensation claims is determined by actuarial methods. Claims ~~Impairment~~in excess of ~~Assets~~insurance deductibles are insured with third-party insurance carriers. Insurance deductible reserves for claims are recognized based on the estimated costs of these claims as limited by the deductibles of the applicable insurance policies. Revisions to insurance deductible reserves for estimated claims are recognized in the period such revisions are known.

~~Long-lived assets such~~· as property, equipment and intangibles are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. An impairment for these assets is recognized if the carrying amount is more than 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.Warranties

~~As a~~The ~~result~~estimated cost of ~~changes~~warranties infor ~~specific~~certain ~~markets,~~construction ~~impairments~~services ofis ~~$1.8~~based ~~million~~on ~~for~~ the ~~carrying~~ ~~amount~~nature and frequency of ~~goodwill~~claims, anticipated claims and $0cost per claim.4 Claims ~~million~~in excess of insurance deductibles are insured with third-party insurance carriers. Estimated costs for ~~the~~warranties ~~carrying~~are ~~amount~~recognized ofwhen ~~certain~~the ~~customer~~revenue ~~relationships~~associated ~~were~~with the service is recognized. Revisions ~~for~~of estimated ~~SelectBuild~~warranties are recognized in the ~~second~~period ~~quarter~~such revisions are ~~of 2006~~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. 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 changes in forfeiture rates, revisions to forfeiture rates are 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 these estimates.

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.

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 of accounts receivable. 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.

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 labor and materials as well as equipment costs related to contract performance.

~~Back to~~Property ~~Table of~~and ~~Contents~~Equipment

5Property and equipment are recorded at cost. Cost ~~Acquisitions~~includes expenditures for major improvements and ~~Minority~~replacements ~~Interests~~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 not significant for the period ended March 31, 2009, $0.3 million for the period ended March 31, 2008 and $0.9 million for 2008. Expenditures for other maintenance and repairs are expensed as incurred. Gains and losses from sales and retirements are included in Other expense (income), net 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:

~~Acquisitions are accounted~~· ~~for~~ten ~~under the purchase method of accounting. The purchase price is allocated~~ to ~~the~~thirty ~~assets~~years ~~acquired,~~for ~~including~~buildings ~~intangible assets,~~ and ~~liabilities assumed based on their estimated fair values at the date of acquisition. Subsequent to the initial allocation of purchase price~~improvements, 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 income from the date of acquisition.

· Inseven ~~June~~to ~~2006,~~ten ~~BMC~~years ~~West~~for ~~acquired~~machinery ~~a building materials distribution~~ and truss manufacturing business in Eastern Idaho for approximately $5.1 million in cash of which $0.1 million has been retained for the settlement period. This purchase price is subject to working capital adjustment. Information required to complete the purchase price is not yet available. Final allocation of the purchase price will be completed as soon as this information is available.fixtures,

· Inthree ~~April~~to ~~2006,~~ten ~~SelectBuild~~years ~~acquired a concrete services business in Northern Arizona~~ for ~~approximately~~handling ~~$1.5~~and ~~million~~delivery inequipment cash of which $0.2 million has been retained for the settlement period. This purchase price is subject to working capital adjustment. Information required to complete the purchase price is not yet available. Final allocation of the purchase price will be completed as soon as this information is available.and

· Inthree ~~April~~to ~~2006,~~ten ~~SelectBuild~~years ~~acquired a wall panel and truss manufacturing business in Palm Springs, California~~ for ~~$6.7~~software ~~million~~development ~~in cash of which $0~~costs.7 million has been retained for the settlement period. Information required to complete the purchase price is not yet available. Final allocation of the purchase price will be completed as soon as this information is available.

·To improve Infinancial ~~February 2006~~returns, ~~BMC~~we ~~West~~periodically ~~acquired~~evaluate ~~three~~our ~~facilities~~investments ~~providing~~in ~~building~~property and ~~materials~~equipment. As ~~distribution~~a ~~and~~result, ~~millwork~~property ~~services~~and inequipment ~~Houston~~may be consolidated, ~~Texas~~leased ~~for~~or ~~$20~~sold.6 For ~~million~~continuing inoperations, ~~cash~~we recognized ofa ~~which~~gain of $05.23 million ~~has been retained~~ for the ~~settlement~~ period. ~~Information~~ended ~~required~~March to31, ~~complete~~2009, ~~the~~$3.4 million ~~purchase~~for ~~price~~the isperiod ~~not~~ended ~~yet~~March ~~available.~~31, ~~Final~~2008 ~~allocation~~and of$3.2 ~~the~~million ~~purchase~~for ~~price~~2008 ~~will~~from bethe sales ~~completed~~of asproperty ~~soon~~and ~~as this information is available~~equipment.

·Assets InHeld ~~January 2006, SelectBuild acquired framing businesses in Palm Springs, California and Reno, Nevada~~ for $57.1 million in cash of which $11.4 million has been retained for the settlement period. Information required to complete the purchase price is not yet available. Final allocation of the purchase price will be completed as soon as this information is available.Sale

·Assets Inheld ~~October~~for sale ~~2005,~~are ~~SelectBuild~~measured ~~acquired~~at athe ~~framing~~lower ~~services~~of ~~business~~carrying inamount ~~San~~or ~~Diego,~~fair ~~California~~value ~~for~~less ~~$72~~costs to sell and are no longer depreciated.6 These ~~million~~assets are being actively marketed for sale at a price that is reasonable in ~~cash~~relation to their carrying amounts. Any Angain ~~additional~~or ~~cash~~loss ~~payment~~arising ~~may~~from bethe ~~required~~sale ~~based~~of onthese ~~operating~~assets ~~performance~~is included ~~through~~in ~~September~~Other ~~2009~~expense (income), net. Assets held for sale are as follows (thousands):

· In September 2005, SelectBuild acquired a concrete and plumbing services business in Las Vegas, Nevada and Southern California for $85.6 million in cash.

	March 31 2009		December 31 2008
Property and equipment
Land	$	23,611	$	26,211
Buildings and improvements		17,840		20,089
	$	41,451	$	46,300

·Long-lived ~~In September 2005, BMC West acquired a truss manufacturing business in McCall, Idaho for $1.3 million in cash.~~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.

Derivative Instruments and Hedging Activities

We are exposed to certain risks related to business operations, some of which we may seek to manage with derivative instruments and hedging activities. The primary risk managed with derivative instruments is interest rate risk. Interest rate swap contracts are entered into to manage interest rate risk associated with variable-rate borrowings. These interest rate swap contracts are accounted for as cash flow hedges unless effectiveness is not probable.

~~Back~~The fair value of toderivative ~~Table~~instruments is based on pricing models using current market rates. The fair value of ~~Contents~~interest rate swap contracts is recorded as an asset or liability and the effective portion of the gain or loss is recorded as a component of Accumulated other comprehensive (loss) income, net, a separate component of equity, and is subsequently reclassified into Interest expense as interest expense is recognized on the term note. 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.

·Derivative financial Ininstruments ~~June~~are ~~2005,~~not ~~SelectBuild~~utilized ~~acquired~~to ahedge ~~stucco~~other ~~business~~risks inor ~~Las Vegas, Nevada~~ for ~~$5.9~~speculative or ~~million~~trading ~~in cash~~purposes.

~~Minority interest reflects~~Revenue 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. Recognition

·Revenues Infor building ~~January~~products ~~2006,~~are ~~SelectBuild~~recognized ~~acquired~~when ~~the~~title ~~remaining~~to ~~20%~~the ~~interest~~goods inand ~~WBC~~risk ~~Construction,~~of ~~LLC~~loss ~~for~~pass to ~~$31.4~~the ~~million~~buyer, ~~in cash of~~ which ~~$28.8 million~~ is ~~payable~~at inthe ~~December~~time ~~2006.~~of ~~An additional cash payment may be required based on operating performance through December 2006~~delivery. The percentage-of-completion ~~Information~~method ~~required~~is used to ~~complete~~recognize ~~the~~revenue ~~purchase~~for ~~price allocation is not yet available~~construction services. Taxes ~~Final~~assessed ~~allocation~~by ofgovernmental ~~the~~authorities ~~purchase~~that ~~price~~are directly ~~will~~imposed beon ~~completed~~our asrevenue-producing ~~soon~~transactions asare ~~this~~excluded ~~information is available~~from sales.

~~In August~~Shipping ~~2005, SelectBuild acquired an additional 20% interest in WBC Construction, LLC for $24.8 million in cash. WBC Construction provides concrete block masonry~~ and ~~concrete services to high-volume production homebuilders~~ ~~in Florida.~~ Handling

·Shipping Inand handling ~~July~~costs ~~2005,~~for ~~SelectBuild~~manufactured ~~acquired~~building acomponents ~~51%~~and ~~interest~~construction inservices are ~~BBP~~included ~~Companies~~as ~~for~~a ~~$9.4~~component ~~million~~of incost ~~cash~~of goods sold. Shipping and handling $1costs ~~million~~for ofbuilding ~~common~~products ~~shares.~~are ~~The~~included ~~remaining~~as ~~49%~~a iscomponent ~~owned~~of byselling, general ~~BBP~~and ~~Concrete~~administrative expenses and iswere ~~recognized~~$10.2 asmillion ~~minority~~for ~~interest~~the period ended March 31, 2009, $14.6 ~~BBP~~million ~~Companies~~for ~~provide~~the ~~concrete~~period ~~services~~ended toMarch ~~high-volume~~31, ~~production~~2008 ~~homebuilders~~and in$57.9 million ~~Arizona~~for 2008.

· In July 2005, SelectBuild acquired an additional 13% interest in Riggs Plumbing, LLC (Riggs Plumbing) for $1.4 million in cash. In April 2005, we acquired an initial 60% interest for $17.8 million in cash. The remaining 27% is owned by Riggs & Associates, LLC and is recognized as minority interest. Riggs Plumbing provides plumbing services to high-volume production builders in the Phoenix and Tucson markets.Reclassifications

~~· In January 2005~~Certain reclassifications, ~~SelectBuild~~none ~~acquired~~of awhich ~~51%~~affected ~~interest~~previously inreported ~~RCI~~consolidated results ~~Construction~~of operations, ~~LLC (RCI Construction) for $4.9 million in~~ cash. ~~The~~flows ~~remaining~~or ~~49%~~shareholders’ ~~is owned by Residential Carpentry~~equity, ~~Inc.~~have ~~and~~been ismade ~~recognized~~to amounts asreported ~~minority~~in ~~interest.~~prior ~~RCI~~periods ~~Construction~~to ~~provides~~conform ~~framing services~~ to ~~high-volume production builders in~~ the ~~greater~~current ~~Chicago area~~period presentation.

