Building Materials Holding Corporation Reports Record Net Sales and Net Income for a Second Quarter.

SAN FRANCISCO--(BUSINESS WIRE)--July 28, 1998--Building Materials Holding Corporation (NASDAQ:BMHC) today announced financial results for the second quarter and six months ended June 30, 1998.

Net sales for the quarter increased 18.6% to $226.0 million from $190.6 million in the same period last year, reflecting same-store sales growth of 5.7%, as well as contributions from acquisitions. Net income was a second quarter record of $4.8 million, which represents a 37.4% increase over net income of $3.5 million in the corresponding quarter of the prior year. Earnings per share for the quarter were $0.38 per diluted share compared to $0.29 per diluted share in the second quarter of 1997. Weighted average number of diluted common shares for the quarter was 12,571,874 versus 12,046,094 one year ago.

Gross margin expanded to 24.2% from 22.8%, primarily as a result of the ongoing shift in the Company's sales mix towards higher margin value-added products such as roof trusses, pre-hung doors and millwork. For the quarter, selling, general and administrative expenses were 19.7% of net sales compared with 18.8% a year ago, due mainly to the higher costs associated with value-added products, as well as the cost of integrating newly acquired operations.

"Our continued ability to successfully execute our growth strategies resulted in record second quarter net sales and income, solid same-store sales comparisons, gross margin expansion and improved profitability," said Robert E. Mellor, president and chief executive officer. "Increased sales of value-added products and a strong focus on improving efficiency and profitability at our existing locations, together with good building permit activity in our market area, were the key drivers of our internal growth during the quarter.

"We continue to increase the number of locations offering value-added products and to focus on actively marketing these full-service capabilities, allowing us to build our market share and to increase the total amount of each sale per building permit.

"In the second quarter, value-added products as a percent of total sales increased to 30.4% from 22.5% a year ago, and were the main factor behind our gross margin expansion. We also continue with the consolidation of certain operations in an effort to lower costs and improve efficiencies at our existing locations.

"The economic factors that affect our business were mixed in the second quarter. Building permit activity in the states where we have centers was up significantly for the three months ended May 1998 compared to the same period a year ago, with seven of the ten states in our market area reporting double digit growth in permit activity for single family units.

"Year-to-date building permit activity growth in the 10 states in which BMHC has operations has outpaced growth in the U.S. as a whole, reflecting the positive economic environment in our market area. However, continued deflation in commodity wood product prices resulted in a decline in overall prices of 3.2% and offset some of our growth in dollar terms.

"Acquisitions completed during the past year played an important part in our strong sales growth in the quarter. We continued to execute our acquisition strategy during the second quarter with five acquisitions consisting of seven locations that had 1997 combined annual sales of approximately $36 million. These acquisitions serve to strengthen the Company's presence in the growing geographic markets of Dallas and Austin, Texas, Spokane, Washington, Western Montana, and the Portland-Salem area of Oregon.

"Significantly, in keeping with our growth strategy, each of these acquired businesses has value-added capabilities that allow more of our existing locations to become full-service centers, thus positioning BMHC to take advantage of the growth opportunities in these attractive markets. Also during the quarter, we purchased a parcel of land to serve as the site for a new Portland area full-service facility, which is part of our strategy of de novo expansion in markets where we already have a presence.

"Looking to the balance of 1998, we remain confident in our ability to successfully execute our growth strategies and are optimistic about our business outlook."

For the six months ended June 30, 1998, net sales were $409.6 million, a 21.4% increase over net sales of $337.4 million in the corresponding period last year. Gross margin expanded to 24.1% from 23.1% in the first half of 1997. Net income for the six months grew 43.1% to $5.6 million from $3.9 million in the prior year period, and earnings per share on a diluted basis were $0.45, an increase of 36.4% over earnings per share of $0.33 for the six months ended June 30, 1997. Despite a decline in overall prices of 3.4%, same store sales increased 8.7% on a year-to-year basis.

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. The Company now operates 56 building materials centers in Arizona, California, Colorado, Idaho, Montana, Nevada, Oregon, Texas, Utah and Washington. -0-

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

                     Three Months Ended           Six Months Ended
                     June 30      June 30       June 30     June 30
                       1998         1997         1998         1997
                     -------      -------       -------      -------
Net Sales           $226,017     $190,616      $409,648     $337,385
Cost of Sales        171,413      147,129       311,079      259,608
                     -------      -------        ------      -------
Gross Profit          54,604       43,487        98,569       77,777
Selling, General and
  Administrative
    Expense           44,523       35,832        84,959       67,745

Other Income             451          427           824          891
Income From
 Operations           10,532        8,082        14,434       10,923

Interest Expense       2,674        2,362         5,171        4,450

Income Before
  Income Taxes         7,858        5,720         9,263        6,473

Income Taxes           3,104        2,260         3,659        2,557

Net Income            $4,754       $3,460        $5,604       $3,916

Net Income Per
 Diluted
  Common Share         $0.38        $0.29         $0.45        $0.33

Weighted
 Average Number
  of Diluted
   Common Shares  12,571,874   12,046,094    12,520,335   12,045,862

CONTACT: Building Materials Holding Corporation

Ellis C. Goebel, 415/227-1650

or

Morgen-Walke Associates

(Investor Relations)

John Swenson/Elizabeth Snowdon, 415/296-7383

(Media Relations)

Sheryl Seapy, 415/296-7383

(Wire Services)

Karen Amlong, 212/850-5600