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<TITLE>S-1</TITLE>
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<DIV align="center">
<B><FONT size="2">As filed with the Securities and Exchange
Commission on February&nbsp;14, 2005</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="2">Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>

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<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

<DIV align="center">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

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<P align="center">
<B><FONT size="5">Form&nbsp;S-1</FONT></B>

<P align="center">
<B><FONT size="4">REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933</FONT></B>

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<B><FONT size="6">Builders FirstSource, Inc.</FONT></B>

<DIV align="center">
<I><FONT size="2">(Exact name of registrant as specified in its
charter)</FONT></I>
</DIV>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Delaware</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">5211</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">52-2084569</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(State or other jurisdiction of<BR>
    incorporation or organization)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(I.R.S. Employer<BR>
    Identification No.)</FONT></I></TD>
</TR>

</TABLE>
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<P align="center">
<B><FONT size="2">2001 Bryan Street, Suite&nbsp;1600</FONT></B>

<DIV align="center">
<B><FONT size="2">Dallas, Texas 75201</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(214)&nbsp;880-3500</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Address, including zip code, and telephone
number, including</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="2">area code, of registrant&#146;s principal
executive offices)</FONT></I>
</DIV>

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<P align="center">
<B><FONT size="2">Donald F. McAleenan, Esq.</FONT></B>

<DIV align="center">
<B><FONT size="2">Senior Vice President and General
Counsel</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Builders FirstSource, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">2001 Bryan Street, Suite&nbsp;1600</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Dallas, Texas 75201</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(214) 880-3500</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Names and addresses, including zip codes, and
telephone</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="2">numbers, including area codes, of agents for
service)</FONT></I>
</DIV>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Robert B. Pincus, Esq.<BR>
    Allison L. Amorison, Esq.<BR>
    Skadden, Arps, Slate, Meagher&nbsp;&#38; Flom LLP<BR>
    One Rodney Square, P.O. Box&nbsp;636<BR>
    Wilmington, Delaware 19899-0636<BR>
    (302) 651-3000</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">J. Scott Hodgkins,&nbsp;Esq.<BR>
    Latham&nbsp;&#38; Watkins LLP<BR>
    633 West Fifth Street, Suite&nbsp;4000<BR>
    Los Angeles, California 90071<BR>
    (213) 485-1234</FONT></B></TD>
</TR>

</TABLE>
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<HR size="1" width="26%" align="center" noshade>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate
date of commencement of proposed sale to the public:</B> As soon
as practicable after this registration statement becomes
effective.
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(c) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="19%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Title of Each Class of</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Securities to be Registered</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Offering Price(1)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Registration Fee(2)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$275,000,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$32,368
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD colspan="5" align="left"><HR size="1" noshade></TD>

</TR>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Includes shares of common stock that the
    underwriters will have the right to purchase to cover
    over-allotments, if any.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(2)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Estimated solely for the purpose of
    calculating the registration fee in accordance with
    Rule&nbsp;457(o) under the Securities Act of 1933.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further
amendment which specifically states that this registration
statement shall thereafter become effective in accordance with
Section&nbsp;8(a) of the Securities Act of 1933 or until this
registration statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section&nbsp;8(a), may determine.</FONT></B>

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<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<FONT size="2" color="#E8112D" face="helvetica,arial">The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities, and it is not soliciting an offer to buy these
securities, in any jurisdiction where the offer or sale is not
permitted.
</FONT>
</TD></TR></TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><FONT size="2" color="#E8112D" face="helvetica,arial">PRELIMINARY PROSPECTUS</FONT></TD>
    <TD align="right"><FONT size="2" color="#E8112D" face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2005</FONT></TD>
</TR>

</TABLE>

<DIV align="center">
<FONT size="2" color="#E8112D" face="helvetica,arial">Subject to
Completion, dated
</FONT>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4" face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
</FONT>

<P align="left">
<IMG src="y05301y0494600.gif" alt="LOGO">

<P align="left">
<FONT size="4" face="helvetica,arial">Common Stock
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">This is the initial public offering of shares of
our common stock. No public market currently exists for our
common stock. We are
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
and the selling stockholder is offering &nbsp;shares of our
common stock. We expect the public offering price to be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. We will not receive any proceeds from the sale of any
shares of our common stock sold by the selling stockholder.
</FONT>

<P align="left">
<FONT size="2">We intend to apply to have our common stock
approved for listing on The Nasdaq National Market under the
symbol &#147;BLDR.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Investing in our common stock involves a high
degree of risk. Before buying any shares, you should carefully
read the discussion of material risks of investing in our common
stock under &#147;Risk factors&#148; beginning on
page&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of this
prospectus.</FONT></B>

<P align="left">
<B><FONT size="2">Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2" face="helvetica,arial">Public offering price
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2" face="helvetica,arial">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2" face="helvetica,arial">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="9" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2" face="helvetica,arial">Underwriting discounts and
    commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2" face="helvetica,arial">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2" face="helvetica,arial">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="9" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2" face="helvetica,arial">Proceeds, before expenses,
    to us
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2" face="helvetica,arial">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2" face="helvetica,arial">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="9" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2" face="helvetica,arial">Proceeds, before expenses,
    to selling stockholder
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2" face="helvetica,arial">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2" face="helvetica,arial">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="9" align="left"><HR size="1" noshade></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The underwriters may also purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock from us and from the selling stockholder at
the public offering price, less underwriting discounts and
commissions payable by us and the selling stockholder, to cover
over-allotments, if any, within 30&nbsp;days from the date of
this prospectus. If the underwriters exercise this option in
full, the total underwriting discounts and commissions will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
our total proceeds, before expenses, will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
the total proceeds, before expenses, to the selling stockholder
will be
$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">
<FONT size="2">The underwriters are offering the common stock as
set forth under &#147;Underwriting.&#148; Delivery of the shares
of common stock will be made on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</FONT>

<P align="center">
<I><FONT size="2" face="helvetica,arial">Joint Book-Running
Managers</FONT></I>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT size="4" face="helvetica,arial">UBS Investment Bank</FONT></B></TD>
    <TD align="right"><B><FONT size="4" face="helvetica,arial">Deutsche Bank Securities</FONT></B></TD>
</TR>

</TABLE>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="4" face="helvetica,arial">________________________________________________________________________________</FONT></B>
</DIV>

<P align="left">
<FONT size="2">You should rely only on the information contained
in this prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with additional information or
information different from that contained in this prospectus. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where those offers and sales
are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of our
common stock.
</FONT>

<P align="left">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="87%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">About this prospectus
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">i</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Prospectus summary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">1</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Risk factors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">10</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Forward-looking statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">21</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Non-GAAP financial measures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">22</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Use of proceeds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">23</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Dividend policy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">23</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Capitalization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">24</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Dilution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">25</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Selected historical consolidated financial data
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">32</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Management&#146;s discussion and analysis of
    financial condition and results of operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">34</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Industry overview and trends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">49</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">53</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Management
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">64</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Executive compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">67</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Principal and selling stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">71</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Certain related party transactions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">73</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Description of capital stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">74</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Description of certain indebtedness
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">77</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Shares eligible for future sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">80</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Certain material U.S.&nbsp;income tax
    consequences for non-U.S.&nbsp;holders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">82</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Underwriting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">85</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Legal matters
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">89</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Experts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">89</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Where you can find more information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">89</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Index to consolidated financial statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">F-1</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">Through and
including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 (the 25th day after the date of this prospectus), federal
securities law may require all dealers that effect transactions
in our common stock, whether or not participating in this
offering, to deliver a prospectus. This requirement is in
addition to the dealers&#146; obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.
</FONT>

<P align="left">
<FONT size="4">About this prospectus
</FONT>

<P align="left">
<FONT size="2">As used in this prospectus, unless the context
requires otherwise, &#147;we,&#148; &#147;us,&#148;
&#147;our,&#148; or the &#147;Company&#148; refers to Builders
FirstSource, Inc. and its consolidated subsidiaries. All
references to fiscal years of the Company in this prospectus
refer to years commencing on January&nbsp;1 of that year and
ending on December&nbsp;31. Unless otherwise indicated, the
information in this prospectus assumes no exercise of the
Underwriters&#146; over-allotment option.
</FONT>

<P align="left">
<FONT size="2">Market data and other statistical information
used throughout this prospectus are based on independent
industry publications, government publications, reports by
independent market research firms, or other published
independent sources. Some data are based on our good faith
estimates that are derived from our review of internal surveys
and independent sources. Although we believe that all of the
foregoing sources are reliable, we have not independently
verified the information and cannot guarantee its accuracy and
completeness. Statements as to our market position relative to
our competitors are generally based on management estimates as
of the end of the third quarter of fiscal year 2004. We cannot
assure you that more recent data would not produce different
estimates of our market position.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> i</FONT></B>
</DIV>

<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="left">
<FONT size="4">Prospectus summary
</FONT>

<P align="left">
<I><FONT size="2">The following summary contains basic
information about us and this offering. It likely does not
contain all the information that is important to you. For a more
complete understanding of us and this offering, we encourage you
to read this entire document carefully, including the &#147;Risk
Factors&#148; section beginning on
page&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and the financial
statements that are included elsewhere in this
prospectus.</FONT></I>

<P align="left">
<B><FONT size="2">OUR COMPANY</FONT></B>

<P align="left">
<FONT size="2">We are a leading supplier and a fast-growing
manufacturer of structural and related building products for
residential new construction in the U.S. We are one of the top
two suppliers of our product categories to Production
Homebuilders, which we define as those U.S.&nbsp;homebuilders
that build more than 100 homes per year. Our large scale, full
product and service offerings, and unique business model
position us to continue growing our sales to Production
Homebuilders, the fastest-growing segment of residential
homebuilders. We have operations principally in the southern and
eastern U.S. with 63 distribution centers and 42 manufacturing
facilities. For the year ended December&nbsp;31, 2004, we
generated sales of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
net income of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
and EBITDA of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
EBITDA is defined in &#147;Non-GAAP financial measures&#148;
included elsewhere in this prospectus.
</FONT>

<P align="left">
<FONT size="2">We provide an integrated solution to our
customers that combines the manufacturing, supply, and
installation of a full range of structural and related building
products. Over the past several years, we have significantly
increased our sales of products that we manufacture. These
products include our factory-built roof and floor trusses, wall
panels and stairs, as well as engineered wood products that we
design and cut for each home (collectively &#147;Prefabricated
Components&#148;). We also manufacture custom millwork and trim
that we market under the Synboard&#174; brand name, as well as
aluminum and vinyl windows, and we assemble interior and
exterior doors into pre-hung units. Our revenue from these
manufactured products totaled
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
for the year ended December&nbsp;31, 2004,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of total
sales. In addition, we supply our customers with a broad
offering of professional grade building products not
manufactured by us such as dimensional lumber and lumber sheet
goods, various window, door and millwork lines, as well as
cabinets, roofing, and gypsum wallboard. Our full range of
construction-related services includes professional
installation, turn-key framing and shell construction, and spans
all our product categories.
</FONT>

<P align="left">
<FONT size="2">We group our building products and services into
five principal product categories: Prefabricated Components,
Windows &#38; Doors, Lumber &#38; Lumber Sheet Goods, Millwork,
and Other Building Products &#38; Services. Over the past five
years we have more than doubled the sales of our Prefabricated
Components, Windows &#38; Doors, and Millwork product
categories, each of which includes both manufactured and
distributed products. Products in these categories typically
carry a higher margin and provide us with opportunities to
cross-sell other products and services, thereby increasing
customer
</FONT>

<DIV>&nbsp;</DIV>

<DIV align="right">
<B><FONT size="2"> 1</FONT></B>
</DIV>
</DIV>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<FONT size="2">penetration. The chart below provides a breakdown
of each product category&#146;s contribution to sales in the
year ended December&nbsp;31, 2004.
</FONT>
</DIV>

<P align="center">
<B><FONT size="2">Sales by Product Category&#151;Year Ended
December&nbsp;31, 2004</FONT></B>

<DIV align="center">
<B><FONT size="2">Total
Sales&#151;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million</FONT></B>
</DIV>

<P align="center">
<IMG src="y05301y0494609.gif" alt="(PIE CHART)">

<P align="left">
<HR size="1" width="15%" align="left" noshade>

<DIV align="left">
<I><FONT size="2">*&nbsp;Includes both manufactured and
distributed products</FONT></I>
</DIV>

<P align="left">
<FONT size="2">We serve a broad customer base ranging from
Production Homebuilders to small custom homebuilders and believe
that we are the number one or two building products supplier for
single-family residential new construction in approximately 75%
of the geographic markets in which we operate. According to 2003
U.S. Census data, we have operations in 20 of the top 50 U.S.
Metropolitan Statistical Areas, as ranked by single family
housing permits, and approximately 44% of U.S. housing starts
occurred in states in which we operate. Our comprehensive
product offering featuring over 250,000 SKUs company-wide and
our full range of construction services, combined with our scale
and experienced sales force, have driven market share gains,
particularly with Production Homebuilders.
</FONT>

<P align="left">
<B><FONT size="2">INDUSTRY OVERVIEW AND TRENDS</FONT></B>

<P align="left">
<B><I><FONT size="2">Our Industry.
</FONT></I></B><FONT size="2">We compete in the professional
segment (&#147;Pro Segment&#148;) of the U.S. residential new
construction building products supply market, which has
estimated 2004 annual sales of $117&nbsp;billion. The Pro
Segment of this market is highly fragmented, with the top ten
suppliers accounting for less than 15% of the total market. This
segment consists predominantly of small, privately owned
companies, most of which have limited access to capital and
manufacturing capabilities, and lack the ability to provide a
full range of construction services. The industry&#146;s
fragmentation is due to the large overall size of the market,
the diversity of the target customer base, and variations in
local building preferences and practices. We focus on a
distinctly different target market than that of home center
retailers, such as Home Depot and Lowe&#146;s, who primarily
serve do-it-yourself and professional remodeling customers. By
contrast, our customers consist of professional homebuilders and
those that provide construction services to them, with whom we
develop strong relationships.
</FONT>

<P align="left">
<B><I><FONT size="2">Housing. </FONT></I></B><FONT size="2">Our
business is driven primarily by the residential new construction
market. According to the National Association of Homebuilders,
U.S. housing starts were 1.85&nbsp;million in 2003 and are
projected to be 1.95&nbsp;million in 2004 and 1.88&nbsp;million
in 2005. While these levels are above the historical average of
1.62&nbsp;million over the past ten years, several industry
sources expect that strong housing demand will continue to be
driven over the next decade by new household formations,
increasing homeownership rates, the size and age of the
population, an aging housing stock (approximately 36% of
existing homes were built before 1960), improved financing
options for buyers, and immigration trends. The Homeownership
Alliance, for example, predicts that these demand drivers will
lead to 1.85&nbsp;million to 2.17&nbsp;million new U.S. housing
starts per year through 2014. Over the past decade, the
homebuilding sector has undergone significant structural changes
that we believe have contributed to greater stability in
</FONT>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2"> 2</FONT></B>
</DIV>
</DIV>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<FONT size="2">the industry. These developments include the
introduction of more professional management teams, a reduction
in speculative land positions, lower levels of unsold inventory,
more conservatively financed balance sheets, geographic
diversification and increased consolidation. As a result of the
recent consolidation activity within the homebuilding industry
and market share gains of the larger builders, our customer base
has shifted increasingly to Production Homebuilders. The market
share of the ten largest Production Homebuilders tripled from
approximately 7% in 1990 to a projected 22% in 2004 and is
expected to increase to 40% by 2010. While Production
Homebuilders have continued to consolidate their industry,
homebuilding remains a locally oriented business, even within
the Production Homebuilders&#146; organizations, as building
codes and architectural preferences vary widely by locale. For
example, building codes in coastal areas are generally much
different from codes in inland areas or those in earthquake
zones, requiring different products and construction techniques.
One of our key success factors is to maintain the local
flexibility required to meet customer demand while maximizing
the benefits of operating a large-scale, integrated company.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">Prefabricated Components.
</FONT></I></B><FONT size="2">The growing use of Prefabricated
Components in the homebuilding process represents a major trend
within the residential new construction building products supply
market. According to the Engineered Wood Association, the use of
manufactured panels in new homes increased by over 60% from 1997
to 2003. In addition, according to the USDA Forest Service, roof
trusses, the largest component of our Prefabricated Components
category, have replaced conventional site-built roof framing in
approximately 70% of all single-family construction today. In
response to this trend, we have increased our manufacturing
capacity and our ability to provide customers with Prefabricated
Components such as roof and floor trusses, stairs, wall panels,
and engineered wood. Builders value the many benefits of using
these products, including reduced cycle time and carrying costs,
increased product quality, and cost savings from the reduction
of expensive on-site labor and material waste. Once established
as a preferred supplier of Prefabricated Components, we are
typically able to cross-sell additional products and services as
our customers increasingly seek integrated solutions.
</FONT>

<P align="left">
<B><FONT size="2">OUR COMPETITIVE STRENGTHS</FONT></B>

<P align="left">
<FONT size="2">We believe our sales, earnings and cash flow will
be driven by our competitive strengths:
</FONT>

<P align="left">
<B><I><FONT size="2">Leading Positions in Growing
Markets.</FONT></I></B><FONT size="2"> We believe that we are
the number one or two building products supplier for
single-family residential new construction in approximately 75%
of the geographic markets in which we operate. We are also the
largest supplier of our product categories to the Production
Homebuilders in our geographic markets as a whole. These leading
market positions allow us to develop and sustain strong
relationships with local customers and attain economies of scale
that enhance profitability and reduce the risk of losing
customers to our competitors. This in turn positions us
favorably to continue to gain market share. Our facilities are
strategically located in many of the fastest-growing markets in
the southern and eastern U.S., where we expect continued growth.
We believe that we are well positioned to grow with the
Production Homebuilders as they increase their market share in
these growing markets.
</FONT>

<P align="left">
<B><I><FONT size="2">Unique Business Model.
</FONT></I></B><FONT size="2">Our unique business model allows
us to cost-effectively supply our customers and target
Production Homebuilders, the fastest-growing segment of our
customer base. We operate an integrated business model across
our network of 63&nbsp;distribution centers and
42&nbsp;manufacturing facilities that differentiates us from
many of our competitors who operate in a decentralized manner
with a collection of facilities. This has enabled us to achieve
an appropriate balance of maximizing the benefits of a centrally
directed, large-scale company while maintaining the flexibility
to build strong customer relationships and provide superior
customer service at the local market level. The key components
of our business model are the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We operate a highly customized, proprietary
    information technology system that drives internal efficiencies
    while allowing us to rapidly respond to our customers and reduce
    their administrative costs.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<DIV align="right">
<B><FONT size="2"> 3</FONT></B>
</DIV>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We tailor the size of our facilities to each
    market to meet the needs of our customers, offering large-scale,
    full-service branches in larger markets and smaller, more
    tailored facilities in secondary markets.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We offer our customers a &#147;one-stop-shop
    approach&#148; that combines a full line of manufactured
    structural building products, lumber and lumber sheet goods, and
    turn-key construction services; this integrated approach
    substantially reduces the administrative burden and cost to our
    customers of dealing with multiple suppliers.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">Full Offering of Manufactured Products and
Construction Services.</FONT></I></B><FONT size="2"> Over the
past several years, we have significantly increased our sales of
manufactured products, which provide us with higher margins and
increased opportunities to cross-sell other products to our
customers. Our ability to supply our own manufactured products,
including Prefabricated Components, windows, pre-hung doors and
our branded Synboard&#174; millwork products, strengthens our
customer relationships by helping homebuilders reduce costs and
cycle time while ensuring high quality. We also provide our
customers with a full range of services, including professional
installation, turn-key framing and shell construction, and
design. This combination of manufactured products and
construction services offers competitive advantages versus the
traditional single-product, &#147;sell-and-deliver&#148;
business model employed by many of our competitors.
</FONT>

<P align="left">
<B><I><FONT size="2">Superior Customer
Service.</FONT></I></B><FONT size="2"> We offer our customers
superior service through our experienced sales force and
reliable delivery capabilities. Our salespeople act as trusted
advisors and on-site consultants to the homebuilder and are
involved in each important step of the construction process to
ensure constant communication and rapidly resolve any issues
that may arise. We typically deploy a salesperson to the job
site to take measurements, interpret blueprints, assist in
product selection and help oversee product installation. Drawing
on a deep base of experience and knowledge, our representatives
advise on regional aesthetic preferences and opportunities for
cost reductions. In addition, our large delivery fleet and
comprehensive inventory management system enable us to provide
&#147;just-in-time&#148; product delivery, ensuring a smoother
and faster production cycle for the homebuilder.
</FONT>

<P align="left">
<B><I><FONT size="2">Attractive Cost and Working Capital
Position. </FONT></I></B><FONT size="2">We have used our
position as one of the few large-scale competitors in our
industry to create an attractive cost position. We have
generated substantial savings over time by implementing
centralized corporate purchasing agreements. Approximately 80%
of our non-lumber product purchases are made pursuant to
company-wide purchase agreements. Our distribution centers
average $32.6 million of annual sales, which is higher than any
of our competitors that have annual sales in excess of
$1&nbsp;billion. This scale allows us to leverage our fixed
costs, including occupancy, location management, supervisory
labor and corporate overhead, to lower our costs per sales
dollar. We measure location productivity at a detailed level and
actively manage efficiency and cost. We have implemented a
comprehensive efficiency measurement system in our truss and
wall panel plants and this system has enabled us to
significantly improve productivity. We aggressively manage every
component of working capital, including accounts receivable,
inventory, and accounts payable, and we have improved our
working capital, expressed as a percentage of sales, from 1999
as compared to the nine-month period ended September&nbsp;30,
2004. All of these activities are designed to ensure that we
serve our customers at the lowest cost possible.
</FONT>

<P align="left">
<B><I><FONT size="2">Experienced Management
Team.</FONT></I></B><FONT size="2"> We have a dedicated
management team with extensive experience and expertise in the
manufacturing, distribution, and marketing of building products.
Our senior management team, including our three regional group
presidents, has a total of over 175&nbsp;years of industry
experience. This team has successfully led us through various
industry cycles, economic conditions and capital structures, and
has demonstrated the ability to grow manufacturing businesses,
introduce new product lines, expand into new geographic markets,
and target and integrate acquisitions, while improving
operational and working capital efficiencies. Our seasoned
operational team is led by three regional group presidents who
average over 25&nbsp;years of industry experience. Local
facility management and sales representatives are knowledgeable
about homebuilding and generally have longstanding relationships
with the builders in their respective markets.
</FONT>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2"> 4</FONT></B>
</DIV>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="left">
<B><FONT size="2">OUR STRATEGY</FONT></B>

<P align="left">
<FONT size="2">Our strategy is to leverage our competitive
strengths to grow sales, earnings, and cash flow and remain the
preferred supplier to the homebuilding industry.
</FONT>

<P align="left">
<B><I><FONT size="2">Increase Customer Penetration Through
Incremental Sales of Manufactured Products and
Services.</FONT></I></B><FONT size="2"> We plan to organically
grow our unit volumes and revenues through further penetration
of our customer base by providing existing customers with
incremental value-added products and services. As part of this
strategy, we intend to increase sales of manufactured products,
which are higher margin and less price sensitive than lumber
products, and are growing in demand by homebuilders.
Prefabricated Components, such as trusses, wall panels, stairs
and engineered wood, are highly valued by our customers,
especially Production Homebuilders, because they reduce
builders&#146; cycle times and carrying costs and generate cost
savings through the reduction of on-site labor and lumber waste.
Once established as a manufacturer of these products by our
customers, we are generally able to cross-sell additional
products. We also intend to grow our sales of construction
services, such as professional installation, turn-key framing
and shell construction, and design, as a complement to our
existing product offerings. Our ability to provide full product
and service solutions further strengthens customer loyalty and
enables us to retain an advantage over our competitors.
</FONT>

<P align="left">
<B><I><FONT size="2">Target Production Homebuilders.
</FONT></I></B><FONT size="2">We intend to leverage our unique
business model, geographic breadth, and scale to continue to
grow our sales to the Production Homebuilders as they continue
to gain market share. The ten largest Production Homebuilders,
as measured by homes sold, tripled their market share from
approximately 7% in 1990 to a projected 22% in 2004, and are
expected to increase their market share to 40% by 2010. We have
grown our sales to this group at an even faster rate. For
example, from 2001 to 2004, the ten largest Production
Homebuilders increased their market share from approximately 18%
to a projected 22%. Over approximately the same period, we
increased our sales to this customer group by
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% from
$262.9&nbsp;million in 2001 to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
for the year ended December&nbsp;31, 2004.
</FONT>

<P align="left">
<B><I><FONT size="2">Expand through New Manufacturing and
Distribution Centers in Existing and Contiguous
Markets.</FONT></I></B><FONT size="2"> We believe that several
key markets in which we currently operate require increased
manufacturing capacity or incremental distribution facilities to
reach their full sales potential. In many locations, we believe
that we can increase market penetration through the introduction
of additional distribution and manufacturing facilities. In
addition, we have identified several markets that we believe we
can enter with a strong market share from the onset by
leveraging our existing nearby facilities, customer
relationships and local knowledge. We will also selectively seek
expansion opportunities that will enable us to grow in the
multi-family and commercial end markets where we currently have
a limited presence. We expect these expansions can be realized
with capital expenditures consistent with historical levels.
</FONT>

<P align="left">
<B><I><FONT size="2">Focus on Cost, Working Capital and
Operating Improvements.</FONT></I></B><FONT size="2"> We are
extremely focused on expenses and working capital to remain a
low cost supplier. We maintain a continuous improvement,
&#147;best practices&#148; operating philosophy and regularly
implement new initiatives to reduce costs, increase efficiency
and reduce working capital, thereby enhancing profitability and
cash flow. For example, we are beginning to link our computer
system to those of our customers to streamline the
administrative aspects of the quoting, invoicing and billing
processes. We are also analyzing our workforce productivity to
determine the optimal labor mix that minimizes cost, and
examining our logistics function to reduce the cost of inbound
freight. Our focus on cost controls and our strategy of shifting
the sales mix to value-added products and services have
significantly improved profitability. Selling, general and
administrative expenses have declined as a percentage of sales
from 21.4% in 2001
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
for the year ended December&nbsp;31, 2004. We have also improved
our working capital, expressed as a percentage of sales, from
1999 as compared to the nine-month period ended
September&nbsp;30, 2004.
</FONT>

<P align="left">
<B><I><FONT size="2">Pursue Strategic
Acquisitions.</FONT></I></B><FONT size="2"> The highly
fragmented nature of the Pro Segment presents substantial
acquisition opportunities. Our acquisition strategy centers on
geographic expansion and continued growth of our Prefabricated
Components business. First, there are a number of attractive
homebuilding markets, including in the western and southwestern
U.S. and parts of the Midwest, where we do not
</FONT>

<DIV>&nbsp;</DIV>

<DIV align="right">
<B><FONT size="2"> 5</FONT></B>
</DIV>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<FONT size="2">currently operate. We believe that our proven
operating model can be successfully adapted to these markets and
the homebuilders in these markets, many of whom we currently
serve elsewhere, and who value our broad product and service
offering, professional expertise, and superior customer service.
When entering a new market, our strategy is to acquire
market-leading suppliers and subsequently expand their product
offerings and/or add manufacturing facilities while integrating
their operations into our centralized platform. This strategy
allows us to quickly achieve the scale required to maximize
profitability and leverage existing customer relationships in
the local market. Second, we will selectively seek to acquire
companies that manufacture Prefabricated Components such as roof
and floor trusses, wall panels, stairs, and engineered wood, as
well as other building products such as millwork. Prefabricated
Components are growing in popularity with homebuilders and
provide us with cross-selling opportunities and higher margins.
Our senior management team has the experience and ability to
identify acquisition candidates and integrate acquisitions,
having acquired and integrated 23 companies since 1998.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">OUR BACKGROUND</FONT></B>

<P align="left">
<FONT size="2">Our company was formed in 1998 through a
partnership between JLL Partners, Inc. (&#147;JLL
Partners&#148;), and certain members of the existing management
team. Through strategic acquisitions and organic growth, we
quickly grew into one of the nation&#146;s largest suppliers of
structural and related building products to homebuilders. Under
the leadership of our experienced senior management team, we
evolved from a portfolio of 23 acquired businesses into an
integrated operating company organized into three regional
operating groups with strong, centralized financial and
operational oversight.
</FONT>

<P align="left">
<B><FONT size="2">OUR PRINCIPAL INVESTORS</FONT></B>

<P align="left">
<FONT size="2">Affiliates of JLL Partners, Inc. control JLL
Building Products, LLC which owns 94.6% of our outstanding
common stock. Founded in 1988, JLL Partners is among the leading
private equity investment firms in the country with
$2.2&nbsp;billion in committed capital currently under
management. JLL&#146;s investment philosophy is to partner with
exceptional managers to grow and improve quality companies. JLL
has invested in a wide variety of sectors, with portfolio
companies that have included AdvancePCS, C.H.I. Overhead Doors,
Foodbrands America, IASIS Healthcare, Mosaic Sales Solutions,
Motor Coach Industries, and PGT Industries.
</FONT>

<P align="left">
<B><FONT size="2">RECENT DEVELOPMENTS</FONT></B>

<P align="left">
<FONT size="2">On February&nbsp;11, 2005 we entered into a
$350.0&nbsp;million senior secured credit facility with a
syndicate of banks. The new credit facility is composed of a
$225.0&nbsp;million six-and-a-half year term loan, a
$110.0&nbsp;million five-year revolver, and a $15.0&nbsp;million
pre-funded letter of credit facility to be available at any time
and from time to time during the six-and-a-half year term. In
addition, on February&nbsp;11, 2005, we issued
$275.0&nbsp;million aggregate principal amount of second
priority senior secured floating rate notes due 2012. See
&#147;Description of Certain Indebtedness&#148; for a summary of
the terms of the new credit facility and the floating rate
notes. With the proceeds from these transactions, we repaid
existing indebtedness and paid a $201.2&nbsp;million dividend to
stockholders and a $35.8&nbsp;million payment to holders of
stock options, as well as expenses of the new credit facility
and floating rate notes.
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<FONT size="2">Our principal executive offices are located at
2001 Bryan Street, Suite&nbsp;1600, Dallas, Texas 75201,
</FONT>

<DIV align="center">
<FONT size="2">and our telephone number is (214)&nbsp;880-3500.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2"> 6</FONT></B>
</DIV>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="left">
<FONT size="4">The offering
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by Builders <BR>
     FirstSource, Inc.
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    if the underwriters exercise their over-allotment option in full)
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by the selling stockholder
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    if the underwriters exercise their over-allotment option in full)
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock to be outstanding after this offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    if the underwriters exercise their over-allotment option in full)
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Use of Proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We intend to use the net proceeds that we receive
    in this offering to repay a portion of our outstanding debt and
    for general corporate purposes. We will not receive any of the
    proceeds from the sale of our common stock by the selling
    stockholder.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Proposed Nasdaq symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#147;BLDR.&#148;
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<DIV align="right">
<B><FONT size="2"> 7</FONT></B>
</DIV>
</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<FONT size="4">Summary of historical financial information and
other data
</FONT>

<P align="left">
<FONT size="2">The following table sets forth a summary of
consolidated financial information and other data for each of
the periods or at each date indicated. The summary historical
consolidated statement of operations and balance sheet data as
of December&nbsp;31, 2003 and 2002 and for each of the three
fiscal years ended December&nbsp;31, 2003 has been derived from
the consolidated financial statements of the Company, which have
been audited by PricewaterhouseCoopers LLP, independent
registered public accounting firm for the Company. The selected
balance sheet data as of December&nbsp;31, 2001 has been derived
from our audited consolidated financial statements not included
herein. The summary historical financial information for the
nine months ended September&nbsp;30, 2003 and as of and for the
nine months ended September&nbsp;30, 2004 has been derived from
the unaudited condensed consolidated financial statements of the
Company included elsewhere herein and reflects all adjustments
that, in the opinion of the management of the Company, are
necessary for a fair presentation of such information.
</FONT>

<P align="left">
<FONT size="2">All information included in the following tables
should be read in conjunction with &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and with the consolidated financial statements
and related notes, included elsewhere in this prospectus.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="6" align="right" nowrap><B><FONT size="1">Nine months ended</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="6" align="right" nowrap><B><FONT size="1">or at September&nbsp;30,</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="10" align="right" nowrap><B><FONT size="1">Year ended or at December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="6" align="right" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="10" align="right" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="right" nowrap><B><FONT size="1">2004</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="right" nowrap><B><FONT size="1">2003</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="right" nowrap><B><FONT size="1">2003</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="right" nowrap><B><FONT size="1">2002</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="right" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="22" align="right" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="18" align="right" nowrap><FONT size="1">(in thousands, except per share amounts)</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Statement of operations data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,552,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,213,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,675,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,500,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,513,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,201,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">940,953</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,155,369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,150,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Gross margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272,507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">373,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">344,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">363,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">326,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">307,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">323,741</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,283</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other expense, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations before income
    taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,211</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income (loss) from discontinued operations, net
    of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,641</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,822</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,980</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle, net of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,504</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations per share&#151;
    basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations per share&#151;
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted average shares outstanding&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,040</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">253,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,320</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted average shares outstanding&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">254,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Balance sheet data (end of period):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">734,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">535,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">567,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total debt, including current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168,533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">301,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">295,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Cash flow data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash provided by (used in) operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,007</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,162</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,823</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,307</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,040</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,311</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,158</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29,292</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,280</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,918</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Other financial data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Depreciation and amortization (excluding
    discontinued operations)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,942</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">EBITDA(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,354</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Capital expenditures (excluding acquisitions)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,394</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,592</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,061</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,491</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">EBITDA, a non-GAAP financial measure used by
    management to measure operating performance, is defined as net
    income (loss) plus income taxes, interest, depreciation,
    amortization, cumulative effect of change in accounting
    principle, other expense (net) and income (loss) from
    discontinued operations. We reference this non-GAAP financial
    measure as a management group frequently in our decision-making
    because it provides meaningful information regarding our
    operating performance and cash flows and facilitates comparisons
    to our historical operating results. For a reconciliation of
    EBITDA to net income, see &#147;Selected Historical Consolidated
    Financial Information&#148;</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<DIV align="left">
<B><FONT size="2"> 8</FONT></B>
</DIV>
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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I><FONT size="2">EBITDA is not a recognized term under GAAP and
    does not purport to be an alternative to net income as an
    indicator of operating performance or to cash flows from
    operating activities as a measure of liquidity. Because not all
    companies use identical calculations, the presentation of EBITDA
    may not be comparable to other similarly titled measures of
    other companies. Additionally, EBITDA is not intended to be a
    measure of free cash flow for management&#146;s discretionary
    use because it does not reflect certain cash requirements such
    as interest payments, income tax payments, and debt service
    requirements.</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<DIV align="right">
<B><FONT size="2"> 9</FONT></B>
</DIV>
</DIV>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Risk factors
</FONT>