~~Assets and liabilities~~Recent ~~acquired in these acquisitions included (thousands):~~Accounting Principles

In May 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles. This accounting principle identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. This accounting principle was adopted November 2008 and had no impact on our consolidated financial position, results of operations or cash flows.

In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities. This accounting principle enhances disclosure for derivative instruments and hedging activities and their effects on consolidated financial position, results of operations and cash flows. Specifically, enhanced disclosures include objectives and strategies for using derivatives, including underlying risk and accounting designation, as well as fair values, gains and losses. This accounting principle was adopted June 2008 and had no impact on our 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 noncontrolling interests. Specifically, noncontrolling interests are presented as a component of equity; consolidated net income includes amounts attributable to both the parent and noncontrolling 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; purchase accounting for acquisitions of noncontrolling interests and acquisitions of additional interests is eliminated; and deconsolidated controlling interests are recognized based on fair value consistent with Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations. The accounting requirements were adopted January 2009 and had no impact on our consolidated financial position, results of operations or cash flows.

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations. This accounting principle requires 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; noncontrolling interests, including goodwill, to be recorded at fair value at the acquisition date; recognition of the fair value of assets and liabilities arising from 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 was adopted January 2009 and had no impact on our consolidated financial position, results of operations or cash flows.

~~Back to Table of Contents~~2. Restructuring

	June 30		December 31				June 30		December 31
	2006			2005			2006			2005
Cash and cash equivalents	$	―		$	1,644	Accounts payable	$	10,172		$	46,078
Receivables		29,505			106,407	Accrued compensation		1,187			7,385
Inventory		12,468			11,559	Insurance deductible reserves		―			3,192
Unbilled receivables		7,783			30,554	Other accrued liabilities		24,784			30,014
Deferred income taxes		―			(6,527)	Billings in excess of costs and
Prepaid expenses and other		105			4,057	estimated earnings		11,080			24,436
						Current portion of long-term debt		―			5,605
Total current assets		49,861			147,694	Total current liabilities		47,223			116,710
Property and equipment		14,313			33,406	Deferred income taxes		(1,746)			8,528
Other long-term assets		28			18	Long-term debt		―			10,048
Other intangibles, net		26,461			46,824	Other long-term liabilities		9,000			―
Goodwill		58,798			109,982	Total liabilities		54,477			135,286
						Minority interests		(5,113)			(3,172)
Total assets	$	149,461		$	337,924	Total liabilities and minority interests	$	49,364		$	132,114

In May 2008, we initiated a comprehensive analysis of our businesses operations to improve cash flow and profitability as well as rationalize our operations for the current conditions of the homebuilding industry. The plan places a priority on positive cash flow, efficient use of capital and higher returns and focuses on closing or consolidating business units in underperforming markets as well as improving business processes. The results of the plan were as follows:

~~The following summarizes~~· ~~pro~~for ~~forma results of operations assuming~~ the acquisitions occurred as of the beginning of 2005. Due to uncertainties in these assumptions, the pro forma data does not purport to be indicative of the results of operations that would have resulted had the acquisitions been consummated at the beginning of the period ~~presented,~~ended orMarch ~~that may occur in the future (thousands~~31, ~~except per share data)~~2009:

	Three Months Ended				Six Months Ended
	June 30				June 30
		2006		2005		2006		2005
Sales
As reported	$	921,992	$	701,521	$	1,806,549	$	1,274,449
Pro forma	$	922,236	$	908,470	$	1,823,718	$	1,700,053
Net income
As reported	$	34,175	$	33,314	$	62,244	$	54,462
Pro forma	$	34,927	$	40,227	$	64,980	$	67,644
Diluted net income per share:
As reported		$1.16		$1.14		$2.10		$1.87
Pro forma		$1.18		$1.37		$2.20		$2.32

closed 6 business units and

~~Subsequent to~~§ ~~June~~consolidated ~~30,~~1 ~~2006~~business unit with other business units.

· ~~In July 2006, SelectBuild acquired a framing services business in Southern California~~ for ~~approximately~~the ~~$75.0~~period ~~million~~ended inMarch ~~cash.~~31, 2008:

~~We have~~§ ~~call~~no ~~and~~restructuring ~~put~~activity ~~obligations~~as ~~associated with our interests in BBP Companies, Riggs Plumbing, RCI Construction, A-1 Truss and WBC Mid-Atlantic. Under~~ the ~~purchase~~ ~~agreements,~~plan wewas ~~have~~not ~~the~~initiated ~~right~~until toMay ~~purchase the other owners’ remaining portions during certain periods or if certain conditions are met~~2008. Likewise, the other owners have the option to require us to purchase their remaining portions during certain periods. The purchase price for the remaining portions will be based generally on a multiple of historical earnings. The following table summarizes the timing of these call and put obligations:

for 2008:

closed 42 business units,

consolidated 15 business units with other business units and

consolidated administrative functions of information systems, reporting, accounts payable and human resources.

Our restructuring plans do not include formal severance plans for employees affected by the closures and consolidations of business units or enhancements to administrative functions.

As of March 31, 2009, the estimated cumulative charges expected to be incurred and recognized in (loss) from continuing operations and resulting liability were as follows (thousands):

	Impairment of assets			Operating lease obligations			Total
Estimated charges	$	8,967		$	11,387		$	20,354
Changes in estimates, net		—			(753	)		(753	)
Cash payments		—			(535	)		(535	)
Non-cash charges		(8,967	)		(3,051	)		(12,018	)
	$	—		$	7,048		$	7,048

Impairments of assets were determined based on available market data and are recognized in Impairment of assets. Operating lease obligations represent the present value of contractual rental payments offset by estimated sublease income and are recognized in Selling, general and administrative expenses. The liability for restructuring is recorded in the consolidated balance sheet as follows:

$4.1 million in Other accrued liabilities and $2.9 million in Other long-term liabilities as of March 31, 2009 and

$5.6 million in Other accrued liabilities and $4.0 million in Other long-term liabilities as of December 31, 2008.

~~Back~~ Activity related to restructuring ~~Table~~plans ofand ~~Contents~~the resulting liability were as follows (thousands):

	Call Options		Put Options
		Three Months Ended March 31, 2009
BBP Companies	July 2008 through June 2015		July 2008 through June 2015
		Impairment of assets			Operating lease obligations			Total
Riggs Plumbing	April 2008 through March 2013		April 2008 through March 2013
Balance at beginning of period		$	—		$	9,644		$	9,644
RCI Construction	January 2008 through January 2012		January 2008 through January 2012
Estimated charges			365			—			365
A-1 Truss	September 2004 through August 2014		September 2009 through August 2014
Change in estimates, net			—			(753	)		(753	)
WBC Mid-Atlantic	October 2003 through September 2010		December 2006 through December 2008
Cash payments			—			(145	)		(145	)
Non-cash charges			(365	)		(1,698	)		(2,063	)
		$	—		$	7,048		$	7,048

	Year Ended December 31, 2008
	Impairment of assets			Operating lease obligations			Total
Balance at beginning of period	$	—		$	—		$	—
Estimated charges		8,602			11,387			19,989
Change in estimates, net		—			—			—
Cash payments		—			(390	)		(390	)
Non-cash charges		(8,602	)		(1,353	)		(9,955	)
	$	—		$	9,644		$	9,644

Due to uncertainties in the markets of certain business units and inherent in the estimation process, it is possible the actual costs of restructuring may vary from estimates. Revisions of these costs are recognized in the period such revisions are known.

~~Back to~~3. Impairment ~~Table~~ of ~~Contents~~ Assets

6Long-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 ~~Marketable~~impairment ~~Securities~~for these assets is recognized if the carrying amount exceeds their fair value and when the carrying amount is not recoverable based on the estimated future operating cash flows on an undiscounted basis.

~~Investments~~Similarly, goodwill ~~in marketable~~is ~~securities~~evaluated ~~consist~~for ofimpairment ~~debt~~in ~~securities~~the ~~held~~fourth byquarter ~~our~~and ~~captive~~whenever ~~insurance subsidiary~~events and circumstances ~~are~~indicate ~~considered~~the ~~available-for-sale~~carrying ~~and~~amount ~~recorded~~may atnot ~~fair~~be ~~value~~recoverable. An ~~Unrealized~~impairment ~~gains~~for ~~and~~goodwill ~~losses~~is ~~are~~recognized ~~recorded~~if asthe acarrying ~~component~~amount ofis ~~accumulated~~more ~~other~~than the ~~comprehensive~~estimated ~~income,~~future ~~net,~~operating acash ~~component~~flows ofas ~~shareholders’~~measured ~~equity.~~by ~~There~~fair ~~were no~~value ~~significant unrealized losses~~techniques.

~~The~~As ~~fair~~a ~~value~~result of our ongoing evaluations of underperforming business units, certain property and equipment specific to these ~~marketable~~business ~~securities~~units were identified as impaired. Impairments ~~follows~~recognized ~~(thousands)~~in loss from continuing operations were as follows:

		June 30		December 31
		2006		2005
Money market funds	$	―	$	415
U.S. government and agencies		12,752		7,838
Asset backed securities		13,789		13,391
Corporate securities		10,100		10,876
	$	36,641	$	32,520

for the period ended March 31, 2009:

~~Contractual maturities~~§ ~~were~~$0.4 asmillion ~~follows~~for ~~(thousands):~~certain property and equipment held for sale.

		June 30		December 31
		2006		2005
Less than one year	$	1,917	$	3,645
One to two years		12,035		9,893
Two to five years		22,689		18,982
	$	36,641	$	32,520

During the later portion of the fourth quarter of 2008, the leading sources of economic and housing data forecasted deeper reductions in estimated housing starts. Market factors as well as developing regulatory efforts to revive historically low housing starts have been further complicated by the weakening economic conditions of rising unemployment and pessimistic consumer confidence stemming from tightened lending standards and losses in home values and investments. Similarly, tightened lending conditions have impacted the liquidity of our customers.

For impairment testing of customer relationships and covenants not to compete, the carrying amounts exceeded the estimated future operating cash flows on an undiscounted basis. The impairment testing for goodwill indicated the carrying amount exceeded our estimate of enterprise value. Impairments recognized in loss from continuing operations were as follows:

for the period ended March 31, 2008:

no impairments were recognized.

for 2008:

$30.2 million for certain customer relationships and covenants not to compete,

$14.2 million for goodwill,

$6.3 million for certain property and equipment held for sale and

$2.3 million for leasehold improvements.

