Building Materials Holding Corporation Reports 24% Increase in Net Sales and 60% Increase in Net Income for Third Quarter.

SAN FRANCISCO--(BUSINESS WIRE)--Oct. 27, 1998--Building Materials Holding Corporation (Nasdaq:BMHC) today announced financial results for the third quarter and nine months ended September 30, 1998.

For the quarter, net sales increased 23.7% to a record $249.8 million from $202.0 million in the same period one year ago. Gross margin for the quarter increased to 24.5% from 23.0% in the corresponding quarter last year, primarily reflecting a continued shift in the sales mix towards higher-margin value-added products.

Selling, general and administrative expenses for the quarter increased slightly to 19.1% of net sales, compared with 18.7% a year ago, mainly due to the higher costs of supporting the growing value-added business. Net income for the third quarter was $6.7 million, a 59.6% increase over net income of $4.2 million in last year's third quarter.

Earnings per diluted share were $0.53, a 51.4% increase over earnings of $0.35 per diluted share in the same period a year ago. Weighted average number of diluted common shares and common share equivalents for the quarter were 12,785,186 versus 12,051,916 one year ago.

"As indicated in the preliminary earnings announcement of September 16, 1998, BMHC's strong performance in the third quarter was the result of successful execution of its growth strategies, combined with a favorable economic environment," said Robert E. Mellor, president and chief executive officer. "In addition to setting record highs for third quarter sales and net income, the company had 7.1% growth in same-store sales during the quarter. This same-store sales increase can be attributed, in large part, to the continued focus on increasing the availability of value-added products which allows the Company to gain market share and to increase total sales per building permit. Value-added products in the quarter accounted for 30.2% of total sales, up from 22.8% in last year's third quarter, and were the key driver of gross margin expansion. Additionally, the focus on maximizing existing operations through strategic consolidations has begun to yield positive results in terms of improved same-store sales and greater efficiencies at these locations.

"The external economic factors affecting BMHC's business continued to be favorable in the third quarter. Building permit activity in the 10 states in which the Company operates increased 23.9% for the three months ended August 1998 compared to the same period a year ago, with single family housing construction up 17.9%. For the first time in five quarters, commodity wood product prices increased versus the prior year, resulting in a 2.5% overall price increase in the third quarter.

"During the third quarter, the execution of the acquisition strategy continued with the signing of a definitive agreement to acquire Buell Supply Company, a Texas-based value-added millwork distribution company that had 1997 annual sales of approximately $20 million. With the Buell acquisition, which closed earlier this month, the Company took a major step towards reaching one of its goals of being the leading millwork provider to professional contractors in the major Texas markets. We also acquired a truss manufacturer, Peak Components, Inc. of Colorado Springs, providing customers in this market a wider range of products. Both of these acquisitions demonstrate BMHC's focus on increasing its ability to manufacture and sell value-added products in attractive geographic markets. There are a number of similarly attractive acquisition opportunities in the marketplace that would complement existing locations or provide entry into new markets. The Company remains committed to actively pursuing those acquisition candidates that BMHC believes will provide financial and strategic value.

"Looking forward, the plan is to continue executing the growth strategies that have shaped the Company's strong performance so far in 1998, including focusing on value-added products, pursuing acquisition opportunities and maximizing existing operations."

For the nine months ended September 30, 1998, net sales were $659.4 million, a 22.3% increase over net sales of $539.3 million in the corresponding period last year. Same store sales for the nine months increased 8.1% on a year-to-year basis. Gross margin expanded to 24.2% from 23.0% in the first nine months of 1997. Net income for the nine months ended September 30, 1998 increased 51.7% to $12.3 million from $8.1 million in the prior year period, and earnings per share on a diluted basis were $0.98, an increase of 46.3% over earnings per share of $0.67 for the nine months ended September 30, 1997.

Certain statements made in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors are discussed in detail in Building Materials Holding Corporation's Form 10-K for the fiscal year ended December 31, 1997. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in the Annual Report on Form 10-K or this news release.

Building Materials Holding Corporation, through its wholly owned subsidiary BMC West Corporation, is a leading distributor of building materials to professional new residential and commercial and industrial contractors as well as professional repair and remodel contractors. -0-

                  BUILDING MATERIALS HOLDING CORPORATION
                    CONSOLIDATED STATEMENTS OF EARNINGS
              (Dollars in Thousands, Except Per Share Data)

                          Three Months Ended      Nine Months Ended
                         Sept. 30   Sept. 30    Sept. 30    Sept. 30
                           1998       1997        1998        1997
                         --------------------  ----------------------

Net Sales               $ 249,757  $ 201,950    $ 659,405   $ 539,335

Cost of Sales           $ 188,649    155,513      499,728     415,121
                        ---------  ---------    ---------   ---------
Gross Profit               61,108     46,437      159,677     124,214
Selling, General and
 Administrative
 Expenses                 47,763      37,717      132,722     105,462
Other Income                 220         487        1,044       1,378
                       ---------    --------    ---------    --------
Income from Operations    13,565       9,207       27,999      20,130
Interest Expense           2,547       2,245        7,718       6,695
Income Before Income
 Taxes                    11,018       6,962       20,281      13,435
Income Taxes               4,295       2,750        7,954       5,307
                       ---------    --------    ---------    --------

Net Income             $   6,723    $  4,212    $  12,327   $   8,128
                       =========    ========    =========   =========
Net Income Per
 Diluted Common Share  $    0.53    $   0.35    $    0.98   $    0.67
                       =========    ========    =========   =========

Weighted Average
 Number of Diluted
 Common Shares        12,785,186  12,051,916   12,609,562  12,046,496