<P align="left">
<I><FONT size="2">An investment in shares of our common stock
involves risks. You should consider carefully the following
information about these risks, together with the other
information contained in this prospectus, before deciding to buy
shares of our common stock. If any of the following risks
actually occurs, our business, financial condition, results of
operations, and future growth prospects could be materially and
adversely affected. In these circumstances, the market price of
our common stock could decline, and you may lose all or part of
the money you paid to buy shares of our common stock. The risks
and uncertainties described below are not the only ones we
face.</FONT></I>

<P align="left">
<B><FONT size="2">RISKS RELATING TO OUR BUSINESS AND
INDUSTRY</FONT></B>

<P align="left">
<B><FONT size="2">The Industry in Which We Operate Is Dependent
upon the Homebuilding Industry, the Economy, and Other Important
Factors.</FONT></B>

<P align="left">
<FONT size="2">The building products supply industry is highly
dependent on new home construction, which in turn is dependent
upon a number of factors, including demographic trends, interest
rates, tax policy, employment levels, consumer confidence, and
the economy generally. Unfavorable changes in demographics or a
weakening of the national economy or of any regional or local
economy in which we operate could adversely affect consumer
spending, result in decreased demand for homes, and adversely
affect our business. Production of new homes may also decline
because of shortages of qualified tradesmen, reliance on
inadequately capitalized sub-contractors, and shortages of
materials. In addition, the homebuilding industry is subject to
various local, state, and federal statutes, ordinances, rules,
and regulations concerning zoning, building design and safety,
construction, and similar matters, including regulations that
impose restrictive zoning and density requirements in order to
limit the number of homes that can be built within the
boundaries of a particular area. Increased regulatory
restrictions could limit demand for new homes and could
negatively affect our sales and earnings. Because we have
substantial fixed costs, relatively modest declines in our
customers&#146; production levels could have a significant
adverse impact on our financial condition, results of operations
and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">The Building Supply Industry Is Cyclical and
Seasonal.</FONT></B>

<P align="left">
<FONT size="2">The building products supply industry is subject
to cyclical market pressures. Prices of building products are
subject to fluctuations arising from changes in supply and
demand, national and international economic conditions, labor
costs, competition, market speculation, government regulation,
and trade policies, as well as from periodic delays in the
delivery of lumber and other products. For example, prices of
wood products, including lumber and panel products, are subject
to significant volatility and directly affect our sales and
earnings. Our Lumber &#38; Lumber Sheet Goods product category
represented &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of total
sales in the year ended December&nbsp;31, 2004. We have no
ability to control the timing and amount of pricing changes for
building products. In addition, the supply of building products
fluctuates based on available manufacturing capacity, and a
shortage of capacity or excess capacity in the industry can
result in significant increases or declines in market prices for
those products, often within a short period of time. Such price
fluctuations can adversely affect our financial condition,
results of operations and cash flows.
</FONT>

<P align="left">
<FONT size="2">In addition, although weather patterns affect our
results of operations throughout the year, adverse weather
historically has reduced construction activity in the first and
fourth quarters in our markets. To the extent that hurricanes,
severe storms, floods, or other natural disasters or similar
events occur in the markets in which we operate, our business
may be adversely affected. We anticipate that fluctuations from
period to period will continue in the future.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 10</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">Product Shortages, Loss of Key Suppliers, and
Our Dependence on Third-Party Suppliers and Manufacturers Could
Affect Our Financial Health.</FONT></B>

<P align="left">
<FONT size="2">Our ability to offer a wide variety of products
to our customers is dependent upon our ability to obtain
adequate product supply from manufacturers and other suppliers.
Generally, our products are obtainable from various sources and
in sufficient quantities. However, the loss of, or a substantial
decrease in the availability of, products from our suppliers or
the loss of key supplier arrangements could adversely impact our
financial condition, results of operations and cash flows.
</FONT>

<P align="left">
<FONT size="2">Although in many instances we have agreements
with our suppliers, these agreements are generally terminable by
either party on limited notice. Failure by our suppliers to
continue to supply us with products on commercially reasonable
terms, or at all, could have a material adverse effect on our
financial condition, results of operations and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">The Loss of Any of Our Significant Customers
Could Affect Our Financial Health.</FONT></B>

<P align="left">
<FONT size="2">Our 10 largest customers generated
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our sales in
the year ended December&nbsp;31, 2004, and our largest customer
accounted for almost &nbsp;% of our sales in that same period.
We cannot guarantee that we will maintain or improve our
relationships with these customers or that we will continue to
supply these customers at current levels. Production
Homebuilders and other customers may seek to purchase some of
the products that we currently sell directly from manufacturers,
or they may elect to establish their own building products
manufacturing and distribution facilities. In addition,
continued consolidation among Production Homebuilders could also
result in a loss of some of our present customers to our
competitors, and the loss of one or more of our significant
customers or a deterioration in our relations with any of them
could significantly affect our financial condition, results of
operations and cash flows. Furthermore, our customers are not
required to purchase any minimum amount of products from us. The
contracts into which we have entered with most of our
professional customers typically provide that we supply
particular products or services for a certain period of time
when and if ordered by the customer. Should our customers
purchase our products in significantly lower quantities than
they have in the past, such decreased purchases could have a
material adverse effect on our financial condition, results of
operations and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">Our Industry is Highly Fragmented and
Competitive, and Increased Competitive Pressure May Adversely
Affect Our Results.</FONT></B>

<P align="left">
<FONT size="2">The building products supply industry is highly
fragmented and competitive. We face significant competition from
local and regional building materials chains, as well as from
privately-owned single site enterprises. Any of these
competitors may (i)&nbsp;foresee the course of market
development more accurately than do we, (ii)&nbsp;develop
products that are superior to our products, (iii)&nbsp;have the
ability to produce similar products at a lower cost,
(iv)&nbsp;develop stronger relationships with local
homebuilders, or (v)&nbsp;adapt more quickly to new technologies
or evolving customer requirements than do we. As a result, we
may not be able to compete successfully with them. In addition,
home center retailers, which have historically concentrated
their sales efforts on retail consumers and small contractors,
may in the future intensify their marketing efforts to
professional homebuilders. Furthermore, certain product
manufacturers sell and distribute their products directly to
Production Homebuilders, and the volume of such direct sales
could increase in the future. Additional manufacturers of
products distributed by us may elect to sell and distribute
directly to homebuilders in the future or enter into exclusive
supplier arrangements with other distributors. Finally, we may
not be able to maintain our costs at a level sufficiently low
for us to compete effectively. If we are unable to compete
effectively, our financial condition, results of operations and
cash flows will be adversely affected.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 11</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">We Are Subject to Competitive Pricing Pressure
From Our Customers.</FONT></B>

<P align="left">
<FONT size="2">Production Homebuilders historically have exerted
significant pressure on their outside suppliers to keep prices
low because of their increasing market share and their ability
to leverage such market share in the highly fragmented building
products supply industry. Continued consolidation among
Production Homebuilders, and changes in Production
Homebuilders&#146; purchasing policies or payment practices,
could result in increased pricing pressure. If we are unable to
generate sufficient cost savings in the future to offset any
price reductions, our financial condition, results of
operations, and cash flows may be adversely affected.
</FONT>

<P align="left">
<B><FONT size="2">Our Level of Indebtedness Could Adversely
Affect our Ability to Raise Additional Capital to Fund Our
Operations, Limit Our Ability to React to Changes in the Economy
or Our Industry, and Prevent Us from Meeting Our Obligations
under Our Debt Instruments.</FONT></B>

<P align="left">
<FONT size="2">As of September&nbsp;30, 2004, after giving
effect to the application of the net proceeds of this offering,
our new senior secured credit facility, our floating rate notes,
and the application of the net proceeds therefrom, our total
indebtedness would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million. See
&#147;Capitalization&#148; for additional information.
</FONT>

<P align="left">
<FONT size="2">Our substantial debt could have important
consequences for you, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increasing our vulnerability to general economic
    and industry conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">requiring a substantial portion of our cash flow
    from operations to be dedicated to the payment of principal and
    interest on our indebtedness, therefore reducing our ability to
    use our cash flow to fund our operations, capital expenditures,
    and future business opportunities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">exposing us to the risk of increased interest
    rates because certain of our borrowings, including the floating
    rate notes and borrowings under the new senior secured credit
    facility, will be at variable rates of interest;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limiting our ability to obtain additional
    financing for working capital, capital expenditures, debt
    service requirements, acquisitions, and general corporate or
    other purposes; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limiting our ability to adjust to changing market
    conditions and placing us at a competitive disadvantage compared
    to our competitors who have less debt.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">We May Incur Additional Indebtedness</FONT></B>

<P align="left">
<FONT size="2">We may incur additional indebtedness under our
new senior secured credit facility, which provides for up to
$110&nbsp;million of revolving credit borrowings and a
$15&nbsp;million pre-funded letter of credit facility. In
addition, we and our subsidiaries may be able to incur
substantial additional indebtedness in the future, including
secured debt, subject to the restrictions contained in the
credit agreement governing our new senior secured credit
facility and the indenture relating to our floating rate notes.
See &#147;Description of Certain Indebtedness.&#148; If new debt
is added to our current debt levels, the related risks that we
now face could intensify.
</FONT>

<P align="left">
<B><FONT size="2">Our Debt Instruments Contain Various Covenants
That Limit Our Ability to Operate Our Business.</FONT></B>

<P align="left">
<FONT size="2">Our financing arrangements, including our new
senior secured credit facility and the indenture governing our
floating rate notes, contain various provisions that limit our
ability to, among other things:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">transfer or sell assets, including the equity
    interests of our restricted subsidiaries, or use asset sale
    proceeds;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">incur additional debt;
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 12</FONT></B>
</DIV>
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<DIV align="left">
<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">pay dividends or distributions on our capital
    stock or repurchase our capital stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make certain restricted payments or investments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">create liens to secure debt;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into transactions with affiliates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">merge or consolidate with another company; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">engage in unrelated business activities.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In addition, our new senior secured credit
facility will require us to meet specified financial ratios.
These covenants may restrict our ability to expand or fully
pursue our business strategies. Our ability to comply with these
and other provisions of the indenture governing our floating
rate notes and the new senior secured credit facility may be
affected by changes in our operating and financial performance,
changes in general business and economic conditions, adverse
regulatory developments, or other events beyond our control. The
breach of any of these covenants, including those contained in
our new senior secured credit facility and the indenture
governing our floating rate notes, could result in a default
under our indebtedness, which could cause those and other
obligations to become due and payable. If any of our
indebtedness is accelerated, we may not be able to repay it.
</FONT>

<P align="left">
<B><FONT size="2">We Are a Holding Company and Conduct All of
Our Operations through Our Subsidiaries. Therefore, We Rely on
Dividends, Interest, and Other Payments, Advances, and Transfers
of Funds from Our Subsidiaries to Meet Our Debt Service and
Other Obligations. As a Result, We May Not Be Able to Generate
Sufficient Cash to Service All of Our Indebtedness and May Be
Forced to Take Other Actions to Satisfy Our Obligations under
Our Indebtedness, Which May Not Be Successful.</FONT></B>

<P align="left">
<FONT size="2">We are a holding company that derives all of our
operating income from our subsidiaries. All of our assets are
held by our direct and indirect subsidiaries, and we rely on the
earnings and cash flows of our subsidiaries, which are paid to
us by our subsidiaries in the form of dividends and other
payments or distributions, to meet our debt service obligations.
The ability of our subsidiaries to pay dividends or make other
payments or distributions to us will depend on their respective
operating results and may be restricted by, among other things,
the laws of their jurisdiction of organization (which may limit
the amount of funds available for the payment of dividends and
other distributions to us), the terms of existing and future
indebtedness and other agreements of our subsidiaries, the new
senior secured credit facility, the terms of the indenture
governing the floating rate notes, and the covenants of any
future outstanding indebtedness we or our subsidiaries incur.
</FONT>

<P align="left">
<FONT size="2">Our financial condition and operating performance
and that of our subsidiaries is also subject to prevailing
economic and competitive conditions and to certain financial,
business, and other factors beyond our control. We cannot assure
you that we will maintain a level of cash flows from operating
activities sufficient to permit us to pay the principal, premium
and liquidated damages, if any, and interest on our indebtedness.
</FONT>

<P align="left">
<FONT size="2">If our cash flows and capital resources are
insufficient to fund our debt service obligations, we may be
forced to reduce or delay capital expenditures, sell assets,
seek additional capital, or restructure or refinance our
indebtedness. These alternative measures may not be successful
and may not permit us to meet our scheduled debt service
obligations. In the absence of such operating results and
resources, we could face substantial liquidity problems and
might be required to dispose of material assets or operations to
meet our debt service and other obligations. The credit
agreement governing our new senior secured credit facility and
the indenture governing the floating rate notes will restrict
our ability to dispose of assets and use the proceeds from such
disposition. We may not be able to consummate those dispositions
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 13</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">or be able to obtain the proceeds that we could
realize from them, and these proceeds may not be adequate to
meet any debt service obligations then due.
</FONT>

<P align="left">
<B><FONT size="2">Our Continued Success Will Depend on Our
Ability to Retain Our Key Employees and to Attract and Retain
New Qualified Employees.</FONT></B>

<P align="left">
<FONT size="2">Our success depends in part on our ability to
attract, hire, train, and retain qualified managerial, sales,
and marketing personnel. We face significant competition for
these types of employees in our industry. We may be unsuccessful
in attracting and retaining the personnel we require to conduct
and expand our operations successfully. In addition, key
personnel may leave us and compete against us. Our success also
depends to a significant extent on the continued service of our
senior management team. We may be unsuccessful in replacing key
managers who either quit or retire. The loss of any member of
our senior management team or other experienced, senior
employees could impair our ability to execute our business plan
and growth strategy, cause us to lose customers and reduce our
net sales, or lead to employee morale problems and/or the loss
of other key employees. In any such event, our financial
condition, results of operations, and cash flows could be
adversely affected.
</FONT>

<P align="left">
<B><FONT size="2">The Nature of Our Business Exposes Us to
Product Liability and Warranty Claims and Other Legal
Proceedings.</FONT></B>

<P align="left">
<FONT size="2">We are involved in product liability and product
warranty claims relating to the products we manufacture and
distribute that, if adversely determined, could adversely affect
our financial condition, results of operations and cash flows.
We rely on manufacturers and other suppliers to provide us with
many of the products we sell and distribute. Because we do not
have direct control over the quality of such products
manufactured or supplied by such third party suppliers, we are
exposed to risks relating to the quality of such products. In
addition, we are exposed to potential claims arising from the
conduct of home builders and their sub-contractors, for which we
may be contractually liable. Although we currently maintain what
we believe to be suitable and adequate insurance in excess of
our self-insured amounts, there can be no assurance that we will
be able to maintain such insurance on acceptable terms or that
such insurance will provide adequate protection against
potential liabilities. Product liability claims can be expensive
to defend and can divert the attention of management and other
personnel for significant periods, regardless of the ultimate
outcome. Claims of this nature could also have a negative impact
on customer confidence in our products and our company. In
addition, we are involved on an ongoing basis in other legal
proceedings. We cannot assure you that any current or future
claims will not adversely affect our financial condition,
results of operations, and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">A Range of Factors May Make Our Quarterly
Revenues and Earnings Variable.</FONT></B>

<P align="left">
<FONT size="2">We have historically experienced, and in the
future will continue to experience, variability in revenues and
earnings on a quarterly basis. The factors expected to
contribute to this variability include, among others,
(i)&nbsp;the volatility of prices of lumber and wood products,
(ii)&nbsp;the cyclical nature of the homebuilding industry,
(iii)&nbsp;general economic conditions in the various local
markets in which we compete, (iv)&nbsp;the pricing policies of
our competitors, (v)&nbsp;the production schedules of our
customers, and (vi)&nbsp;the effects of the weather. These
factors, among others, make it difficult to project our
operating results on a consistent basis.
</FONT>

<P align="left">
<B><FONT size="2">We May be Adversely Affected by Any Disruption
in Our Information Technology Systems.</FONT></B>

<P align="left">
<FONT size="2">Our operations are dependent upon our information
technology systems, which encompass all of our major business
functions. Our centralized financial reporting system currently
draws data from our two enterprise resource planning
(&#147;ERP&#148;) systems. We rely upon such information
technology systems to manage and replenish inventory, to fill
and ship customer orders on a timely basis, and to coordinate our
</FONT>

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<B><FONT size="2"> 14</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">sales activities across all of our products and
services. A substantial disruption in our information technology
systems for any prolonged time period could result in delays in
receiving inventory and supplies or filling customer orders and
adversely affect our customer service and relationships. As part
of our continuing integration of our computer systems, we plan
to integrate our two ERPs into a single system. This integration
may divert management&#146;s attention from our core businesses.
In addition, we may experience delays in such integration or
problems with the functionality of the integrated system, which
could increase the expected cost of the integration. There can
be no assurance that such delays, problems, or costs will not
have a material adverse effect on our financial condition,
results of operations or cash flows.
</FONT>

<P align="left">
<B><FONT size="2">We May be Adversely Affected by Any Natural or
Man-Made Disruptions to Our Distribution and Manufacturing
Facilities.</FONT></B>

<P align="left">
<FONT size="2">We currently maintain a broad network of
distribution and manufacturing facilities throughout the
southern and eastern U.S. Any serious disruption to our
facilities resulting from fire, earthquake, weather-related
events, an act of terrorism, or any other cause could damage a
significant portion of our inventory and could materially impair
our ability to distribute our products to customers. In
addition, we could incur significantly higher costs and longer
lead times associated with distributing our products to our
customers during the time that it takes for us to reopen or
replace a damaged facility. If any of these events were to
occur, our financial condition, results of operations and cash
flows could be materially adversely affected.
</FONT>

<P align="left">
<B><FONT size="2">We May be Unable to Successfully Implement Our
Expansion Plans Included in Our Business Strategy.</FONT></B>

<P align="left">
<FONT size="2">Our business plan provides for continued growth
through acquisitions, particularly in the western and
southwestern U.S., and organic growth (see
&#147;Business&#151;Our Strategy&#148;). Failure to identify and
acquire suitable acquisition candidates on appropriate terms
could have a material adverse effect on our growth strategy.
Moreover, a significant change in our business or the economy,
an unexpected decrease in our cash flow for any reason, or the
requirements of our new senior secured credit facility could
result in an inability to obtain the capital required to effect
new acquisitions or expansions of existing facilities. Our
failure to make successful acquisitions or to build or expand
facilities, including manufacturing facilities, produce saleable
product, or meet customer demand in a timely manner could result
in damage to or loss of customer relationships. In addition,
although we have been successful in the past in integrating 23
acquisitions, we may not be able to integrate the operations of
future acquired businesses with our own in an efficient and
cost-effective manner or without significant disruption to our
existing operations. Acquisitions, moreover, involve significant
risks and uncertainties, including difficulties integrating
acquired personnel and other corporate cultures into our
business, the potential loss of key employees, customers, or
suppliers, difficulties in integrating different computer and
accounting systems, and exposure to unforeseen liabilities of
acquired companies, and the diversion of management attention
and resources from existing operations. We may also be required
to incur additional debt in order to consummate acquisitions in
the future, which debt may be substantial and may limit our
flexibility in using our cash flow from operations. Our failure
to integrate future acquired businesses effectively or to manage
other consequences of our acquisitions, including increased
indebtedness, could prevent us from remaining competitive and,
ultimately, could adversely affect our financial condition,
results of operations and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">Federal and State Regulations Could Impose
Substantial Costs and/or Restrictions on Our Operations That
Would Reduce Our Net Income.</FONT></B>

<P align="left">
<FONT size="2">We are subject to various federal, state, and
local regulations, including, among other things, regulations
promulgated by the Department of Transportation and applicable
to our fleet of delivery trucks, work
</FONT>

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<B><FONT size="2"> 15</FONT></B>
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<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
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</DIV>

<P align="left">
<FONT size="2">safety regulations promulgated by the Department
of Labor&#146;s Occupational Safety and Health Administration,
employment regulations promulgated by the United States Equal
Employment Opportunity Commission, and state and local zoning
restrictions and building codes. More burdensome regulatory
requirements in these or other areas may increase our general
and administrative costs and adversely affect our financial
condition, results of operations, and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">We are Subject to Potential Exposure to
Environmental Liabilities and Are Subject to Environmental
Regulation.</FONT></B>

<P align="left">
<FONT size="2">We are subject to various federal, state, and
local environmental laws, ordinances, and regulations. Although
we believe that our facilities are in material compliance with
such laws, ordinances, and regulations, as owners and lessees of
real property, we can be held liable for the investigation or
remediation of contamination on such properties, in some
circumstances, without regard to whether we knew of or were
responsible for such contamination. No assurance can be provided
that remediation may not be required in the future as a result
of spills or releases of petroleum products or hazardous
substances, the discovery of unknown environmental conditions or
more stringent standards regarding existing residual
contamination. More burdensome environmental regulatory
requirements may increase our general and administrative costs
and adversely affect our financial condition, results of
operations, and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">We May be Adversely Affected by Uncertainty in
the Economy and Financial Markets, Including as a Result of
Terrorism and the War in the Middle East.</FONT></B>

<P align="left">
<FONT size="2">Instability in the economy and financial markets,
including as a result of terrorism and the war in the Middle
East, may result in a decrease in housing starts, which would
adversely affect our business. In addition, the war, related
setbacks, or adverse developments, including a retaliatory
military strike or terrorist attack, may cause unpredictable or
unfavorable economic conditions and could have a material
adverse effect on our operating results and financial condition
and on our ability to raise capital. Terrorist attacks similar
to the ones committed on September&nbsp;11, 2001, may directly
affect our ability to keep our operations and services
functioning properly and could have a material adverse effect on
our financial condition, results of operations, and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">Being a Public Company Will Increase Our
Administrative Costs.</FONT></B>

<P align="left">
<FONT size="2">As a public company, we will incur significant
legal, accounting, and other expenses that we did not incur as a
private company. Under the SEC rules and regulations, as well as
those of Nasdaq, our financial compliance costs will increase.
Such rules may also make it more difficult and more expensive to
obtain director and officer liability insurance, and we may be
forced to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar
coverage. These rules and regulations could also make it more
difficult for us to attract and retain qualified members of our
board of directors, particularly to serve on our audit
committee, and qualified executive officers.
</FONT>

<P align="left">
<B><FONT size="2">Investor Confidence and the Price of Our
Common Stock May Be Adversely Affected if We Are Unable to
Comply with Section&nbsp;404 of the Sarbanes-Oxley Act of
2002.</FONT></B>

<P align="left">
<FONT size="2">Upon completion of this offering, we will become
an SEC reporting company. As a reporting company, we will be
subject to rules adopted by the SEC pursuant to Section&nbsp;404
of the Sarbanes-Oxley Act of 2002, which require us to include
in our annual report on Form&nbsp;10-K our management&#146;s
report on, and assessment of, the effectiveness of our internal
controls over financial reporting. In addition, our independent
auditors must attest to and report on management&#146;s
assessment of the effectiveness of our internal controls over
financial reporting and the effectiveness of such internal
controls. These requirements will first apply to our annual
report for the fiscal year ending December&nbsp;31, 2005. If we
fail
</FONT>

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<B><FONT size="2"> 16</FONT></B>
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<DIV align="left">
<B><FONT size="2">Risk factors</FONT></B>
</DIV>

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</DIV>

<P align="left">
<FONT size="2">to properly assess and/or achieve and maintain
the adequacy of our internal controls, there is a risk that we
will not comply with all of the requirements imposed by
Section&nbsp;404. Moreover, effective internal controls are
necessary for us to produce reliable financial reports and are
important to help prevent financial fraud. Any of these possible
outcomes could result in an adverse reaction in the financial
marketplace due to a loss of investor confidence in the
reliability of our financial statements, which ultimately could
harm our business and could negatively impact the market price
of our securities.
</FONT>

<P align="left">
<B><FONT size="2">Risks Related to the Offering</FONT></B>

<P align="left">
<B><FONT size="2">There Has Been No Prior Public Market for Our
Common Stock, and an Active Trading Market May Not
Develop.</FONT></B>

<P align="left">
<FONT size="2">Prior to this offering, there has been no public
market for our common stock. An active trading market may not
develop following completion of this offering or, if developed,
may not be sustained. The lack of an active market may impair
your ability to sell your shares at the time you wish to sell
them or at a price that you consider reasonable. The lack of an
active market may also reduce the fair market value of your
shares. An inactive market may also impair our ability to raise
capital by selling shares of capital stock and may impair our
ability to acquire other companies by using our shares as
consideration.
</FONT>

<P align="left">
<B><FONT size="2">Our Stock Price May Be Volatile, and You May
Lose All or Part of Your Investment.</FONT></B>

<P align="left">
<FONT size="2">The initial public offering price for the shares
of our common stock sold in this offering has been determined by
negotiation among the representatives of the underwriters and
us. This price may not reflect the market price of our common
stock following this offering and the price of our common stock
may decline. In addition, the market price of our common stock
could be highly volatile and may fluctuate substantially due to
many factors, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">actual or anticipated fluctuations in our results
    of operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">variance in our financial performance from the
    expectations of market analysts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">announcements by us or our competitors of
    significant business developments, changes in customer
    relationships, acquisitions or expansion plans;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in the prices of products we sell;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our involvement in litigation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our sale of common stock or other securities in
    the future;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">market conditions in our industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in key personnel;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in market valuation or earnings of our
    competitors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the trading volume of our common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in the estimation of the future size and
    growth rate of our markets;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">general economic and market conditions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In addition, the stock markets have experienced
extreme price and volume fluctuations. Broad market and industry
factors may materially harm the market price of our common
stock, regardless of our operating performance. In the past,
following periods of volatility in the market price of a
company&#146;s securities, securities class action litigation
has often been instituted against that company. If we were
involved in any similar litigation we could incur substantial
costs and our management&#146;s attention and resources could be
diverted, which could adversely impact our financial condition,
results of operations and cash flows.
</FONT>

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<DIV align="right">
<B><FONT size="2"> 17</FONT></B>
</DIV>

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<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
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</DIV>

<P align="left">
<B><FONT size="2">Investors in This Offering Will Suffer
Immediate and Substantial Dilution.</FONT></B>

<P align="left">
<FONT size="2">The initial public offering price of our common
stock is substantially higher than the net tangible book value
per share of our common stock. Purchasers of our common stock in
this offering will experience immediate and substantial
dilution, and the exercise of stock options subsequent to this
offering will cause investors to experience further dilution,
which means that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">you will pay a price per share that substantially
    exceeds the per share book value of our assets immediately
    following the offering after subtracting our
    liabilities;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the purchasers in this offering will have
    contributed &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
    of the total amount to fund us but will own
    only &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
    of our outstanding shares.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">If We Fail to Meet the Requirements of The
Nasdaq National Market, Our Stock Could Be Delisted, and the
Market for Our Stock Could Be Less Liquid.</FONT></B>

<P align="left">
<FONT size="2">We are proposing to apply to list our common
stock on The Nasdaq National Market. There are continuing
eligibility requirements of companies listed on The Nasdaq
National Market. If we are not able to continue to satisfy the
eligibility requirements for The Nasdaq National Market, then
our stock may be delisted. Delisting could result in a lower
price of our common stock and may limit the ability of our
stockholders to sell our stock.
</FONT>

<P align="left">
<B><FONT size="2">If Securities or Industry Analysts Do Not
Publish Research or Reports about Our Business, Our Stock Price
and Trading Volume Could Decline.</FONT></B>

<P align="left">
<FONT size="2">The trading market for our common stock will
likely be significantly influenced by the research and reports
that securities or industry analysts publish about us and our
business. We do not have any control over these analysts. If one
or more of the analysts who cover us downgrade our stock, our
stock price would likely decline. In addition, if one or more of
these analysts cease coverage of our company or fail to
regularly publish reports on us, we could lose visibility in the
financial markets, which could cause our stock price or trading
volume to decline.
</FONT>

<P align="left">
<B><FONT size="2">The Market Price of Our Common Stock Could Be
Negatively Affected by Future Sales of Our Common
Stock.</FONT></B>

<P align="left">
<FONT size="2">Sales by us or our stockholders of a substantial
number of shares of our common stock in the public market
following this offering, or the perception that these sales
might occur, could cause the market price of our common stock to
decline or could impair our ability to raise capital through a
future sale of, or pay for acquisitions using, our equity
securities. The shares held by certain of our current officers,
and by our directors and principal stockholder following this
offering will be subject to lock-up agreements and may not be
sold to the public during
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-day period
following the date of this prospectus without the consent of the
underwriters. UBS Investment Bank, as the representative of the
underwriters, may, in its sole discretion and at any time
without notice, release all or any portion of the shares subject
to these lock-up agreements. For more information about these
lock-up agreements, see &#147;Underwriting.&#148; Shares held by
our officers, directors and principal stockholder will be
considered &#147;restricted securities&#148; within the meaning
of Rule&nbsp;144 under the Securities Act and, after the lock-up
period, will be eligible for resale subject to certain
limitations of Rule&nbsp;144.
</FONT>

<P align="left">
<FONT size="2">The holders of an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, or their permitted transferees, are
entitled to rights with respect to the registration of these
shares under the Securities Act of 1933. See &#147;Description
of Capital Stock&#151; Registration Rights.&#148; In addition to
outstanding shares eligible for future
sale, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock are issuable under currently outstanding
stock options granted to several officers, directors and
employees. Following this offering, we intend to file a
registration statement under the Securities Act
registering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
under our stock incentive plan. Shares included in such
</FONT>

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<DIV align="left">
<B><FONT size="2"> 18</FONT></B>
</DIV>
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<DIV align="left">
<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">registration statement will be available for sale
in the public market immediately except for shares held by
affiliates who will have certain restrictions on their ability
to sell. Sales of substantial amounts of common stock in the
public market, or the perception that these sales may occur,
could materially adversely affect the prevailing market price of
our common stock and our ability to raise capital through a
public offering of our equity securities. See &#147;Shares
Eligible for Future Sale.&#148;
</FONT>

<P align="left">
<B><FONT size="2">The Controlling Position of Affiliates of JLL
Partners Will Limit Your Ability to Influence Corporate
Matters.</FONT></B>

<P align="left">
<FONT size="2">Affiliates of JLL Partners control JLL Building
Products, LLC, the selling stockholder, which, prior to this
offering, owns 94.6% of our outstanding common stock and, after
this offering, is expected to
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common
stock. Accordingly, following this offering, such affiliates of
JLL Partners will have significant influence over our management
and affairs and over all matters requiring stockholder approval,
including the election of directors and significant corporate
transactions, such as a merger or other sale of our company or
its assets, for the foreseeable future. This concentrated
control will limit your ability to influence corporate matters
and, as a result, we may take actions that some of our
stockholders do not view as beneficial. As a result, the market
price of our common stock could be adversely affected.
</FONT>

<P align="left">
<B><FONT size="2">Provisions in Our Charter Documents Could
Discourage a Takeover That Stockholders May Consider
Favorable.</FONT></B>

<P align="left">
<FONT size="2">Provisions in our certificate of incorporation
and bylaws, as amended and restated upon the closing of this
offering, may have the effect of delaying or preventing a change
of control or changes in our management. These provisions
include the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our stockholders may not remove a director
    without cause, and our certificate of incorporation provides for
    a classified board of directors with staggered, three-year
    terms. As a result, it could take up to three years for
    stockholders to replace the entire board.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our board of directors has the exclusive right to
    elect directors to fill a vacancy created by the expansion of
    the board of directors or the resignation, death or removal of a
    director, which prevents stockholders from being able to fill
    vacancies on our board of directors.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our stockholders may not act by written consent.
    As a result, holders of our capital stock would be able to take
    actions only at a stockholders&#146; meeting.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">No stockholder may call a special meeting of
    stockholders. This may make it more difficult for stockholders
    to take certain actions.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We do not have cumulative voting in the election
    of directors. This limits the ability of minority stockholders
    to elect director candidates.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Stockholders must provide advance notice to
    nominate individuals for election to the board of directors or
    to propose matters that can be acted upon at a
    stockholders&#146; meeting. These provisions may discourage or
    deter a potential acquirer from conducting a solicitation of
    proxies to elect the acquirer&#146;s own slate of directors or
    otherwise attempting to obtain control of our company.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our board of directors may issue, without
    stockholder approval, shares of undesignated preferred stock.
    The ability to authorize undesignated preferred stock makes it
    possible for our board of directors to issue preferred stock
    with voting or other rights or preferences that could impede the
    success of any attempt to acquire us.
    </FONT></TD>
</TR>

</TABLE>

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</DIV>

<DIV align="right">
<B><FONT size="2"> 19</FONT></B>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Risk factors</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">Our Management Team May Invest or Spend the
Proceeds of This Offering in Ways with Which You May Not Agree
or in Ways That May Not Yield a Return.</FONT></B>

<P align="left">
<FONT size="2">Presently, anticipated uses of the proceeds of
this offering include repaying some of our outstanding debt and
for other general corporate purposes. Other than with respect to
repaying our outstanding debt in the manner described in the
&#147;Use of Proceeds,&#148; we cannot specify with certainty
how we will use the net proceeds of this offering. Accordingly,
our management will have considerable discretion in the
application of the net proceeds, and you will not have the
opportunity to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate
purposes that do not increase our operating results or market
value. Until the net proceeds are used, they may be placed in
investments that do not produce income or that lose value.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 20</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Forward-looking statements
</FONT>

<P align="left">
<FONT size="2">This prospectus includes or incorporates
forward-looking statements regarding, among other things, our
financial condition and business strategy. We have based these
forward-looking statements on our current expectations and
projections about future events. All statements other than
statements of historical facts included in this prospectus,
including, without limitation, statements under the headings
&#147;Prospectus Summary,&#148; &#147;Risk Factors,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations,&#148; and
&#147;Business,&#148; and located elsewhere in this prospectus
regarding the prospects of our industry and our prospects,
plans, financial position, and business strategy may constitute
forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of
forward-looking terminology such as &#147;may,&#148;
&#147;will,&#148; &#147;expect,&#148; &#147;intend,&#148;
&#147;estimate,&#148; &#147;anticipate,&#148; &#147;plan,&#148;
&#147;foresee,&#148; &#147;believe,&#148; or
&#147;continue,&#148; or the negatives of these terms or
variations of them or similar terminology. Although we believe
that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these
expectations will prove to be correct. Important factors that
could cause actual results to differ materially from our
expectations are disclosed in this prospectus, including in
conjunction with the forward-looking statements included in this
prospectus and under &#147;Risk Factors.&#148; All subsequent
written and oral forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified in their
entirety by the cautionary statements included in this document.
These forward-looking statements speak only as of the date of
this prospectus. We will not update these statements except as
may be required by applicable securities laws. Factors, risks,
and uncertainties that could cause actual outcomes and results
to be materially different from those projected include, among
others:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Dependence on the homebuilding industry, the
    economy, and other important factors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Cyclical and seasonal nature of the building
    products supply industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Product shortages, loss of key suppliers, and our
    dependence on third-party suppliers and manufacturers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Loss of significant customers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Competition in the highly fragmented building
    products supply industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pricing pressure from our customers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our level of indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our incurrence of additional indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our inability to take certain actions because of
    restrictions in our debt agreements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our reliance on our subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Dependence on key personnel;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Exposure to product liability and warranty claims;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Variability of our quarterly revenues and
    earnings;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Disruptions in our information technology systems;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Disruptions at our facilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our ability to execute our strategic plans;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Effects of regulatory conditions on our
    operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Exposure to environmental liabilities and
    regulation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Economic and financial uncertainty resulting from
    terrorism and war;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Costs incurred as a result of becoming a public
    company; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our ability to meet the requirements of the
    Sarbanes-Oxley Act of 2002.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 21</FONT></B>
</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Forward-looking statements</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Non-GAAP financial measures
</FONT>