~~Back~~4. Discontinued ~~to Table of Contents~~Operations

The results of operations and financial position of discontinued operations are separately reported for all periods presented as a result of the following transactions:

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

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

Assets, liabilities, sales and loss after related income tax expense (benefit) for these operations are separately reported from continuing operations and were as follows (thousands):

	March 31		December 31
	2009		2008
Assets	$	5,073	$	5,659
Liabilities	$	502	$	773

	Three Months Ended March 31						Year Ended December 31
	2009			2008			2008
Sales
Building products	$	—		$	485		$	2,021
Construction services	$	17		$	12,206		$	38,624

Loss from discontinued operations	$	(152	)	$	(57	)	$	(22,353	)

5. Net Loss Per Share

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

	Three Months Ended March 31						Year Ended December 31
	2009			2008			2008
Loss from continuing operations	$	(45,068	)	$	(33,804	)	$	(192,456	)
Loss from discontinued operations		(152	)		(57	)		(22,353	)
Net loss attributable to common shareholders	$	(45,220	)	$	(33,861	)	$	(214,809	)

Weighted average shares - basic		29,508			28,972			29,081
Effect of dilutive:
Share options		—			—			—
Restricted shares		—			—			—
Warrants		—			—			—
Weighted average shares - assuming dilution		29,508			28,972			29,081

Net loss per share:
Continuing operations	$	(1.53	)	$	(1.17	)	$	(6.62	)
Discontinued operations		—			—			(0.77	)
Basic	$	(1.53	)	$	(1.17	)	$	(7.39	)

Continuing operations	$	(1.53	)	$	(1.17	)	$	(6.62	)
Discontinued operations		—			—			(0.77	)
Diluted	$	(1.53	)	$	(1.17	)	$	(7.39	)

Cash dividends declared per share	$	—		$	—		$	—

Potential common shares for options, restricted shares and warrants are generally excluded from the computation of diluted net loss per share if there is a loss from continuing operations for the period. Additionally, certain share options, restricted shares and warrants are excluded from the computation of diluted net loss per share:

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

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

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

	Three Months Ended March 31				Year Ended December 31
	2009		2008		2008
Average market value of shares		$0.38		$5		$3
Share options:
Exercise price range		$5 to $38		$5 to $38		$5 to $38
Not dilutive		2,472		2,964		2,627
Restricted shares:
Grant price range		$15 to $18		$14 to $42		$15 to $38
Not dilutive		103		297		214
Warrants:
Exercise price		$0.47		—		$0.47
Not dilutive		2,825		—		2,825

6. Noncontrolling Interests

Noncontrolling 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 noncontrolling interests are consolidated, noncontrolling interests loss represents the loss attributable to the other owners.

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

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

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

	March 31		December 31				March 31		December 31
	2009			2008			2009			2008
Receivables	$	—		$	—	Other accrued liabilities	$	—		$	(47	)
Prepaid expenses and other		—			—
Current assets		—			—	Current liabilities		—			(47	)

Property and equipment		—			—	Deferred income taxes		—			—
Other intangibles, net		—			—	Noncontrolling interests		—			(8,528	)
Goodwill		—			—
	$	—		$	—		$	—		$	(8,575	)

7. Intangible Assets and Goodwill

Intangible assets represent the values assigned to customer relationships, covenants not to compete, ~~and~~ trade names. and favorable leases. Intangible assets are amortized on a straight-line basis over their expected useful lives. Customer relationships are amortized over ~~three~~7 ~~to seventeen~~ years, and covenants not to compete over ~~two~~3 ~~to five~~ years ~~and~~. Amortization ~~trade~~expense ~~names~~for intangible ~~over~~assets ~~three~~was ~~years~~$0.8 ~~Intangible~~million ~~amortization~~for ~~expense~~the ~~was~~period ended March 31, 2009, $62.14 million for the period ended ~~June~~March 3031, ~~2006~~2008 and $48.79 million ~~in 2005~~for 2008. Intangible assets consist of the following (thousands):

	June 30, 2006
	March 31, 2009
	Gross Carrying Amount			~~Accumulated Amortization~~	Accumulated Amortization		~~Net Carrying Amount~~		Net Carrying Amount
Customer relationships	$	~~83,645~~$	25,300	$	~~(14,541)~~	$	$(7,730	~~69,104~~)		$	17,570
Covenants not to compete		~~9,193~~	1,900		~~(3,314)~~		(1,045	~~5,879~~)			855
Trade names		204			(125)			79
		$	27,200			$	(8,775	)		$	18,425
Other		146			(46)			100
	$	93,188		$	(18,026)		$	75,162

	December 31, 2005
		December 31, 2008
	~~Gross Carrying Amount~~	Gross Carrying Amount			Accumulated Amortization			~~Net Carrying Amount~~	Net Carrying Amount
Customer relationships	$	~~58,926~~$	29,074	$	$	(910,~~165)~~802	)		$	4918,~~761~~272
Covenants not to compete		~~7,541~~	4,089			(23,~~307)~~139	)			~~5,234~~950
Trade names		204				(91)				113
Favorable leases			382			(382	)			—
Other		146				(27)				119
		$	33,545		$	(14,323	)		$	19,222
	$	66,817		$		(11,590)			$	55,227

Estimated amortization expense for intangible assets is $62.14 million for the remainder of ~~2006~~2009, $113.52 million for ~~2007~~2010, $103.10 million for ~~2008~~2011, $92.98 million for ~~2009~~2012, $92.1 8 million for ~~2010~~2013 and $284.52 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~~ amounts previously reported as goodwill may occur as a result of completing the ~~purchase~~ purchase price allocation to the assets acquired, including intangible assets, ~~and~~ 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)~~:

	SelectBuild			BMC West			Total
		Three Months Ended							Year Ended
Balance at December 31, 2005	$	167,268		$	20,202		$	187,470
		March 31							December 31
Purchase price adjustment		(530)			—			(530)
		2009			2008				2008
Impairment		(1,839)			—			(1,839)
Balance at beginning of period		$	—			$	14,196		$	14,196
Goodwill acquired		58,331			993			59,324
Impairment			—				—			(14,196	)
Balance at June 30, 2006	$	223,230		$	21,195		$	244,425
		$	—			$	14,196		$	—

17While 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):

Back to Table of Contents

	Three Months Ended					Year Ended
	March 31					December 31
	2009		2008			2008
Balance at beginning of period	$	—		$	3,460	$	3,460
Impairment		—			—		(3,460	)
	$	—		$	3,460	$	—

8. Debt

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

As of June 30, 2006			Stated Interest Rate	Notional Amount of Interest Rate Swaps		Effective Interest Rate
As of March 31, 2009				Notional			Effective Interest Rate
	Balance		Stated Interest Rate	Amount of Interest Rate Swaps		~~Average for Quarter~~	Average for Quarter	~~As of June 30~~		As of March 31
Revolver	$	~~143~~2,~~000~~300	LIBOR (minimum of 3%) plus 05.7525% orOR Prime plus 3.25% and 0.0050% commitment fee	$	―—	~~6.29%~~		67.~~25%~~0	%		7.0	%
Term note		75313,~~000~~773	LIBOR (minimum of 3%) plus 05.7525% orOR Prime plus 03.0025%		―123,019	~~5.73%~~		511.~~73%~~5	%		11.5	%
Term note		121,250	LIBOR plus 1.75%		100,000	6.26%		6.95%
Other		1,275	Various		—			—			—
Other		13,777	Various		―
		317,348		$	123,019
		353,027		$	100,000
Less: Current portion		316,309
Less: Current portion		13,804
Less: Unamortized discount		658
	$	~~339,223~~381

As of December 31, 2005

Stated Interest Rate

Notional Amount of Interest Rate Swaps

Effective Interest Rate

As of December 31, 2008

Notional

Effective Interest Rate

Balance

Stated Interest Rate

Amount of Interest Rate Swaps

~~Average for Year~~

Average for Year

~~As of December 31~~

As of December 31

Revolver

~~77,500~~—

LIBOR (minimum of 3%) plus 05.7525% orOR Prime plus 3.25% and 0.0050% commitment fee

―—

~~5.37%~~

612.~~08%~~9

n/a

Term note

75325,~~000~~759

LIBOR (minimum of 3%) plus 05.7525% orOR Prime plus 03.0025%

―135,124

~~4.52%~~

59.~~28%~~6

11.5

Term note

121,875

LIBOR plus 1.75%

100,000

6.23%

6.17%

Other

1,412

Various

—

Other

13,925

Various

―

327,171

135,124

288,300

100,000

Less: Current portion

39,443

Less: Current portion

10,131

Less: Unamortized discount

719

~~278~~287,~~169~~009

~~Revolver~~21

In ~~June~~September ~~2005~~2008, we entered into an ~~amended~~amendment ~~$300~~to ~~million~~our ~~revolver~~credit agreement with ~~a group~~our of lenders. The Inamended ~~April~~credit ~~2006,~~facility wecontinues ~~exercised an existing option~~ to ~~add~~provide ~~another~~a $~~150~~200 million inrevolver ~~borrowing~~subject ~~capacity~~ to ~~our revolver which increased our~~ borrowing ~~capacity~~ ~~under~~base ~~the~~limitations ~~revolver~~and toa $~~450~~340 million. ~~The~~term note ~~revolver~~maturing ~~matures~~ in ~~June 2010. The~~November ~~revolver consists of both LIBOR and Prime based borrowings~~2011. However, ~~Interest rates are~~the ~~subject to quarterly adjustment based on operating performance and range~~April ~~from~~2009 ~~LIBOR~~limited ~~plus~~waiver ~~0.75%~~limits toborrowings ~~2.00%,~~under orthe ~~Prime~~revolver ~~plus 0.00%~~ to ~~0.75%. Interest is paid quarterly. As of June 30, 2006,~~ $~~143~~20 million ~~was~~and ~~outstanding~~may not ~~under~~provide ~~the revolver~~adequate liquidity.

18· Revolver

~~Back~~The $200 million revolver is subject to ~~Table~~borrowing base limitations and matures in November 2011. The revolver may consist of ~~Contents~~both LIBOR and Prime based borrowings. In the September 2008 amendment, the variable interest rate for the revolver was increased to LIBOR plus 5.25% or Prime plus 3.25%. Minimum LIBOR interest is 3.0%. Additionally, a commitment fee for the unused portion is 0.50%. LIBOR interest is paid quarterly and Prime interest is paid monthly. As of March 31, 2009, $2.3 million was outstanding under the revolver.

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

~~In June~~Letters ~~2005, we also entered into a $75 million term note with a group~~ of ~~lenders.~~credit ~~The~~outstanding ~~term~~that ~~note~~guaranteed ~~matures~~performance inor ~~June~~payment ~~2010~~to ~~with~~third ~~10%~~parties ofwere ~~the initial principal payable~~$109.0 ~~for each~~million ofas ~~the two years commencing September 2006, 20%~~ of ~~the~~March initial principal payable for one year commencing September 2008 and the remaining principal balance due June 2010. Interest rates are subject to quarterly adjustment based on operating performance and range from LIBOR plus 0.75% to 2.00%31, ~~or Prime plus 0~~2009.~~00%~~ These toletters ~~0.75%. Interest is paid quarterly. As~~ of ~~June~~credit ~~30,~~reduce ~~2006,~~the $~~75 million~~200 ~~was outstanding~~million ~~under~~revolver ~~this term note~~commitment.

~~In August~~Total ~~2003, we entered into a $125 million term note with a group of lenders.~~availability ~~The~~under ~~term~~the ~~note~~revolver ~~matures in June 2010 and~~ is ~~payable~~subject ~~in quarterly installments for the first six years in amounts equal~~ to 1%a ofmonthly ~~the~~borrowing ~~initial~~base ~~principal~~calculation ~~amount~~that per year and equal quarterly installments for the remaining principal balance during year seven. The interest rate for the term note is LIBOR plus 1.75%, or Prime plus 1.00%. Interest is paid quarterly. As of June 30, 2006, $121.3 million was outstanding under this term note.includes:

~~Other~~· 70% of certain accounts receivable,

~~Other long-term debt~~· of50% ~~$13.8 million consists~~ of ~~term~~certain ~~notes~~inventory, ~~equipment notes and capital leases for equipment. Interest rates vary and dates of maturity are through March 2021.~~

25% of certain other inventory,

approximately 75% of the appraised value of certain property and equipment and

50% of the appraised value of real estate.

As of March 31, 2009, the unused borrowing base under the revolver was $49.2 million, however the April 2009 limited waiver limits borrowings under the revolver to $20 million.

Term Note

The term note matures in November 2011 and is payable in quarterly installments of $0.9 million with the remaining principal of $270.0 million payable in November 2011. In the September 2008 amendment, the variable interest rate for the term note was increased to LIBOR plus 5.25% or Prime plus 3.25%. Minimum LIBOR interest is 3.0%. LIBOR interest is paid quarterly and Prime interest is paid monthly. In addition to the LIBOR and Prime interest rates, the term note includes an additional annual payment-in-kind interest or fee of 2.75% that is payable on the earlier of payoff or maturity. As of March 31, 2009, $313.8 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 March 31, 2009, other long-term debt was $1.3 million.

Covenants and Maturities

~~The~~ Our credit ~~facility~~agreement ~~consists~~requires ofmonthly ~~the~~compliance ~~revolver~~with financial covenants, including minimum liquidity and ~~term~~adjusted ~~notes.~~earnings ~~The~~before ~~credit~~interest, ~~facility~~taxes, isdepreciation ~~collateralized~~and byamortization ~~tangible~~(monthly ~~and~~Adjusted ~~intangible~~EBITDA). Operating ~~property~~results, particularly ofincome ~~our~~from ~~wholly-owned~~continuing ~~subsidiaries~~operations, ~~except~~are a primary factor for these ~~the assets~~covenants, ofand our ~~captive~~ability ~~insurance~~to ~~subsidiary.~~comply ~~The~~with ~~credit~~these ~~facility~~covenants ~~contains~~depends on our operating performance. Lack of compliance with these covenants ~~and~~would constitute ~~conditions~~an ~~requiring~~event of default under the ~~maintenance~~credit ofagreement ~~certain~~which, ~~financial~~absent ~~ratios.~~any Atwaiver, ~~June~~forbearance ~~30,~~or ~~2006~~modification, wewould ~~were~~enable inthe ~~compliance~~lenders ~~with~~under ~~these~~our ~~covenants~~credit agreement to cause all amounts borrowed to become due and payable immediately and to prohibit ~~conditions~~further borrowings by us under the revolver.

Based on financial information for February 2009, we were not in compliance with the monthly Adjusted EBITDA requirement of our credit agreement. In March 2009, we obtained a limited waiver through April 15, 2009 for lack of compliance with the monthly Adjusted EBITDA requirement and we preserved access to limited liquidity permitting us to borrow up to $20 million under the revolver. Previously, we had obtained waivers for financial covenants due to lower than planned operating performance as of both June 2008 and December 2007.

In April 2009, our lenders also agreed to extend the limited waiver through June 1, 2009. In May 2009, the limited waiver was extended through June 29, 2009. This limited waiver continues to waive compliance with the monthly Adjusted EBITDA, forecast and projection requirements of our credit agreement. The limited waiver limits borrowings under the revolver to $20 million and limits capital expenditures to $0.1 million

from the date of the extended limited waiver. Lenders approving each of the March, April and May 2009 limited waivers were paid a fee of 0.10% of their revolver commitment and their portion of the outstanding principal amount of the term note.

For March 2009, we were not in compliance with the monthly Adjusted EBITDA requirement of our credit agreement. Additionally, as the limited waiver for these financial covenants is less than a year, it is probable we will not be in compliance with these financial covenants within the next year and given there is no amendment or other financing agreement currently in place, the revolver and term note are classified as a current liability in the consolidated balance sheet.

We are anticipating tax refunds of $56 million as a result of net operating losses for 2008. These refunds will be applied to reduce the amount outstanding under our term loan facility to approximately $275 million. The remaining portion of the tax refund will be available for working capital needs after payment of any borrowings under the revolver. We filed for our federal tax refund in April 2009 and our professional advisors have advised us that receipt of the refund is anticipated in mid- to late May 2009.

We are currently negotiating with our lenders to develop debt and capital structures to support our long-term strategic plan and business objectives. We expect that these negotiations may lead to a bankruptcy filing which we anticipate would reflect the agreement of our lenders and would provide for the payment in full of all amounts owing to key vendors and the uninterrupted supply of goods and services to our customers. Equity holders may be substantially diluted or be eliminated in a bankruptcy filing.

There can be no assurance these negotiations will result in debt and capital structures acceptable to us and the lenders or an agreement that would achieve our goals. If these negotiations fail, we would not be able to continue as a going concern and would be forced to seek relief through bankruptcy filing without an agreement of our lenders. We also continue to pursue alternative financing arrangements as well as evaluate other financing options.

If our leverage ratio is at or above a certain maximum as of September 30, 2010, the monthly Adjusted EBITDA may be replaced with quarterly compliance with a leverage ratio and interest coverage ratio. Operating results, particularly income from continuing operations, are a primary factor for these covenants and our ability to comply with these covenants depends on our operating performance. The significant downturn in single-family housing starts has negatively impacted and may continue to negatively impact our operating performance.

The credit agreement requires certain proceeds and cash flows be applied to the credit facility as follows:

Revolver

30% of tax refunds and

cash in excess of $25 million.

Term Note

proceeds from certain dispositions,

70% of tax refunds and

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

Proceeds from tax refunds and certain dispositions are retained in a separate cash account. Cash in excess of $25 million in this separate cash account is to be applied to the revolver or term note. There was no amount in this separate cash account as of March 31, 2009. In the event of default, this cash is restricted and not available for our operating needs.

The amended credit facility continues to restrict 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.

In connection with the September 2008 amendment, 100% or $2.8 million of unamortized deferred loan costs related to the term note were recognized as interest expense in the third quarter of 2008. We also incurred $3.8 million of costs in connection with the amendment and $2.0 million of these costs will be amortized over the remaining term of the credit facility whereas $1.8 million of these costs were recognized as interest expense in the third quarter of 2008.

In connection with the February 2008 amendment, 60% or $2.4 million of unamortized deferred loan costs related to the previous revolver were recognized as interest expense in the first quarter of 2008. We also incurred $4.9 million of fees in connection with the amendment and these costs were to be amortized over the remaining term of our credit facility. However, in connection with the September 2008 amendment, the remaining $2.6 million of these unamortized costs were recognized as interest expense in the third quarter of 2008.

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

2006	$	8,252
2009	$	316,246
2007		13,978
2010		223
2008		14,130
2011		66
2009		77,830
2012		65
2010		237,408
2013		70
Thereafter		~~1,429~~678
	$	~~353~~317,~~027~~348

As of June 30, 2006 and December 31, 2005 there were $73.8 million and $75.9 million, respectively of letters of credit outstanding that guaranteed performance or payment to third parties. These letters of credit reduce borrowing availability under the revolver.Warrants

In connection with the amendment of our credit facility in September 2008, we issued warrants that entitle the lenders to purchase approximately 8.75% or 2.8 million of our common shares at a purchase price of $0.47 per common share, the closing price on the NYSE on September 30, 2008. These warrants may be exercised through September 2015.

The fair value of the warrants of $0.8 million was recorded as a discount on the term note. Amortization of the discount will be recognized ratably through November 2011, the remaining term of our credit facility.

Hedging Activities

~~Derivative~~In ~~and hedging~~addition ~~activities~~to ~~are recorded on~~ the ~~balance~~amendment ~~sheet~~to atour ~~their~~credit ~~fair~~facility ~~values. In June~~in ~~2004~~September 2008, we ~~entered~~amended our ~~into~~ interest rate swap contracts ~~that~~to ~~effectively convert a~~lower ~~portion~~amounts ofand ~~the~~a ~~floating~~maturity ~~rate~~matching ~~borrowings of~~ the credit ~~$121~~facility.3 As ~~million~~of ~~term~~March ~~note to a fixed interest rate through June~~ 2009, ~~thus reducing~~ the ~~impact of increases in~~ interest ~~rates~~rate onswap ~~future~~contracts effectively ~~interest~~converted ~~expense~~$123.0 ~~Approximately~~million ~~82%~~ of ~~the~~variable ~~outstanding floating~~ rate borrowings ofto ~~the~~a ~~term~~fixed interest ~~note~~rate as of ~~June~~10.6% ~~30,~~plus ~~2006~~any ~~have~~difference ~~been~~between ~~hedged through~~minimum ~~the~~LIBOR ~~designation of~~ interest ~~rate swap contracts accounted for as~~of ~~cash flow hedges~~3.0% Asand ~~a result~~LIBOR, ~~the~~thus ~~interest~~reducing ~~rate~~the onimpact ~~$100 million~~ of ~~the~~increases ~~$121.3 million~~in ~~floating~~interest ~~rate~~rates ~~borrowings~~on future ~~outstanding~~interest ~~at June 30~~expense. Additionally, ~~2006~~the ~~was~~notional ~~fixed~~amount ~~at an average rate~~ of ~~6.14%. After giving effect to~~ the interest rate swap contracts~~, total~~ ~~borrowings~~will ~~were~~be ~~32%~~ratably ~~fixed~~reduced ~~and~~to ~~68%~~zero ~~floating~~through the maturity of November 2011.