<P align="left">
<FONT size="2">EBITDA, as presented in this prospectus, is a
supplemental measure of our performance that is not required by,
or presented in accordance with, GAAP. It is not a measurement
of our financial performance under GAAP and should not be
considered as an alternative to net income or any other
performance measures derived in accordance with GAAP or as
alternatives to cash flows from operating activities as measures
of our liquidity. We define EBITDA as net income (loss) plus
income taxes, interest, depreciation, amortization, cumulative
effect of change in accounting principle, other expense (net)
and income (loss) from discontinued operations. We believe
EBITDA provides investors with meaningful information with
respect to our operating performance and cash flows and
facilitates comparisons to our historical operating results. We
include it to provide additional information with respect to our
ability to meet our future debt service, capital expenditures
and working capital requirements. In addition, in evaluating
this non-GAAP measure, you should be aware that in the future we
will incur expenses such as those used in calculating EBITDA. In
addition, our presentation of this measure should not be
construed as an inference that our future results will be
unaffected by unusual or nonrecurring items. Our EBITDA measure
has limitations as an analytical tool, and you should not
consider it in isolation, or as a substitute for analysis of our
results as reported under GAAP. Some of these limitations are:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">it does not reflect our cash expenditures, or
    future requirements, for capital expenditures or contractual
    commitments,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">it does not reflect changes in, or cash
    requirements for, our working capital needs,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">it does not reflect the significant interest
    expense, or the cash requirements necessary to service interest
    or principal payments, on our debt,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">it does not reflect any cash income taxes we may
    be required to pay,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">although depreciation and amortization are
    non-cash charges, the assets being depreciated and amortized
    will often have to be replaced in the future, and this measure
    does not reflect any cash requirements for such replacements,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">it is not adjusted for all non-cash income or
    expense items that are reflected in our statements of cash flows,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">it does not reflect the impact of earnings or
    charges resulting from matters we do not consider to be
    indicative of our ongoing operations,&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">other companies in our industry may calculate
    this measure differently than we do, which limits its usefulness
    as a comparative measure.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Because of these limitations, our EBITDA measure
should not be considered a measure of discretionary cash
available to us to invest in the growth of our business or as a
measure of cash that will be available to us to meet our
obligations. You should compensate for these limitations by
relying primarily on our GAAP results and using our EBITDA
measure supplementally. See our consolidated financial
statements and the related notes included elsewhere in this
prospectus.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 22</FONT></B>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Use of proceeds
</FONT>

<P align="left">
<FONT size="2">We estimate that we will receive net proceeds
from this offering of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
if the underwriters exercise their over-allotment option in
full, based on an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, and after deducting estimated underwriting discounts and
commissions and our estimated offering expenses. We will not
receive any proceeds from the sale of shares of common stock by
the selling stockholder.
</FONT>

<P align="left">
<FONT size="2">We intend to use the net proceeds of this
offering:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">to repay approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    of indebtedness;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">to pay the fees and expenses of this
    offering;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">for working capital and general corporate
    purposes.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Pending the uses described above, we intend to
invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
</FONT>

<P align="left">
<FONT size="4">Dividend policy
</FONT>

<P align="left">
<FONT size="2">We have not paid regular dividends in the past;
and any future determination relating to dividend policy will be
made at the discretion of our board of directors and will depend
on a number of factors, including restrictions in our debt
instruments, our future earnings, capital requirements,
financial condition, future prospects, and other factors that
our board of directors may deem relevant. The terms of our new
senior secured credit facility and the indenture governing our
floating rate notes restrict our ability to pay dividends.
</FONT>

<P align="left">
<FONT size="2">Although we have not paid regular dividends in
the past, a dividend was paid to stockholders in the first
quarter of 2005 in an aggregate amount of $201.2&nbsp;million
(or $0.80&nbsp;per share) in connection with the closing of our
new senior secured credit facility and floating rate notes, and
an aggregate of $139.6&nbsp;million (or $0.56 per share) of
dividends was paid in 2004.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 23</FONT></B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Capitalization
</FONT>

<P align="left">
<FONT size="2">The following table sets forth our consolidated
cash and cash equivalents and capitalization as of
September&nbsp;30, 2004, on an actual basis and as adjusted to
give effect to this offering, our new senior secured credit
facility, the issuance of our floating rate notes, and the
application of the net proceeds from this offering, the new
senior secured credit facility, and our floating rate notes as
if they had occurred on September&nbsp;30, 2004. You should read
this table in conjunction with &#147;Use of Proceeds,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations,&#148; &#147;Unaudited Pro
Forma Financial Data&#148; and our consolidated financial
statements and the notes thereto, each included elsewhere in
this prospectus.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September 30, 2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjusted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in millions</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Existing first lien term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">228.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Existing second lien term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Existing other debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">New revolving credit facility(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">New senior secured credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Floating rate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Total debt</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">314.1</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Shareholders&#146; equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Common stock ($0.01 par value, 300,000 shares
    authorized, 251,339 and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued and
    outstanding at Actual and Adjusted September&nbsp;30, 2004,
    respectively)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Total capitalization</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><B><FONT size="2">$</FONT></B></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">511.3</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><B><FONT size="2">$</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">$110.0&nbsp;million of unfunded revolving
    facility commitment; $15.0&nbsp;million pre-funded letter of
    credit facility will not be reflected on the balance sheet until
    drawn upon.</FONT></I></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 24</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Dilution
</FONT>

<P align="left">
<FONT size="2">If you invest in our common stock, your interest
will be diluted to the extent of the difference between the
public offering price per share of our common stock and the pro
forma net tangible book value per share of our common stock
after giving effect to this offering. After giving effect to the
new senior secured credit facility and the floating rate notes,
the net tangible book value of our common stock as of
September&nbsp;30, 2004 would have been approximately
$(147.6)&nbsp;million, or approximately $(0.59)&nbsp;per share.
After giving effect to our sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock in this offering at an assumed initial
public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, and after deducting estimated underwriting discounts and
commissions and our estimated offering expenses, our pro forma
as adjusted net tangible book value as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 would have been approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The difference represents an immediate increase in pro
forma net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to our existing stockholders and an immediate dilution in
pro forma net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors.
</FONT>

<P align="left">
<FONT size="2">The following table illustrates the per share
dilution to the new investors:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Assumed initial public offering price per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net tangible book value per share as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Increase in net tangible book value per share
    attributable to this offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Pro forma net tangible book value per share after
    this offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Dilution per share to new investors in this
    offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">If the underwriters exercise their over-allotment
option in full, the pro forma net tangible book value per share
would increase to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, and the dilution per share to new investors would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">
<FONT size="2">The following table summarizes, on a pro forma
basis as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, the differences between our existing stockholders and
investors in this offering with respect to the total number of
shares of common stock purchased from us, the total
consideration paid to us, and the average price per share paid
by our existing stockholders and the price per share paid by
investors in this offering before deducting estimated
underwriting discounts and commissions and our estimated
offering expenses:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Purchased</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Total Consideration</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average Price</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
</TR>

<TR>
    <TD colspan="21"></TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Existing Stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">New Investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">If the underwriters exercise their over-allotment
option in full, our existing stockholders would
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% and our new investors would
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the total number of
shares of our common stock outstanding after this offering.
</FONT>

<P align="left">
<FONT size="2">The discussion and tables above
exclude &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock issuable upon exercise of outstanding
options with exercise prices ranging from
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share,
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock available for future grant or issuance under
our stock incentive plan. Because the exercise prices of the
outstanding options are significantly below the assumed initial
offering price, investors purchasing common stock in this
offering will suffer additional dilution when and if these
options are exercised.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 25</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Unaudited pro forma financial data
</FONT>

<P align="left">
<FONT size="2">The following unaudited pro forma condensed
consolidated balance sheet as of September&nbsp;30, 2004 is
based on the unaudited historical condensed consolidated balance
sheet as of September&nbsp;30, 2004 of Builders FirstSource,
Inc. and gives effect to this offering, the new senior secured
credit facility, the floating rate notes, and the use of
proceeds therefrom as if they had occurred on September&nbsp;30,
2004.
</FONT>

<P align="left">
<FONT size="2">The unaudited pro forma condensed consolidated
statement of operations for the year ended December&nbsp;31,
2003 has been derived from our audited consolidated financial
statements for the year ended December&nbsp;31, 2003. The
unaudited pro forma condensed consolidated statement of
operations for the nine-month period ended September&nbsp;30,
2004 has been derived from our unaudited condensed consolidated
financial statements for the nine-month period
September&nbsp;30, 2004. The pro forma consolidated statements
of operations give effect to the following events (the
&#147;Transactions&#148;) as if each occurred on January&nbsp;1,
2003, for the year ended December&nbsp;31, 2003 and
January&nbsp;1, 2004 for the nine months ended
September&nbsp;30, 2004.
</FONT>

<P align="left">
<FONT size="2">Debt financing (closed February&nbsp;11, 2005):
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We entered into a new $350.0&nbsp;million senior
    secured credit facility with a syndicate of banks.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We issued $275.0&nbsp;million of the floating
    rate notes.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We paid a dividend of $201.2&nbsp;million to
    stockholders and we paid $35.8&nbsp;million to holders of stock
    options.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We paid the fees and expenses relating to the
    floating rate notes and the new senior secured credit facility.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Offering:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We
    issued &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock in this offering.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We repaid
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    indebtedness with the net proceeds of this offering.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We paid the fees and expenses related to this
    offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The unaudited pro forma financial statements
should be read in conjunction with the accompanying notes, our
historical financial statements and related notes,
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148;, and other financial
information contained in this prospectus. The pro forma
information presented herein does not purport to be indicative
of the financial position or results of operations that would
have actually occurred had the Transactions taken place on the
dates indicated or which may occur in the future. All pro forma
adjustments are based on preliminary estimates and assumptions
and are subject to revision upon completion of the Transactions.
</FONT>

<P align="left">
<FONT size="2">We believe the estimates and assumptions used to
prepare the unaudited pro forma consolidated financial data
provide a reasonable basis for presenting the significant
effects of the Transactions and that the pro forma adjustments
give appropriate effect to the estimates and assumptions and are
properly applied in the unaudited pro forma consolidated
financial data.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 26</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Unaudited pro forma financial data</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">As of September&nbsp;30, 2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">before</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">debt</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
</TR>

<TR>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,799</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(a)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,378</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,378</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">467,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,799</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">444,361</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Property, plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,675</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(b)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,840</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(c)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">734,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,964</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">724,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="23"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Liabilities and shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,565</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(i)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Book overdrafts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current maturities of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,325</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(d)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">210,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,890</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194,222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Long-term debt, less current maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">187,470</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(d)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">497,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">537,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">709,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Commitments and contingencies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Shareholders&#146; equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,513</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,513</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(147,385</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(f)(h)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,129</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Stock purchase loans receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,840</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(c)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,700</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(e)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,894</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(f)(h)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(28,290</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(g)(h)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,565</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(i)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(181,544</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,642</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total liabilities and shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">734,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,964</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">724,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 27</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Unaudited pro forma financial data</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET</FONT></B>

<P align="left">
<FONT size="2">Debt Financing (closed February&nbsp;11, 2005):
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(a)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Total available cash and cash equivalents balance
    was used as a source of funds for the payments discussed in
    notes&nbsp;(f) and (g) below.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(b)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Represents $20.7&nbsp;million of capitalized
    financing costs related to the new senior secured credit
    facility and the issuance of the floating rate notes. The final
    syndicate of banks has not been determined and, therefore, the
    estimated amount of financing costs that will be deferred is
    subject to change depending on final allocation and
    participation of applicable banks.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(c)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Represents the reduction in deferred financing
    costs and shareholders&#146; equity for the write-off of costs
    incurred related to the Company&#146;s prior credit facility
    which is being refinanced. As discussed in note&nbsp;(b) above,
    this amount is subject to change depending on the final make-up
    of the lending bank syndicate. At September&nbsp;30, 2004, the
    Company had a balance of $10.0&nbsp;million of unamortized
    deferred financing costs, of which $2.2&nbsp;million related to
    the revolving line of credit under the prior credit facility.
    The costs related to the revolving line of credit were not
    written off in the pro forma condensed consolidated balance
    sheet since the revolving line of credit under the new credit
    facility will increase the Company&#146;s borrowing capacity.
    The remaining unamortized balance of deferred financing costs
    related to the prior revolving line of credit will be combined
    with costs incurred to secure the new revolving credit and
    amortized over the life of the new revolving credit agreement.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(d)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Represents the $275.0&nbsp;million of floating
    rate notes plus the $225.0&nbsp;million borrowed under the
    Company&#146;s new senior secured credit facility, net of the
    repayment of the Company&#146;s prior credit facility of
    $313.9&nbsp;million. The new credit facility requires
    consecutive quarterly payments equal to 1.0% of the original
    principal amount of the loan. Therefore, $2.3&nbsp;million is
    included in current maturities of long-term debt in the
    accompanying pro forma condensed consolidated balance sheet as
    of September&nbsp;30, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(e)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Represents a $1.7&nbsp;million termination
    payment to be paid related to the prepayment of the
    Tranche&nbsp;B term loan under the prior credit facility which
    was expensed.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(f)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Represents the dividend of $158.3&nbsp;million
    paid to stockholders as part of the debt financing, assuming
    such payment was made on September&nbsp;30, 2004. Retained
    earnings was fully reduced by $10.9&nbsp;million and additional
    paid-in capital was reduced by $147.4&nbsp;million for the
    remainder of the dividend as discussed in note&nbsp;(h) below.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(g)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Represents the payment made to option holders of
    $28.3&nbsp;million as part of the debt financing, assuming such
    payment was made on September&nbsp;30, 2004, in-lieu of
    adjusting the option exercise price.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(h)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The dividend paid to stockholders and the payment
    made to stock option holders were dependent upon the
    Company&#146;s level of debt and cash and cash equivalents at
    the date of the closing (February&nbsp;11, 2005) of the debt
    financing. The following is a reconciliation of the dividends
    paid to stockholders and the payment made to stock option
    holders on February&nbsp;11, 2005 to the amount of those
    payments assuming the payments occurred on September&nbsp;30,
    2004.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February&nbsp;11,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro-rata</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2005</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Reduction</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Dividend to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">201.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Payment to option holders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">(i)
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Represents the tax effect of the pro-forma
    adjustments (c), (e) and (g) at a 38.5% tax rate.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 28</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Unaudited pro forma financial data</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">For the Nine Month Period Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">before</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">debt</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
</TR>

<TR>
    <TD colspan="22"></TD>
</TR>

<TR>
    <TD colspan="22" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in thousands, except per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,552,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,552,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,201,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,201,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Gross margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,193</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(a)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations before income
    taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,211</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,193</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,018</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,539</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(b)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,654</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,531</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations per
    share&nbsp;&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations per
    share&nbsp;&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted average shares outstanding&nbsp;&#151;
    basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted average shares outstanding&nbsp;&#151;
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 29</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Unaudited pro forma financial data</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">For the Year Ended December&nbsp;31, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">before</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">debt</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Historical</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro forma</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><FONT size="1">(In thousands, except per share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,675,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,675,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Gross margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">373,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">373,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">326,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">326,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other expense, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,707</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(a)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations before income
    taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,707</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,846</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)(b)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,861</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,122</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations per
    share&nbsp;&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations per
    share&nbsp;&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted average shares outstanding&nbsp;&#151;
    basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,040</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted average shares outstanding&nbsp;&#151;
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 30</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Unaudited pro forma financial data</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(a)</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents the adjustment to historical interest
    expense on debt to be issued or incurred in connection with the
    debt financing, as presented in the following table.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Historical interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense resulting from the floating rate
    notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense resulting from borrowings under
    the new senior secured credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,821</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense resulting from borrowings under
    the old credit facilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,816</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,683</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total cash interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,965</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,567</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Amortization of additional deferred financing
    costs related to the floating rate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Amortization of deferred financing costs
    associated with the new senior secured credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,659</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Amortization of deferred financing costs
    associated with the old credit facilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,498</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,954</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total pro forma interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">As of September&nbsp;30, 2004, the pro forma
    balance on the new senior secured credit facility was
    $225.0&nbsp;million and the pro forma balance on the floating
    rate notes was $275.0&nbsp;million. The assumed interest rate on
    the new senior secured credit facility was 5.27% (LIBOR plus
    2.50%) and the interest rate on the floating rate notes was
    7.02% (LIBOR plus 4.25%). The new senior secured credit facility
    also includes a letter of credit fee of 2.75% on outstanding
    borrowings and a 0.50% commitment fee on the revolving line of
    credit. For each 1/8% change in the assumed interest rate of the
    new credit facility and notes, interest expense would increase
    by approximately $0.6&nbsp;million and $0.5&nbsp;million for the
    year ended December&nbsp;31, 2003 and the nine-month period
    ended September&nbsp;30, 2004, respectively.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">The average outstanding balance of the old senior
    secured credit facility during the nine month period ended
    September&nbsp;30, 2004 was approximately $315&nbsp;million at
    an average interest rate of 6.17%. The old credit facility also
    included a letter of credit fee of 2.75% on outstanding
    borrowings and a 0.50% commitment fee on the revolving line of
    credit. The nine month period ended September&nbsp;30, 2004 also
    included interest from the 2003 credit facility which was
    refinanced in February 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">The average outstanding balance of the credit
    facility in existence in 2003 for the year ended
    December&nbsp;31, 2003 was approximately $135&nbsp;million at an
    average interest rate of 5.10%. This credit facility also
    included a letter of credit fee ranging from 2.50% to 2.75% on
    outstanding borrowings and a commitment fee on the revolving
    line of credit ranging from 0.325% to 0.375%.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(b)</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents the income tax effect of the pro forma
    adjustments assuming a tax rate of 38.5% and 38.3% for the nine
    month period ended September&nbsp;30, 2004 and the year ended
    December&nbsp;31, 2003, respectively.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 31</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Selected historical consolidated financial
information
</FONT>

<P align="left">
<FONT size="2">The following table sets forth our selected
historical consolidated financial information for each of the
periods or as of the date indicated. The selected statement of
operations and balance sheet data as of December&nbsp;31, 2003
and 2002 and for each of the three fiscal years ended
December&nbsp;31, 2003 has been derived from our consolidated
financial statements, included elsewhere herein which have been
audited by PricewaterhouseCoopers, LLP, our independent
Registered Public Accounting Firm. The selected statement of
operations and balance sheet data as of December&nbsp;31, 2001,
2000 and 1999 and for the fiscal years ended December&nbsp;31,
2000 and 1999 has been derived from our audited consolidated
financial statements not included herein. The selected financial
information for the nine months ended September&nbsp;30, 2003
and as of and for the nine months ended September&nbsp;30, 2004
has been derived from our unaudited consolidated financial
statements included elsewhere herein and reflects all
adjustments that, in the opinion of our management, are
necessary for a fair presentation of such information.
</FONT>

<P align="left">
<FONT size="2">All information included in the following tables
should be read in conjunction with &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations,&#148; the consolidated financial statements and
related notes and other financial information, included
elsewhere in this prospectus.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="30%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine months ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Year ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
</TR>

<TR>
    <TD colspan="31"></TD>
</TR>

<TR>
    <TD colspan="31" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(in thousands, except per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="1">Statement of operations data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,552,453</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,213,460</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,675,093</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,500,006</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,513,545</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,513,086</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,202,846</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,201,004</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">940,953</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,301,728</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,155,369</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,150,233</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,141,658</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">935,468</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Gross margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">351,449</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">272,507</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">373,365</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">344,637</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">363,312</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">371,428</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">267,378</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">275,551</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">240,893</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">326,419</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">307,317</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">323,741</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">308,574</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">209,667</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,051</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,171</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">750</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,288</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">75,898</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">30,563</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">45,775</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">36,570</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">31,283</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">62,854</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">57,711</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Other (income) expense, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">901</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">620</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,220</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,067</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,567</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(74</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">18,687</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,935</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,124</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,055</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,581</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">30,891</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,757</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Income from continuing operations before income
    taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">57,211</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,727</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">34,031</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,295</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,635</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">28,396</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,028</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,026</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,330</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13,048</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,955</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,609</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,805</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">15,051</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,185</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13,397</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,983</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13,340</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,026</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,591</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">19,977</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Income (loss) from discontinued operations, net
    of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">103</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,641</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(3,822</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,980</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">292</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">555</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Cumulative effect of change in accounting
    principle, net of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(19,504</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,288</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,756</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,161</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,906</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,883</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,532</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Income from continuing operations<BR>
    per share&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.14</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.05</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.08</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.05</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.02</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.08</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.15</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Income from continuing operations<BR>
    per share&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.13</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.05</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.08</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.05</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.02</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.08</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.15</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Weighted average shares outstanding&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">251,321</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">252,215</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">252,040</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">253,629</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">255,320</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">222,676</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">138,472</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Weighted average shares outstanding&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">264,738</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">252,701</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">252,519</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">254,108</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">256,816</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">224,322</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">139,238</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 32</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine months ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Year ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
</TR>

<TR>
    <TD colspan="30"></TD>
</TR>

<TR>
    <TD colspan="30" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(in thousands, except per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="1">Balance sheet data (end of period):</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,799</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,585</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,248</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,309</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,346</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,202</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">734,909</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">626,161</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">535,185</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">567,729</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">637,911</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">601,963</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Total debt, including current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">314,055</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">168,533</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">129,706</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">154,010</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">223,829</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">298,923</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">197,186</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">301,631</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">285,902</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">295,743</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">296,260</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">194,928</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="1">Cash flow data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Net cash provided by (used in) operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">61,329</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(27,007</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(40,162</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">48,530</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">78,039</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">102,932</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,385</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(14,823</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,307</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(13,040</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(10,311</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,158</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(127,126</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(208,661</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Net cash provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(29,292</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">34,375</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">56,539</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(39,280</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(74,918</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,338</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">200,716</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="1">Other financial data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Depreciation and amortization (excluding
    discontinued operations)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13,998</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">14,942</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">19,579</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,002</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">24,543</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">20,880</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13,811</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">EBITDA(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">89,896</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">45,505</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">65,354</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">56,572</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">55,826</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">83,734</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">71,522</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Capital expenditures (excluding acquisitions)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,394</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,019</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">15,592</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">15,061</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,491</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">23,123</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">17,120</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">EBITDA, a non-GAAP measure used by management
    to measure operating performance, is defined as net income
    (loss) plus income taxes, interest, depreciation, amortization,
    cumulative effect of changes in accounting principle, other
    (income) expense (net) and income (loss) from discontinued
    operations. We reference this non-GAAP financial measure as a
    management group frequently in our decision-making because it
    provides meaningful information regarding our operating
    performance and cash flows and facilitates comparisons to our
    historical operating results.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">&nbsp;&nbsp;&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">EBITDA is not a recognized term under GAAP and
    does not purport to be an alternative to net income as an
    indicator of operating performance or to cash flows from
    operating activities as a measure of liquidity. Because not all
    companies use identical calculations, the presentation of EBITDA
    may not be comparable to other similarly titled measures of
    other companies. Additionally, EBITDA is not intended to be a
    measure of free cash flow for management&#146;s discretionary
    use because it does not reflect certain cash requirements such
    as interest payments, income tax payments, and debt service
    requirements.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">&nbsp;&nbsp;&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Below is a table reconciling EBITDA to net
    income (loss):</FONT></I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine months ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">For the year ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
</TR>

<TR>
    <TD colspan="29"></TD>
</TR>

<TR>
    <TD colspan="29" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,883</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">Cumulative effect of change in accounting
    principle, net of tax
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <FONT size="2">(Income) loss from discontinued operations, net
    of tax
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(103</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(292</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(555</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,757</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other (income) expense, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,567</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Depreciation expense (excluding discontinued
    operations)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,875</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,758</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,512</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,407</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Amortization expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">123</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">821</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,404</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">EBITDA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,354</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 33</FONT></B>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">
</FONT>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Management&#146;s discussion and analysis of
financial condition
</FONT>

<DIV align="left">
<FONT size="4">and results of operations
</FONT>
</DIV>

<P align="left">
<I><FONT size="2">The following discussion of our financial
condition and results of operations should be read in
conjunction with all of the consolidated historical financial
statements and the notes thereto included elsewhere in this
prospectus. This discussion contains forward-looking statements.
Please see &#147;Risk Factors&#148; and &#147;Forward-Looking
Statements&#148; for a discussion of certain of the
uncertainties, risks and assumptions associated with these
statements.</FONT></I>

<P align="left">
<B><FONT size="2">OVERVIEW</FONT></B>

<P align="left">
<FONT size="2">We are a leading supplier and a fast-growing
manufacturer of structural and related building products for
residential new construction in the U.S. Our manufactured
products include our factory-built roof and floor trusses, wall
panels and stairs, as well as engineered wood that we design and
cut for each home. We also manufacture custom millwork and trim
that we market under the Synboard&#174; brand name, as well as
aluminum and vinyl windows, and we assemble interior and
exterior doors into pre-hung units. In addition, we supply our
customers with a broad offering of professional grade building
products not manufactured by us, such as dimensional lumber and
lumber sheet goods, various window, door and millwork lines, as
well as cabinets, roofing, and gypsum wallboard. Our full range
of construction-related services includes professional
installation, turn-key framing and shell construction, and spans
all our product categories.
</FONT>

<P align="left">
<FONT size="2">We manage our business as a single operating
segment. We group our building products and services into five
principal product categories: Prefabricated Components,
Windows&nbsp;&#38; Doors, Lumber&nbsp;&#38; Lumber Sheet Goods,
Millwork, and Other Building Products&nbsp;&#38; Services.
Prefabricated Components consist of factory-built floor and roof
trusses, wall panels, stairs, as well as engineered wood that we
design and cut for each home. The Windows&nbsp;&#38; Doors
category is comprised of the manufacturing, assembly and
distribution of windows, and the assembly and distribution of
interior and exterior door units. Lumber&nbsp;&#38; Lumber Sheet
Goods include dimensional lumber, plywood and oriented strand
board (&#147;OSB&#148;) products used in on-site house framing.
Millwork includes interior and exterior trim, columns, and posts
that we distribute, as well as custom exterior features that we
manufacture under the Synboard&#174; brand name. The Other
Building Products&nbsp;&#38; Services category is comprised of
products including cabinets, gypsum, roofing, and insulation,
and services including turn-key framing and shell construction,
design assistance, and the professional installation of
products, which spans all of our product categories.
</FONT>

<P align="left">
<B><FONT size="2">Factors influencing future results of
operations</FONT></B>

<P align="left">
<FONT size="2">Our future results of operations will be impacted
by the following factors, some of which are beyond our control.
</FONT>

<P align="left">
<B><I><FONT size="2">Homebuilding
Industry.</FONT></I></B><FONT size="2"> Our business is driven
primarily by the residential new construction market. According
to the National Association of Homebuilders, U.S.&nbsp;housing
starts were 1.85&nbsp;million in 2003 and are projected to be
1.95&nbsp;million in 2004 and 1.88&nbsp;million in 2005. While
these levels are above the historical average of
1.62&nbsp;million over the past ten years, several industry
sources expect that strong housing demand will continue to be
driven over the next decade by new household formations,
increasing homeownership rates, the size and age of the
population, an aging housing stock (approximately 36% of
existing homes were built before 1960), improved financing
options for buyers, and immigration trends. In recent years, the
homebuilding industry has undergone significant consolidation,
with the larger homebuilders substantially increasing their
market share. In accordance with this trend, our customer base
has increasingly shifted to Production Homebuilders, the fastest
growing segment of residential homebuilders.
</FONT>

<DIV align="left">
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</DIV>

<DIV align="left">
<B><FONT size="2"> 34</FONT></B>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">The growing use of Prefabricated Components in
the homebuilding process represents a major trend within the
residential new construction building products supply market.
Builders value the many benefits of using these products,
including reduced cycle time and carrying costs, increased
product quality, and cost savings from the reduction of
expensive on-site labor and material waste. In response to this
trend, we have continued to increase our manufacturing capacity
and our ability to provide customers with Prefabricated
Components such as roof and floor trusses, wall panels, stairs
and engineered wood, as well as windows, pre-hung doors and our
branded Synboard&#174; millwork products.
</FONT>

<P align="left">
<B><I><FONT size="2">Economic
Conditions.</FONT></I></B><FONT size="2"> Our financial
performance will be impacted by economic changes nationally and
locally in the markets we serve. The building products supply
industry is dependent on new home construction and subject to
cyclical market pressures. Our operations are subject to
fluctuations arising from changes in supply and demand, national
and international economic conditions, labor costs, competition,
government regulation, trade policies, and other factors that
affect the homebuilding industry such as demographic trends,
interest rates, single-family housing starts, employment levels,
consumer confidence, and the availability of credit to
homebuilders, contractors and homeowners.
</FONT>

<P align="left">
<B><I><FONT size="2">Cost of
Materials.</FONT></I></B><FONT size="2"> Prices of wood
products, which are subject to cyclical market pressures,
adversely impact operating income when prices rapidly rise or
fall within a relatively short period of time. We purchase
certain materials, including lumber products which are then sold
to customers as well as used as direct production inputs for our
manufactured products. Short term changes in the cost of these
materials, some of which are subject to significant
fluctuations, are sometimes passed on to our customers, but our
pricing quotation periods may limit our ability to pass on such
price changes. Our inability to pass on material price increases
to our customers could adversely impact operating income.
</FONT>

<P align="left">
<B><I><FONT size="2">Recapitalization.</FONT></I></B><FONT size="2">
In connection with our new senior secured credit facility, our
floating rate notes, and the use of proceeds therefrom, we will
recognize certain expenses in the first quarter of 2005. The
payment to our option holders will be recorded as compensation
expense reducing pre-tax income by approximately
$35.8&nbsp;million. We expect to pay approximately
$22.4&nbsp;million in fees in connection with the issuance of
the floating rate notes and our new senior secured credit
facility. The amount of fees that will be capitalized or
expensed, as well as the amount of previously deferred loan
costs that will be expensed, is dependent upon the ultimate
participation of banks in our new senior secured credit
facility, in relation to their participation in our 2004 credit
facility. To date, the banks&#146; level of participation has
not been determined. As a result of these payments, we expect to
report a net loss for the first quarter of 2005.
</FONT>

<P align="left">
<B><I><FONT size="2">Selling, General and Administrative
Expense.</FONT></I></B><FONT size="2"> On January&nbsp;18, 2005,
we announced that we are planning to prepare for an underwritten
initial public offering of our common stock, which we expect to
complete in the second quarter of 2005. Following consummation
of our proposed initial public offering, we would incur certain
incremental costs and expenses as a result of being a public
company, including costs associated with our reporting
requirements.
</FONT>

<P align="left">
<B><FONT size="2">CRITICAL ACCOUNTING POLICIES AND
ESTIMATES</FONT></B>

<P align="left">
<FONT size="2">Critical accounting policies are those that both
are important to the accurate portrayal of a company&#146;s
financial condition and results, and require subjective or
complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently
uncertain.
</FONT>

<P align="left">
<FONT size="2">In order to prepare financial statements that
conform to accounting principles generally accepted in the
United States, commonly referred to as GAAP, we make estimates
and assumptions that affect the amounts reported in our
financial statements and accompanying notes. Certain estimates
are particularly sensitive due to their significance to the
financial statements and the possibility that future events may
be significantly different from our expectations.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 35</FONT></B>
</DIV>
<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">We have identified the following accounting
policies that require us to make the most subjective or complex
judgments in order to fairly present our consolidated financial
position and results of operations.
</FONT>

<P align="left">
<B><I><FONT size="2">Sales.</FONT></I></B><FONT size="2"> We
recognize sales when the following criteria are met: persuasive
evidence of an arrangement exists, delivery has occurred or
services have been rendered, our price to the buyer is fixed and
determinable, and collectibility is reasonably assured. We
generally recognize sales upon delivery to the customer&#146;s
delivery site. We use the completed contract method to recognize
sales for certain construction and installation contracts. All
sales recognized are net of allowances for cash discounts and
estimated returns, which are estimated using historical
experience.
</FONT>

<P align="left">
<B><I><FONT size="2">Vendor
Rebates.</FONT></I></B><FONT size="2"> Many of our arrangements
with our vendors provide for us to receive a rebate of a
specified amount payable to us when we achieve any of a number
of measures, generally related to the volume of purchases from
our vendors. We account for these rebates as a reduction of the
prices of the vendor&#146;s products, which reduces inventory
until we sell the product, at which time these rebates reduce
cost of sales. Throughout the year, we estimate the amount of
rebates based upon our historical level of purchases. We
continually revise these estimates to reflect actual purchase
levels.
</FONT>

<P align="left">
<FONT size="2">If market conditions were to change, vendors may
change the terms of some or all of these programs. Although
these changes would not affect the amounts which we have
recorded related to product already purchased, it may impact our
gross margins on products we sell or sales earned in future
periods.
</FONT>

<P align="left">
<B><I><FONT size="2">Allowance for Doubtful Accounts and Related
Reserves.</FONT></I></B><FONT size="2"> We maintain an allowance
for doubtful accounts for estimated losses due to the failure of
our customers to make required payments. We perform periodic
credit evaluations of our customers and typically do not require
collateral. Consistent with industry practices, we generally
require payment from most customers within 30&nbsp;days. As our
business is seasonal in certain regions, our customers&#146;
businesses are also seasonal. Sales are lowest in the winter
months, and our past due accounts receivable balance as a
percentage of total receivables generally increases during this
time. Throughout the year, we record estimated reserves based
upon our historical write-offs of uncollectible accounts, taking
into consideration certain factors, such as aging statistics and
trends, customer payment history, independent credit reports,
and discussions with customers.
</FONT>

<P align="left">
<FONT size="2">Periodically, we perform a specific analysis of
all accounts past due and write off account balances when we
have exhausted reasonable collection efforts and determined that
the likelihood of collection is remote. We charge these
write-offs against our allowance for doubtful accounts.
</FONT>

<P align="left">
<B><I><FONT size="2">Impairment of Long-Lived
Assets.</FONT></I></B><FONT size="2"> Long-lived assets,
including property and equipment, are reviewed for possible
impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. Our judgment
regarding the existence of impairment indicators is based on
market and operational performance. Determining whether an
impairment has occurred typically requires various estimates and
assumptions, including determining which cash flows are directly
related to the potentially impaired asset, the useful life over
which cash flows will occur, their amount, and the asset&#146;s
residual value, if any. In turn, measurement of an impairment
loss requires a determination of fair value, which is based on
the best information available. We use internal cash flow
estimates, quoted market prices when available and independent
appraisals as appropriate to determine fair value. We derive the
required cash flow estimates from our historical experience and
our internal business plans and apply an appropriate discount
rate. If these projected cash flows are less than the carrying
amount, an impairment loss is recognized based on the fair value
of the asset less any costs of disposition.
</FONT>

<P align="left">
<B><I><FONT size="2">Goodwill.</FONT></I></B><FONT size="2">
Goodwill represents the excess of the amount we paid to acquire
businesses over the estimated fair value of tangible assets and
identifiable intangible assets acquired, less liabilities
assumed. At September&nbsp;30, 2004, our net goodwill balance
was approximately $163.1&nbsp;million, representing
approximately 22.2% of our total assets.
</FONT>

<DIV align="left">
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</DIV>

<DIV align="left">
<B><FONT size="2"> 36</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">In fiscal 2002, we adopted the provisions of
SFAS&nbsp;142, <I>Goodwill and Other Intangible Assets.</I>
Under these rules, we test goodwill for impairment in the fourth
quarter of each fiscal year or at any other time when impairment
indicators exist. Examples of such indicators that would cause
us to test goodwill for impairment between annual tests include
a significant change in the business climate, unexpected
competition, significant deterioration in market share or a loss
of key personnel. We determine fair value using a discounted
cash flow approach to value our reporting units.
</FONT>

<P align="left">
<FONT size="2">If circumstances change or events occur to
indicate that our fair market value on a reporting unit basis
has fallen below its net book value, we will compare the
estimated implied value of the goodwill to its book value. If
the book value of goodwill exceeds the estimated implied value
of goodwill, we will recognize the difference as an impairment
loss in operating income.
</FONT>

<P align="left">
<B><I><FONT size="2">Inventories.</FONT></I></B><FONT size="2">
Inventories consist principally of materials purchased for
resale, including lumber, sheet goods, windows, doors and
millwork, and raw materials for certain manufactured products
and are stated at the lower of cost or market. Cost is
determined using the weighted average method, the use of which
approximates the first-in, first-out method. We accrue for
shrink based on the actual historical shrink results of our most
recent physical inventories adjusted, if necessary, for current
economic conditions. These estimates are compared with actual
results as physical inventory counts are taken and reconciled to
the general ledger.
</FONT>

<P align="left">
<FONT size="2">During the year, we monitor our inventory levels
by location and record provisions for excess inventories based
on slower moving inventory. We define potential excess inventory
as the amount of inventory on hand in excess of the historical
usage, excluding special order items purchased in the last three
months. We then apply our judgment as to forecasted demand and
other factors, including liquidation value, to determine the
required adjustments to net realizable value. Our inventories
are generally not susceptible to technological obsolescence.
</FONT>

<P align="left">
<B><I><FONT size="2">Deferred Income
Taxes.</FONT></I></B><FONT size="2"> We assess whether it is
more likely than not that some or all of our deferred tax assets
will not be realized. We consider the reversal of existing
deferred tax liabilities, future taxable income, and tax
planning strategies in our assessment. We have certain state
income tax carryforwards where we believe it is unlikely that we
will realize the benefits associated with these tax
carryforwards and have established a valuation allowance against
our deferred tax assets. Changes in our estimates of future
taxable income and tax planning strategies will affect our
estimate of the realization of the tax benefits of these tax
carryforwards.
</FONT>

<P align="left">
<B><I><FONT size="2">Insurance Deductible
Reserve.</FONT></I></B><FONT size="2"> We have large deductibles
for general liability, auto liability and workers&#146;
compensation insurance. The expected liability for unpaid claims
falling within our deductible, including incurred but not
reported losses, is determined using the assistance of a
third-party actuary. This amount is reflected on our balance
sheet as an accrued liability. Our accounting policy includes an
internal evaluation and adjustment of our reserve for all
insurance-related liabilities on a quarterly basis. At least on
an annual basis, we engage an external actuarial professional to
independently assess and estimate the total liability
outstanding, which is compared to the actual reserve balance at
that time and adjusted accordingly.
</FONT>

<P align="left">
<B><FONT size="2">RESULTS OF OPERATIONS</FONT></B>

<P align="left">
<FONT size="2">The following discussion and analysis provides
information that management believes is relevant to an
assessment and understanding of our consolidated results of
operations for the years ended December&nbsp;31, 2003, 2002 and
2001 and the nine-month periods ended September&nbsp;30, 2004
and 2003 and our financial condition as of December&nbsp;31,
2003 and 2002 and September&nbsp;30, 2004.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 37</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">The following table sets forth, for the years
ended December&nbsp;31, 2003, 2002 and 2001 and the nine-month
periods ended September&nbsp;30, 2004 and 2003 the percentage
relationship to sales of certain costs, expenses and income
items:
</FONT>

<CENTER>
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<TR>
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    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="22"></TD>
</TR>

<TR>
    <TD colspan="22" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cost and operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Gross margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other expense, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">(Income) Loss from discontinued operations, net
    of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle, net of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Nine months ended September&nbsp;30, 2004
compared with the nine months ended September&nbsp;30,
2003</FONT></B>

<P align="left">
<B><I><FONT size="2">Sales. </FONT></I></B><FONT size="2">Sales
for the nine-month period ended September&nbsp;30, 2004 were
$1,552.5&nbsp;million, a $339.0&nbsp;million, or 27.9%, increase
over sales of $1,213.5&nbsp;million in the same period of 2003.
Sales benefited from strong homebuilding activity in all our
geographic markets. Our sales management initiatives, including
incentive and training programs, have allowed the Company to
grow sales in all product categories at a faster rate than
reported growth in residential housing starts during the same
period. In addition, the growth rate of Prefabricated Components
reflects the success of our strategy of diversifying into more
value-added product sales.
</FONT>

<P align="left">
<FONT size="2">The following table shows sales classified by
major product category (in millions):
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Nine-Months Ended September 30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Growth</FONT></B></TD>
</TR>

<TR>
    <TD colspan="21"></TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Prefabricated Components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">223.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Windows&nbsp;&#38; Doors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">291.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">260.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Lumber&nbsp;&#38; Lumber Sheet Goods
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">624.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">414.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Millwork
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other Building Products&nbsp;&#38; Services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">218.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Total</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><B><FONT size="2">$</FONT></B></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">1,552.5</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">100.0</FONT></B></TD>
    <TD align="left" valign="bottom" nowrap><B><FONT size="2">%</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><B><FONT size="2">$</FONT></B></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">1,213.5</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">100.0</FONT></B></TD>
    <TD align="left" valign="bottom" nowrap><B><FONT size="2">%</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 38</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">Sales of Prefabricated Components increased
$63.5&nbsp;million or 28.4%, from $223.8&nbsp;million for the
nine-month period ended September&nbsp;30, 2003 to
$287.3&nbsp;million for the nine-month period ended
September&nbsp;30, 2004. This was largely attributable to the
increase in truss and panel sales of $46.2&nbsp;million
resulting from usage of Prefabricated Components by Production
Homebuilders.
</FONT>

<P align="left">
<FONT size="2">Sales of Windows&nbsp;&#38; Doors increased
$31.3&nbsp;million, or 12.0%, from $260.3&nbsp;million for the
nine-month period ended September&nbsp;30, 2003 to
$291.6&nbsp;million for the nine-month period ended
September&nbsp;30, 2004. This was attributable to increased
sales of assembled and distributed window products.
</FONT>

<P align="left">
<FONT size="2">Sales of Lumber&nbsp;&#38; Lumber Sheet Goods
increased $210.1&nbsp;million, or 50.7%, from
$414.4&nbsp;million for the nine-month period ended
September&nbsp;30, 2003 to $624.5&nbsp;million for the
nine-month period ended September&nbsp;30, 2004. This increase
was largely attributable to price increases of approximately
$189.0&nbsp;million and unit volume increases of
$21.1&nbsp;million. Sales were favorably impacted by
significantly higher prices for Lumber&nbsp;&#38; Lumber Sheet
Goods due to increases in demand coupled with limited capacity
additions by manufacturers over the last several years.
</FONT>

<P align="left">
<FONT size="2">Sales of Millwork products increased
$13.4&nbsp;million, or 11.4%, from $117.3&nbsp;million for the
nine-month period ended September&nbsp;30, 2003 to
$130.7&nbsp;million for the nine-month period ended
September&nbsp;30, 2004. This increase was largely attributable
to our new sales management programs.
</FONT>

<P align="left">
<FONT size="2">Sales of Other Building Products&nbsp;&#38;
Services increased $20.7&nbsp;million, or 10.5%, from
$197.7&nbsp;million for the nine-month period ended
September&nbsp;30, 2003 to $218.4&nbsp;million for the
nine-month period ended September&nbsp;30, 2004. This increase
was largely attributable to increases in installation services,
and higher sales volume of gypsum, insulation and hardware
products.
</FONT>

<P align="left">
<B><I><FONT size="2">Gross Margin.</FONT></I></B><FONT size="2">
Gross margin increased $78.9&nbsp;million, or 29.0%, from
$272.5&nbsp;million for the nine-month period ended
September&nbsp;30, 2003 to $351.4&nbsp;million for the
nine-month period ended September&nbsp;30, 2004. The gross
margin percentage increased from 22.5% for the nine-month period
ended September&nbsp;30, 2003 to 22.6% for the nine-month period
ended September&nbsp;30, 2004. Contributing to this increase was
an $18.6&nbsp;million, or 32.0%, increase in gross margins in
Prefabricated Components. This increase was primarily a result
of labor efficiencies and increased sales volume which resulted
in the more efficient absorption of fixed costs, partially
offset by increased raw materials costs. In addition, the
overall gross margin increase was attributed to a
$41.3&nbsp;million, or 59.8%, increase in Lumber&nbsp;&#38;
Lumber Sheet Goods gross margins, and a corresponding increase
in Lumber&nbsp;&#38; Lumber Sheet Goods gross margin percentage
from 16.7% for the nine-month period ended September&nbsp;30,
2003 to 17.7% for the nine-month period ended September&nbsp;30,
2004. This gross margin increase was a result of higher sales
levels while purchasing programs implemented in 2004 were the
predominant reason for the improvement in gross margin
percentage.
</FONT>

<P align="left">
<B><I><FONT size="2">Selling, General and Administrative
Expenses.</FONT></I></B><FONT size="2"> Selling, general and
administrative expenses increased by $34.7&nbsp;million, or
14.4%, from $240.9&nbsp;million for the nine-months ended
September 2003 to $275.6&nbsp;million for the nine-months ended
September 2004. The increase was attributable to a
$23.9&nbsp;million increase in salaries and benefits expense,
largely as a result of higher commission and bonus expense
related primarily to increased sales and profitability, a
$1.5&nbsp;million increase in fuel costs and a $2.2&nbsp;million
increase in shipping costs. As a percentage of sales, selling,
general and administrative expenses decreased from 19.9% for the
nine months ended September 2003 to 17.7% for the nine months
ended September 2004. This decrease was due to labor
efficiencies and leveraging fixed operating costs.
</FONT>

<P align="left">
<B><I><FONT size="2">Interest
Expense.</FONT></I></B><FONT size="2"> Interest expense
increased by $10.8&nbsp;million from $7.9&nbsp;million for the
nine-month period ended September&nbsp;30, 2003 to
$18.7&nbsp;million for the nine-month period ended
September&nbsp;30, 2004. The increase was the result of higher
average debt levels as well as higher average interest rates
during the nine-month period ended September&nbsp;30, 2004
following the recapitalization completed in February 2004.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 39</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">Interest expense in 2003 and 2004 included
$1.6&nbsp;million and $1.3&nbsp;million of debt issue cost
amortization, respectively, and 2004 included the write-off of
$2.2&nbsp;million of previously deferred loan costs.
</FONT>

<P align="left">
<B><I><FONT size="2">Provision for Income
Taxes.</FONT></I></B><FONT size="2"> The effective combined
federal and state tax rate was 38.5% and 38.3% for the
nine-month period ended September&nbsp;30, 2004 and the same
period of 2003, respectively.
</FONT>

<P align="left">
<B><I><FONT size="2">Income (Loss) from Discontinued Operations,
Net of Tax.</FONT></I></B><FONT size="2"> During the nine months
ended September&nbsp;30, 2003, the Company recognized an expense
of $1.6&nbsp;million in order to adjust asset balances to their
estimated net realizable value and an impairment charge of $1.2
million to write-off the carrying value of goodwill pertaining
to these operations as a result of the exit plan in
September&nbsp;2003. The Company completed the exit plan prior
to December&nbsp;31, 2003.
</FONT>

<P align="left">
<B><FONT size="2">2003 compared with 2002</FONT></B>

<P align="left">
<B><I><FONT size="2">Sales. </FONT></I></B><FONT size="2">Sales
for the year ended 2003 were $1,675.1&nbsp;million, a
$175.1&nbsp;million, or 11.7%, increase over sales of
$1,500.0&nbsp;million for the year ended 2002. Overall, sales
benefited from improved economic conditions and low interest
rates.
</FONT>

<P align="left">
<FONT size="2">The following table shows sales by major product
category (millions):
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of Sales</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% Growth</FONT></B></TD>
</TR>

<TR>
    <TD colspan="21"></TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Prefabricated Components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">303.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Windows&nbsp;&#38; Doors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">354.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">325.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Lumber&nbsp;&#38; Lumber Sheet Goods
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">593.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">515.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Millwork
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other Building Products&nbsp;&#38; Services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">Total</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><B><FONT size="2">$</FONT></B></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">1,675.1</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">100.0</FONT></B></TD>
    <TD align="left" valign="bottom" nowrap><B><FONT size="2">%</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><B><FONT size="2">$</FONT></B></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">1,500.0</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">100.0</FONT></B></TD>
    <TD align="left" valign="bottom" nowrap><B><FONT size="2">%</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">11.7</FONT></B></TD>
    <TD align="left" valign="bottom" nowrap><B><FONT size="2">%</FONT></B></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Sales of Prefabricated Components increased
$46.1&nbsp;million, or 17.9%, from $257.3&nbsp;million for the
year ended 2002 to $303.4&nbsp;million for the year ended 2003.
In particular, truss and panel sales grew $33.7&nbsp;million as
we continued our strategy of opening new plants and modernizing
and expanding our existing plants.
</FONT>

<P align="left">
<FONT size="2">Sales of Windows&nbsp;&#38; Doors increased
$29.4&nbsp;million, or 9.0%, from $325.2&nbsp;million for the
year ended 2002 to $354.6&nbsp;million for the year ended 2003.
Sales of manufactured aluminum and vinyl windows increased
$16.0&nbsp;million as we continued to expand this product
offering.
</FONT>

<P align="left">
<FONT size="2">Sales of Lumber&nbsp;&#38; Lumber Sheet Goods
increased $78.3&nbsp;million, or 15.2%, from $515.4&nbsp;million
for the year ended 2002 to $593.7&nbsp;million for the year
ended 2003. Higher prices contributed approximately
$57.0&nbsp;million of the increase while increased unit volumes
amounted to approximately $21.3&nbsp;million. Sales prices were
favorably impacted, particularly in the second half of 2003, by
higher market prices for panel and lumber products due to
increases in demand coupled with minimal increases in capacity
by the major manufacturers.
</FONT>

<P align="left">
<FONT size="2">Sales of Millwork products increased
$7.6&nbsp;million, or 5.0%, from $151.1&nbsp;million for the
year ended 2002 compared to $158.7&nbsp;million for the year
ended 2003.
</FONT>

<P align="left">
<FONT size="2">Sales of Other Building Products&nbsp;&#38;
Services increased $13.7&nbsp;million, or 5.5%, from
$251.0&nbsp;million for the year ended 2002 to
$264.7&nbsp;million for the year ended 2003. This increase was
largely attributable to the continued growth of installation
services ($8.4&nbsp;million increase in sales of services).
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 40</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><I><FONT size="2">Gross Margin.</FONT></I></B><FONT size="2">
Gross margin increased $28.7&nbsp;million, or 8.3%, from
$344.6&nbsp;million for the year ended 2002 to
$373.4&nbsp;million for the year ended 2003. Gross margin on
Prefabricated Components increased $13.6&nbsp;million, and
expressed, as a percentage of sales, increased 0.7% as a result
of value-added engineering and raw material substitution
reducing the raw material costs of the finished product. The
overall gross margin percentage for 2003 decreased to 22.3%
compared to 23.0% in 2002. Gross margin on Lumber&nbsp;&#38;
Lumber Sheet Goods increased $2.3&nbsp;million but, expressed as
a percentage of sales, fell 2.0% from 18.6% in 2002 to 16.6% in
2003. This decrease was primarily due to the rapid increase in
procurement costs in 2003, and our limited ability to pass along
these increases due to existing customer commitments.
</FONT>

<P align="left">
<B><I><FONT size="2">Selling, General and Administrative
Expenses.</FONT></I></B><FONT size="2"> Selling, general and
administrative expenses increased $19.1&nbsp;million, or 6.2%,
from $307.3&nbsp;million in 2002 to $326.4&nbsp;million in 2003.
Salaries and benefits expense increased $14.1&nbsp;million in
2003 due to higher commissions and increased variable costs
associated with the strong sales performance. In addition, fuel
costs and third party delivery charges increased
$2.9&nbsp;million in 2003 due to the increase in number of
deliveries. Selling, general and administrative expenses
expressed as a percentage of sales decreased from 20.5% in 2002
to 19.5% in 2003. The largest improvement was in the salaries
and benefits percentage, which decreased 0.6% due to improved
labor efficiencies and the leveraging of fixed management and
supervisory payroll costs.
</FONT>

<P align="left">
<B><I><FONT size="2">Interest Expense.
</FONT></I></B><FONT size="2">Interest expense totaled
$11.1&nbsp;million for 2003 compared to $12.1&nbsp;million for
2002. The decrease was due to lower average debt levels in 2003.
Interest expense in 2003 and 2002 included $2.0&nbsp;million and
$2.1&nbsp;million of debt issue cost amortization, respectively.
</FONT>

<P align="left">
<B><I><FONT size="2">Provision for Income
Taxes.</FONT></I></B><FONT size="2"> The effective tax rate was
38.3% for 2003 compared to 40.2% for 2002. Our overall effective
tax was in excess of the federal statutory rate due to state
income taxes. The effective state tax rate fell due to change in
mix of income generated in states in which we are subject to
taxation.
</FONT>

<P align="left">
<B><I><FONT size="2">Loss from Discontinued Operations, Net of
Tax.</FONT></I></B><FONT size="2"> Loss from discontinued
operations, net of tax increased $0.8&nbsp;million, or 28.3%, to
$3.8&nbsp;million in 2003 from $3.0&nbsp;million in 2002. The
increase was due to the Company announcing its intent to exit
its operations in Colorado in September 2003 based upon several
factors including unfavorable market conditions and a poor
competitive position which prevented the Company from generating
profitable results. The cessation of operations in this market
was treated as a discontinued operation as it had
distinguishable cash flow and operations that have been
eliminated from the ongoing Company and we have no further cash
flows or operations in this market. The Company completed the
exit plan prior to December&nbsp;31, 2003. As a result of the
exit plan, in 2003 the Company recorded an expense of
$1.9&nbsp;million in order to adjust asset balances to their
estimated net realizable value, an expense of $0.2&nbsp;million
related to facility exit costs, and an impairment charge of
$1.2&nbsp;million to write-off the carrying value of goodwill
pertaining to these operations. During 2002, the Company also
closed a facility related to the Colorado operations and
recorded an expense of approximately $1.2&nbsp;million for the
closure of this facility primarily related to future minimum
lease payments due on the vacated facility.
</FONT>

<P align="left">
<B><I><FONT size="2">Cumulative Effect of Change in Accounting
Principle, Net of Tax.</FONT></I></B><FONT size="2"> As of
January&nbsp;1, 2002, we adopted SFAS&nbsp;142 which eliminates
the amortization of goodwill and intangible assets with
indefinite lives and requires instead that those assets be
tested for impairment annually. The application of the
transition provisions of this new accounting standard required
us to reduce our goodwill balance by $19.5&nbsp;million, net of
tax during 2002.
</FONT>

<P align="left">
<B><FONT size="2">2002 compared with 2001</FONT></B>

<P align="left">
<B><I><FONT size="2">Sales. </FONT></I></B><FONT size="2">Sales
for the year ended 2002 were $1,500.0&nbsp;million, a
$13.5&nbsp;million, or 0.9% decrease from sales of
$1,513.5&nbsp;million for the year ended 2001. The decrease in
sales was primarily due to lower market prices associated with
Lumber&nbsp;&#38; Lumber Sheet Goods, which reached their lowest
levels in recent history,
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 41</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">as well as the construction of smaller, lower
value homes, which typically do not provide expanded sales
opportunities due to the reduced cost of the materials. In
addition, the closure of underperforming locations reduced sales
by $47.7&nbsp;million.
</FONT>

<P align="left">
<B><I><FONT size="2">Gross Margin.</FONT></I></B><FONT size="2">
Gross margin decreased $18.7&nbsp;million, or 5.1%, from
$363.3&nbsp;million for the year ended 2001 to
$344.6&nbsp;million for the year ended 2002. The gross margin
percentage for 2002 decreased to 23.0% compared to 24.0% in
2001. The shift to smaller housing packages and lower value
products in 2002 was the reason for the decline in margin
percentages.
</FONT>

<P align="left">
<B><I><FONT size="2">Selling, General and Administrative
Expenses.</FONT></I></B><FONT size="2"> Selling, general and
administrative expenses decreased $16.4&nbsp;million, or 5.1%,
to $307.3&nbsp;million in 2002 from $323.7&nbsp;million in 2001.
Salaries and benefits expense fell $6.3&nbsp;million, the result
of lower sales commissions, bonuses and reductions in the
workforce due to the sales decline.
</FONT>

<P align="left">
<B><I><FONT size="2">Facility Closure
Costs.</FONT></I></B><FONT size="2"> Facility closure costs
decreased approximately $7.5&nbsp;million from $8.3&nbsp;million
in 2001 to $0.8&nbsp;million in 2002. The decrease was primarily
attributable to the closing and consolidation of various
underperforming locations in 2001 in our efforts to achieve
certain economies of scale.
</FONT>

<P align="left">
<B><I><FONT size="2">Interest Expense.
</FONT></I></B><FONT size="2">Interest expense totaled
$12.1&nbsp;million for 2002 compared to $20.6&nbsp;million for
2001. The decrease was due to lower average debt levels in 2002.
Interest expense in both 2002 and 2001 included
$2.1&nbsp;million of debt issue cost amortization.
</FONT>

<P align="left">
<B><I><FONT size="2">Provision for Income
Taxes.</FONT></I></B><FONT size="2"> The effective tax rate was
40.2% for 2002 and 39.3% for 2001. Our overall effective tax was
in excess of the federal statutory rate due to state income
taxes, which increased during 2002 due to state legislative
changes. The increase in the effective tax rate was attributed
to benefits recognized related to certain state tax planning
strategies implemented during 2001 partially off-set by the
impact of the amortization of non-deductible goodwill.
</FONT>

<P align="left">
<B><I><FONT size="2">Loss from Discontinued Operations, Net of
Tax.</FONT></I></B><FONT size="2"> Loss from discontinued
operations, net of tax increased to $3.0&nbsp;million in 2002,
or 40.6%, from $2.1&nbsp;million in 2001. The $0.9&nbsp;million
increase was primarily attributed to the Company closing a
facility related to the Colorado operations in 2002 and
recording an expense of approximately $1.2&nbsp;million for the
closure of this facility primarily related to future minimum
lease payments due on the vacated facility.
</FONT>

<P align="left">
<B><FONT size="2">LIQUIDITY AND CAPITAL RESOURCES</FONT></B>

<P align="left">
<FONT size="2">Our primary capital requirements are to fund
working capital needs, meet required debt payments, including
debt service payments on the floating rate notes and our new
senior secured credit facility, to fund capital expenditures and
acquisitions, and to pay dividends, if any, on our common stock.
Capital resources have primarily consisted of cash flows from
operations and borrowings under our credit facility.
</FONT>

<P align="left">
<B><FONT size="2">Consolidated cash flows</FONT></B>

<P align="left">
<B><I><FONT size="2">Operating
activities.</FONT></I></B><FONT size="2"> Cash flows provided by
operating activities increased to $61.3&nbsp;million for the
nine-month period ended September&nbsp;30, 2004 from net cash
used of $27.0&nbsp;million for the nine-month period ended
September&nbsp;30, 2003. The increase of $88.3&nbsp;million in
cash flows provided by operating activities was primarily driven
by the overall increase in net income, net decrease in accounts
receivable and retained interest in transferred accounts
receivable of $47.1&nbsp;million and increases in accounts
payable and accrued liabilities of $26.9&nbsp;million. These
increases were offset in part by a $11.2&nbsp;million increase
in inventory. The remaining sources were from changes in other
working capital. The increase in accounts receivable and
retained interest in transferred accounts receivable was
primarily due to our accounts receivable securitization
agreement expiring in August 2003. The increase in accrued
liabilities was due to increased compensation, including
bonuses, and sales and income tax accruals which were a direct
result of our increased performance for the nine-month period
ended September&nbsp;30, 2004 as compared to the
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 42</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">prior year. The increase in inventory levels was
a direct result of the Company building inventory levels to
support higher sales.
</FONT>

<P align="left">
<FONT size="2">Net cash used in operating activities increased
to $40.2&nbsp;million for 2003 from cash flows provided by
operating activities of $48.5&nbsp;million in 2002. The increase
in cash used by operating activities of $88.7&nbsp;million was
primarily driven by net increases in accounts receivable and
retained interest in transferred accounts receivable of
$62.8&nbsp;million, increases in cash used for inventory of
$31.5&nbsp;million, and net decreases in accounts payable and
accrued liabilities of $6.2&nbsp;million. These increases in
cash used were offset in part by an increase in net income
before depreciation and amortization, cumulative effect of
change in accounting principle, and non-cash gain (loss) from
discontinued operations of $8.3&nbsp;million. The remaining
sources were from changes in other working capital. The increase
in accounts receivable and retained interest in transferred
accounts receivable was primarily due to our accounts receivable
securitization agreement expiring in August 2003. The net
decrease in accounts payable and accrued liabilities was
primarily due to the timing of payments off-set in part by
increased compensation and sales tax accruals which were a
direct result of the Company&#146;s increased performance from
prior year. The increase in inventory levels was a direct result
of the Company building inventory levels to support higher sales
in addition to the Company taking advantage of declining lumber
prices near the end of the year in 2003.
</FONT>

<P align="left">
<FONT size="2">In 2002, cash provided from operating activities
decreased to $48.5&nbsp;million from $78.0&nbsp;million in 2001.
The decrease of $29.5&nbsp;million was primarily driven by net
increases in accounts receivable and retained interest in
transferred accounts receivable of $44.1&nbsp;million, partially
off-set by increases in cash received from inventory of
$5.1&nbsp;million and net increases in accounts payable and
accrued liabilities of $15.1&nbsp;million. The remaining sources
were from changes in other working capital. The increase in
accounts receivable and retained interest in transferred
accounts receivable was primarily due to a decrease in proceeds
from new securitizations. The net increase in accounts payable
and accrued liabilities was primarily due to the timing of
payments.
</FONT>

<P align="left">
<B><I><FONT size="2">Investing
activities.</FONT></I></B><FONT size="2"> During the first
nine&nbsp;months of fiscal 2004 and fiscal 2003, cash flows used
for investing activities totaled $14.8&nbsp;million and
$5.3&nbsp;million, respectively. Capital expenditures increased
approximately $5.4&nbsp;million to $16.4&nbsp;million for the
nine&nbsp;month period ended September&nbsp;30, 2004 from
$11.0&nbsp;million for the nine month period ended
September&nbsp;30, 2003 primarily due to the purchase of
machinery and equipment at our existing facilities. Proceeds
from the sale of property, plant, and equipment decreased
$4.6&nbsp;million from $6.2&nbsp;million for the first nine
months of 2003 to $1.6&nbsp;million for the first nine months of
2004 primarily due to our undertaking a significant effort to
update our delivery and warehouse fleet in 2003.
</FONT>

<P align="left">
<FONT size="2">During 2003, cash used in investing activities
increased approximately $2.7&nbsp;million from
$10.3&nbsp;million in 2002 to $13.0&nbsp;million in 2003. This
increase was primarily attributable to our using
$4.6&nbsp;million to acquire three companies in 2003 as compared
to only $1.7&nbsp;million in 2002 relating to acquisitions. This
increase was mainly due to management initiating a concerted
effort to control capital expenditures in 2002.
</FONT>

<P align="left">
<FONT size="2">During 2002, cash used in investing activities
increased from $2.2&nbsp;million in 2001 to $10.3&nbsp;million
in 2002. The $8.2&nbsp;million increase was primarily attributed
to the Company receiving approximately $18.2&nbsp;million from a
sale in 2001 of certain distribution and manufacturing
properties. We also decreased capital expenditures in 2002 from
$22.5&nbsp;million in 2001 to $15.1&nbsp;million in 2002 mainly
due to our concerted effort to control capital expenditures in
2002.
</FONT>

<P align="left">
<B><I><FONT size="2">Financing
activities.</FONT></I></B><FONT size="2"> Net cash provided by
financing activities was $34.4&nbsp;million for the first nine
months of 2003 as compared to $29.3&nbsp;million used in the
first nine months of 2004. The increase in cash used in
financing activities was primarily due to our entering into a
credit agreement in February of 2004 from which we received
approximately $315.0&nbsp;million of proceeds, of which
approximately
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 43</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">$139.6&nbsp;million was used to pay a dividend
and $168.3&nbsp;million was used to retire the existing debt
facility. We also made $1.2&nbsp;million of scheduled principal
payments during the first nine months of 2004 on our 2004 credit
facility. We had net borrowings of $61.9&nbsp;million on our
revolving line of credit and made approximately
$22.3&nbsp;million of principal payments through the first nine
months of 2003. Book overdrafts decreased $24.1&nbsp;million
during the first nine months of 2004 as compared to a decrease
of $3.8&nbsp;million in the first nine months of 2003.
</FONT>

<P align="left">
<FONT size="2">Net cash provided by financing activities was
$56.5&nbsp;million in 2003 as compared to $39.3&nbsp;million
used in financing activities in 2002. The increase in cash
provided by financing activities was primarily due to our
incurring net borrowings of long-term debt of $38.8&nbsp;million
in 2003 as compared to us repaying $24.3&nbsp;million of
long-term debt in 2002. The increased borrowings in 2003 were
attributable to our accounts receivable securitization agreement
expiring in 2003, which was a significant source of cash. Book
overdrafts increased $20.5&nbsp;million during 2003 as compared
to a decrease of $13.3&nbsp;million in 2002.
</FONT>

<P align="left">
<FONT size="2">Net cash used in financing activities was
$39.3&nbsp;million in 2002 as compared to $74.9&nbsp;million
used in financing activities in 2001. We reduced long-term debt
by $69.8&nbsp;million in 2001 which was significantly higher
than the $24.3&nbsp;million of long-term debt repaid in 2002. In
2001, we received a significant amount of proceeds from our
accounts receivable securitization agreement and applied a
majority of the proceeds towards repaying our long-term debt.
Book overdrafts decreased $13.3&nbsp;million during 2002 as
compared to a decrease of $2.7&nbsp;million in 2001.
</FONT>

<P align="left">
<B><I><FONT size="2">Pre-Transaction Capital Resources.
</FONT></I></B><FONT size="2">On February&nbsp;25, 2004, we
entered into a $405.0&nbsp;million senior secured credit
agreement (the &#147;2004 Credit Agreement&#148;) with a
syndicate of banks. The 2004 Credit Agreement was initially
comprised of a $90.0&nbsp;million long-term revolver due
February&nbsp;25, 2009; a $230.0&nbsp;million Tranche&nbsp;A
term loan due in quarterly installments beginning June&nbsp;30,
2004 and ending February&nbsp;25, 2010; and an
$85.0&nbsp;million Tranche&nbsp;B term loan due on
August&nbsp;25, 2010. During 2004, we permanently repaid
approximately $1.2&nbsp;million under the term loan which
permanently reduced the borrowing capacity under the 2004 Credit
Agreement.
</FONT>

<P align="left">
<FONT size="2">Interest rates under the credit agreement for the
revolving loans and the Tranche&nbsp;A term loan are based on
the prime rate in the United States or LIBOR (plus a margin, or
&#147;LIBOR spread,&#148; based on leverage ratios, which is
currently LIBOR plus 2.75% and prime rate plus 1.75% for
revolving loans and LIBOR plus 3.25% and prime rate plus 2.25%
for the Tranche&nbsp;A term loan), at our option at the time of
borrowing. Interest rates under the credit agreement for the
Tranche&nbsp;B term loan are based on the prime rate in the
United States or LIBOR (plus a fixed margin, or &#147;LIBOR
spread,&#148; which is LIBOR plus 8.50% and prime rate plus
7.50%), at our option at the time of borrowing provided that the
base interest rate shall in no event be less than 2.0%. The
weighted-average interest rate at September&nbsp;30, 2004 for
borrowings under the 2004 Credit Agreement, was 6.2%. A variable
commitment fee based on the total leverage ratio is charged on
the unused amount of the revolver (0.50% at September&nbsp;30,
2004). At September&nbsp;30, 2004 the available borrowing
capacity of the revolver totaled $73.8&nbsp;million after being
reduced by outstanding letters of credit of approximately
$16.2&nbsp;million.
</FONT>