19As of March 2009, approximately 39% of the outstanding variable rate borrowings have been hedged with these interest rate swap contracts. After giving effect to the interest rate swap contracts, total borrowings were 61% variable and 39% fixed. The fair value of the interest rate swap contracts was a liability of $6.4 million as of March 31, 2009. 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.

~~Back~~Hedge accounting was discontinued in January 2009, as it is not probable future LIBOR interest rates for the remaining term of the interest rate swap contracts will be at or above the minimum LIBOR interest of 3.0% of the term note. In September 2008, we amended our interest rate swap contracts. Monthly settlements are made to ~~Table~~ratably reduce the notional amount of ~~Contents~~the interest rate swap contracts through November 2011. As a result, the following amounts were recognized as Interest expense:

2025

~~Back to~~· ~~Table~~$0.1 million for the period ended March 31, 2009 for an increase in the fair value of ~~Contents~~ the interest rate swap contracts rather than recorded in Accumulated other comprehensive loss, net, a component of equity. This increase in the fair value was after $1.2 million of notional reduction settlement payments for the period ended March 31, 2009. There were no notional reduction settlement payments for the period ended March 31, 2008.

9· $0.4 ~~Shareholders’~~million ~~Equity~~for the period ended March 31, 2009 for amortization of unrealized loss due to increases in fair value of interest rate swap contracts previously accounted for as a cash flow hedge and recorded in Accumulated other comprehensive loss, net. The remaining unrealized loss of $4.1 million in Accumulated other comprehensive loss, net as of March 31, 2009 will be subsequently amortized to Interest expense over the remaining term of our term note.

$0.2 million for the period ended March 31, 2009 and $0.9 million for 2008 for amortization of the notional reduction settlement payments previously accounted for as a cash flow hedge and recorded in Accumulated other comprehensive loss, net. The remaining unrealized loss of $2.7 million for notional reduction settlement payments previously accounting for cash flow hedged for 2008 recorded in Accumulated other comprehensive loss, net as of March 31, 2009 will be subsequently amortized to Interest expense over the remaining term of our term note.

In December 2008, we determined the interest rate swap contracts were not an effective hedge of variable interest due to the recent significant reductions in LIBOR interest rates. As a result of the estimated difference between the LIBOR interest of the interest rate swap contracts and the minimum LIBOR interest of 3.0% of the term note, we recognized $3.0 million of interest expense for the ineffective portion of these interest rate swap contracts for 2008. The effective portion of the interest rate swap contracts of $4.5 million was recorded as an unrealized loss and an unrealized tax benefit of $1.7 million in Accumulated other comprehensive loss, net, a component of equity. A corresponding deferred tax asset for the unrealized tax benefit was eliminated with a valuation allowance as there may be an inability to utilize this deferred tax asset. The remaining unrealized loss of $4.1 million in Accumulated other comprehensive loss, net as of March 31, 2009 will be subsequently amortized to Interest expense over the remaining term of our term note.

The fair value and gains and losses on interest rate swap contracts are as follows (thousands):

	March 31				December 31
	2009				2008
	Balance Sheet	Fair			Balance Sheet	Fair
	Classification	Value			Classification	Value
Interest rate swap contracts –
not designated as cash flow hedge	Other long-term
	liabilities		$	6,411			$	—
Interest rate swap contracts – designated as cash flow hedge					Other long-term
			$	—	liabilities		$	7,514

The effect of interest rate swap contracts on the consolidated statement of operations is as follows (thousands):

	Gain (Loss) Recognized in Accumulated Other Comprehensive Loss, Net
	Three Months Ended March 31						Year Ended December 31
		2009		2008				2008
Unrealized (loss) gain		$	—	$	(8,419	)		$	226

	Loss Reclassified from Accumulated Other Comprehensive Loss, Net to Interest Expense
	Three Months Ended March 31				Year Ended December 31
	2009		2008		2008
Effective cash flow hedge
Interest rate swap contracts – active
Amortization of unrealized loss	$	384	$	—	$	—
Interest rate swap contracts – terminated
Notional reduction settlement payments
Amortization of payments		250		—		926

Ineffective cash flow hedge
Interest rate swap contracts – active Ineffective portion		—		—		3,022
	$	634	$	—	$	3,948

9. Shareholders’ (Deficit) 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~~ ~~approximately~~which 29.7 million are issued and outstanding as of ~~June~~March 3031, ~~2006~~ 2009.

Of the unissued shares, ~~850,636~~6.0 million shares were reserved for the following:

		Unissued Shares
Employee Stock Purchase Plan	1.3 million
Employee Stock Purchase Plan			114,070
2008 Stock Incentive Plan	1.9 million
2004 Incentive and Performance Plan			736,566
Warrants	2.8 million

~~Shareholders’ Rights Plan~~Warrants

In ~~September~~connection ~~1997,~~with ~~our~~the ~~Board~~amendment of ~~Directors adopted a shareholder rights plan. If a person acquires 15% or more of~~ our ~~common~~credit ~~shares~~facility orin ~~makes~~September a2008, ~~tender offer~~we ~~or other~~issued ~~offer~~warrants tothat doentitle ~~so without~~ the ~~approval~~lenders ofto ~~the~~purchase ~~Board~~approximately of8.75% ~~Directors,~~or ~~our~~2.8 ~~shareholders~~million ~~would~~of ~~have the right to purchase~~ our common shares ~~or the shares of the acquiring company~~ at a ~~significant~~purchase ~~discount.~~price ~~The Board~~ of ~~Directors~~$0.47 ~~has the right~~per tocommon ~~redeem these rights for a nominal amount~~share, ~~to extend~~ the ~~period before~~ ~~the~~closing ~~rights~~price ~~may~~on bethe ~~exercised~~NYSE oron toSeptember ~~take~~30, ~~other actions as defined~~2008. These ~~The~~warrants ~~plan~~may ~~is intended~~be toexercised ~~encourage~~through ~~any person seeking to acquire us to negotiate with the Board of Directors. The plan expires in~~ September ~~2007~~2015.

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

Expected term (years)	5.5
Expected volatility	64.6	%
Expected dividend yield	0.0	%
Risk-free interest rate	3.0	%
Exercise price	$0.47
Weighted average fair value	$0.28

These assumptions to determine fair value are based principally on historical experience. Due to uncertainties inherent in these assumptions, it is possible that actual value received by the warrant holders may vary from the estimate of the fair value of these warrants.

The fair value of the warrants of $0.8 million was recorded as a discount on our term note. Amortization of the discount will be recognized ratably through November 2011, the remaining term of our credit facility.

No warrants have been exercised and all 2.8 million warrants are outstanding and exercisable as of March 31, 2009. Warrants exercised are settled with newly issued common shares. The common shares for warrants are not included in the calculation of basic income per share until exercised, however the common shares for warrants may be included in the calculation of diluted income per share.

Dividends

~~During 2006,~~Cash ~~cash~~ dividends per common share were as follows:

· $0.10 per share in the second quarter

	2009		2008
First quarter	$	—	$	—
Second quarter		—		—
Third quarter		—		—
Fourth quarter		—		—
	$	—	$	—

·Our ~~$0.10~~credit facility, ~~per~~amended ~~share~~ in September 2008, prohibits the ~~first~~payment ~~quarter~~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.

~~On July~~Our 28credit facility, ~~2006,~~amended ~~our~~in ~~Board~~September of2008, ~~Directors~~prohibits ~~approved~~the arepurchase ~~quarterly cash dividend~~ of ~~$0.10~~ ~~per~~our common ~~share~~ shares. The ~~dividend~~determination isof ~~payable~~future toshare ~~shareholders~~repurchases ofwill ~~record as~~depend ofon ~~September~~many 22factors, ~~2006~~including ~~and~~credit ~~will~~facility berestrictions, ~~paid~~financial onposition, results orof ~~about~~operations ~~October~~and ~~12, 2006~~cash flows.

2129

Back to Table of Contents

10. Employee Benefit Plans

Retirement Plans

~~We provide~~· Savings ~~a savings~~ and ~~retirement plan for salaried and certain hourly employees~~ ~~whereby~~Retirement eligible employees may contribute a percentage of their earnings to a trust. Matching contributions of $2.6 million for the period ended June 30, 2006, $1.8 million for the period ended June 30, 2005 and $3.9 million for 2005 were made to the trusts based on a percentage of the contributions made by the participating employees.Plan

~~Additionally,~~We ~~there is~~provide a ~~supplemental~~savings and retirement plan for ~~eligible~~salaried ~~participants.~~and ~~Contributions are based on achieving~~ certain ~~operating~~hourly ~~performance~~employees whereby ~~and~~eligible ~~certain~~employees ~~participants receive~~may contribute a ~~guaranteed~~percentage ~~return~~of ~~ranging~~their ~~from~~earnings ~~zero~~ to ~~9% based on years of service.~~a ~~Contributions were $3~~trust.4 Participants ~~million~~may ~~for~~defer ~~the~~up ~~period~~to ~~ended~~75% ~~June~~of ~~30,~~their ~~2006, $3.5~~eligible ~~million for~~compensation ~~the~~(base ~~period ended June 30~~salary, ~~2005~~annual incentive and ~~$7.5 million in 2005. The plan’s investments are principally company~~long-~~owned~~term ~~life~~incentives) ~~insurance~~subject ~~policies. Payments are made~~ to the ~~participants~~limitations orimposed ~~their~~under ~~beneficiaries~~the ~~over~~Internal aRevenue ~~5, 10 or 15-year period~~Code.

~~Cash~~Prior to 2009, our ~~Equity~~matching ~~Plan~~contributions ranged from 25% of the first 4% to 50% of the first 6% of the participant’s contribution. Matching contributions are established at the discretion of the Compensation Committee of our Board of Directors in the first quarter. Vesting in matching contributions occurs at the rate of 20% per year of service, upon reaching normal or early retirement date, or upon death, disability or certain other circumstances. Matching contributions were temporarily suspended for 2009 and matching contributions of $1.0 million for the period ended March 31, 2008 and $2.9 million for 2008 were made to the trusts based on a percentage of the contributions made by participants.