<P align="left">
<FONT size="2">The 2004 Credit Agreement is collateralized by
substantially all tangible and intangible property and interest
in property and proceeds thereof owned by us and our
wholly-owned subsidiaries. The 2004 Credit Agreement also
contains certain restrictive covenants, which, among other
things, relate to the payment of dividends, incurrence of
indebtedness, repurchase of common stock or other distributions,
and asset sales and also require compliance with certain
financial covenants with respect to a maximum total leverage
ratio and a minimum interest coverage ratio. We could be
required to make mandatory prepayments of amounts outstanding
under the 2004 Credit Agreement based on the results of an
excess cash flow calculation that must be performed annually
under the terms of the Agreement. At September&nbsp;30, 2004, we
were in compliance with all covenants under the 2004 Credit
Agreement.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 44</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><I><FONT size="2">Post-Transaction Capital
Resources.</FONT></I></B><FONT size="2"> On February&nbsp;11,
2005, we entered into a $350.0&nbsp;million senior secured
credit agreement (the &#147;New Credit Agreement&#148;) with a
syndicate of banks. The New Credit Agreement is comprised of a
$225.0&nbsp;million six-and-a-half year term loan; a
$110.0&nbsp;million five-year revolver; and a pre-funded letter
of credit facility to be available at any time and from time to
time during the six and a half year term in the aggregate face
amount at any time outstanding not to exceed $15.0&nbsp;million.
</FONT>

<P align="left">
<FONT size="2">Interest rates under the New Credit Agreement for
the term loan, the revolving loans and the letter of credit
facility are based on the corporate base rate of UBS&nbsp;AG,
Stamford Branch, or LIBOR, in each case plus a margin, at our
option at the time of borrowing. In addition, the interest rate
applicable to the revolving loans under the New Credit Agreement
is subject to a pricing grid based on our leverage ratio.
</FONT>

<P align="left">
<FONT size="2">The New Credit Agreement is collateralized by
(i)&nbsp;a pledge of the common stock of all of our subsidiaries
and (ii)&nbsp;a security interest in substantially all tangible
and intangible property and proceeds thereof now owned or
hereafter acquired by us and substantially all our subsidiaries.
The New Credit Agreement also contains certain restrictive
covenants that, among other things, relate to the payment of
dividends, incurrence of indebtedness, repurchase of common
stock or other distributions, and asset sales and also require
compliance with certain financial covenants with respect to a
maximum total leverage ratio and a minimum interest coverage
ratio. We can be required to make mandatory prepayments of
amounts outstanding under the New Credit Agreement based on
certain asset sales and casualty events, issuances of debt and
the results of an excess cash flow calculation that must be
performed annually under the terms of the New Credit Agreement.
</FONT>

<P align="left">
<FONT size="2">On February&nbsp;11, 2005, we issued
$275.0&nbsp;million in aggregate principal amount of second
priority senior secured floating rate notes due 2012. Interest
accrues on the notes at a rate of LIBOR plus 4.25%. The LIBOR
rate is reset at the beginning of each quarter. The floating
rate notes are collateralized by (i)&nbsp;a pledge of the common
stock of all of our subsidiaries and (ii)&nbsp;a security
interest in substantially all tangible and intangible property
and proceeds thereof now owned or hereafter acquired by us and
substantially all our subsidiaries. The indenture governing the
floating rate notes contains covenants that limit our ability
and the ability of our restricted subsidiaries to, among other
things: incur additional indebtedness; pay dividends or make
other distributions on our capital stock or repurchase, repay or
redeem our capital stock; make certain investments; incur liens;
enter into certain types of transactions with affiliates; create
restrictions on the payment of dividends or other amounts to us
by our restricted subsidiaries; and sell all or substantially
all of our assets or merge with or into other companies.
</FONT>

<P align="left">
<FONT size="2">Long-term debt consists of the following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="right" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Revolving credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Tranche&nbsp;A term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">228,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Tranche&nbsp;B term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168,533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Less current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Based on our ability to generate cash flows from
operations, our borrowing capacity under the revolver under the
New Credit Agreement and our access to capital markets, we
believe we will have sufficient capital to meet our anticipated
short-term and long-term needs, including our capital
expenditures,
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 45</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">acquisition strategies and our debt obligations
for the foreseeable future. Upon completion of this offering, we
expect to have total long-term debt of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">
<B><I><FONT size="2">Capital
Expenditures.</FONT></I></B><FONT size="2"> Capital expenditures
vary depending on prevailing business factors, including current
and anticipated market conditions. With the exception of 2003,
capital expenditures in recent years have remained at relatively
low levels in comparison to the operating cash flows generated
during corresponding periods. We believe that this trend will
continue given our existing facilities and acquisition plans,
and our product portfolio and anticipated market conditions
going forward. During the nine months ended September&nbsp;30,
2004 and the same period in 2003, our capital expenditures
amounted to $16.4&nbsp;million and $11.0&nbsp;million,
respectively. For the years ended December&nbsp;31, 2003, 2002
and 2001, capital expenditures totaled $15.6&nbsp;million,
$15.1&nbsp;million and $22.5&nbsp;million, respectively. Market
conditions in 2002 into early 2003 led to reduced capital
expenditures during those periods. However, we increased capital
expenditures in late 2003 and early 2004 given the improvement
in business conditions. Consistent with previous spending
patterns, future capital expenditures will focus primarily on
expanding our value-added product offerings such as
Prefabricated Components.
</FONT>

<P align="left">
<FONT size="2">We anticipate that cash flows from operations and
liquidity from the New Credit Agreement will be sufficient to
execute the Company&#146;s business plans and acquisition
strategies.
</FONT>

<P align="left">
<B><FONT size="2">DISCLOSURES OF CONTRACTUAL OBLIGATIONS AND
COMMERCIAL COMMITMENTS</FONT></B>

<P align="left">
<FONT size="2">The following summarizes the contractual
obligations of the Company as of September&nbsp;30, 2004
exclusive of the new senior secured credit facility and floating
rate notes (in thousands):
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Payments Due by Period</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Less</FONT></B></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">than</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1&nbsp;&#150; 3</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">4</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">5</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After 5</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Contractual Obligations</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1&nbsp;Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Years</FONT></B></TD>
</TR>

<TR>
    <TD colspan="25"></TD>
</TR>

<TR>
    <TD colspan="25" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Long-Term Debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">193,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Operating Leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">176,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59,774</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest on Long Term Debt(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,501</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total Contractual Cash Obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">607,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59,380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Interest based on LIBOR rate of 2.01% at
    September&nbsp;30, 2004. Actual future interest may vary based
    on LIBOR fluctuations.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Purchase orders entered into in the ordinary
course of business are excluded from the above table. Amounts
for which we are liable under purchase orders are reflected on
our consolidated balance sheet as accounts payable and accrued
liabilities.
</FONT>

<P align="left">
<B><FONT size="2">Other cash obligations not reflected in the
balance sheet</FONT></B>

<P align="left">
<FONT size="2">The amounts reflected in the table above for
operating leases represent future minimum lease payments under
noncancelable operating leases with an initial or remaining term
in excess of one year at September&nbsp;30, 2004.
</FONT>

<P align="left">
<FONT size="2">In accordance with GAAP, our operating leases are
not recorded in our balance sheet. In addition, we have residual
value guarantees on certain equipment leases. Under these leases
the Company has the option of (a)&nbsp;purchasing the equipment
at the end of the lease term at its then fair market value,
(b)&nbsp;arranging for the sale of the equipment to a third
party, or (c)&nbsp;returning the equipment to the lessor to sell
the equipment. If the sales proceeds in either case are less
than the residual value, then we are required to reimburse the
lessor for the deficiency up to a specified level as stated in
each lease agreement. The
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 46</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">guarantees under these leases for the residual
values of equipment at the end of the respective operating lease
periods approximated $10.9&nbsp;million as of September&nbsp;30,
2004.
</FONT>

<P align="left">
<FONT size="2">Based upon the expectation that none of these
leased assets will have a residual value at the end of the lease
term that is materially less than the value specified in the
related operating lease agreement, we do not believe it is
probable that we will be required to fund any amounts under the
terms of these guarantee arrangements. Accordingly, no accruals
have been recognized for these guarantees.
</FONT>

<P align="left">
<B><FONT size="2">DISCLOSURES OF CERTAIN MARKET RISKS</FONT></B>

<P align="left">
<FONT size="2">The Company experiences changes in interest
expense when market interest rates change. Changes in the
Company&#146;s debt could also increase these risks. The Company
has managed its exposure to market interest rate changes through
periodic refinancing of our variable-rate debt with fixed-rate
term debt obligations. Based on debt outstanding at
September&nbsp;30, 2004, a 25&nbsp;basis point increase in
interest rates would result in approximately $796,000 of
additional interest costs annually.
</FONT>

<P align="left">
<FONT size="2">The Company does not utilize any derivative
financial instruments to hedge price movements of our materials.
However, we will begin using interest rate swap contracts to fix
long-term interest rates on a portion of our floating rate debt.
</FONT>

<P align="left">
<FONT size="2">We purchase certain materials, including lumber
products, which are then sold to customers as well as used as
direct production inputs for our manufactured products which we
deliver. Short term changes in the cost of these materials, some
of which are subject to significant fluctuations, are sometimes,
but not always, passed on to our customers. Our inability to
pass on material price increases to our customers can adversely
impact operating income.
</FONT>

<P align="left">
<B><FONT size="2">QUARTERLY RESULTS AND SEASONALITY</FONT></B>

<P align="left">
<FONT size="2">The Company&#146;s first and fourth quarters
historically have been, and are expected to continue to be,
adversely affected by weather patterns in some of the
Company&#146;s markets, causing reduced construction activity.
In addition, quarterly results historically have reflected, and
are expected to continue to reflect, fluctuations from period to
period arising from, among other things, (i)&nbsp;the volatility
of prices of lumber and wood products, (ii)&nbsp;the cyclical
nature of the homebuilding industry, (iii)&nbsp;general economic
conditions in the various local markets in which we compete,
(iv)&nbsp;the pricing policies of our competitors, (v)&nbsp;the
production schedules of our customers, and (vi)&nbsp;the effects
of the weather.
</FONT>

<P align="left">
<FONT size="2">The composition and level of working capital
typically changes during periods of increasing sales as the
Company carries more inventory and receivables. Working capital
levels typically increase in the second and third quarters of
the year due to higher sales during the peak residential
construction season. These increases historically have resulted
in negative operating cash flows during this peak season, which
generally have been financed through our revolving credit
facility. Collection of receivables and reduction in inventory
levels following the peak of the building and construction
season have more than offset this negative cash flow in recent
years. We believe our new revolving credit facility and our
ability to generate positive cash-flows from operating
activities will continue to be sufficient to cover seasonal
working capital needs.
</FONT>

<P align="left">
<B><FONT size="2">NEW ACCOUNTING STANDARDS</FONT></B>

<P align="left">
<FONT size="2">In December 2004, the FASB issued
SFAS&nbsp;No.&nbsp;123 (Revised 2004) &#147;Share Based
Payment&#148; (&#147;SFAS&nbsp;123R&#148;), which is a revision
of SFAS&nbsp;123 and supersedes APB&nbsp;25 and SFAS&nbsp;148.
This statement requires that the cost resulting from all
share-based payment transactions be recognized in the financial
statements. This statement establishes fair value as the
measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair value
based measurement method in
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 47</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management&#146;s discussion and analysis of
financial condition and results of operations</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">accounting for share-based payment transactions
with employees except for equity instruments held by employee
share ownership plans.
</FONT>

<P align="left">
<FONT size="2">SFAS&nbsp;123R applies to all awards granted
after the required effective date (the beginning of the first
interim or annual reporting period that begins after
June&nbsp;15, 2005) and to awards modified, repurchased, or
cancelled after that date. As of the required effective date,
all public entities that used the fair value based method for
either recognition or disclosure under Statement&nbsp;123 will
apply this Statement using a modified version of prospective
application. Under that transition method, compensation cost is
recognized on or after the required effective date for the
portion of outstanding awards for which the requisite service
has not yet been rendered, based on the grant-date fair value of
those awards calculated under Statement&nbsp;123 for either
recognition or pro forma disclosures. For periods before the
required effective date, those entities may elect to apply a
modified version of the retrospective application under which
financial statements for prior periods are adjusted on a basis
consistent with the pro forma disclosures required for those
periods by Statement&nbsp;123. The Company previously used the
minimum value method under SFAS&nbsp;123 to calculate the fair
value of its options and will apply the prospective transition
method as of the required effective date. The Company will
continue to account for the currently outstanding options under
APB&nbsp;25 and will apply the provisions of SFAS&nbsp;123R
prospectively to new awards and to awards modified, repurchased,
or cancelled after adoption of this statement.
</FONT>

<P align="left">
<FONT size="2">In November 2004, the FASB issued
SFAS&nbsp;No.&nbsp;151, <I>Inventory Costs&#151; an amendment of
ARB No.&nbsp;43, Chapter&nbsp;4
</I>(&#147;SFAS&nbsp;No.&nbsp;151&#148;). SFAS&nbsp;No.&nbsp;151
amends the guidance in ARB No.&nbsp;43, Chapter&nbsp;4,
&#147;Inventory Pricing,&#148; to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). SFAS&nbsp;No.&nbsp;151
requires that those items be recognized as current period
charges. In addition, SFAS&nbsp;No.&nbsp;151 requires that
allocation of fixed production overhead to the costs of
inventory be based on the normal capacity of the production
facilities. This new standard is effective for inventory costs
incurred during fiscal years beginning after June&nbsp;&nbsp;15,
2005. Earlier application is permitted for inventory costs
incurred during fiscal years beginning after November&nbsp;23,
2004. The Company does not anticipate the adoption of this
statement to have a significant impact on its financial position
or results of operations.
</FONT>

<P align="left">
<FONT size="2">In December 2004, the FASB issued Statement
No.&nbsp;153, <I>Exchanges of Nonmonetary Assets</I>, an
amendment of APB Opinion No.&nbsp;29, <I>Accounting for
Nonmonetary Transactions
</I>(&#147;SFAS&nbsp;No.&nbsp;153&#148;). The amendments made by
SFAS&nbsp;No.&nbsp;153 are based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value
of the assets exchanged. Further, the amendments eliminate the
narrow exception for nonmonetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of
nonmonetary assets that do not have commercial substance.
Previously, Opinion 29 required that the accounting for an
exchange of a productive asset for a similar productive asset or
an equivalent interest in the same or similar productive asset
should be based on the recorded amount of the asset
relinquished. By focusing the exception on exchanges that lack
commercial substance, the Board believes SFAS&nbsp;No.&nbsp;153
produces financial reporting that more faithfully represents the
economics of the transactions. This statement is effective for
nonmonetary asset exchanges occurring in fiscal periods
beginning after June&nbsp;15, 2005. The Company does not believe
the adoption of this new statement will have a material impact
on its financial condition or results of operations.
</FONT>

<P align="left">
<FONT size="2">In September 2004, the Emerging Issues Task Force
(&#147;EITF&#148;) reached a consensus on EITF Issue
No.&nbsp;04-8, &#147;The Effect of Contingently Convertible Debt
on Diluted Earnings Per Share,&#148; which requires shares
associated with contingently convertible debt instruments with
market price triggers to be included in the computation of
diluted earnings per share (&#147;EPS&#148;) regardless of
whether the market price trigger has been met. EITF&nbsp;04-8
also requires that prior period diluted EPS amounts presented
for comparative purposes be restated. EITF&nbsp;04-8 is
effective for reporting periods ending after
December&nbsp;&nbsp;15, 2004. The Company does not believe the
adoption of this new statement will have a material impact on
its financial condition or results of operations.
</FONT>

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<P align="left">
<FONT size="4">Industry overview and trends
</FONT>

<P align="left">
<FONT size="2">We compete in the professional segment (&#147;Pro
Segment&#148;) of the U.S.&nbsp;residential new construction
building products supply market, which has estimated 2004 annual
sales of $117&nbsp;billion. Our competitive landscape is highly
fragmented, consisting primarily of small, privately owned
companies, most of which have limited access to capital and
manufacturing capabilities, and lack the ability to provide a
full range of construction services. We serve a broad customer
base ranging from small custom homebuilders to the largest
Production Homebuilders, including publicly traded companies
that have multi-billion dollar market capitalizations such as
Centex, D.R. Horton, Hovnanian Enterprises, Pulte, and Ryland
Group. Our target market is distinctly different from that of
home center retailers, such as Home Depot and Lowe&#146;s, which
primarily serve do-it-yourself and professional remodeling
customers.
</FONT>

<P align="left">
<FONT size="2">We believe the following industry conditions and
trends will benefit our business:
</FONT>

<P align="left">
<B><I><FONT size="2">Large, Fragmented
Market.</FONT></I></B><FONT size="2"> The estimated
$117&nbsp;billion Pro Segment of the U.S.&nbsp;residential new
construction building products supply market is highly
fragmented, with the top ten suppliers accounting for less than
15% of the total market, and only six generating over
$1&nbsp;billion in sales. This segment consists predominantly of
small, privately owned companies, most of which have limited
access to capital and lack sophisticated information technology
systems and large-scale procurement capabilities. The
industry&#146;s fragmentation is due to the overall size of the
market, the diversity of the target customer base, and
variations in local building preferences and practices. While we
and our largest competitors have significantly grown market
share over the past several years, including through
acquisitions, the market remains extremely fragmented relative
to most other industries. We believe that the highly fragmented
nature of the Pro Segment presents substantial acquisition
opportunities as well as the opportunity to increase market
share in existing markets.
</FONT>

<P align="left">
<B><I><FONT size="2">Strong Housing
Fundamentals.</FONT></I></B><FONT size="2"> Our business is
driven primarily by the new residential construction market.
According to the National Association of Homebuilders,
U.S.&nbsp;housing starts were 1.85&nbsp;million in 2003 and are
projected to be 1.95&nbsp;million in 2004 and 1.88&nbsp;million
in 2005. While these levels are above the historical average of
1.62&nbsp;million over the past ten years, several industry
sources expect that strong housing demand will continue to be
driven over the next decade by new household formations,
increased housing affordability, rising homeownership rates, the
size and age of the population, an aging housing stock, improved
financing options for buyers, and immigration trends. The
Homeownership Alliance, for example, predicts that these demand
drivers will lead to 1.85&nbsp;million to 2.17&nbsp;million new
U.S.&nbsp;housing starts per year through 2014. The
Homeownership Alliance further predicts that U.S.&nbsp;home
ownership rates, which are strongly correlated with new housing
construction, will reach 70% by 2013, an increase from 64% in
1985 and 68% in 2003.
</FONT>

<P align="left">
<B><FONT size="2">Home Ownership</FONT></B>

<P align="left">
<IMG src="y05301y0494602.gif" alt="BAR GRAPH">

<DIV align="left">
<I><FONT size="2">SOURCE:&nbsp;&nbsp;&nbsp;&nbsp;U.S.&nbsp;Census,
Homeownership Alliance</FONT></I>
</DIV>

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<B><FONT size="2">Industry overview and trends</FONT></B>
</DIV>

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<P align="left">
<FONT size="2">The strong levels of housing starts are being
driven in large part by an increase in household formations.
According to Fitch Ratings, the average ratio of new incremental
household formations to total housing starts from 1960-1999 was
86.6%. This ratio dipped to 80.5% in the 1990s, representing the
creation of some slack between demand and supply, but has
rebounded to 88.5% for the time period from 2000-2003, trending
above the historical average and signaling a tightening of the
supply/demand balance. Favorable demographic factors are
expected to continue to drive increased household formations.
Baby boomers have created demand that could not be accommodated
by the existing housing base. While this demand was primarily
for starter homes and apartments in the past, we expect it will
increasingly be directed toward single-family homes aimed at
move-up buyers, as well as second homes. Further, the &#147;echo
boom&#148;, comprised of the children of baby boomers, has just
begun to impact the housing market.
</FONT>

<P align="left">
<FONT size="2">The U.S.&nbsp;housing market is also expected to
benefit from immigration trends. According to the Joint Center
for Housing Studies at Harvard University, foreign immigration
should account for almost one third of the total
U.S.&nbsp;population growth through 2010. The immigrant
population is expected to be concentrated between the ages of 20
and 50, and therefore represents a more immediate stimulus to
new household formation activity than population growth due to
new births. Further, Census results show that the homeownership
rate for immigrants is highly dependent on the length of time
since their arrival in the U.S.&nbsp;This figure rises from 25%
for those who have resided in the U.S.&nbsp;for less than
10&nbsp;years to 74% for those who have been in the
U.S.&nbsp;more than 30&nbsp;years. With the immigration peak
that occurred in the 1990s, this trend portends a dramatic
increase in immigrant homeowners in the coming decades.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;Immigration into the U.S.</FONT></B>

<P align="left">
<IMG src="y05301y0494607.gif" alt="(Bar Graph)">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">SOURCES:</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">The Yearbook of Immigration Statistics, Joint
    Center for Housing Studies at Harvard University</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Immigrant Home Ownership Rate by Time Since
    Arrival in the U.S.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<IMG src="y05301y0494608.gif" alt="(Bar Graph)">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">SOURCE:</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">U.S. Census Bureau</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">Consolidation and Emergence of Large-Scale
Production Homebuilders.</FONT></I></B><FONT size="2"> The
homebuilding sector has undergone a significant change over the
past decade as evidenced by a variety of industry trends,
including the introduction of more professional management
teams, a reduction in speculative land positions, lower levels
of unsold inventory, more conservatively financed balance
sheets, geographic diversification and increased consolidation.
Substantial consolidation among residential homebuilders and
market share gains by the top Production Homebuilders since the
early 1990s have shifted our target customer base increasingly
to large volume homebuilders. The market share of the ten
largest Production Homebuilders tripled from approximately 7% in
1990 to a projected 22% in 2004, and is expected to increase to
40% by 2010.
</FONT>

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<DIV align="left">
<B><FONT size="2">Industry overview and trends</FONT></B>
</DIV>

<DIV align="left">
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</DIV>

<P align="left">
<B><FONT size="2">Market Share of the Top 10
Homebuilders</FONT></B>

<P align="left">
<IMG src="y05301y0494605.gif" alt="BAR GRAPH">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">SOURCES:</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Production Homebuilders&#146; Public Filings;
    National Association of Realtors</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">While Production Homebuilders continue to
consolidate their industry, homebuilding remains a locally
oriented business even within the Production Homebuilders&#146;
organizations, as building codes and architectural preferences
vary widely by locale. For example, building codes in coastal
areas are generally much different from codes in inland areas or
those in earthquake zones, requiring different products and
construction techniques. One of our key success factors is to
maintain the local flexibility required to meet customer demand
while maximizing the benefits of operating a large-scale,
integrated company.
</FONT>

<P align="left">
<B><I><FONT size="2">Homebuilders&#146; Increasing Demand for
Integrated Solutions.</FONT></I></B><FONT size="2"> As the
homebuilding industry continues to consolidate, our customers
are increasingly demanding an integrated solution from their
building products suppliers. We play an integral role for our
customers that encompasses the entire homebuilding process from
planning to final construction. Prior to construction, we advise
our customers on essential issues such as design and product mix
and selection, as well as cost reduction opportunities. We then
deliver a comprehensive package of structural and related
building products to the job-site, which includes products that
we manufacture individually for the given house, such as roof
and floor trusses, wall panels and stairs. On the job-site, we
provide a full range of installation, turn-key framing and shell
construction services that reduce cycle time and costs for the
homebuilder. Our sales representatives are also deployed to the
job-site throughout the homebuilding process to ensure constant
communication and rapidly resolve issues that may arise,
including on the interpretation of blueprints, additional
product and service needs, and questions regarding building code
requirements. We believe this fully integrated approach further
strengthens customer loyalty and enables us to retain an
advantage over our competitors.
</FONT>

<P align="left">
<B><I><FONT size="2">Building Components
Manufacturing.</FONT></I></B><FONT size="2"> The growing use of
Prefabricated Components in the homebuilding process represents
a major trend within the new residential construction building
products supply market. This trend has already had a large
impact on the homebuilding industry, as, according to the USDA
Forest Service, roof trusses, the largest component of our
Prefabricated Components category, have replaced conventional
site-built roof framing in approximately 70% of all
single-family construction. Further, the Engineered Wood
Association reports that the use of manufactured panels in new
homes increased by over 60% from 1997 to 2003.
</FONT>

<P align="left">
<FONT size="2">In accordance with this trend, we have increased
our manufacturing capacity and our ability to provide customers
with Prefabricated Components such as roof and floor trusses,
stairs, wall panels, and engineered wood. Builders value the
many benefits of using these products, including reduced cycle
time and carrying costs, increased product quality, and cost
savings from the reduction of expensive on-site labor and
material waste. Once established as a preferred supplier of
Prefabricated Components, we are typically able to cross-sell
additional products and services as our customers increasingly
seek integrated solutions. Prefabricated wood components are
also becoming increasingly common in floor and wall construction.
</FONT>

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<DIV align="left">
<B><FONT size="2">Industry overview and trends</FONT></B>
</DIV>

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</DIV>

<P align="left">
<FONT size="2">According to the Freedonia Group, the outlook for
Prefabricated Component products is strong, with shipments of
roof trusses forecasted to rise at a 3.7% CAGR for the period
from 2001 to 2011. Smaller sub-segments such as floor trusses
and walls and partitions are expected to grow at a faster pace
over the same period, with CAGRs of 6.2% and 7.3%, respectively.
Sales growth of these products is being driven by increased
homebuilder awareness and acceptance of these products resulting
from cost and performance advantages. These products represent a
strategic focus for us going forward, as they carry higher
margins than our purely distributed product offerings.
</FONT>

<P align="left">
<B><FONT size="2">Gross Sales of Manufactured Products</FONT></B>

<P align="left">
<IMG src="y05301y0494606.gif" alt="BAR GRAPH">

<DIV align="left">
<I><FONT size="2">SOURCE:&nbsp;&nbsp;&nbsp;&nbsp;The Freedonia
Group</FONT></I>
</DIV>

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<P align="left">
<FONT size="4">Business
</FONT>

<P align="left">
<B><FONT size="2">GENERAL</FONT></B>

<P align="left">
<FONT size="2">We are a leading supplier and a fast-growing
manufacturer of structural and related building products for
residential new construction in the U.S. We are one of the top
two suppliers of our product categories to Production
Homebuilders, which we define as those U.S.&nbsp;homebuilders
that build more than 100 homes per year. Our large scale, full
product and service offerings, and unique business model
position us to continue growing our sales to Production
Homebuilders, the fastest-growing segment of residential
homebuilders. We have operations principally in the southern and
eastern U.S. with 63 distribution centers and 42 manufacturing
facilities. For the year ended December&nbsp;31, 2004, we
generated sales of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
net income of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
and EBITDA of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
</FONT>

<P align="left">
<FONT size="2">We provide an integrated solution to our
customers that combines the manufacturing, supply, and
installation of a full range of structural and related building
products. Over the past several years, we have significantly
increased our sales of products that we manufacture. These
products include our factory-built roof and floor trusses, wall
panels and stairs, as well as engineered wood products that we
design and cut for each home (collectively &#147;Prefabricated
Components&#148;). We also manufacture custom millwork and trim
that we market under the Synboard&#174; brand name, as well as
aluminum and vinyl windows, and we assemble interior and
exterior doors into pre-hung units. Our revenue from these
manufactured products totaled
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
for the year ended December&nbsp;31, 2004,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of total sales. In addition, we supply our customers with a
broad offering of professional grade building products not
manufactured by us such as dimensional lumber and lumber sheet
goods, various window, door and millwork lines, as well as
cabinets, roofing, and gypsum wallboard. Our full range of
construction-related services includes professional
installation, turn-key framing and shell construction, and spans
all our product categories.
</FONT>

<P align="left">
<FONT size="2">We group our building products and services into
five principal product categories: Prefabricated Components,
Windows &#38; Doors, Lumber &#38; Lumber Sheet Goods, Millwork,
and Other Building Products &#38; Services. Over the past five
years we have more than doubled the sales of our Prefabricated
Components, Windows &#38; Doors, and Millwork product
categories, each of which includes both manufactured and
distributed products. Products in these categories typically
carry a higher margin and provide us with opportunities to
cross-sell other products and services, thereby increasing
customer penetration.
</FONT>

<P align="left">
<FONT size="2">We serve a broad customer base ranging from
Production Homebuilders to small custom homebuilders and believe
that we are the number one or two building products supplier for
single-family residential new construction in approximately 75%
of the geographic markets in which we operate. According to 2003
U.S. Census data, we have operations in 20 of the top 50 U.S.
Metropolitan Statistical Areas, as ranked by single family
housing permits, and approximately 44% of U.S. housing starts
occurred in states in which we operate. Our comprehensive
product offering featuring over 250,000 SKUs company-wide and
our full range of construction services, combined with our scale
and experienced sales force, have driven market share gains,
particularly with Production Homebuilders.
</FONT>

<P align="left">
<B><FONT size="2">OUR COMPETITIVE STRENGTHS</FONT></B>

<P align="left">
<FONT size="2">We believe our sales, earnings and cash flow will
be driven by our competitive strengths:
</FONT>

<P align="left">
<B><I><FONT size="2">Leading Positions in Growing
Markets.</FONT></I></B><FONT size="2"> We believe that we are
the number one or two building products supplier for
single-family residential new construction in approximately 75%
of the geographic markets in which we operate. We are also the
largest supplier of our product categories to the Production
Homebuilders in our geographic markets as a whole. These leading
market positions allow us to develop and sustain strong
relationships with local customers and attain economies of scale
that enhance
</FONT>

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<B><FONT size="2">Business</FONT></B>
</DIV>

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<P align="left">
<FONT size="2">profitability and reduce the risk of losing
customers to our competitors. This in turn positions us
favorably to continue to gain market share. Our facilities are
strategically located in many of the fastest-growing markets in
the southern and eastern U.S., where we expect continued growth.
We believe that we are well positioned to grow with the
Production Homebuilders as they increase their market share in
these growing markets.
</FONT>

<P align="left">
<B><I><FONT size="2">Unique Business Model.
</FONT></I></B><FONT size="2">Our unique business model allows
us to cost-effectively supply our customers and target
Production Homebuilders, the fastest-growing segment of our
customer base. We operate an integrated business model across
our network of 63&nbsp;distribution centers and
42&nbsp;manufacturing facilities that differentiates us from
many of our competitors who operate in a decentralized manner
with a collection of facilities. This has enabled us to achieve
an appropriate balance of maximizing the benefits of a centrally
directed, large-scale company while maintaining the flexibility
to build strong customer relationships and provide superior
customer service at the local market level. The key components
of our business model are the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We operate a highly customized, proprietary
    information technology system that drives internal efficiencies
    while allowing us to rapidly respond to our customers and reduce
    their administrative costs.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We tailor the size of our facilities to each
    market to meet the needs of our customers, offering large-scale,
    full-service branches in larger markets and smaller, more
    tailored facilities in secondary markets.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">We offer our customers a &#147;one-stop-shop
    approach&#148; that combines a full line of manufactured
    structural building products, lumber and lumber sheet goods, and
    turn-key construction services; this integrated approach
    substantially reduces the administrative burden and cost to our
    customers of dealing with multiple suppliers.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">Full Offering of Manufactured Products and
Construction Services.</FONT></I></B><FONT size="2"> Over the
past several years, we have significantly increased our sales of
manufactured products, which provide us with higher margins and
increased opportunities to cross-sell other products to our
customers. Our ability to supply our own manufactured products,
including Prefabricated Components, windows, pre-hung doors and
our branded Synboard&#174; millwork products, strengthens our
customer relationships by helping homebuilders reduce costs and
cycle time while ensuring high quality. We also provide our
customers with a full range of services, including professional
installation, turn-key framing and shell construction, and
design. This combination of manufactured products and
construction services offers competitive advantages versus the
traditional single-product, &#147;sell-and-deliver&#148;
business model employed by many of our competitors.
</FONT>

<P align="left">
<B><I><FONT size="2">Superior Customer
Service.</FONT></I></B><FONT size="2"> We offer our customers
superior service through our experienced sales force and
reliable delivery capabilities. Our salespeople act as trusted
advisors and on-site consultants to the homebuilder and are
involved in each important step of the construction process to
ensure constant communication and rapidly resolve any issues
that may arise. We typically deploy a salesperson to the job
site to take measurements, interpret blueprints, assist in
product selection and help oversee product installation. Drawing
on a deep base of experience and knowledge, our representatives
advise on regional aesthetic preferences and opportunities for
cost reductions. In addition, our large delivery fleet and
comprehensive inventory management system enable us to provide
&#147;just-in-time&#148; product delivery, ensuring a smoother
and faster production cycle for the homebuilder.
</FONT>

<P align="left">
<B><I><FONT size="2">Attractive Cost and Working Capital
Position. </FONT></I></B><FONT size="2">We have used our
position as one of the few large-scale competitors in our
industry to create an attractive cost position. We have
generated substantial savings over time by implementing
centralized corporate purchasing agreements. Approximately 80%
of our non-lumber product purchases are made pursuant to
company-wide agreements. Our distribution centers average $32.6
million of annual sales, which is higher than any of our
competitors that have annual sales in excess of $1&nbsp;billion.
This scale allows us to leverage our fixed costs, including
occupancy, location
</FONT>

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<B><FONT size="2">Business</FONT></B>
</DIV>

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<P align="left">
<FONT size="2">management, supervisory labor and corporate
overhead, to lower our costs per sales dollar. We measure
location productivity at a detailed level and actively manage
efficiency and cost. We have implemented a comprehensive
efficiency measurement system in our truss and wall panel plants
and this system has enabled us to significantly improve
productivity. We aggressively manage every component of working
capital, including accounts receivable, inventory, and accounts
payable, and we have improved our working capital, expressed as
a percentage of sales, from 1999 as compared to the nine-month
period ended September&nbsp;30, 2004. All of these activities
are designed to ensure that we serve our customers at the lowest
cost possible.
</FONT>

<P align="left">
<B><I><FONT size="2">Experienced Management
Team.</FONT></I></B><FONT size="2"> We have a dedicated
management team with extensive experience and expertise in the
manufacturing, distribution, and marketing of building products.
Our senior management team, including our three regional group
presidents, has a total of over 175&nbsp;years of industry
experience. This team has successfully led us through various
industry cycles, economic conditions and capital structures, and
has demonstrated the ability to grow manufacturing businesses,
introduce new product lines, expand into new geographic markets,
and target and integrate acquisitions, while improving
operational and working capital efficiencies. Our seasoned
operational team is led by three regional group presidents who
average over 25&nbsp;years of industry experience. Local
facility management and sales representatives are knowledgeable
about homebuilding and generally have longstanding relationships
with the builders in their respective markets.
</FONT>

<P align="left">
<B><FONT size="2">OUR STRATEGY</FONT></B>

<P align="left">
<FONT size="2">Our strategy is to leverage our competitive
strengths to grow sales, earnings, and cash flow and remain the
preferred supplier to the homebuilding industry.
</FONT>