~~In April~~Participants 1999, our Board of Directors adopted the Cash Equity Plan. Employees were eligible to receive awards at the discretion of the Compensation Committee of the Board of Directors. Awards are common share equivalent units that may ~~be exchanged~~direct ~~for~~their ~~the~~contributions ~~market~~and ~~value~~matching ofcontributions ~~those~~through ~~shares.~~any ~~The number~~ of ~~units available~~the ~~for~~investment ~~grant~~options offered, including ~~those~~self-directed ~~units outstanding and unexercised, cannot exceed~~brokerage ~~two percent of the common shares outstanding at any given time~~accounts. Investment ~~The~~options ~~awards~~ are ~~restricted~~ ~~from~~reviewed ~~sale or transfer, vest after three years from the date of grant~~ and ~~expire~~may ~~after~~be ~~five years. No units have been awarded since February 2002.~~revised ~~Compensation~~quarterly ~~expense~~by isan ~~recognized~~Investment onCommittee acomprised ~~straight-line basis over the respective vesting period with periodic adjustments to compensation expense based on changes in the market value~~ of ~~the~~management ~~common shares. The related compensation expense for this plan was not significant for the period ended June 30, 2006, $0.3 million for the period ended June 30, 2005~~ and ~~$0.3~~advised ~~million in 2005.~~by ~~Common share equivalent units of 7,700 remain outstanding and unexercised at June 30, 2006~~consultants. ~~No further grants or awards will be made under this plan.~~

· Executive Deferred Compensation

We previously provided a deferred compensation plan for directors, executives and key employees. The objective of the plan was to provide executives and key employees with an additional opportunity to save for their retirement. Executive and key employee participants could defer up to 80% of their eligible compensation (base salary, annual incentive and medium term incentives). Director participants could defer 100% of their compensation. Effective January 2009, the plan was suspended and no participant contributions or matching contributions will be made.

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 were the same as the savings and retirement plan matching contribution percentage. Matching contributions were established at the discretion of the Compensation Committee of our Board of Directors in the first quarter. There were no matching contributions for the period ended March 31, 2009 and matching contributions of less than $0.1 million for the period ended March 31, 2008 and $0.1 million for 2008 were made to the trust based on a percentage of the contributions made by participants.

Investments of the deferred compensation plan 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 may be 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 obligation 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 $1.3 million at March 31, 2009 and $4.0 million at December 31, 2008.

Compensation deferred and invested in our common shares is recorded as a component of shareholders’ equity. As the obligation 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 $0.1 million or 15,116 common shares at March 31, 2009 and $0.9 million or 107,757 common shares at December 31, 2008.

· Supplemental Retirement

Additionally, there is a supplemental retirement plan for executives and key employees. The objective of the plan is to provide a 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. Effective January 2009, the plan was suspended as no contributions or return will be made to participants except the contribution and return required for the employment agreements of certain executives and no new participants will be added to the plan.

Contributions have typically been 5.5% of net income. Contributions are allocated proportionately to participants based on their base salaries and limited to 30% of a participant’s base salary.

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 policies receive a return based on long-term corporate bond yields. This return has been approximately 6% and may vary based on changes to this yield. Inactive participants receive a return of 0% to 9% based on their years of service and payment elections. Participants receiving our common shares receive a return of any related dividend.

Contributions and the return are established at the discretion of the Compensation Committee of our Board of Directors in the first quarter. Participants are immediately vested in the contribution.

The Compensation Committee decided to make:

no contribution or return to participants and no contribution or return was required for the employment agreements of certain executives for the period ended March 31, 2009.

no contribution or return to participants and no contribution or return was required for the employment agreements of certain executives for the period ended March 31, 2008.

no contributions or return to participants and no contribution or return was required for the employment agreements of certain executives for 2008.

The cash surrender value of the company-owned life insurance policies approximates the obligation, however the 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.

· Management Retention Compensation

In February 2008, the Compensation Committee of our Board of Directors approved management retention agreements for certain executives and key employees. Participants receive common share equivalent units which may be exchanged for the market value of those shares upon vesting two years from the date of grant. Compensation expense recognized for these agreements was not significant for the period ended March 31, 2009, for the period ended March 31, 2008 and for 2008.

Employee Stock Purchase Plan

In ~~September~~February ~~2000~~2008, our Board of Directors adopted the Employee Stock Purchase Plan, ~~which~~as approved by our shareholders ~~approved~~ in May ~~2001~~2008. The plan amended an employee share purchase plan originally effective October 2000. 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 ismay be 85% or more of the lowest market price on either the first or last day of each three month period ending January, April, July and October. A ~~There~~total ~~were~~of 2 million shares ~~400~~were authorized for issuance,~~000~~ ~~common~~however 0.4 million shares ~~authorized~~were issued under ~~this~~the previous employee share purchase plan ~~and~~resulting ~~there~~in ~~were~~1.6 ~~114,070~~million shares remaining available for ~~future~~this ~~purchase~~plan. Unissued asshares ofwere ~~June~~1.3 30million for the period ended March 31, ~~2006~~2009 and 1.4 million as of December 31, 2008. Compensation expense recognized was ~~$0.1~~not ~~million~~significant for the period ended ~~June~~March 3031, ~~2006~~2009, ~~$0.1 million~~ for the period ended ~~June~~March 3031, ~~2005~~2008 and $0for 2008.~~2 million in 2005.~~

~~2004~~ Incentive and Performance ~~Plan~~ Plans

In February ~~2004~~2008, our Board of Directors adopted the ~~2004~~2008 Stock Incentive ~~and Performance~~ Plan, ~~which~~as approved by our shareholders ~~approved~~ in May ~~2004~~2008. A total of 2.4 million common shares ~~are~~ 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.

In addition to the payment of an annual retainer, non-employee directors receive annual share grants with an approximate value of $50,000, based on the closing price of our common shares on the day of grant. There were no grants of equity for the period ended March 31, 2009 and shares of 0.1 million that were restricted from trading for six months were granted to directors for 2008.

There were no grants of equity awards to employees, including all executives, for the period ended March 31, 2009 or 2008. Grants of equity awards are approved by our Compensation Committee at regularly scheduled meetings. Unissued shares were 1.9 million as of March 31, 2009 and December 31, 2008.

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 these plans.

Options

· InGrants ~~the~~of ~~period~~options ~~ended~~under ~~June~~the ~~30,~~2008 ~~2006,~~Stock weIncentive ~~granted~~Plan ~~407,100 options to employees. These options~~ vest ratably over ~~three~~a maximum of 5 years from the date of grant and expire after ~~seven~~10 years if unexercised. ~~These~~Under certain circumstances, some or all of the options ~~were~~may vest earlier. Options are to be awarded with exercise prices equal to the ~~fair~~closing ~~value~~share price of ~~the~~our common shares on the date of grant.

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

~~Back~~ · 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 ~~Table~~the closing share price of ~~Contents~~our common shares on the date of grant. No further grants will be made under this plan.

·Share-based compensation Inexpense ~~2005,~~includes wethe ~~granted~~fair ~~424,000~~value ~~options~~of toshare ~~employees. These~~ options, ~~vest~~restricted ~~ratably~~shares and ~~over~~other ~~three~~share ~~years~~awards ~~from the date of grant~~ and ~~expire~~is ~~after~~recognized ~~seven~~over ~~years~~the ifrequisite ~~unexercised~~service period. Additionally, ~~These~~tax ~~options~~benefits ~~were~~for ~~awarded~~share-based ~~with~~compensation payments ~~exercise~~are ~~prices~~reported ~~equal~~as toa ~~the~~financing ~~fair~~activity ~~value~~for of the ~~shares~~statement ~~on the date~~ of ~~grant~~cash flows.

·The Infair ~~2004,~~value weof each ~~granted~~option ~~402,000~~is ~~options~~estimated toon ~~employees.~~the ~~These~~date ~~options~~of ~~vest~~grant ~~ratably~~using ~~over~~the ~~three~~modified Black-Scholes-Merton ~~years~~model. These ~~from~~assumptions are ~~the~~based ~~date~~principally ofon ~~grant~~historical ~~and~~experience. Due ~~expire~~to ~~after~~uncertainties inherent ~~seven~~in ~~years~~these ifassumptions, ~~unexercised.~~it ~~These~~is ~~options~~possible ~~were~~that ~~awarded~~actual ~~with~~share-based compensation ~~exercise~~may ~~prices~~vary ~~equal~~from tothe estimate of the fair value of these options. There were no grants of share options, restricted shared or other awards for the ~~shares~~period onended March 31, 2009, for the ~~date~~period ofended ~~grant~~March 31, 2008 and for 2008.

· In 2004, we granted 207,000 options to employees under the 2000 Stock Incentive Plan. These options vest ratably over three years from the date of grant and expire after seven years if unexercised. These options were awarded with exercise prices equal to the fair value of the shares on the date of grant.33

·Activity Infor ~~2003,~~option awards wewas ~~granted~~as ~~371~~follows (thousands,~~500~~ ~~options~~except toper ~~employees~~share under the 2000 Stock Incentive Plan. These options vest ratably over four years from the date of grant and expire after seven years if unexercised. These options were awarded with exercise prices equal to the fair value of the shares on the date of grant.data):

· In February 1997, the Board of Directors authorized issuance of 100,000 options as an additional incentive to attract a member of senior management. These options vested in February 2002 and expire after ten years if unexercised. These options were awarded with exercise prices equal to the fair value of the shares on the date of grant.

	Three Months Ended March 31							Three Months Ended March 31					Year Ended December 31
	2009							2008					2008
	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		2,627			$14		3.2		2,978			$15		2,978			$15
Granted		—			$—				—			$—		—			$—
Exercised		—			$—				(1	)		$6		(1	)		$6
Forfeited		(155	)		$21				(6	)		$26		(350	)		$20
Outstanding at end of the period		2,472			$14		2.8		2,971			$15		2,627			$14

Exercisable at end of the period		2,305			$13		2.6		2,414			$13		2,245			$13

The following table summarizes information regarding options outstanding at June 30, 2006:

	March 31				Year Ended December 31
	2009		2008		2008
Weighted average grant-date fair value		—		—		—
Intrinsic value of options exercised	$	—	$	1	$	1
Fair value of options vested	$	1,957	$	4,120	$	3,767

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Options Outstanding	Weighted Average Contractual Life (Years)	Weighted Average Exercise Price	Options Exercisable	Weighted Average Exercise Price
$4.84 to $5.97	555,000	3.96	$4.94	555,000	$4.94
$6.00 to $6.97	452,154	5.20	$6.78	364,030	$6.73
$7.00 to $7.88	471,312	6.43	$7.38	367,816	$7.23
$8.70 to $9.75	337,994	4.84	$8.70	211,998	$8.70
$22.77 to $28.36	413,998	5.63	$22.88	134,011	$22.88
$37.93 to $38.16	405,100	6.55	$37.93	―	―
$4.84 to $38.16	2,635,558	5.39	$14.06	1,632,855	$7.82

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 who exercised their options.