<P align="left">
<B><I><FONT size="2">Increase Customer Penetration Through
Incremental Sales of Manufactured Products and
Services.</FONT></I></B><FONT size="2"> We plan to organically
grow our unit volumes and revenues through further penetration
of our customer base by providing existing customers with
incremental value-added products and services. As part of this
strategy, we intend to increase sales of manufactured products,
which are higher margin and less price sensitive than lumber
products, and are growing in demand by homebuilders.
Prefabricated Components, such as trusses, wall panels, stairs
and engineered wood, are highly valued by our customers,
especially Production Homebuilders, because they reduce
builders&#146; cycle times and carrying costs and generate cost
savings through the reduction of on-site labor and lumber waste.
Once established as a manufacturer of these products by our
customers, we are generally able to cross-sell additional
products. We also intend to grow our sales of construction
services, such as professional installation, turn-key framing
and shell construction, and design, as a complement to our
existing product offerings. Our ability to provide full product
and service solutions further strengthens customer loyalty and
enables us to retain an advantage over our competitors.
</FONT>

<P align="left">
<B><I><FONT size="2">Target Production Homebuilders.
</FONT></I></B><FONT size="2">We intend to leverage our unique
business model, geographic breadth, and scale to continue to
grow our sales to the Production Homebuilders as they continue
to gain market share. The ten largest Production Homebuilders,
as measured by homes sold, tripled their market share from
approximately 7% in 1990 to a projected 22% in 2004, and are
expected to increase their market share to 40% by 2010. We have
grown our sales to this group at an even faster rate. For
example, from 2001 to 2004, the ten largest Production
Homebuilders increased their market share from approximately 18%
to a projected 22%. Over approximately the same period, we
increased our sales to this customer group by approximately 70%
from $262.9&nbsp;million in 2001 to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
in 2004.
</FONT>

<P align="left">
<B><I><FONT size="2">Expand through New Manufacturing and
Distribution Centers in Existing and Contiguous
Markets.</FONT></I></B><FONT size="2"> We believe that several
key markets in which we currently operate require increased
manufacturing capacity or incremental distribution facilities to
reach their full sales potential. In many locations, we believe
that we can increase market penetration through the introduction
of additional distribution and
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<P align="left">
<FONT size="2">manufacturing facilities. In addition, we have
identified several markets that we believe we can enter with a
strong market share from the onset by leveraging our existing
nearby facilities, customer relationships and local knowledge.
We will also selectively seek expansion opportunities that will
enable us to grow in the multi-family and commercial end markets
where we currently have a limited presence. We expect these
expansions can be realized with capital expenditures consistent
with historical levels.
</FONT>

<P align="left">
<B><I><FONT size="2">Focus on Cost, Working Capital and
Operating Improvements.</FONT></I></B><FONT size="2"> We are
extremely focused on expenses and working capital to remain a
low cost supplier. We maintain a continuous improvement,
&#147;best practices&#148; operating philosophy and regularly
implement new initiatives to reduce costs, increase efficiency
and reduce working capital, thereby enhancing profitability and
cash flow. For example, we are beginning to link our computer
system to those of our customers to streamline the
administrative aspects of the quoting, invoicing and billing
processes. We are also analyzing our workforce productivity to
determine the optimal labor mix that minimizes cost, and
examining our logistics function to reduce the cost of inbound
freight. Our focus on cost controls and our strategy of shifting
the sales mix to value-added products and services have
significantly improved profitability. Selling, general and
administrative expenses have declined as a percentage of sales
from 21.4% in 2001
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
in 2004. We have also improved our working capital, expressed as
a percentage of sales, from 1999 as compared to the nine-month
period ended September&nbsp;30, 2004.
</FONT>

<P align="left">
<B><I><FONT size="2">Pursue Strategic
Acquisitions.</FONT></I></B><FONT size="2"> The highly
fragmented nature of the Pro Segment presents substantial
acquisition opportunities. Our acquisition strategy centers on
geographic expansion and continued growth of our Prefabricated
Components business. First, there are a number of attractive
homebuilding markets, including in the western and southwestern
U.S. and parts of the Midwest, where we do not currently
operate. We believe that our proven operating model can be
successfully adapted to these markets and the homebuilders in
these markets, many of whom we currently serve elsewhere, and
who value our broad product and service offering, professional
expertise, and superior customer service. When entering a new
market, our strategy is to acquire market-leading distributors
and subsequently expand their product offerings and/or add
manufacturing facilities while integrating their operations into
our centralized platform. This strategy allows us to quickly
achieve the scale required to maximize profitability and
leverage existing customer relationships in the local market.
Second, we will selectively seek to acquire companies that
manufacture Prefabricated Components such as roof and floor
trusses, wall panels, stairs, and engineered wood, as well as
other building products such as millwork. Prefabricated
Components are growing in popularity with homebuilders and
provide us with cross-selling opportunities and higher margins.
Our senior management team has the experience and ability to
identify acquisition candidates and integrate acquisitions,
having acquired and integrated 23 companies since 1998.
</FONT>

<P align="left">
<B><FONT size="2">OUR PRODUCTS AND SERVICES</FONT></B>

<P align="left">
<FONT size="2">We distribute a wide variety of products and
services directly to homebuilder customers through our network
of 63 distribution centers in 11&nbsp;states. In addition,
through our 42 manufacturing facilities, many of which are
located on the same premises as our distribution centers, we are
a fast-growing manufacturer of building products, including
floor and roof trusses, wall panels, stairs, millwork and
windows.
</FONT>

<P align="left">
<FONT size="2">We group our full range of building products and
services into five product categories: Prefabricated Components,
Windows &#38; Doors, Lumber&nbsp;&#38; Lumber Sheet Goods,
Millwork, and Other Building
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<P align="left">
<FONT size="2">Products&nbsp;&#38; Services. The following chart
provides the sales breakdown for our five product categories for
the year ended December&nbsp;31, 2004:
</FONT>

<P align="center">
<B><FONT size="2">Sales by Product Category&#151;Year Ended
December&nbsp;31, 2004</FONT></B>

<DIV align="center">
<B><FONT size="2">Total
Sales&#151;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million</FONT></B>
</DIV>

<P align="center">
<IMG src="y05301y0494601.gif" alt="(PIE CHART)">

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="34%"></TD>
    <TD width="66%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">*&nbsp;&nbsp;&nbsp;&nbsp;Includes both manufactured and distributed products</FONT></I></TD>
    <TD align="left">
</TD>
</TR>

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<P align="left">
<I><FONT size="2">Prefabricated
Components.</FONT></I><FONT size="2"> We are one of the largest
manufacturers of Prefabricated Components for residential new
construction in the U.S.&nbsp;Prefabricated Components has been
our fastest growing product category over the past five years.
This growth has been a response to changing building practices
that utilize more manufactured products, as well as a concerted
effort to increase profitability through the sale of value-added
products. Prefabricated Components are factory-built substitutes
for job site-framing and include floor and roof trusses, wall
panels, stairs, and engineered wood that we design and cut for
each home. Our manufacturing facilities utilize the latest
technology and the highest quality materials to produce a
quality product, increase efficiency, reduce lead times, and
minimize production errors. As a result, we believe we incur
significantly lower engineering and set-up costs than do our
competitors, contributing to improved margins and customer
satisfaction. Sales of Prefabricated Components were
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
during the year ended December&nbsp;31, 2004,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of total sales.
</FONT>

<P align="left">
<I><FONT size="2">Windows&nbsp;&#38;
Doors.</FONT></I><FONT size="2"> The Windows&nbsp;&#38; Doors
category comprises the manufacturing, assembly and distribution
of windows, and the assembly and distribution of interior and
exterior door units. These products typically require a high
degree of product knowledge and training to sell. As we continue
to emphasize higher margin product lines, value-added goods like
those in the Windows&nbsp;&#38; Doors category are expected to
increasingly contribute to our sales and overall profitability.
Windows&nbsp;&#38; Doors sales were
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
during the year ended December&nbsp;31, 2004,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of total sales.
</FONT>

<P align="left">
<I><FONT size="2">Lumber&nbsp;&#38; Lumber Sheet
Goods.</FONT></I><FONT size="2"> Lumber&nbsp;&#38; Lumber Sheet
Goods include dimensional lumber, plywood and oriented strand
board (&#147;OSB&#148;) products used in on-site house framing.
This product line has not grown at the same rate as our overall
sales over the last five&nbsp;years, as demonstrated by the fact
that it
represented &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of total sales for the year ended December&nbsp;31, 2004,
compared to 47.6% of total sales in 1999. This shift in product
mix has been intentional as we have sought to migrate builder
demand toward higher margin Prefabricated Components for their
framing needs. Despite this shift in product mix, we believe we
have grown our market share for Lumber &#38; Lumber Sheet Goods
over this time period. We expect the Lumber&nbsp;&#38; Lumber
Sheet Goods business to remain a stable revenue source in the
future, but to grow over the long-term at a slower rate than our
other business lines. Sales of Lumber&nbsp;&#38; Lumber Sheet
Goods for the year ended December&nbsp;31, 2004, were
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
</FONT>

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<I><FONT size="2">Millwork.</FONT></I><FONT size="2"> Millwork
represents a small, but profitable product category. This
category includes interior and exterior trim, columns and posts
that we distribute, as well as custom exterior features that we
manufacture under the Synboard&#174; brand name. Millwork sales
during the year ended December&nbsp;31, 2004, were
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of total sales.
</FONT>

<P align="left">
<I><FONT size="2">Other Building Products&nbsp;&#38;
Services.</FONT></I><FONT size="2"> Other Building
Products&nbsp;&#38; Services consists of products including
cabinets, gypsum, roofing, and insulation, and services
including turn-key framing and shell construction, design
assistance and professional installation of products which spans
all our product categories. We provide professional installation
and turn-key services as a solution for our homebuilder
customers to increase productivity and avoid project delays. We
believe these services require scale, capital and sophistication
that smaller competitors do not possess. Sales of Other Building
Products&nbsp;&#38; Services were
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
during the year ended December&nbsp;31, 2004,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of total sales.
</FONT>

<P align="left">
<B><FONT size="2">SALES AND MARKETING</FONT></B>

<P align="left">
<FONT size="2">Our marketing and sales strategy primarily seeks
to attract and retain customers through exceptional customer
service, leading product quality, a broad and complete product
and service offering, and competitive pricing. This strategy is
centered on building and maintaining strong customer
relationships rather than traditional marketing and advertising.
Homebuilders recognize the value we add: shorter lead times,
lower material costs, faster project completion and higher
quality. We expect to continue to successfully compete for
business and gain market share through superior service.
</FONT>

<P align="left">
<FONT size="2">Our experienced, locally focused sales force is
at the core of our sales effort. This sales effort involves
deploying salespeople who are skilled in housing construction to
meet with a homebuilder&#146;s construction superintendent,
local purchasing agent, or local executive with the goal of
becoming the primary product supplier. If selected by the
homebuilder, the salesperson and his or her team of experts
review blueprints for the contracted homes and advise the
homebuilder in areas such as opportunities for cost reduction
and regional aesthetic preferences. Next, the team determines
the specific package of our products that are needed to complete
the project and schedules a sequence of site deliveries. Our
large delivery fleet and comprehensive inventory management
system enable us to provide &#147;just-in-time&#148; product
delivery, ensuring a smoother and faster production cycle for
the homebuilder. Throughout the construction process, the
salesperson makes frequent site visits to ensure timely delivery
and proper installation and to make suggestions for efficiency
improvements. Our level of service is highly valued by customers
and generates significant customer loyalty. We currently employ
over 500&nbsp;outside sales representatives, who are typically
paid a commission based on gross margin dollars collected and
work with over 300 internal sales coordinators and product
specialists.
</FONT>

<P align="left">
<B><FONT size="2">OUR CUSTOMERS</FONT></B>

<P align="left">
<FONT size="2">Our customer mix is a balance of large national
homebuilders, regional homebuilders, and local builders. Our
customer base is highly diversified, with the top ten customers
accounting for
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of sales in the year ended December&nbsp;31, 2004, and no single
customer accounting for more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of sales. At the same time, our top ten customers are comprised
primarily of the largest Production Homebuilders, including
publicly traded companies such as Centex, D.R.&nbsp;Horton,
Hovnanian Enterprises, Pulte, and Ryland Group.
</FONT>

<P align="left">
<FONT size="2">We are one of the top two suppliers of our
product categories to the Production Homebuilders, the fastest
growing segment of the residential builders, and are the largest
supplier of our product categories to Production Homebuilders in
our geographic markets as a whole. In line with the growth of
this segment, we have increased our sales to the ten largest
Production Homebuilders, as measured by homes sold, by
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
from $262.9&nbsp;million in 2001 to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
in the year ended December&nbsp;31, 2004.
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<FONT size="2">In addition to the largest Production
Homebuilders, we also service and supply regional and local
custom homebuilders. Custom homebuilders require high levels of
service since our sales team must work very closely with the
designers on a day-to-day basis in order to ensure the
appropriate products are produced and delivered to the building
site. To account for these increased service costs, pricing in
the industry is generally commensurate with the level of service
provided and the volumes purchased.
</FONT>

<P align="left">
<B><FONT size="2">MATERIALS AND SUPPLIER RELATIONSHIPS</FONT></B>

<P align="left">
<FONT size="2">We purchase raw materials for our manufacturing
plants and finished products for resale by our distribution
operations. The key raw materials for our Prefabricated
Components are dimensional lumber, OSB and engineered wood. We
purchase door slabs and hardware for our pre-hanging door
plants, seluca-blown PVC for our custom millwork plants, and
aluminum and vinyl extrusions and glass for our window plant.
Our distributed products include windows, doors, millwork,
lumber and lumber sheet goods. Our largest suppliers are
national lumber and wood products producers and distributors
such as Bluelinx, Boise Cascade, International Paper, and
Weyerhaeuser and building products manufacturers such as
Masonite and MW&nbsp;Windows. We believe there is sufficient
supply in the marketplace to competitively source most of our
requirements without reliance on any particular supplier and
that our diversity of suppliers affords us purchasing
flexibility. Due to our centralized oversight of purchasing and
our large lumber and OSB purchasing volumes, we are able to
maximize the advantages of both our and our suppliers&#146;
national footprints and negotiate purchases in multiple markets
to achieve more favorable contracts with respect to price, terms
of sale, and supply than our regional competitors. Additionally,
for certain customers, we institute purchasing programs on raw
materials such as OSB to align portions of our procurement costs
with our pricing commitments. We purchase lumber and OSB on the
spot market as necessary to fulfill customer contracts.
</FONT>

<P align="left">
<FONT size="2">We currently source products from over 5,000
suppliers in order both to reduce our dependence on any single
company and to maximize purchasing leverage. Although no
purchases from any single supplier represent more than 11% of
our cost of goods sold, we believe we are one of the largest
customers for many suppliers, and therefore have significant
purchasing leverage. We have found that using multiple suppliers
ensures a stable source of products and the best purchasing
terms as the suppliers compete to gain and maintain our business.
</FONT>

<P align="left">
<FONT size="2">We maintain strong relationships with our
suppliers, and we believe opportunities exist to improve
purchasing terms in the future, including inventory storage or
&#147;just-in-time&#148; delivery to reduce our inventory
carrying costs. Additional procurement cost savings and
purchasing synergies are expected to further enhance our margins
and cash flow generation capability.
</FONT>

<P align="left">
<B><FONT size="2">MANUFACTURING</FONT></B>

<P align="left">
<FONT size="2">We manufacture four different types of products:
Prefabricated Components, millwork, windows, and pre-hung doors.
Our Prefabricated Components allow builders to build higher
quality homes more efficiently. Roof trusses, floor trusses,
wall panels and stair units are built in an indoor,
factory-controlled environment. Engineered wood floors and beams
are cut to the required size and packaged for the given
application at many of our locations. Without Prefabricated
Components, builders construct these items on site, where
weather and variable labor quality can negatively impact
construction cost, quality and installation time. In addition,
engineered wood beams have greater structural strength than
conventional framing materials, allowing builders to frame
houses with more open space and to create a larger variety of
house designs. Engineered wood floors are stronger and
straighter than conventionally framed floors.
</FONT>

<P align="left">
<FONT size="2">We manufacture custom millwork products such as
synthetic exterior trim, custom windows and box columns under
the Synboard&#174; brand name. Our millwork is produced from
extruded PVC and offers several advantages over traditional wood
features, such as greater durability and less maintenance
requirements. We also operate an aluminum and vinyl window plant
in Houston, Texas which allows us
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<FONT size="2">to provide builders, primarily in the Texas
market, with an adequate supply of cost-competitive products.
Our pre-hung interior and exterior doors consist of a door slab
with the hinges and door jambs attached, reducing job site
installation time and providing higher quality finished door
units than those constructed on site.
</FONT>

<P align="left">
<I><FONT size="2">Prefabricated Components&#151; Trusses and
Wall Panels.</FONT></I><FONT size="2"> Truss and wall panel
production has two steps, design and fabrication. Each house
requires its own set of designed shop drawings, which vary by
builder type: non-custom versus custom builders. Non-custom
builders use prototype house plans, which may be modified for
each individual customer. The number of changes made to a given
prototype house, and the number of prototype houses in
existence, varies by builder and their construction and sales
philosophy. We maintain an electronic master file of trusses and
wall panels for each builder&#146;s prototype houses. There are
three primary benefits to master filing. First, it reduces
design cost as a designer can make minor changes to a prototype
house rather than designing the components individually. Second,
it improves design quality as the majority of the house&#146;s
design is based on a proven prototype. Third, master filing
allows us to change one file and update all related prototype
house designs automatically as we improve the design over time
or if the builder modifies the base prototype house. We do not
use a master file for custom builders who do not replicate
houses, as it is not cost-effective. For these builders, the
components are designed individually for each house.
</FONT>

<P align="left">
<FONT size="2">After the shop drawings are designed for a given
house, regardless of whether or not the master file system is
used, the shop drawings are downloaded into a proprietary
software system to review the design for potential errors and to
schedule the job for production. The fabrication process begins
with the cutting of individual pieces of lumber to the lengths
required to assemble the finished component. Shop drawings are
downloaded from the design department to our computerized saws.
The cut lumber is then joined together to form the roof trusses,
floor trusses or wall panels. The finished components are stored
by house awaiting shipment to the job site.
</FONT>

<P align="left">
<FONT size="2">We are able to generate fabrication time
standards for each component during the design step. We use
these standards to measure efficiency by comparing actual
production time with the calculated standard. Each plant&#146;s
performance is benchmarked by comparing efficiency across plants.
</FONT>

<P align="left">
<I><FONT size="2">Prefabricated Components&#151; Engineered
Wood.</FONT></I><FONT size="2"> As with trusses and wall panels,
engineered wood components have a design and fabrication step.
Engineered wood floors are designed using a master filing system
similar to the truss and wall panel system. Engineered wood
beams are designed to ensure the beam will be structurally sound
in the given application. After the design phase, a printed
layout is generated. This layout is used to cut the engineered
wood to the required length and assemble all of the components
into a house package. The components are then installed on the
job site. Engineered wood design and fabrication is done at the
majority of our distribution locations.
</FONT>

<P align="left">
<I><FONT size="2">Prefabricated Components&#151;
Stairs.</FONT></I><FONT size="2"> We manufacture box stairs at
several of our locations and curved stairs at our East
Brunswick, New Jersey location. After a house is framed, our
salesman takes measurements at the job site prior to
manufacturing to account for any variation between the
blueprints and the actual framed house. Box&nbsp;stairs can be
fabricated based on these measurements. Curved stairs are
typically a more customized product used in the entry foyer of a
home and require additional designing, which is done using a CAD
based computer program. Box&nbsp;stairs are manufactured by
routing 1 1/4 inch by 12&nbsp;inch stringer lumber to form the
frame that holds the stair treads. The treads are then nailed
and glued into the frame. The frame for curved stairs is built
on a specially designed jig to give the stairs the desired
curvature.
</FONT>

<P align="left">
<I><FONT size="2">Custom Millwork.</FONT></I><FONT size="2"> Our
manufactured custom millwork consists primarily of synthetic
exterior trim, custom windows, features and box columns we sell
under the Synboard&#174; brand name. Synboard&#174; requires no
ongoing maintenance as compared to wood exterior trim products
that require periodic caulking and painting. Synboard&#174;
products are sold throughout our company and are manufactured at
three locations.
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<FONT size="2">Sheets of 4 foot by 18 or 20 foot seluca-blown,
extruded PVC (&#147;Synboard&#174;&#148;) are sanded, cut and
shaped to produce the desired product. Exterior trim boards are
produced by cutting the Synboard&#174; into the same
industry-standard dimensions used for wood-based exterior trim
boards. Exterior features are formed by assembling pieces of
Synboard&#174; and other PVC-based moldings that have been cut,
heated and bent over forms to achieve the desired shape. Custom
windows are made by building the frame from Synboard&#174; and
glazing the glass into place. Box&nbsp;columns are fabricated
from sections of PVC that are cut on a 45 degree angle and
mitered together.
</FONT>

<P align="left">
<I><FONT size="2">Windows.</FONT></I><FONT size="2"> We
manufacture a full line of traditional aluminum and vinyl
windows at a 200,000&nbsp;square foot manufacturing facility
located in Houston, Texas. The process begins with the purchase
of aluminum and vinyl lineal extrusions. These extrusions are
cut to size and joined together to form the window frame and
sash. Sheet glass is purchased and cut to size. Two pieces of
identically shaped glass are then sealed together with a sealing
compound to create a glass unit with improved insulating
capability. The sealed glass unit is then inserted and glazed
into the window frame and sash. The unit is completed when a
balance is installed to operate the window and a lock is added
to secure the window in a closed position.
</FONT>

<P align="left">
<I><FONT size="2">Pre-hung Doors.</FONT></I><FONT size="2"> We
pre-hang interior and exterior doors at many of our locations.
Door slabs and pre-cut door jambs are inserted into a door
machine. The door machine bores holes into the doors for the
door hardware and applies the jambs and hinges to the door slab.
The casing that frames interior doors is then applied at a
separate station. Exterior doors do not have a casing, and
instead may have sidelights applied to the sides of the door, a
transom attached over the top of the door unit and a door sill
applied to the threshold.
</FONT>

<P align="left">
<B><FONT size="2">COMPETITION</FONT></B>

<P align="left">
<FONT size="2">We compete in the professional segment (&#147;Pro
Segment&#148;) of the U.S.&nbsp;residential new construction
building products supply market, which is estimated to have 2004
annual sales of $117&nbsp;billion. The Pro Segment of this
market consists predominantly of small, privately owned
companies, including framing and shell construction contractors,
local and regional materials distributors, single or multi-site
lumberyards, and truss manufacturing and millwork operations,
most of which have limited access to capital and lack
sophisticated information technology systems and large-scale
procurement capabilities. The top ten Pro Segment suppliers
account for less than 15% of the total market, which remains
fragmented due to its overall size, the diversity of the target
customer market, and variations in local building preferences
and practices. There are only six building products suppliers in
the Pro Segment that generate over $1&nbsp;billion in sales. Our
largest competitors in our markets are 84&nbsp;Lumber (a
privately held company), Stock Building Supply (formerly known
as Carolina Holdings, a unit of U.K.-based Wolseley, plc), and
Strober (a privately held company). We focus on a distinctly
different target market than the home center retailers such as
Home Depot and Lowe&#146;s, who primarily serve do-it-yourself
and professional remodeling customers. By contrast, our
customers consist of professional homebuilders and those that
provide construction services to them, with whom we develop
strong relationships.
</FONT>

<P align="left">
<FONT size="2">We believe we are the number one or two building
products supplier for single-family residential new construction
in approximately 75% of the geographic markets in which we
operate. We are also the largest supplier of our product
categories to the Production Homebuilders in our geographic
markets as a whole. Due in part to our long-standing customer
relationships, local market knowledge and competitive pricing,
we believe we have substantial competitive advantages over the
small, privately owned companies with which we primarily
compete. According to 2003 U.S.&nbsp;Census data, we have
operations in 20 of the top 50&nbsp;U.S.&nbsp;Metropolitan
Statistical Areas as ranked by single family housing permits and
approximately 44% of U.S.&nbsp;housing starts occurred in states
in which we operate.
</FONT>

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<B><FONT size="2">Business</FONT></B>
</DIV>

<DIV align="left">
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</DIV>

<P align="left">
<B><FONT size="2">EMPLOYEES</FONT></B>

<P align="left">
<FONT size="2">At December&nbsp;31, 2004, we had approximately
6,200&nbsp;employees, none of whom was represented by a union.
We believe that we have good relations with our employees.
</FONT>

<P align="left">
<B><FONT size="2">INFORMATION TECHNOLOGY SYSTEMS</FONT></B>

<P align="left">
<FONT size="2">Our primary ERP system, which we use for
operations representing 70% of our revenue, is a proprietary
system that has been highly customized by our computer
programmers. The system has been designed to operate our
businesses in a highly efficient manner. The materials required
for thousands of standard builder plans are stored by the system
for rapid quoting or order entry. Hundreds of price lists are
maintained on thousands of SKUs, facilitating rapid price
changes in changing product cost environments. A customer&#146;s
order can be tracked at each stage of the process and billing
can be customized to reduce a customer&#146;s administrative
costs and speed payment. We also operate a legacy ERP system for
operations representing 30% of our revenue. This system allows
us to effectively manage the business and deliver outstanding
customer service, but lacks several of the enhancements we have
made to our primary system. Accordingly, we are in the process
of migrating our remaining operations from the legacy system to
our primary system.
</FONT>

<P align="left">
<FONT size="2">We have implemented a single financial reporting
system that has been highly customized for our business. Our
Hyperion financial reporting package is used to aggregate data
from our two ERP systems. The Hyperion system effectively
consolidates the financial information of each location to allow
us to plan, track, and report performance and compensation
measures. Our state-of-the-art information technology
infrastructure affords our corporate headquarters complete
financial oversight and control over each of our locations,
allowing us to minimize errors and maximize efficiency and
reliability.
</FONT>

<P align="left">
<FONT size="2">We have developed a proprietary program for use
in our component plants. This software reviews product designs
for errors, schedules the plants and provides the data used to
measure plant efficiency. In addition, we have purchased several
software products that have been integrated with our primary ERP
system. These programs assist in analyzing blueprints to
generate material lists, configure kitchen cabinet orders to
submit to manufacturers, purchase lumber products from the
lowest cost source and configure orders and schedule production
in our window plants.
</FONT>

<P align="left">
<B><FONT size="2">FACILITIES AND PROPERTIES</FONT></B>

<P align="left">
<FONT size="2">We have a broad network of distribution and
manufacturing facilities in 11&nbsp;states throughout the
southern and eastern U.S.&nbsp;We have 63 distribution
facilities and 42 manufacturing facilities, many of which are
located on the same premises as our distribution facilities. Our
manufacturing facilities produce trusses, wall panels,
engineered wood, stairs, windows, pre-hung doors, and custom
millwork. We are organized into three regional operating groups,
Atlantic, Central, and Southeast, in order to achieve operating
efficiencies while maintaining maximum capacity for growth. The
Atlantic and Central markets generally consist of larger, higher
volume builders than the Southeast markets. As a result, each
manufacturing facility in the Atlantic and Central regions
typically supplies a single distribution center, while Southeast
manufacturing facilities supply multiple distribution centers
within an economical three-hour shipping radius.
</FONT>

<P align="left">
<FONT size="2">Distribution centers are generally leased and
typically include 15 to 25&nbsp;acres of outside storage, a
60,000&nbsp;square foot warehouse, 10,000&nbsp;square feet of
office space, and 30,000&nbsp;square feet of covered storage.
The outside area provides space for lumber storage and a staging
area for delivery while the warehouse stores millwork, windows,
and doors. The distribution centers are generally located in
industrial areas with low cost real estate and easy access to
freeways to maximize distribution efficiency and convenience. A
majority of the distribution centers are situated on rail lines
for efficient receipt of goods.
</FONT>

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<DIV align="left">
<B><FONT size="2"> 62</FONT></B>
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<DIV align="left">
<B><FONT size="2">Business</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">Our manufacturing facilities are generally
located on the same premises as our distribution facilities.
Truss and panel manufacturing facilities vary in size from
30,000&nbsp;square feet to 60,000&nbsp;square feet with 8 to
10&nbsp;acres of outside storage for lumber and for finished
goods. Our window manufacturing facility in Houston, Texas has
approximately 200,000&nbsp;square feet.
</FONT>

<P align="left">
<FONT size="2">We operate a fleet of approximately 1,500 trucks
to deliver products from our distribution and manufacturing
centers to job sites. Through our emphasis on local market
flexibility and strategically placed locations, we minimize
shipping and freight costs while maintaining a high degree of
local market expertise. Through knowledge of local homebuilder
needs, customer coordination, and rapid restocking ability, we
reduce working capital requirements and guard against
out-of-stock products. We believe that this reliability is
highly valued by our customers and reinforces customer
relationships.
</FONT>

<P align="left">
<B><FONT size="2">LEGAL PROCEEDINGS</FONT></B>

<P align="left">
<FONT size="2">We are involved in various claims and lawsuits
incidental to the conduct of our business in the ordinary
course. We carry insurance coverage in such amounts in excess of
our self-insured retention as we believe to be reasonable under
the circumstances and that may or may not cover any or all of
our liabilities in respect of claims and lawsuits. We do not
believe that the ultimate resolution of these matters will have
a material adverse impact on our financial position or operating
results.
</FONT>

<P align="left">
<FONT size="2">Although our business and facilities are subject
to federal, state, and local environmental regulation,
environmental regulation does not have a material impact on our
operations. We believe that our facilities are in material
compliance with such laws and regulations. As owners and lessees
of real property, we can be held liable for the investigation or
remediation of contamination on such properties, in some
circumstances without regard to whether we knew of or were
responsible for such contamination. Our current expenditures
with respect to environmental investigation and remediation at
our facilities are minimal, although no assurance can be
provided that more significant remediation may not be required
in the future as a result of spills or releases of petroleum
products or hazardous substances or the discovery of unknown
environmental conditions.
</FONT>

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<DIV align="right">
<B><FONT size="2"> 63</FONT></B>
</DIV>

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</DIV>

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<P align="left">
<FONT size="4">Management
</FONT>

<P align="left">
<B><FONT size="2">DIRECTORS AND EXECUTIVE OFFICERS</FONT></B>

<P align="left">
<FONT size="2">Information with respect to our directors and
executive officers, as of the date hereof, is set forth below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" nowrap><FONT size="1">Name</FONT></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Floyd F. Sherman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="bottom"><FONT size="2">Chairman of the Board and Chief Executive Officer</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Kevin P. O&#146;Meara
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="bottom"><FONT size="2">Senior Vice President and Chief Operating Officer</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Charles L. Horn
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="bottom"><FONT size="2">Senior Vice President and Chief Financial Officer</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Donald F. McAleenan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="bottom"><FONT size="2">Senior Vice President and General Counsel</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Frederick B. Schenkel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">Vice President, Manufacturing</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Alexander R. Castaldi
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Director</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Ramsey A. Frank
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Director</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Paul S. Levy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Director</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Brett N. Milgrim
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Director</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Our Board of Directors consists of five members
elected annually by our stockholders. All executive officers are
chosen by the Board of Directors and serve at its pleasure.
There are no family relationships among any of the directors or
executive officers, and there is no arrangement or understanding
between any of the directors or executive officers and any other
person pursuant to which he was selected as a director or
officer. Unless otherwise indicated, each director and officer
is a citizen of the United States and the business address of
each individual is: 2001 Bryan Street, Suite&nbsp;1600, Dallas,
Texas 75201.
</FONT>

<P align="left">
<FONT size="2">Set forth below is a brief description of the
business experience of each of our directors, executive
officers, and our three regional group presidents.
</FONT>

<P align="left">
<I><FONT size="2">Floyd F. Sherman,</FONT></I><FONT size="2">
Chairman and Chief Executive Officer. Mr.&nbsp;Sherman has been
a director since 2001, when he came to BFS. Prior to joining
BFS, he spent 28&nbsp;years at Triangle Pacific/ Armstrong
Flooring, the last nine of which he served as Chairman and Chief
Executive Officer. Mr.&nbsp;Sherman has over 40&nbsp;years of
experience in the building products industry. A native of
Kerhonkson, New York, and a veteran of the U.S.&nbsp;Army,
Mr.&nbsp;Sherman is a graduate of the New York State College of
Forestry at Syracuse University. He also holds an M.B.A. degree
from Georgia State University.
</FONT>

<P align="left">
<I><FONT size="2">Kevin P.
O&#146;Meara,</FONT></I><FONT size="2"> Chief Operating Officer.
Mr.&nbsp;O&#146;Meara is a co-founder of BFS. At the inception
of BFS, he served as the Chief Financial Officer.
Mr.&nbsp;O&#146;Meara was promoted to his current position in
May 2000. Prior to co-founding BFS, Mr.&nbsp;O&#146;Meara served
as Vice President, Strategic Planning and Business Development
at Fibreboard Corporation. He worked three years in the Dallas
office of Bain&nbsp;&#38; Company, a strategic management
consulting firm. He also worked six years at two private
investment firms. Mr.&nbsp;O&#146;Meara is a C.P.A. and has a
B.A. (economics)&nbsp;and a B.B.A. (accounting)&nbsp;from
Southern Methodist University and an M.B.A. from Harvard
Business School.
</FONT>

<P align="left">
<I><FONT size="2">Charles L. Horn,</FONT></I><FONT size="2">
Chief Financial Officer. Mr.&nbsp;Horn joined BFS in May 1999 as
Vice President-Finance and Controller. He was promoted to CFO in
May 2000. Prior to joining the Company, Mr.&nbsp;Horn served in
a variety of positions at Pier One Imports, most recently as
Vice President and Treasurer. Prior to Pier One, he served as
Vice President Finance/ Chief Financial Officer of Conquest
Industries. Mr.&nbsp;Horn also
</FONT>

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<B><FONT size="2"> 64</FONT></B>
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<B><FONT size="2">Management</FONT></B>
</DIV>

<DIV align="left">
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</DIV>

<P align="left">
<FONT size="2">has seven years of public accounting experience
with Price Waterhouse. Mr.&nbsp;Horn is a C.P.A. and received
his B.B.A. degree from Abilene Christian University and M.B.A.
from The University of Texas at Austin.
</FONT>

<P align="left">
<I><FONT size="2">Donald F. McAleenan,</FONT></I><FONT size="2">
Senior Vice President and General Counsel. Mr.&nbsp;McAleenan is
a co-founder of BFS and serves as General Counsel. Prior to
co-founding BFS, Mr.&nbsp;McAleenan served as Vice President and
Deputy General Counsel of Fibreboard Corporation from 1992 to
1997. Mr.&nbsp;McAleenan was also Assistant General Counsel of
AT&#38;E&nbsp;Corporation and spent nine years as a securities
lawyer at two New York City law firms. Mr.&nbsp;McAleenan has a
B.S. from Georgetown University and J.D. from New York
University Law School.
</FONT>