As ~~a result~~ of ~~the~~March ~~adoption of Statement of Financial Accounting Standard No. 123 (Revised 2004)~~31, ~~Share-Based Payment~~2009, ~~compensation expense~~ isoption ~~recognized~~awards ~~over~~outstanding ~~the~~and ~~requisite~~exercisable ~~service~~were ~~period for all share-based compensation granted after~~ as ~~well as unvested on January 1, 2006. No expense~~follows ~~is recognized for awards vested in periods prior to January 1~~(thousands, ~~2006.~~except The fair value of compensation expense recognized for vested options was $2.8 million whereas the compensation expense for non-vested options due to early retirement eligibility was $0.6 million for the period ended June 30, 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.~~data):

		Options Outstanding							Options Exercisable
Exercise Price		Shares		Weighted Average Exercise Price		Intrinsic Value	Weighted Average Remaining Contractual Life (years)		Shares		Weighted Average Exercise Price		Intrinsic Value
	$5		534		$5			1.2		534		$5
	$7		563		$7			3.0		563		$7
	$8		179		$8			4.1		179		$8
	$9		260		$9			1.9		260		$9
	$17 to $18		351		$18			4.7		184		$18
	$23		317		$23			2.7		317		$23
	$38		268		$38			3.4		268		$38
			2,472							2,305
In-the-money:
Outstanding			—							—
Exercisable						$—							$—

~~Back~~The intrinsic value to(the ~~Table~~difference between our share price on the last day of ~~Contents~~trading in March 2009 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 ~~each~~compensation ~~option~~expense isrecognized ~~estimated~~for onoptions was $0.2 million for the ~~date~~period ended March 31, 2009, $1.0 million for the period ended March 31, 2008 and $2.8 million for 2008. The common shares for options are not included in the calculation of ~~grant~~basic ~~using~~income per share, however the ~~Black-Scholes~~common ~~option~~shares for options ~~pricing~~may ~~model~~be ~~with~~included in the ~~following~~calculation ~~key~~of ~~assumptions:~~diluted income per share.

Grant Year	Grant Date	Expected Term (Years)	Expected Volatility	Expected Dividend Yield	Risk Free Interest Rate	Grant Date Fair Value
2006	January 2006	5.94	48.58%	0.70%	3.77%	$37.93
2005	May 2005	7.00	54.16%	0.68%	4.29%	$28.36
2005	February 2005	6.84	54.16%	0.84%	4.10%	$22.77
2004	May 2004	7.00	54.25%	1.45%	4.56%	$8.50
2004	February 2004	7.50	54.68%	1.45%	4.09%	$7.88
2003	April 2003	8.50	55.42%	1.33%	3.94%	$6.97

~~These~~As ~~assumptions are~~of ~~based~~March ~~principally~~31, on2009, ~~historical~~there ~~experience~~was $1.2 ~~When~~million ~~circumstances indicate the availability~~ of ~~new~~unrecognized orcompensation ~~different~~expense related ~~information~~to ~~that would be useful in estimating~~ these ~~assumptions,~~options. This ~~revisions~~compensation ~~will~~expense beis ~~made~~recognized ~~and reflected in~~ as the ~~period~~requisite ~~such revisions~~services are ~~determined.~~rendered ~~Due~~and ~~to uncertainties inherent in these assumptions, it~~ is ~~possible~~expected ~~that~~to ~~actual~~be ~~share-based~~recognized ~~compensation may vary from the estimate~~ratably ~~of the~~through ~~fair~~March ~~value of these options~~2011.

~~As of~~Options ~~June 30, 2006, there was $9.2 million of unrecognized compensation expense~~exercised ~~related to these options. This is recognized as the requisite services~~ are ~~rendered~~ ~~and~~settled iswith ~~expected~~newly toissued becommon ~~recognized over the next 3 years~~shares.

Restricted Shares

·Grants Inof restricted shares vest 3 years from the ~~period~~date ~~ended~~of ~~June~~grant. Under 30certain circumstances, ~~2006,~~some weor ~~issued~~all ~~138,400~~of the restricted shares tomay ~~employees~~vest earlier. The ~~weighted-average~~ fair value of restricted shares is the ~~restricted~~closing share price of our common shares ~~granted~~on ~~was~~the ~~$37~~date of grant.88 Compensation ~~per~~expense is ~~share~~recognized over the vesting period.

·Activity ~~In 2005, we issued 118,000~~ for restricted ~~shares~~share toawards ~~employees.~~was ~~The~~as ~~weighted-average~~follows ~~fair~~(thousands, ~~value~~except ~~of the restricted shares granted was $23.19~~ per share. data):

· In 2004, we issued 149,000 restricted shares to employees. The weighted-average fair value of the restricted shares granted was $10.89 per share.

	Three Months Ended March 31										Year Ended December 31
	2009					2008					2008
	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		214			$26		410			$26		410			$26
Granted		—			$—		—			$—		—			$—
Vested		(90	)		$38		(110	)		$23		(118	)		$23
Forfeited		(21	)		$18		(3	)		$38		(78	)		$27
Nonvested at end of the period		103			$18		297			$27		214			$26

These restricted shares vest over periods through 2011, however under certain circumstances some or all of the restricted shares may vest earlier. There were 500 restricted shares forfeited in the period ended June 30, 2006, no restricted shares forfeited in the period ended June 30, 2005 and 9,500 restricted shares forfeited in 2005. Compensation expense is recognized over the vesting period. Compensation expense recognized was $1.5 million for the period ended June 30, 2006, $0.6 million for the period ended June 30, 2005 and $1.3 million in 2005.

	Three Months Ended March 31				Year Ended December 31
	2009		2008		2008
Weighted average grant-date fair value		$—		$—		$—
Fair value of restricted shares granted		$—		$—		$—
Fair value of restricted shares vested		$3,391		$2,516		$2,761

~~As of~~The ~~June~~fair ~~30,~~value ~~2006,~~of compensation ~~there~~expense ~~was~~recognized ~~$6.4~~for ~~million~~restricted ofshares ~~unrecognized~~was ~~compensation~~not ~~expense~~significant for ~~related~~the toperiod ~~these~~ended ~~restricted~~March ~~shares.~~31, ~~This~~2009, is$0.7 ~~recognized~~million asfor the ~~requisite~~period ~~services are~~ended ~~rendered~~March 31, 2008 and is$1.0 ~~expected~~million tofor be2008. The ~~recognized~~common ~~over~~shares ~~the~~for ~~next 5 years. Restricted~~restricted shares are not included in the calculation of basic income per share until these shares vest, however the common shares for restricted shares ~~are~~may be included in the calculation of diluted income per share.

24As of March 31, 2009, there was $0.6 million of unrecognized compensation expense related to these restricted shares. This compensation expense is recognized as the requisite services are rendered and is expected to be recognized ratably through March 2010.

Back to Table of Contents

·We issue Inshares ~~the~~to ~~period~~non-employee ~~ended~~directors ~~June~~of ~~30,~~our ~~2006~~Board of Directors for their services. These shares vest immediately, wehowever trading is restricted for six months from the date of grant. We issued 1299,~~000~~ 200 shares toin ~~non-employee~~May ~~directors~~2008 and recognized compensation expense of $0.41 million. ~~These~~for ~~shares~~the period ~~vest~~ended ~~immediately~~March 31, ~~however~~2009, ~~trading~~$0.1 ismillion ~~restricted~~ for ~~one~~the ~~year~~period ~~from~~ended ~~the~~March ~~date~~31, of2008 and ~~grant~~$0.4 million for 2008.

· In 2005, we issued 14,000 shares to non-employee directors and recognized compensation expense of $0.4 million. These shares vest immediately, however trading is restricted for one year from the date of grant.35

The following table summarizes ~~activity~~equity ~~for~~compensation information as of March 31, 2009 (thousands, except per share~~-based~~ ~~awards~~data):

		June 30				December 31
	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
		2006				2005
Equity compensation plans approved by security holders	2,575		$13.23		1,901
		Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Equity compensation plans not approved by security holders	2,825(1)		$0.47		—
Outstanding at beginning of the period		2,557,412		$8.75		2,904,796	$6.11
Total	5,400		$6.55		1,901
Granted		545,500		$28.31		542,000	$17.90
Exercised		(61,738)		$9.33		(861,384)	$5.70
Forfeited		(10,216)		$17.78		(28,000)	$5.56
Outstanding at end of the period		3,030,958		$12.23		2,557,412	$8.75
Options exercisable at end of the period		1,632,855		$7.82		1,425,300	$6.32
Weighted average fair value of options granted at fair value for the period		$37.93				$22.88

~~The~~(1) In ~~following~~connection ~~table~~with the amendment of our credit facility in September 2008, our ~~summarizes~~Board ~~equity~~of ~~compensation~~Directors ~~information~~authorized asissuance of ~~June~~these warrants that entitle the lenders to purchase approximately 8.75% or 2.8 million of our common shares at a purchase price of $0.47 per common share, the closing price on the NYSE on September 30, ~~2006:~~2008. These warrants may be exercised through September 2015.

	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	2,930,958	$12.43	736,566
Equity compensation plans not approved by security holders	100,000	$6.25	―
Total	3,030,958	$12.23	736,566

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 other share awards was $0.2 million for the period ended March 31, 2009, $1.8 million for the period ended March 31, 2008 and $4.3 million for 2008.

2536

Back to Table of Contents

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~~ for the future tax consequences attributable to differences between the ~~financial~~ 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~~ recognized to reduce the carrying amount ~~amounts~~ of deferred tax assets ~~unless~~to it the amount that is more likely than not to be realized. If it is later determined it is more likely than not that deferred ~~such~~tax assets will be realized, the valuation allowance will be adjusted. Revisions of the valuation allowance are recognized in the period such revisions are known.

Income ~~taxes associated~~ ~~with~~tax ~~the other owner’s proportionate share of BBP Companies, acquired~~benefit in(expense) ~~July 2005, were $1.3 million for the period ended June 30, 2006~~ and ~~$1.2 million~~effective inrates ~~2005.~~were Weas ~~are~~follows required to recognize income taxes for all of the earnings of this 51% interest due to its C Corporation status. While these income taxes are recognized in income taxes, the portion of income taxes associated with the other owner's proportionate share of earnings are eliminated through minority interest. (thousands):

	Three Months Ended March 31											Year Ended December 31
	2009					2008						2008
			Effective Rate						Effective Rate						Effective Rate
Continuing operations:
Income tax benefit (expense)	$	12		0.0	%	$	(3,849	)		(12.8	)%	$	23,409			10.8	%
Discontinued operations:
Income tax benefit (expense)	$	—		0.0	%	$	3,456			98.4	%	$	(1,860	)		(9.1	)%

~~Back~~The significant change in our effective tax rate for continuing operations was the result of uncertainty of our ability to ~~Table~~realize deferred tax assets. Deferred tax assets resulted from operating losses and impairments, however valuation allowances were recognized due to the potential inability to realize these deferred tax assets. In assessing the ability to realize deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate ~~Contents~~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, tax planning strategies, cumulative earnings and our industry are considered in making this assessment.