<P align="left">
<I><FONT size="2">Frederick B.
Schenkel,</FONT></I><FONT size="2"> Vice President,
Manufacturing. Mr.&nbsp;Schenkel joined BFS in 1998 when the
Company acquired BSL from Pulte Home Corporation. At BSL, and
later with the Company, Mr.&nbsp;Schenkel was a location
manager. He became Vice President of the Atlantic Group in 1999
and was promoted to Vice President, Manufacturing in 2002.
Mr.&nbsp;Schenkel has more than 31&nbsp;years of experience
managing manufacturing facilities in the industry and, before
joining BSL, held such positions as manufacturing manager for
The Ryland Group, Inc., vice president of manufacturing for
Diversified Homes Corporation of Maryland, and plant manager for
Regional Building Systems, Inc. Mr.&nbsp;Schenkel holds a B.A.
in accounting from Saint Bonaventure University.
</FONT>

<P align="left">
<I><FONT size="2">Morris&nbsp;E.
Tolly,</FONT></I><FONT size="2"> Southeast Group President.
Mr.&nbsp;Tolly has been with the Company since 1998 when the
Company acquired Pelican Companies, Inc. (&#147;Pelican&#148;).
Mr.&nbsp;Tolly was a General Manager and Market Manager for
Pelican and later for the Company prior to being promoted in
2000 to President of the Southeast Group. Overall,
Mr.&nbsp;Tolly has over 40&nbsp;years of experience in the
building products industry.
</FONT>

<P align="left">
<I><FONT size="2">Douglas E.
Schweinhart,</FONT></I><FONT size="2"> Atlantic Group President.
Mr.&nbsp;Schweinhart joined BFS in 1998 when the Company
acquired Builders Supply&nbsp;&#38; Lumber Co. (&#147;BSL&#148;)
from Pulte Home Corporation. Previously, Mr.&nbsp;Schweinhart
was a founder and Vice President of BSL. He also spent
12&nbsp;years with Lowe&#146;s Contractor Yards in various
capacities. Overall, Mr.&nbsp;Schweinhart has over 28&nbsp;years
of experience in the building products industry.
Mr.&nbsp;Schweinhart received his B.S. degree in Finance from
Towson State University.
</FONT>

<P align="left">
<I><FONT size="2">Alan K. Davenport,</FONT></I><FONT size="2">
Central Group President. Mr.&nbsp;Davenport joined BFS in 2000
as Vice President of National Sales and Marketing. In December
2002, Mr.&nbsp;Davenport was promoted to President of the newly
formed Central Group. Prior to joining BFS, Mr.&nbsp;Davenport
spent over ten years in the building products industry in
various executive positions with Wickes, Inc. and 84 Lumber.
Mr.&nbsp;Davenport is a graduate of the University of
Cincinnati. He holds a B.S. degree in architecture/construction
management technology.
</FONT>

<P align="left">
<I><FONT size="2">Alexander R.
Castaldi,</FONT></I><FONT size="2"> Director. Mr.&nbsp;Castaldi
has been a director since 2004. Mr.&nbsp;Castaldi, a C.P.A., is
a Senior Managing Director of JLL Partners, Inc., which he
joined in 2003, and was previously a CFO of three very
successful management buyouts. He was most recently Executive
Vice President, Chief Financial and Administration Officer of
Remington Products Company. Previously, Mr.&nbsp;Castaldi was
Vice President and Chief Financial Officer at Uniroyal Chemical
Company. From 1990 until 1995, he was Senior Vice President and
Chief Financial Officer at Kendall International, Inc. During
the 1980s, Mr.&nbsp;Castaldi was also Vice President, Controller
of Duracell, Inc. and Uniroyal, Inc. Mr.&nbsp;Castaldi serves as
a director of several companies, including Motor Coach
Industries International, Inc., Mosaic Sales Solutions, Corp.,
PGT&nbsp;Industries, Inc., and C.H.I.&nbsp;Overhead Doors, Inc.
</FONT>

<P align="left">
<I><FONT size="2">Ramsey&nbsp;A.
Frank,</FONT></I><FONT size="2"> Director. Mr.&nbsp;Frank has
been a director since 2001. Mr.&nbsp;Frank is a Senior Managing
Director of JLL Partners, Inc., which he joined in 1999. From
January 1993 to July 1999, Mr.&nbsp;Frank was a Managing
Director at Donaldson, Lufkin&nbsp;&#38; Jenrette, Inc., where
he headed the restructuring group and was a senior member of the
leveraged finance group. Mr.&nbsp;Frank serves as a director of
several companies, including Motor Coach Industries
International, Inc., C.H.I.&nbsp;Overhead Doors, Inc.,
PGT&nbsp;Industries, Inc., and Medical Card System, Inc.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 65</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Management</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<I><FONT size="2">Paul S. Levy,</FONT></I><FONT size="2">
Director. Mr.&nbsp;Levy has been a director since 1998.
Mr.&nbsp;Levy is a Senior Managing Director of JLL Partners,
Inc., which he founded in 1988. Mr.&nbsp;Levy serves as a
director of several companies, including Fairfield Manufacturing
Company, Inc., Lancer Industries, Inc., Motor Coach Industries
International, Inc., Mosaic Sales Solutions, Corp.,
PGT&nbsp;Industries, Inc., and C.H.I.&nbsp;Overhead Doors, Inc.
</FONT>

<P align="left">
<I><FONT size="2">Brett N. Milgrim,</FONT></I><FONT size="2">
Director. Mr.&nbsp;Milgrim has been a director since 1999.
Mr.&nbsp;Milgrim is a director of both PGT&nbsp;Industries, Inc.
and C.H.I.&nbsp;Overhead Doors, Inc. and is a Managing Director
of JLL Partners, Inc., which he joined in 1997.
</FONT>

<P align="left">
<B><FONT size="2">Board Composition</FONT></B>

<P align="left">
<FONT size="2">We intend to appoint an independent director
prior to the completion of this offering. Upon completion of
this offering, our board will consist of the new independent
director and Messrs. Sherman, Levy, Castaldi, Frank, and
Milgrim. Immediately prior to the consummation of this offering,
we will adopt our amended and restated articles of incorporation
and our amended and restated by-laws, which will provide that
our board of directors be divided into three classes, each of
whose members will serve for a staggered three-year term. We
intend to appoint one additional independent member to the board
of directors within 90&nbsp;days of the consummation of this
offering, and, within one year of the consummation of this
offering, we expect to appoint that number of additional
independent members to the board of directors as are necessary
to comply with the requirements of the Sarbanes-Oxley Act of
2002 and The Nasdaq National Market.
</FONT>

<P align="left">
<B><FONT size="2">Board Committees</FONT></B>

<P align="left">
<FONT size="2">Upon completion of this offering, our board of
directors intends to appoint an audit committee, the composition
of which will comply with the requirements of The Nasdaq
National Market and the Sarbanes-Oxley Act of 2002. Our board of
directors also intends to appoint such other committees as may
be required by the rules of The Nasdaq National Market.
</FONT>

<P align="left">
<FONT size="2">The audit committee will select, on behalf of our
board of directors, an independent public accounting firm to be
engaged to audit our financial statements, discuss with the
independent auditors their independence, review and discuss the
audited financial statements with the independent auditors and
management, and recommend to our board of directors whether the
audited financials should be included in our Annual Reports on
Form&nbsp;10-K to be filed with the SEC.
</FONT>

<P align="left">
<B><FONT size="2">Compensation of Directors</FONT></B>

<P align="left">
<FONT size="2">For the year ended December&nbsp;31, 2004, the
individuals serving on the board of directors did not receive
any compensation for their service as directors. We intend to
set the compensation for independent directors prior to
completion of this offering. We do not intend to pay
compensation to individuals serving on our board of directors
who are employees or affiliates of the Company for their service
as directors.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 66</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Executive compensation
</FONT>

<P align="left">
<B><FONT size="2">SUMMARY OF COMPENSATION</FONT></B>

<P align="left">
<FONT size="2">The following summary compensation table sets
forth information concerning compensation earned in the fiscal
year ended December&nbsp;31, 2004, by our chief executive
officer and our other four most highly compensated executive
officers serving at the end of the last fiscal year. We refer to
these executives as our &#147;named executive officers&#148;
elsewhere in this prospectus.
</FONT>

<P align="center">
<B><FONT size="2">Summary Compensation Table</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Annual Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Long-Term Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All Other</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation(2)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="22"></TD>
</TR>

<TR>
    <TD colspan="22" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Floyd F. Sherman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">600,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,107,036</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Chairman of the Board and Chief Executive
    Officer</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Kevin P. O&#146;Meara
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">360,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">848,444</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">565,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3,769</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Senior Vice President and Chief Operating
    Officer</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Charles L. Horn
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">330,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">927,740</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,117,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Senior Vice President and Chief Financial
    Officer</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Donald F. McAleenan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">320,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">754,172</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">575,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">6,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Senior Vice President and General
    Counsel</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Frederick B. Schenkel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">232,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">492,097</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">6,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Vice President, Manufacturing</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Reflects bonus earned under the 2004 Builders
    FirstSource Cash Incentive Bonus Plan. This amount may be
    adjusted upon completion of the audited financials for the year
    ended December&nbsp;31, 2004, to account for any difference
    between estimated and actual financial performance results used
    in the bonus calculation.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(2)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Reflects Company matching contributions under
    our 401(k) plan.</FONT></I></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 67</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Executive compensation</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">The following table sets forth information
concerning the grant of stock options to each of our named
executive officers during the last fiscal year.
</FONT>

<P align="center">
<B><FONT size="2">Option Grants in Last Fiscal Year</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Individual Grants</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent of total</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">options granted</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise or</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Grant date</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">underlying options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to employees</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">base price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">present</FONT></B></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">granted(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">in fiscal year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($/Sh)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">value($)(2)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="21"></TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Floyd F. Sherman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Kevin P. O&#146;Meara
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">565,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">February&nbsp;27, 2014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Charles L. Horn
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,117,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">February&nbsp;27, 2014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,892</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Donald F. McAleenan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">575,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">February&nbsp;27, 2014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Frederick B. Schenkel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">February&nbsp;27, 2014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">These options vest in full on
    December&nbsp;31, 2011. These options have accelerated vesting
    provisions that provide that (a)&nbsp;one sixth of the options
    will vest on each of December&nbsp;31, 2004, 2005, and 2006, if
    certain annual financial performance targets are met in the
    applicable year; (b)&nbsp;one half of the options will vest on
    December&nbsp;31, 2006, if certain cumulative financial
    performance targets for the three calendar years ended
    December&nbsp;31, 2006, are met; and (c)&nbsp;upon a change in
    control of the Company some or all of the previously unvested
    options will vest if certain financial targets have been
    met.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(2)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">The options are valued by the minimum value
    option pricing variation of the Black-Scholes pricing model. The
    following weighted average assumptions were used for the grants:
    expected term&#151; six years; expected volatility&#151; 0.00%;
    expected dividend yield&#151; 0.00%; and risk free rate&#151;
    3.01%. No adjustment was made for non-transferability or risk of
    forfeitures.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The following table sets forth information
concerning the exercise of stock options during the last fiscal
year by each of our named executive officers and the number and
value of unexercised options held by such individuals as of the
end of the last fiscal year.
</FONT>

<P align="center">
<B><FONT size="2">Aggregated Option Exercises in Last Fiscal
Year</FONT></B>

<DIV align="center">
<B><FONT size="2">and Fiscal Year-end Option Values</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value of Unexercised In-</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">the-Money Options at</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">underlying unexercised</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year-End ($)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares acquired</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">options at fiscal year-end(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable/</FONT></B></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">on exercise(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">realized($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercisable/unexercisable(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
</TR>

<TR>
    <TD colspan="17"></TD>
</TR>

<TR>
    <TD colspan="17" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Floyd F. Sherman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,518,149/ 2,839,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Kevin P. O&#146;Meara
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,501,580/ 1,323,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Charles L. Horn
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,812,927/ 1,437,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Donald F. McAleenan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,935,345/ 1,189,655</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Frederick B. Schenkel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124,334/ 175,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">In connection with the payment of an
    extraordinary dividend to our stockholders in February 2004, the
    exercise price of most of our then-outstanding stock options,
    including all stock options held by our named executive
    officers, was adjusted to take into account the decrease in the
    fair market value of the underlying shares after the payment of
    the extraordinary dividend. With respect to our named executive
    officers, this adjustment resulted in the reduction of the
    exercise price of their options from $1.00 to $0.315&nbsp;per
    share and applied to the following number of shares subject to
    options: Mr.&nbsp;Sherman, 11,357,533; Mr.&nbsp;O&#146; Meara,
    4,259,075; Mr.&nbsp;Horn, 2,132,162; Mr.&nbsp;McAleenan,
    3,549,229; and Mr.&nbsp;Schenkel, 250,000.</FONT></I></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 68</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Executive compensation</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">Employment agreements</FONT></B>

<P align="left">
<FONT size="2">We have entered into employment agreements with
four of our named executive officers. These employment
agreements provide for Mr.&nbsp;Sherman to serve as Chairman of
the Board of Directors and as our Chief Executive Officer,
Mr.&nbsp;O&#146;Meara to serve as our Senior Vice President of
Operations and Chief Operating Officer, Mr.&nbsp;Horn to serve
as our Senior Vice President of Finance and Chief Financial
Officer, and Mr.&nbsp;McAleenan to serve as our Senior Vice
President and General Counsel.
</FONT>

<P align="left">
<B><FONT size="2">Mr.&nbsp;Sherman&#146;s agreement</FONT></B>

<P align="left">
<FONT size="2">Mr.&nbsp;Sherman&#146;s employment agreement was
entered into on September&nbsp;1, 2001, and has a two-year term,
with automatic one-year renewals commencing on the first
anniversary of the effective date of the employment agreement,
unless either party provides at least 90&nbsp;days&#146; notice
of non-renewal. In addition to providing for his annual base
salary and employee benefits, Mr.&nbsp;Sherman&#146;s employment
agreement provides, among other things, that he will be eligible
for an annual cash bonus of up to 133% of his base salary, as
determined by our board of directors or the compensation
committee, and for the initial grant of an option to
purchase&nbsp;11,357,533&nbsp;shares of our common stock. Our
board of directors may increase the amount of
Mr.&nbsp;Sherman&#146;s bonus if they deem such an increase
appropriate. This option vests ratably on each of the first four
anniversaries of the effective date of the employment agreement
and in full upon a &#147;change of control&#148; (as defined in
the employment agreement) of the Company.
</FONT>

<P align="left">
<FONT size="2">Mr.&nbsp;Sherman&#146;s employment agreement
provides that if he is terminated by us without
&#147;cause&#148; (as defined in the employment agreement) he
will be entitled to payment of his annual base salary and health
and welfare benefits for the remainder of the term of the
employment agreement. His employment agreement further provides
that, during his employment with us and for one year thereafter,
he may not disclose confidential information and may not
directly or indirectly compete with the Company. In addition, he
may not solicit any employees of the Company or any of its
subsidiaries during his employment with us and for two years
thereafter.
</FONT>

<P align="left">
<B><FONT size="2">Agreements with other named executive
officers</FONT></B>

<P align="left">
<FONT size="2">The employment agreements with
Messrs.&nbsp;O&#146;Meara, Horn, and McAleenan were entered into
on January&nbsp;15, 2004. Each of these agreements has a
one-year term, with automatic one-year renewals commencing on
the first anniversary of the effective date of the employment
agreement, unless either party provides at least
90&nbsp;days&#146; notice of non-renewal. In addition to
providing for an annual base salary and employee benefits, each
of these agreements provides, among other things, that the
executive is eligible for an annual cash bonus under our annual
cash incentive plan, which currently provides for a target bonus
percentage of 100% of the executive&#146;s base salary. Pursuant
to the employment agreements, this target bonus percentage will
not be less than 100% of the executive&#146;s base salary.
</FONT>

<P align="left">
<FONT size="2">Under each of these employment agreements, in the
event that (a)&nbsp;the executive&#146;s employment is
terminated by us without &#147;cause&#148; (as defined in the
employment agreement), (b)&nbsp;the executive terminates his
employment because of a material adverse diminution in job title
or responsibilities or a relocation of his principal place of
employment more than 100&nbsp;miles from its current location
without his consent, (c)&nbsp;we notify the executive of our
intent not to renew the employment agreement and the executive
delivers a &#147;notice of resignation&#148; (as defined in the
employment agreement) within 90&nbsp;days of receipt of the
notice of non-renewal, or (d)&nbsp;the executive&#146;s
employment is terminated by mutual consent and the parties enter
into an agreement whereby the executive agrees to be bound by
the post-termination restrictive covenants in the agreement
(described below), the executive will be entitled to
continuation of his base salary and health benefits for one year
after the date of termination, plus payment of an amount equal
to his &#147;average bonus compensation&#148; (as defined in the
employment agreement). During the executive&#146;s employment
with us and for one year thereafter, the executive may not
disclose confidential information and may not directly or
indirectly compete with the Company. In addition, the executive
may
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 69</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Executive compensation</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">not solicit any employees of the Company or any
of its subsidiaries during his employment with us and for two
years thereafter.
</FONT>

<P align="left">
<B><FONT size="2">1998 Stock Incentive Plan, as amended and
restated March&nbsp;1, 2004</FONT></B>

<P align="left">
<FONT size="2">The purpose of the 1998 Stock Incentive Plan is
to provide our key employees, officers, consultants, and
advisors with an opportunity to acquire shares of our common
stock. Under this plan, our board of directors is authorized to
grant stock options and other equity based awards, such as stock
appreciation rights or restricted stock awards. In addition, the
plan provides for the sale of shares to plan participants at
prices to be determined by our board of directors. Stock options
granted under the plan may be either &#147;incentive stock
options&#148; within the meaning of Section&nbsp;422(b) of the
Code, or non-qualified stock options. A total of
64,000,000&nbsp;shares of our common stock have been reserved
for issuance under this plan. A total of 46,000,000&nbsp;shares
have been made available for the issuance of options and other
equity based awards and a total of 18,000,000&nbsp;shares have
been made available for the sale of common stock. The plan is
intended to comply with the requirements of Rule&nbsp;701 under
the Securities Act.
</FONT>

<P align="left">
<FONT size="2">The plan is administered by our board of
directors, which has the discretion to determine the persons to
whom awards will be granted, the type of awards, the number of
awards, vesting requirements, and other features and conditions
of awards under the plan, including whether the awards will
contain provisions relating to a change in control of the
Company. It is contemplated that, following an initial public
offering of the Company&#146;s common stock, the plan will be
administered by a committee of our board of directors that will
be composed solely of at least two persons who are &#147;outside
directors&#148; within the meaning of Section&nbsp;162(m) of the
Internal Revenue Code and &#147;non-employee directors&#148;
within the meaning of Rule&nbsp;16(b) under the Exchange Act.
</FONT>

<P align="left">
<FONT size="2">In the event of any extraordinary dividend, stock
dividend, recapitalization, reclassification, merger,
acquisition, consolidation, stock split, warrant or rights
issuance, combination or exchange of shares, or other similar
transaction, our board of directors has the sole discretion to
equitably adjust the exercise price, the number and kind of
shares of common stock available for issuance under the plan,
the number and kind of shares covered by outstanding options,
and other awards under the plan to preserve the value of each
share of common stock and the value of each award.
</FONT>

<P align="left">
<FONT size="2">In the event of a sale of the Company, the board
of directors, in its sole discretion, may cancel all outstanding
stock options issued under the plan and provide for a cash
payment to each holder thereof equal to (i)&nbsp;the excess of
the consideration received by the Company&#146;s stockholders
pursuant to the sale of the Company over the exercise price per
share of the option multiplied by (ii)&nbsp;the number of shares
of common stock subject to the option.
</FONT>

<P align="left">
<B><FONT size="2">2005 Cash Incentive Plan</FONT></B>

<P align="left">
<FONT size="2">Our 2005 Cash Incentive Plan provides for the
payment of a cash bonus to each plan participant based on the
achievement of performance goals relating to (i)&nbsp;return on
net tangible assets, (ii)&nbsp;operating cash flow, and
(iii)&nbsp;operating income. These goals are based on the
performance of a given location, region, or the entire Company,
depending on the participant&#146;s position. Target bonus
percentages are set for each performance objective. Bonus payout
percentages increase as the achievement levels increase. The
plan also contains a discretionary bonus to recognize and reward
individual performance. This portion of the bonus is based on
the review of the participant&#146;s performance by the
participant&#146;s direct supervisor. All of our executive
officers participate in this plan.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 70</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Principal and selling stockholders
</FONT>

<P align="left">
<FONT size="2">The following table sets forth certain
information regarding the beneficial ownership, as of
February&nbsp;7, 2005, and as adjusted to reflect the sale of
the shares of common stock offered by us and the selling
stockholder in this offering, of: (i)&nbsp;our common stock by
each person known to us to hold greater than 5% of the total
number of outstanding shares; (ii)&nbsp;our common stock by each
current director or executive officer and of all the current
directors and executive officers as a group; and (iii)&nbsp;each
stockholder selling shares in this offering. The number of
shares beneficially owned by each person or group as of
February&nbsp;7, 2005 includes shares of common stock that such
person or group had the right to acquire on or within
60&nbsp;days after February&nbsp;7, 2005, including upon the
exercise of options. All such information is estimated and
subject to change.
</FONT>

<P align="left">
<FONT size="2">Ownership of our common stock is shown in terms
of &#147;beneficial ownership.&#148; Amounts and percentages of
common stock beneficially owned are reported on the basis of
regulations of the SEC governing the determination of beneficial
ownership of securities. Under the rules of the SEC, a person is
deemed to be a &#147;beneficial owner&#148; of a security if
that person has or shares &#147;voting power,&#148; which
includes the power to vote or to direct the voting of such
security, or &#147;investment power,&#148; which includes the
power to dispose of or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of
any securities of which he has a right to acquire beneficial
ownership within 60&nbsp;days. More than one person may be
considered to beneficially own the same shares. In the table
below, unless otherwise noted, a person has sole voting and
dispositive power for those shares shown as beneficially owned
by such person.
</FONT>

<P align="left">
<B><FONT size="2">Common Stock</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Beneficially Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Beneficially Owned</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Before the Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">After the Offering</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ownership of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ownership</FONT></B></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT size="1">Name&nbsp;and&nbsp;Address&nbsp;of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offered</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Shares of</FONT></B></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT size="1">Beneficial&nbsp;Owner(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock(4)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock(5)(6)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Hereby</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
</TR>

<TR>
    <TD colspan="21"></TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">JLL Building Products, LLC(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,836,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Floyd F. Sherman(7)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,518,149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Kevin P. O&#146;Meara(8)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,944,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Charles L. Horn(9)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,957,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Donald F. McAleenan(10)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,378,308</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Frederick B. Schenkel(11)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">270,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Alexander R. Castaldi(2)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,836,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Ramsey A. Frank(2)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,836,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Paul S. Levy(2)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,836,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Brett N. Milgrim(2)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,836,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Directors and executive officers of the Company
    as a group
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,905,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">&nbsp;*&nbsp;&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Less than 1%.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Unless otherwise indicated, the business
    address of each person named in the table is Builders
    FirstSource, Inc., 2001&nbsp;Bryan Street, Suite&nbsp;1600,
    Dallas, Texas 75201.</FONT></I></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 71</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Principal and selling stockholders</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(2)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">The business address for Messrs.&nbsp;Levy,
    Frank, Milgrim, and Castaldi is 450&nbsp;Lexington Ave.,
    Suite&nbsp;3350, New York, New York 10017.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(3)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Messrs.&nbsp;Levy, Frank, Milgrim, and
    Castaldi are all associated with JLL Partners Fund&nbsp;II, L.P.
    and JLL Partners Fund&nbsp;III, L.P., which, as members of JLL
    Building Products, LLC, may be deemed to beneficially own the
    shares of common stock owned by JLL Building Products, LLC. In
    addition, Mr.&nbsp;Levy is Managing Member of
    JLL&nbsp;Associates G.P.&nbsp;II, L.L.C., which controls
    JLL&nbsp;Partners Fund&nbsp;II, L.P., and of JLL
    Associates&nbsp;III, L.L.C., the general partner of JLL Partners
    Fund&nbsp;III, L.P., and, as a result, may be deemed to
    beneficially own all of the shares of common stock owned by JLL
    Building Products, LLC. Messrs.&nbsp;Frank, Milgrim, and
    Castaldi disclaim any beneficial ownership of our common
    stock.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(4)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">The number of shares beneficially owned by
    each person or group as of February&nbsp;7, 2005 includes shares
    of common stock that such person or group had the right to
    acquire on or within 60&nbsp;days after February&nbsp;7, 2005,
    including upon the exercise of options.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(5)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">For each person and group included in the
    table, percentage ownership is calculated by dividing the number
    of shares beneficially owned by such person or group as
    described above by the sum of 251,482,040&nbsp;shares of common
    stock outstanding on February&nbsp;7, 2005 and the number of
    shares of common stock that such person or group had the right
    to acquire on or within 60&nbsp;days of February&nbsp;7, 2005,
    including upon the exercise of options.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(6)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Subject to dilution resulting from potential
    awards of common stock and exercise of options to acquire common
    stock under the 1998 Stock Incentive Plan, as amended.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(7)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Includes 8,518,149&nbsp;shares of common stock
    issuable upon exercise of options exercisable within
    60&nbsp;days of February&nbsp;7, 2005 under the Company&#146;s
    1998 Stock Incentive Plan, as amended.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(8)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Includes 3,501,580&nbsp;shares of common stock
    issuable upon exercise of options exercisable within
    60&nbsp;days of February&nbsp;7, 2005 under the Company&#146;s
    1998 Stock Incentive Plan, as amended.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(9)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Includes 1,832,927&nbsp;shares of common stock
    issuable upon exercise of options exercisable within
    60&nbsp;days of February&nbsp;7, 2005 under the Company&#146;s
    1998 Stock Incentive Plan, as amended.</FONT></I></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(10)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Includes 2,935,345&nbsp;shares of common stock
    issuable upon exercise of options exercisable within
    60&nbsp;days of February&nbsp;7, 2005 under the Company&#146;s
    1998 Stock Incentive Plan, as amended.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(11)&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Includes 160,334&nbsp;shares of common stock
    issuable upon exercise of options exercisable within
    60&nbsp;days of February&nbsp;7, 2005 under the Company&#146;s
    1998 Stock Incentive Plan, as amended.</FONT></I></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 72</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Certain related party transactions
</FONT>

<P align="left">
<FONT size="2">In February 2005, with a portion of the net
proceeds of our offering of floating rate notes and our new
senior secured credit facility, we paid a dividend to our
stockholders and a compensation-based payment to all holders of
our outstanding stock options (including vested and unvested
options). Such payment to option holders was made in connection
with the payment of such dividend, rather than making an
adjustment to the exercise price or number of shares subject to
such options. The aggregate dividend to stockholders was
$201.2&nbsp;million, and the aggregate payment to option holders
was $35.8&nbsp;million, which was treated as compensation
expense.
</FONT>

<P align="left">
<FONT size="2">In February 2004, we completed a recapitalization
to refinance our indebtedness and pay a dividend to our
stockholders in an aggregate amount equal to
$139.6&nbsp;million. In connection with such dividend, our board
of directors exercised its discretion under the anti-dilution
provisions of our employee stock plan to adjust the exercise
price of stock options to reflect the change in the share value
on the dividend date. This adjustment was made to the stock
options held by our executive officers as well as other
employees. Approximately $0.4&nbsp;million was also paid to
certain option holders whose exercise price could not be
adjusted for the dividend.
</FONT>

<P align="left">
<FONT size="2">JLL Partners, affiliates of which control JLL
Building Products, LLC, the selling stockholder, is reimbursed
by us for expenses it pays or incurs on our behalf or in
connection with its investment in us. The amount reimbursed was
approximately $300,000 in each of 2004 and 2003, and
approximately $265,000 in 2002. In the ordinary course of
business, we purchase windows from PGT Industries, Inc., a
company controlled by affiliates of JLL Partners.
</FONT>

<P align="left">
<FONT size="2">In connection with this offering, we will amend
our registration rights agreement with JLL Building Products,
LLC and some of our executive officers. See &#147;Description of
Capital Stock&nbsp;&#151; Registration Rights.&#148;
</FONT>

<P align="left">
<FONT size="2">The Company loaned $50,000 to Mr.&nbsp;Horn to
purchase shares of our common stock, under our 1998&nbsp;Stock
Incentive Plan, as amended, which loan, together with interest
thereon, was repaid in full on February&nbsp;25, 2004.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 73</FONT></B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Description of capital stock
</FONT>

<P align="left">
<FONT size="2">The following is a summary of the material terms
of our capital stock. The following description of our capital
stock is subject to, and qualified in its entirety by reference
to, our amended and restated certificate of incorporation,
amended and restated by-laws and other agreements, copies of
which have been filed as exhibits to the registration statement
of which this prospectus is a part, and by the provisions of
applicable Delaware law.
</FONT>

<P align="left">
<B><FONT size="2">GENERAL MATTERS</FONT></B>

<P align="left">
<FONT size="2">Our amended and restated certificate of
incorporation, which will be filed with the State of Delaware
and become effective immediately prior to the closing of this
offering, provides that we are authorized to
issue &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value $0.01&nbsp;per share,
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of undesignated preferred stock, par value $0.01&nbsp;per share.
</FONT>

<P align="left">
<FONT size="2">As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, we had
outstanding &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, held
by &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders
of record. As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, we had outstanding options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock.
</FONT>

<P align="left">
<B><FONT size="2">COMMON STOCK</FONT></B>

<P align="left">
<FONT size="2">Shares of our common stock have the following
rights, preferences and privileges:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Voting rights.</FONT></I><FONT size="2"> Each
    outstanding share of common stock entitles its holder to one
    vote on all matters submitted to a vote of our stockholders,
    including the election of directors. There are no cumulative
    voting rights. Generally, all matters to be voted on by
    stockholders must be approved by a majority of the votes
    entitled to be cast by all shares of common stock present or
    represented by proxy.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Dividends.</FONT></I><FONT size="2"> Holders
    of common stock are entitled to receive dividends as, when and
    if dividends are declared by our board of directors out of
    assets legally available for the payment of dividends.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Liquidation.</FONT></I><FONT size="2"> In the
    event of a liquidation, dissolution or winding up of our
    affairs, whether voluntary or involuntary, after payment of our
    liabilities and obligations to creditors, our remaining assets
    will be distributed ratably among the holders of shares of
    common stock on a per share basis.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Rights and
    preferences.</FONT></I><FONT size="2"> Our common stock has no
    preemptive, redemption, conversion or subscription rights. The
    rights, powers, preferences and privileges of holders of our
    common stock are subject to, and may be adversely affected by,
    the rights of the holders of shares of any series of preferred
    stock that we may designate and issue in the future.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">LISTING</FONT></B>

<P align="left">
<FONT size="2">We intend to apply to list our common stock on
The Nasdaq National Market under the trading symbol
&#147;BLDR&#148;.
</FONT>

<P align="left">
<B><FONT size="2">PREFERRED STOCK</FONT></B>

<P align="left">
<FONT size="2">Our amended and restated certificate of
incorporation provides that the board of directors has the
authority, without action by the stockholders, to designate and
issue up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock in one or more classes or series and to fix
for each class or series the powers, rights, preferences and
privileges of each series of preferred stock, including dividend
rights, conversion rights, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting
any class or series, which may be greater than the rights of the
holders of the common stock. There will be no shares of
preferred stock outstanding immediately after the closing of
this offering. Any issuance of shares of preferred stock could
adversely affect the voting power of holders of common stock,
and the likelihood
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 74</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Description of capital stock</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">that the holders will receive dividend payments
and payments upon liquidation could have the effect of delaying,
deferring or preventing a change in control. We have no present
plans to issue any shares of preferred stock.
</FONT>

<P align="left">
<B><FONT size="2">REGISTRATION RIGHTS</FONT></B>

<P align="left">
<FONT size="2">In connection with this offering, we will amend
our registration rights agreement with JLL&nbsp;Building
Products, LLC and some of our executive officers. The agreement
will provide that, upon the request of JLL&nbsp;Building
Products, we will register under the Securities Act the shares
of our common stock held by JLL&nbsp;Building Products for sale
in accordance with its intended method of disposition, and will
take other actions as are necessary to permit the sale of the
shares in various jurisdictions. In addition, if we register any
of our equity securities either for our own account or for the
account of other security holders, JLL Building Products and
such executive officers are entitled to notice of the
registration and may include their shares in the registration,
subject to certain customary underwriters&#146;
&#147;cut-back&#148; provisions. All fees, costs and expenses of
underwritten registrations will be borne by us, other than
underwriting discounts and selling commissions, which will be
borne by the stockholder selling its shares. Our obligation to
register the shares and take other actions is subject to certain
restrictions on, among other things, the frequency of requested
registrations, the number of shares to be registered and the
duration of these rights.
</FONT>

<P align="left">
<B><FONT size="2">ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF
OUR CERTIFICATE OF INCORPORATION AND BY-LAWS</FONT></B>

<P align="left">
<FONT size="2">Our amended and restated certificate of
incorporation and by-laws contain provisions that are intended
to enhance the likelihood of continuity and stability in the
composition of the board of directors and which may have the
effect of delaying, deferring or preventing a future takeover or
change in control of our company unless the takeover or change
in control is approved by our board of directors. These
provisions include the following:
</FONT>

<P align="left">
<I><FONT size="2">Staggered Board of
Directors.</FONT></I><FONT size="2"> Our amended and restated
certificate of incorporation provides for a staggered board of
directors, divided into three classes, with our stockholders
electing one class each year. Between stockholders&#146;
meetings, the board of directors will be able to appoint new
directors to fill vacancies or newly created directorships so
that no more than the number of directors in any given class
could be replaced each year and it would take three successive
annual meetings to replace all directors.
</FONT>

<P align="left">
<I><FONT size="2">Elimination of stockholder action through
written consent.</FONT></I><FONT size="2"> Our amended and
restated certificate of incorporation provides that stockholder
action can be taken only at an annual or special meeting of
stockholders and cannot be taken by written consent in lieu of a
meeting.
</FONT>

<P align="left">
<I><FONT size="2">Elimination of the ability to call special
meetings.</FONT></I><FONT size="2"> Our amended and restated
certificate of incorporation provides that, except as otherwise
required by law, special meetings of our stockholders can only
be called pursuant to a resolution adopted by a majority of our
board of directors or by our chief executive officer or the
chairman of our board of directors. Stockholders are not
permitted to call a special meeting or to require our board to
call a special meeting.
</FONT>

<P align="left">
<I><FONT size="2">Advance notice procedures for stockholder
proposals.</FONT></I><FONT size="2"> Our by-laws establish an
advance notice procedure for stockholder proposals to be brought
before an annual meeting of our stockholders, including proposed
nominations of persons for election to our board. Stockholders
at our annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting
by or at the direction of our board or by a stockholder who was
a stockholder of record on the record date for the meeting, who
is entitled to vote at the meeting and who has given to our
secretary timely written notice, in proper form, of the
stockholder&#146;s intention to bring that business before the
meeting.
</FONT>