12There was no tax benefit associated with exercised options and vested restricted shares for the period ended March 31, 2009 and the tax benefit associated with exercised options and vested restricted share increased taxes receivable $0.3 ~~Legal~~million ~~Proceedings~~for the period ended March 31, 2008 and $0.3 million for 2008. 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 are recognized in additional paid-in capital, a component of equity.

27Our ability to realize 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 may be realized and reduce our effective tax rate in future periods.

~~Back to Table of Contents~~37

1312. ~~Segment Information~~ Financial Instruments

The ~~consolidated financial~~ ~~statements~~estimated ~~include~~fair values ~~operations~~of ~~from~~cash ~~two reportable segments: SelectBuild~~ and ~~BMC~~cash ~~West.~~equivalents, ~~These~~receivables, ~~segments~~unbilled ~~represent~~receivables, ~~businesses that are managed~~accounts ~~separately.~~payable ~~Each~~and ofaccruals ~~these~~are ~~businesses~~the ~~requires~~same ~~distinct~~as ~~marketing~~their ~~and~~carrying ~~operating strategies.~~amounts ~~Management~~due ~~reviews~~to ~~financial performance based on these operating~~their ~~segments~~short-term nature.

~~SelectBuild~~Our amended credit facility provides ~~construction~~a ~~services~~$200 million revolver subject to ~~high-volume~~borrowing ~~homebuilders~~base limitations and a $340 million term note maturing in November 2011. However, ~~These~~the April ~~services~~2009 limited waiver limits borrowings under the revolver to $20 million ~~include~~and ~~wood~~may ~~framing~~not orprovide ~~concrete~~adequate ~~block~~liquidity. As ~~masonry,~~of ~~concrete~~March ~~services~~31, ~~plumbing~~2009, there ~~and other~~were ~~services~~$2.3 ~~Construction~~million ~~services~~borrowings ~~include~~outstanding ~~managing~~under ~~labor~~the revolver and ~~construction~~$313.8 million ~~schedules~~outstanding asunder ~~well~~the asterm ~~sourcing~~note. After ~~materials~~giving effect to the interest rate swap contracts, the interest for our debt is 61% variable and 39% fixed.

~~BMC West~~Quoted ~~markets~~market ~~and~~prices ~~sells~~are ~~building~~not ~~products,~~available ~~manufactures~~for ~~building~~our ~~components~~debt. Given ~~and~~the ~~provides~~significant downturn ~~construction~~in ~~services.~~the ~~Products~~homebuilding ~~include~~industry ~~structural lumber~~ and ~~building~~tightening ~~materials purchased~~credit from ~~other~~lenders ~~manufacturers~~ as well as ~~manufactured~~our current ~~building~~negotiations ~~components including~~to ~~millwork,~~develop ~~trusses~~debt and ~~wall~~capital ~~panels.~~structures ~~Construction~~acceptable ~~services~~to ~~include framing~~us and our ~~installation~~lenders, ofit ~~miscellaneous~~is ~~building~~not ~~products.~~practicable ~~Building~~to ~~products and~~estimate ~~construction~~the ~~services~~fair ~~are~~value ~~sold~~of ~~principally to professional builders and~~our ~~contractors~~debt.

~~The financial performance~~Changes ~~for~~in ~~these~~interest rates ~~reporting~~expose ~~segments~~us isto ~~based~~financial onmarket ~~income~~risk. We ~~from~~currently ~~operations~~utilize ~~before~~ interest ~~expense,~~rate ~~income~~swap ~~taxes~~contracts ~~and~~to ~~minority~~hedge ~~interests.~~variable ~~These~~interest ~~segments~~rates. As of ~~follow~~March 2009, the ~~accounting~~interest ~~principles~~rate ~~described~~swap incontracts ~~the~~effectively ~~Summary~~converted $123.0 million of ~~Significant Accounting~~variable ~~Policies~~rate ~~included~~debt into ~~our~~a ~~Annual~~fixed ~~Report~~interest onrate ~~Form~~of 10-K.6% ~~for~~plus ~~the year~~any ~~ended~~difference ~~December~~between ~~31,~~minimum ~~2005~~LIBOR interest of 3.0% ~~Sales~~and ~~between~~LIBOR. The notional ~~segments~~amount ~~are~~of ~~recognized~~the atinterest ~~market prices and~~rate noswap ~~single~~contracts ~~customer~~will ~~accounts~~be ~~for~~ratably ~~more~~reduced ~~than~~to zero ~~10%~~through the maturity of ~~sales~~November 2011.

~~Selected~~Derivative financial ~~information~~ byinstruments ~~segment~~are isnot asutilized ~~follows~~to ~~(thousands):~~hedge other risks or for speculative or trading purposes.

	Sales			Income (Loss) Before Taxes and Minority Interests	Depreciation and Amortization	Capital (1) Expenditures	Assets
	Segment	Inter- Segment	Trade
Three Months Ended June 30, 2006
SelectBuild	$503,342	$(1,411)	$501,931	$47,098	$ 6,050	$15,024	$ 760,561
BMC West	420,637	(576)	420,061	39,178	3,939	6,375	503,709
Corporate	―	―	―	(21,959)	929	2,630	114,724
	$923,979	$(1,987)	$921,992	64,317	$10,918	$24,029	$1,378,994
Interest Expense				6,465
				$57,852
Three Months Ended June 30, 2005
SelectBuild	$303,648	$ (13)	$303,635	$36,756	$2,486	$ 8,337	$341,395
BMC West	398,230	(344)	397,886	41,030	2,795	5,032	479,824
Corporate	―	―	―	(16,894)	734	440	70,689
	$701,878	$(357)	$701,521	60,892	$6,015	$13,809	$891,908
Interest Expense				3,350
				$57,542

2813. Commitments and Contingencies

~~Back to~~Legal ~~Table of Contents~~Proceedings

Six Months Ended June 30, 2006
SelectBuild	$1,001,672	$(1,443)	$1,000,229	$ 93,173	$11,951	$29,256	$ 760,561
BMC West	807,513	(1,193)	806,320	69,724	7,560	10,498	503,709
Corporate	―	―	―	(44,194)	1,797	3,290	114,724
	$1,809,185	$(2,636)	$1,806,549	118,703	$21,308	$43,044	$1,378,994
Interest Expense				12,055
				$106,648
Six Months Ended June 30, 2005
SelectBuild	$ 546,149	$(272)	$ 545,877	$ 65,288	$ 4,527	$11,691	$341,395
BMC West	729,049	(477)	728,572	69,905	5,545	10,350	479,824
Corporate	―	―	―	(33,993)	1,513	877	70,689
	$1,275,198	$(749)	$1,274,449	101,200	$11,585	$22,918	$891,908
Interest Expense				6,548
				$ 94,652

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.

~~(1)~~Operating ~~Property and equipment from acquisitions are included as capital expenditures.~~Leases

29We lease certain real property, vehicles and office equipment under operating leases. Operating lease expense was as follows (thousands):

Back to Table of Contents

	Three Months Ended March 31						Year Ended December 31
	2009			2008			2008
Operating lease expense	$	7,082		$	7,553		$	29,907
Less: Sublease income		(591	)		(326	)		(1,741	)
	$	6,491		$	7,227		$	28,166

~~Item~~Certain of these 2leases are non-cancelable ~~MANAGEMENT’S~~and ~~DISCUSSION~~have ~~AND~~minimum ~~ANALYSIS~~lease OFpayment ~~FINANCIAL~~requirements ~~CONDITION AND RESULTS OF~~as ~~OPERATIONS~~follows (thousands):

	Operating Leases		Sublease Income			Operating Leases, net
2009	$	19,477	$	(1,172	)	$	18,305
2010		19,514		(817	)		18,697
2011		12,747		(385	)		12,362
2012		7,573		(110	)		7,463
2013		4,684		(113	)		4,571
Thereafter		3,461		(9	)		3,452
	$	67,456	$	(2,606	)	$	64,850

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):

	Three Months Ended						Year Ended
	March 31			March 31			December 31
	2009			2008			2008
Balance at beginning of period	$	5,701		$	6,805			$	6,805
Provision for warranties		(232	)		275				(492	)
Warranty charges		(65	)		(563	)			(612	)
	$	5,404		$	6,517			$	5,701

14. Fair Values of Assets and Liabilities

Our assets and liabilities measured at fair value are grouped into 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 (thousands):

				Fair Value Measurements at Reporting Date Using
	March 31 2009			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
Interest rate swap contracts	$	(6,411	)	$	—	$	(6,411	)	$	—

				Fair Value Measurements at Reporting Date Using
	December 31 2008			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
Interest rate swap contracts	$	(7,514	)	$	—	$	(7,514	)	$	—

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 (thousands):

			Fair Value Measurements at Reporting Date Using
	December 31 2008		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Year Ended December 31 2008 Gains (Losses)
Other intangibles, net	$	19,222	$	—	$	—	$	19,222	$	(30,218	)
Goodwill		—		—		—		—		(14,196	)
	$	19,222	$	—	$	—	$	19,222	$	(44,414	)

Other intangibles, net are evaluated for impairment whenever events and circumstances indicate the carrying amount may not be recoverable. An impairment for intangibles with finite useful lives is recognized 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.

Other intangibles with a carrying amount of $49.4 million were written down to their implied fair value of $19.2 million, resulting in an impairment charge of $30.2 million for 2008.

Goodwill is evaluated for impairment 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. 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.

Goodwill with a carrying amount of $14.2 million was written down to its implied fair value of zero, resulting in an impairment charge of $14.2 million for 2008.

15. Quarterly Results of Operations (unaudited)

Operating results by quarter for 2009 and 2008 were as follows (thousands, except per share data):

	First			Second			Third			Fourth
2009
Sales	$	167,499			$	—		$	—		$	—

Loss from continuing operations(1)	$	(45,068	)		$	—		$	—		$	—
Loss from discontinued operations(1) (2)		(152	)			—			—			—
Net loss attributable to common shareholders	$	(45,220	)		$	—		$	—		$	—

Net loss per share:
Continuing operations	$	(1.53	)		$	—		$	—		$	—
Discontinued operations		—				—			—			—
Diluted	$	(1.53	)		$	—		$	—		$	—

Common share prices:
High	$	0.61			$	—		$	—		$	—
Low	$	0.22			$	—		$	—		$	—

Filing Compare · BUILDING MATERIALS HOLDING Corp