<DIV align="left">
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</DIV>

<DIV align="right">
<B><FONT size="2"> 75</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Description of capital stock</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<I><FONT size="2">Removal of Directors; Board of Directors
Vacancies.</FONT></I><FONT size="2"> Our certificate of
incorporation and by-laws provide that members of our board of
directors may not be removed without cause. Our by-laws further
provide that only our board of directors may fill vacant
directorships, except in limited circumstances. These provisions
would prevent a stockholder from gaining control of our board of
directors by removing incumbent directors and filling the
resulting vacancies with such stockholder&#146;s own nominees.
</FONT>

<P align="left">
<FONT size="2">The foregoing provisions of our amended and
restated certificate of incorporation and by-laws could
discourage potential acquisition proposals and could delay or
prevent a change in control. These provisions are intended to
enhance the likelihood of continuity and stability in the
composition of our board of directors and in the policies
formulated by our board of directors and to discourage certain
types of transactions that may involve an actual or threatened
change of control. These provisions are designed to reduce our
vulnerability to an unsolicited acquisition proposal. The
provisions also are intended to discourage certain tactics that
may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for
our shares and, as a consequence, they also may inhibit
fluctuations in the market price of the common stock that could
result from actual or rumored takeover attempts. Such provisions
also may have the effect of preventing changes in our
management. See &#147;Risk Factors&#151; Risks Related to the
Offering&#151; Provisions in our charter documents and under
Delaware law could discourage a takeover that stockholders may
consider favorable.&#148;
</FONT>

<P align="left">
<B><FONT size="2">LIMITATIONS ON LIABILITY AND INDEMNIFICATION
OF OFFICERS AND DIRECTORS</FONT></B>

<P align="left">
<FONT size="2">Our amended and restated certificate of
incorporation and by-laws provide indemnification for our
directors and officers to the fullest extent permitted by the
DGCL. In addition, as permitted by Delaware law, our amended and
restated certificate of incorporation includes provisions that
eliminate the personal liability of our directors for monetary
damages resulting from breaches of certain fiduciary duties as a
director. The effect of this provision is to restrict our rights
and the rights of our stockholders in derivative suits to
recover monetary damages against a director for breach of
fiduciary duties as a director, except that a director will be
personally liable for:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any breach of his or her duty of loyalty to us or
    our stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">acts or omissions not in good faith or which
    involve intentional misconduct or a knowing violation of law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any transaction from which the director derived
    an improper personal benefit;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">improper distributions to stockholders.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">These provisions may not be held to be
enforceable for violations of the federal securities laws of the
United States.
</FONT>

<P align="left">
<B><FONT size="2">TRANSFER AGENT AND REGISTRAR</FONT></B>

<P align="left">
<FONT size="2">The transfer agent and registrar for our common
stock
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
and its telephone number
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<DIV align="left">
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</DIV>

<DIV align="left">
<B><FONT size="2"> 76</FONT></B>
</DIV>

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<DIV align="left">

</DIV>

<DIV align="left">
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</DIV>

<P align="left">
<FONT size="4">Description of certain indebtedness
</FONT>

<P align="left">
<FONT size="2">The following is a summary of the material
provisions of the agreements governing our material debt to be
in effect upon the closing of this offering. The following is
only a summary and it does not include all of the provisions of
our material debt, copies of which have been filed as exhibits
to our registration statement filed in connection with this
offering and are available as set forth under &#147;Where You
Can Find More Information.&#148;
</FONT>

<P align="left">
<B><FONT size="2">SENIOR SECURED CREDIT FACILITY</FONT></B>

<P align="left">
<FONT size="2">On February&nbsp;11, 2005, we entered into a new
senior secured credit facility. with various lenders, UBS
Securities LLC and Deutsche Bank Securities Inc., as Joint
Arrangers, UBS AG, Stamford Branch, as Administrative Agent and
Deutsche Bank Securities Inc., as Syndication Agent.
</FONT>

<P align="left">
<I><FONT size="2">Structure.</FONT></I><FONT size="2"> The new
senior secured credit facilities consist of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a new senior secured term loan facility of
    $225.0&nbsp;million (the &#147;Term Loan&nbsp;Facility&#148;),
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a new senior secured revolving credit facility of
    $110.0&nbsp;million (the &#147;Revolving Credit
    Facility&#148;),&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a new pre-funded letter of credit facility of
    $15.0&nbsp;million (the &#147;Funded LC Facility&#148;). Funds
    in an aggregate principal amount of $15.0&nbsp;million have been
    deposited (the &#147;Credit-linked Deposit&#148;) by the lenders
    under the Funded LC Facility in an account (the
    &#147;Credit-Linked Deposit Account&#148;) held in the name of
    the Administrative Agent.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">We may borrow, repay, and reborrow from the
Revolving Credit Facility from time to time until the earlier of
the maturity date thereof and the termination of the revolving
loan commitment. The Funded LC Facility will be used solely in
connection with general corporate purposes.
</FONT>

<P align="left">
<I><FONT size="2">Maturity, Amortization, and
Prepayment.</FONT></I><FONT size="2"> The Term
Loan&nbsp;Facility has a maturity of six and a half years and
will amortize in consecutive equal quarterly installments in an
aggregate annual amount equal to 1.0% of the original principal
amount of the Term Loan&nbsp;Facility, with the balance payable
on the maturity date. Unless terminated earlier, the Revolving
Credit Facility has a maturity of five years. The Funded LC
Facility has a maturity of six and a half years.
</FONT>

<P align="left">
<FONT size="2">The new senior secured credit facilities are
subject to mandatory prepayment with, in general, (i)&nbsp;100%
of the net proceeds of certain asset sales or other disposition
of assets, subject to a 365-day reinvestment period and with
exceptions to be agreed; (ii)&nbsp;100% of the net cash proceeds
from certain issuances of debt, with exceptions to be agreed;
(iii)&nbsp;100% of all casualty and condemnation proceeds in
excess of amounts applied within 365&nbsp;days of receipt to
replace or restore any properties in respect of which such
proceeds are paid; and (iv)&nbsp;75% of the excess cash flow,
subject to leverage-based stepdowns to be agreed. Any such
prepayment is applied first to the Term Loan&nbsp;Facility, then
to the Credit Linked Deposit and the proceeds thereof applied to
cash-collateralize any outstanding Funded Letters of Credit to
the extent such Funded Letters of Credit outstanding at the time
exceed the Credit-Linked Deposit, and thereafter to the
Revolving Credit Facility.
</FONT>

<P align="left">
<I><FONT size="2">Interest and Fees.</FONT></I><FONT size="2">
The term loans under the Term Loan&nbsp;Facility bear interest,
at our option, at a rate equal to LIBOR plus 2.50%&nbsp;per
annum or base rate plus 1.50%&nbsp;per annum. The loans under
the Revolving Credit Facility initially bear interest, at our
option, at a rate equal to LIBOR plus 2.50%&nbsp;per annum or
base rate plus 1.50%&nbsp;per annum, and, beginning
September&nbsp;30, 2005, may decline to as much as 1.75% for
LIBOR loans and 0.75% for base rate loans if certain leverage
ratios are met. A commitment fee equal to 0.500% to
0.375%&nbsp;per annum (determined by our leverage) accrues on
the undrawn portion of the Revolving Credit Facility and such
fee is payable quarterly in arrears. We pay the lenders under
the Funded LC Facility LIBOR plus 2.75%&nbsp;per annum minus UBS
AG, Stamford Branch&#146;s internal deposit
</FONT>

<DIV align="left">
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</DIV>

<DIV align="right">
<B><FONT size="2"> 77</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Description of certain indebtedness</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">rate, and such lenders will receive UBS AG,
Stamford Branch&#146;s internal deposit rate on the amounts in
the Credit-Linked Deposit Account.
</FONT>

<P align="left">
<I><FONT size="2">Guarantees.</FONT></I><FONT size="2"> All of
the obligations under the new senior secured credit facilities
are guaranteed by all of our existing and future direct and
indirect subsidiaries (collectively, the
&#147;Guarantors&#148;), subject to exceptions for foreign
subsidiaries to the extent such guarantees would be prohibited
by applicable law or would result in adverse tax consequences.
</FONT>

<P align="left">
<I><FONT size="2">Pledge and Security.</FONT></I><FONT size="2">
The new senior secured credit facilities are secured by
perfected first priority pledges of all of the equity interests
of each of the Guarantors and perfected first priority security
interests in and mortgages on all of our tangible and intangible
assets and those of the Guarantors, except, in the case of the
stock of a foreign subsidiary, to the extent such pledge would
be prohibited by applicable law or would result in materially
adverse tax consequences, and subject to such other exceptions
as are agreed.
</FONT>

<P align="left">
<I><FONT size="2">Covenants.</FONT></I><FONT size="2"> The new
senior secured credit facilities contain a number of covenants
that, among other things, restrict our ability and the ability
of our subsidiaries to (i)&nbsp;dispose of assets;
(ii)&nbsp;change our business; (iii)&nbsp;engage in mergers or
consolidations; (iv)&nbsp;make certain acquisitions;
(v)&nbsp;pay dividends or repurchase or redeem stock;
(vi)&nbsp;incur indebtedness and issue preferred stock;
(vii)&nbsp;make investments and loans; (viii)&nbsp;create liens;
(ix)&nbsp;engage in certain transactions with affiliates;
(x)&nbsp;enter into sale and leaseback transactions;
(xi)&nbsp;issue stock or stock options; (xii)&nbsp;amend or
prepay other indebtedness; (xiii)&nbsp;modify or waive material
documents; or (xiv)&nbsp;change our fiscal year. In addition,
under the new senior secured credit facilities, we are required
to comply with specified financial ratios and tests, including a
minimum interest coverage ratio, a maximum leverage ratio, and
maximum capital expenditures.
</FONT>

<P align="left">
<I><FONT size="2">Events of Default.</FONT></I><FONT size="2">
The new senior secured credit facilities contain customary
events of default, including (i)&nbsp;nonpayment of principal or
interest; (ii)&nbsp;false or misleading representations or
warranties; (iii)&nbsp;noncompliance with covenants;
(iv)&nbsp;insolvency and bankruptcy-related events;
(v)&nbsp;judgments in excess of specified amounts;
(vi)&nbsp;certain ERISA matters; (vii)&nbsp;actual or asserted
invalidity of guarantees of the new senior secured credit
facilities or impairment of security interests in collateral;
(viii)&nbsp;invalidity or unenforceability of certain provisions
of any loan document; and (ix)&nbsp;certain change of control
events.
</FONT>

<P align="left">
<B><FONT size="2">SECOND PRIORITY SENIOR SECURED FLOATING RATE
NOTES</FONT></B>

<P align="left">
<FONT size="2">On February&nbsp;11, 2005, we issued
approximately $275.0&nbsp;million in aggregate principal amount
of our floating rate notes, all of which continue to be
outstanding.
</FONT>

<P align="left">
<I><FONT size="2">Maturity and
Interest.</FONT></I><FONT size="2"> The floating rate notes
mature on February&nbsp;15, 2012. Interest accrues at a rate of
LIBOR plus 4.25%. The LIBOR rate is reset at the beginning of
each quarter. Interest on the floating rate notes is payable
quarterly in arrears on each February&nbsp;15, May&nbsp;15,
August&nbsp;15, and November&nbsp;15, commencing on May&nbsp;15,
2005.
</FONT>

<P align="left">
<I><FONT size="2">Ranking.</FONT></I><FONT size="2"> The
floating rate notes are our senior secured obligations and rank
equally in right of payment with all of our existing and future
senior debt. The floating rate notes are effectively junior in
right of payment to any of our indebtedness that is secured by
first priority liens on the assets securing the floating rate
notes, including our new senior secured credit facility, or
secured by assets not securing the floating rate notes, and are
junior in right of payment to all indebtedness of our future
nonguarantor subsidiaries. The subsidiary guarantees are the
senior secured obligations of our subsidiary guarantors and rank
equal in right of payment with all of our subsidiary
guarantors&#146; existing and future senior debt, but rank
effectively junior in right of payment to the subsidiary
guarantees of our new senior secured credit facility.
</FONT>

<P align="left">
<I><FONT size="2">Guarantees.</FONT></I><FONT size="2"> All of
our existing subsidiaries jointly and severally guarantee the
floating rate notes. Our future significant restricted domestic
subsidiaries will also be required to guarantee the floating
rate notes.
</FONT>

<DIV align="left">
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</DIV>

<DIV align="left">
<B><FONT size="2"> 78</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Description of certain indebtedness</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<I><FONT size="2">Pledge and Security.</FONT></I><FONT size="2">
The new floating rate notes are secured by perfected second
priority pledges of all of the equity interests of each of the
guarantors of the floating rate notes and perfected second
priority security interests in and mortgages on all of our
tangible and intangible assets and those of the guarantors,
except, in the case of the stock of a foreign subsidiary, to the
extent such pledge would be prohibited by applicable law or
would result in materially adverse tax consequences, and subject
to such other exceptions as are agreed.
</FONT>

<P align="left">
<I><FONT size="2">Optional Redemption.</FONT></I><FONT size="2">
At any time on or after February&nbsp;15, 2007, we may redeem
some or all of the floating rate notes at a redemption price
equal to 100% of the principal amount thereof, plus a premium
declining ratably to par, plus accrued and unpaid interest and
liquidated damages, if any to the redemption dates.
</FONT>

<P align="left">
<FONT size="2">At any time before February&nbsp;15, 2007, we may
redeem the floating rate notes, in whole or in part, at a
redemption price equal to 100% of the principal amount of the
floating rate notes redeemed, plus a make-whole premium, accrued
and unpaid interest, and liquidated damages, if any, to the
redemption date.
</FONT>

<P align="left">
<FONT size="2">At any time before February&nbsp;15, 2007, we may
redeem up to 35% of the aggregate principal amount of the
floating rate notes with the proceeds of certain equity
offerings, including this offering, so long as:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we pay holders of the floating rate notes a
    redemption price an amount equal to par plus the interest rate
    then in effect, plus accrued and unpaid interest and liquidated
    damages, if any, to the redemption date;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">at least 65% of the aggregate principal amount of
    the floating rate notes issued under the indenture, remains
    outstanding immediately after such redemption; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we redeem the floating rate notes within
    90&nbsp;days of any such equity offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<I><FONT size="2">Covenants.</FONT></I><FONT size="2"> The
indenture governing the floating rate notes contains covenants
that limit our ability and the ability of our restricted
subsidiaries to, among other things: incur additional
indebtedness; pay dividends or make other distributions on our
capital stock or repurchase, repay or redeem our capital stock;
make certain investments; incur liens; enter into certain types
of transactions with affiliates; create restrictions on the
payment of dividends or other amounts to us by our restricted
subsidiaries; and sell all or substantially all of our assets or
merge with or into other companies. These covenants are subject
to a number of important exceptions and qualifications.
</FONT>

<P align="left">
<I><FONT size="2">Change of Control
Offer.</FONT></I><FONT size="2"> If we experience a change of
control, we may be required to offer to purchase the floating
rate notes at a purchase price equal to 101% of the principal
amount, plus accrued and unpaid interest and liquidated damages,
if any, to the repurchase date.
</FONT>

<P align="left">
<I><FONT size="2">Events of Default.</FONT></I><FONT size="2">
The indenture contains customary events of default, including,
but not limited to, (i)&nbsp;defaults in the payment of
principal or interest, (ii)&nbsp;defaults in the compliance with
the covenants contained in the indenture, (iii)&nbsp;cross
defaults on debt in excess of $20.0&nbsp;million,
(iv)&nbsp;failure to pay more than $20.0&nbsp;million of
judgments that have not been stayed by appeal or otherwise, or
(v)&nbsp;our bankruptcy or other insolvency events.
</FONT>

<DIV align="left">
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<DIV align="right">
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</DIV>

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<DIV align="left">

</DIV>

<DIV align="left">
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</DIV>

<P align="left">
<FONT size="4">Shares eligible for future sale
</FONT>

<P align="left">
<FONT size="2">Prior to this offering, there has been no public
market for our common stock, and a significant public market for
our common stock may not develop or be sustained after this
offering. Future sales of significant amounts of our common
stock, including shares of our outstanding common stock and
shares of our common stock issued upon exercise of outstanding
options, in the public market after this offering could
adversely affect the prevailing market price of our common stock
and could impair our ability to raise capital through the sale
of our equity securities.
</FONT>

<P align="left">
<B><FONT size="2">SALE OF RESTRICTED SHARES AND LOCK-UP
AGREEMENTS</FONT></B>

<P align="left">
<FONT size="2">Upon the closing of this offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding
shares of common stock based upon our shares outstanding as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, assuming no exercise of stock options.
</FONT>

<P align="left">
<FONT size="2">Of these shares, the shares of common stock sold
in this offering will be freely tradeable without restriction
under the Securities Act, unless purchased by affiliates of our
company, as that term is defined in Rule&nbsp;144 under the
Securities Act.
</FONT>

<P align="left">
<FONT size="2">The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock were issued and sold by us in private
transactions, and are eligible for public sale if registered
under the Securities Act or sold in accordance with
Rules&nbsp;144, 144(k) or 701 of the Securities Act. However, of
these remaining shares of common stock, representing an
aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding common stock after giving effect to this
offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;are
held by officers, directors, and existing security holders who
are subject to lock-up agreements for a period
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;days
after the date of this prospectus under which these holders have
agreed not to sell or otherwise dispose of their shares of
common stock. The representative of the underwriters may, in its
sole discretion and at any time without notice, release all or
any portion of the securities subject to the lock-up agreements.
</FONT>

<P align="left">
<FONT size="2">As of the date of this prospectus, up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the remaining shares may be eligible for sale in the public
market. Beginning 90&nbsp;days after the date of this
prospectus, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
these remaining shares will be eligible for sale in the public
market, although all
but &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
will be subject to certain volume limitations under
Rule&nbsp;144. As soon as practicable after the closing of this
offering, we intend to file a registration statement on
Form&nbsp;S-8 under the Securities Act covering shares of our
common stock issued or reserved for issuance under our 1998
Stock Incentive Plan and agreements with our employees.
Accordingly, shares of our common stock registered under such
registration statement will be available for sale in the open
market.
</FONT>

<P align="left">
<B><FONT size="2">RULE&nbsp;144</FONT></B>

<P align="left">
<FONT size="2">In general, Rule&nbsp;144 allows a stockholder
(or stockholders where shares are aggregated) who has
beneficially owned shares of our common stock for at least one
year and who files a Form&nbsp;144 with the SEC to sell within
any three month period commencing 90&nbsp;days after the date of
this prospectus a number of those shares that does not exceed
the greater of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">1% of the number of shares of common stock then
    outstanding, which will equal
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    immediately after this offering;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the average weekly trading volume of the common
    stock during the four calendar weeks preceding the filing of the
    Form&nbsp;144 with respect to such sale.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Sales under Rule&nbsp;144, however, are subject
to specific manner of sale provisions, notice requirements, and
the availability of current public information about our
company. We cannot estimate the number of shares of common stock
our existing stockholders will sell under Rule&nbsp;144, as this
will depend on the market price for our common stock, the
personal circumstances of the stockholders, and other factors.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 80</FONT></B>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Shares eligible for future sale</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">RULE&nbsp;144(k)</FONT></B>

<P align="left">
<FONT size="2">Under Rule&nbsp;144(k), in general, a stockholder
who has beneficially owned shares of our common stock for at
least two years and who is not deemed to have been an affiliate
of our company at any time during the immediately preceding
90&nbsp;days may sell shares without complying with the manner
of sale provisions, notice requirements, public information
requirements, or volume limitations of Rule&nbsp;144. Affiliates
of our company, however, must always sell pursuant to
Rule&nbsp;144, even after the otherwise applicable
Rule&nbsp;144(k) holding periods have been satisfied.
</FONT>

<P align="left">
<B><FONT size="2">RULE&nbsp;701</FONT></B>

<P align="left">
<FONT size="2">Rule&nbsp;701 generally allows a stockholder who
purchased shares of our common stock pursuant to a written
compensatory plan or contract and who is not deemed to have been
an affiliate of our company during the immediately preceding
90&nbsp;days to sell these shares in reliance upon
Rule&nbsp;144, but without being required to comply with the
public information, holding period, volume limitation, or notice
provisions of Rule&nbsp;144. Our 1998 Stock Incentive Plan
provided for the issuance
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
pursuant to Rule&nbsp;701. Rule&nbsp;701 also permits affiliates
of our company to sell their Rule&nbsp;701&nbsp;shares under
Rule&nbsp;144 without complying with the holding period
requirements of Rule&nbsp;144. All holders of
Rule&nbsp;701&nbsp;shares, however, are required to wait until
90&nbsp;days after the date of this prospectus before selling
such shares pursuant to Rule&nbsp;701. In addition, holders of
Rule&nbsp;701 shares who are subject to the lock-up agreements
described in &#147;&#151;&nbsp;Sale of Restricted Shares and
Lock-up Agreements&#148; have agreed not to sell their shares
for a period of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;days after
the date of this prospectus.
</FONT>

<P align="left">
<FONT size="2">As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our outstanding common stock have been issued in reliance on
Rule&nbsp;701, including as a result of exercises of stock
options, and an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
are issuable upon exercise of outstanding stock options issued
under our 1998 Stock Incentive Plan.
</FONT>

<P align="left">
<B><FONT size="2">REGISTRATION RIGHTS</FONT></B>

<P align="left">
<FONT size="2">After the closing of this offering, JLL Building
Products, LLC, which will hold
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, has the right, subject to various
conditions and limitations, to cause us to register shares of
our common stock held by it and to include its shares in
registration statements relating to our securities. By
exercising its registration rights and causing a large number of
shares to be registered and sold in the public market, it could
cause the price of the common stock to fall. In addition, any
demand to include such shares in our registration statements
could have a material adverse effect on our ability to raise
needed capital. See &#147;Description of Capital
Stock&#151;Registration Rights.&#148;
</FONT>

<P align="left">
<B><FONT size="2">OPTIONS</FONT></B>

<P align="left">
<FONT size="2">In addition to the shares of common stock
outstanding immediately after this offering, as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, there were outstanding options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. As soon as practicable after the closing of
this offering, we intend to file a registration statement on
Form&nbsp;S-8 under the Securities Act covering shares of our
common stock issued or reserved for issuance under our 1998
Stock Incentive Plan and agreements with our employees.
Accordingly, shares of our common stock registered under such
registration statement will be available for sale in the open
market upon exercise by the holders, subject to vesting
restrictions with us, contractual lock-up restrictions, and/or
market stand-off provisions applicable to each option agreement
that prohibit the sale or other disposition of the shares of
common stock underlying the options for a period
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;days
after the date of this prospectus without the prior written
consent from us or our underwriters.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 81</FONT></B>
</DIV>

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<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Material United States federal income tax
considerations for non-U.S.&nbsp;holders
</FONT>

<P align="left">
<FONT size="2">The following is a summary of the anticipated
material United States federal income and estate tax
consequences to a Non-U.S. Holder (as defined below) of the
acquisition, ownership and disposition of our common stock under
current United States federal tax law. This discussion does not
address specific tax consequences that may be relevant to
particular persons in light of their individual circumstances
(including, for example, pass-through entities (e.g.,
partnerships) or persons who hold our common stock through
pass-through entities, banks or financial institutions,
broker-dealers, insurance companies, tax-exempt entities, common
trust funds, pension plans, controlled foreign corporations,
passive foreign investment companies, owners of more than 5% of
our common stock, United States expatriates, dealers in
securities or currencies, persons that have a functional
currency other than the United States dollar and persons in
special situations, such as those who hold our common stock as
part of a straddle, hedge, conversion transaction, or other
integrated investment), all of whom may be subject to tax rules
that differ significantly from those summarized below. Unless
otherwise stated, this discussion is limited to the tax
consequences to those Non-U.S. Holders who are the original
beneficial owners of our common stock and who hold such common
stock as &#147;capital assets&#148; (generally, property held
for investment) under the United States Internal Revenue Code of
1986, as amended (the &#147;Code&#148;). In addition, this
discussion does not describe any tax consequences arising under
the tax laws of any state, local or non-United States
jurisdiction. This discussion is based upon the Code, the
Treasury Department regulations (the &#147;Treasury
Regulations&#148;) promulgated thereunder and administrative and
judicial interpretations thereof, all as of the date hereof and
all of which are subject to change, possibly with retroactive
effect.
</FONT>

<P align="left">
<B><FONT size="2">Prospective purchasers of our common stock are
urged to consult their tax advisors concerning the United States
federal tax consequences to them of acquiring, owning and
disposing of our common stock, as well as the application of
state, local and non-United States tax laws.</FONT></B>

<P align="left">
<FONT size="2">As used herein, a &#147;U.S. Person&#148; is
(i)&nbsp;an individual who is a citizen or resident of the
United States, (ii)&nbsp;a corporation, partnership or other
entity taxable as a corporation or partnership created or
organized under the laws of the United States, any state thereof
or the District of Columbia, (iii)&nbsp;an estate that is
subject to United States federal income taxation without regard
to the source of its income or (iv)&nbsp;a trust (a)&nbsp;the
administration of which is subject to the primary supervision of
a United States court and which has one or more United States
persons who have the authority to control all substantial
decisions of the trust or (b)&nbsp;that was in existence on
August&nbsp;20, 1996, was properly treated as a United States
person under the Code on the previous day, and elected to
continue to be so treated. A &#147;Non-U.S. Holder&#148; is a
holder of our common stock who is not a U.S. Person.
</FONT>

<P align="left">
<FONT size="2">If a partnership, or other entity or arrangement
treated as a partnership for United States federal income tax
purposes, holds our common stock, the tax treatment of each
partner will generally depend upon the status of the partner and
the activities of the partnership. Partners in a partnership
that is a prospective investor should consult their tax advisors
as to the particular United States federal tax consequences
applicable to them.
</FONT>

<P align="left">
<B><FONT size="2">Dividends</FONT></B>

<P align="left">
<FONT size="2">Dividends paid to a Non-U.S. Holder will
generally be subject to withholding of United States federal
income tax at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty. Dividends that are
effectively connected with the conduct of a trade or business by
the Non-U.S. Holder within the United States and, where an
income tax treaty applies, are attributable to a United States
permanent establishment of the Non-U.S. Holder, are not,
however, subject to the withholding tax, but are instead subject
to United States federal income tax on a net income basis at
applicable graduated
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 82</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Material United States federal income tax
considerations for non-U.S.&nbsp;holders</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">individual or corporate rates. Certain
certification and disclosure requirements must be satisfied for
effectively connected income to be exempt from withholding. Any
such effectively connected dividends received by a foreign
corporation may be subject to an additional &#147;branch profits
tax&#148; at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty. A Non-U.S. Holder who wishes
to claim the benefit of an applicable income tax treaty rate
(and avoid backup withholding as discussed below) for dividends,
will be required to (a)&nbsp;complete Internal Revenue Service
(&#147;IRS&#148;)&nbsp;Form W-8BEN (or other applicable form)
and certify under penalties of perjury that such holder is not a
U.S.&nbsp;person or (b)&nbsp;if the common stock is held through
certain foreign intermediaries, satisfy the relevant
certification requirements of applicable Treasury Regulations.
Special certification and other requirements apply to certain
Non-U.S. Holders that are entities rather than individuals.
</FONT>

<P align="left">
<FONT size="2">A Non-U.S. Holder eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the IRS.
</FONT>

<P align="left">
<B><FONT size="2">Gain on Disposition of Common Stock</FONT></B>

<P align="left">
<FONT size="2">A Non-U.S. Holder will generally not be subject
to United States federal income tax with respect to gain
recognized on a sale or other disposition of our common stock
unless (i)&nbsp;the gain is effectively connected with a trade
or business of the Non-U.S. Holder in the United States, and,
where an income tax treaty applies, is attributable to a United
States permanent establishment of the Non-U.S. Holder,
(ii)&nbsp;in the case of a Non-U.S. Holder who is an individual
and holds the common stock as a capital asset, such holder is
present in the United States for 183 or more days in the taxable
year of the sale or other disposition and certain other
conditions are met, or (iii)&nbsp;we either are or have been a
&#147;United States real property holding corporation&#148; (a
&#147;USRPHC&#148;) for United States federal income tax
purposes at any time during the shorter of the five-year period
preceding such sale or other disposition or the period that such
Non-U.S. Holder held our common shares (the &#147;Applicable
Period&#148;).
</FONT>

<P align="left">
<FONT size="2">An individual Non-U.S. Holder described in clause
(i)&nbsp;above will be subject to tax on the net gain derived
from the sale under regular graduated United States federal
income tax rates. An individual Non-U.S. Holder described in
clause (ii)&nbsp;above will be subject to a flat 30% tax on the
gain derived from the sale, which may be offset by United States
source capital losses (even though the individual is not
considered a resident of the United States). If a Non-U.S.
Holder that is a foreign corporation is described in clause
(i)&nbsp;above, it will be subject to tax on its gain under
regular graduated United States federal income tax rates and, in
addition, may be subject to the branch profits tax equal to 30%
of its effectively connected earnings and profits or at such
lower rate as may be specified by an applicable income tax
treaty.
</FONT>

<P align="left">
<FONT size="2">We do not believe that we have been, are
currently or are likely to be a USRPHC. If we were to become a
USRPHC, so long as our common stock is regularly traded on an
established securities market and continues to be traded, you
would be subject to federal income tax on any gain from the sale
or other disposition of shares of common stock only if you
actually or constructively owned, during the Applicable Period,
more than 5% of the class of stock that includes such shares.
</FONT>

<P align="left">
<B><FONT size="2">Federal Estate Tax</FONT></B>

<P align="left">
<FONT size="2">Common stock held by an individual Non-U.S.
Holder at the time of death will generally be included in such
holder&#146;s gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides
otherwise.
</FONT>

<P align="left">
<B><FONT size="2">Information Reporting and Backup
Withholding</FONT></B>

<P align="left">
<FONT size="2">We must report annually to the IRS and to each
Non-U.S. Holder the amount of dividends paid to such holder and
the tax withheld with respect to such dividends, regardless of
whether withholding was
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 83</FONT></B>
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Material United States federal income tax
considerations for non-U.S.&nbsp;holders</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">required. Copies of the information returns
reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the
Non-U.S. Holder resides under the provisions of an applicable
income tax treaty. A Non-U.S. Holder will be subject to backup
withholding on dividends paid to such holder unless applicable
certification requirements are met.
</FONT>

<P align="left">
<FONT size="2">If common stock is sold by a Non-U.S. Holder
outside the United States and conducted through a non-United
States related financial institution or broker, backup
withholding and information reporting generally would not apply.
Information reporting and, depending on the circumstances,
backup withholding, generally would apply to the proceeds of a
sale of common stock within the United States or conducted
through a United States related financial institution or broker
unless the beneficial owner certifies under penalties of perjury
that it is not a U.S.&nbsp;Person (and the payer does not have
actual knowledge or reason to know that the beneficial owner is
a U.S.&nbsp;Person) or the owner otherwise establishes an
exemption.
</FONT>

<P align="left">
<FONT size="2">Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against a Non-U.S.
Holder&#146;s United States federal income tax liability
provided the required information is furnished to the IRS.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 84</FONT></B>
</DIV>

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<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="4">Underwriting</FONT></B>

<P align="left">
<FONT size="2">We and the selling stockholder are offering the
shares of our common stock described in this prospectus through
the underwriters named below. UBS Securities LLC and Deutsche
Bank Securities Inc. are the representatives of the
underwriters. UBS Securities LLC and Deutsche Bank Securities
Inc. are the joint book-running managers of this offering. We
and the selling stockholder have entered into an underwriting
agreement with the representatives. Subject to the terms and
conditions of the underwriting agreement, each underwriter has
severally agreed to purchase the number of shares of common
stock listed next to its name in the following table.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Underwriters</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="6"></TD>
</TR>

<TR>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">UBS Securities LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deutsche Bank Securities Inc.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The underwriting agreement provides that the
underwriters must buy all of the shares if they buy any of them.
However, the underwriters are not required to take or pay for
the shares covered by the underwriters&#146; over-allotment
option described below.
</FONT>

<P align="left">
<FONT size="2">Our common stock and the common stock of the
selling stockholder is offered subject to a number of
conditions, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">receipt and acceptance of our common stock by the
    underwriters; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the underwriters&#146; right to reject orders in
    whole or in part.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In connection with this offering, certain of the
underwriters or securities dealers may distribute prospectuses
electronically.
</FONT>

<P align="left">
<B><FONT size="2">OVER-ALLOTMENT OPTION</FONT></B>

<P align="left">
<FONT size="2">We and the selling stockholder have granted the
underwriters an option to buy up to an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if
any, made in connection with this offering. The underwriters
have 30&nbsp;days from the date of this prospectus to exercise
this option. If the underwriters exercise this option, they will
each purchase additional shares approximately in proportion to
the amounts specified in the table above.
</FONT>

<P align="left">
<B><FONT size="2">COMMISSIONS AND DISCOUNTS</FONT></B>

<P align="left">
<FONT size="2">Shares sold by the underwriters to the public
will initially be offered at the initial public offering price
set forth on the cover of this prospectus. Any shares sold by
the underwriters to securities dealers may be sold at a discount
of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. Any of these
securities dealers may resell any shares purchased from the
underwriters to other brokers or dealers at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms. Sales of shares made outside of the United States
may be made by affiliates of the underwriters. Upon execution of
the underwriting agreement, the underwriters will be obligated
to purchase the shares at the prices and upon the terms stated
therein, and, as a result, will thereafter bear any risk
associated with changing the offering price to the public or
other selling terms. The underwriters have informed us that they
do not expect discretionary sales to exceed 5% of the shares of
common stock to be offered.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 85</FONT></B>
</DIV>

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<DIV align="left">
<B><FONT size="2">Underwriting</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="2">We have agreed to pay the offering expenses of
the selling stockholder. The selling stockholder will pay the
underwriting discounts and commissions applicable to the shares
that they sell. The following table shows the per share and
total underwriting discounts and commissions we will pay to the
underwriters. These amounts are shown assuming both no exercise
and full exercise of the underwriters&#146; option to purchase
up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from us and an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from the selling stockholder.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Paid by us</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Paid by selling stockholder</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">No exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Full exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">No exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Full exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">No exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Full exercise</FONT></B></TD>
</TR>

<TR>
    <TD colspan="25"></TD>
</TR>

<TR>
    <TD colspan="25" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">We estimate that the total expenses of this
offering payable by us, not including underwriting discounts and
commissions, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">
<B><FONT size="2">NO SALES OF SIMILAR SECURITIES</FONT></B>

<P align="left">
<FONT size="2">We and each of our directors, executive officers
and the selling stockholder have entered into lock-up agreements
with the underwriters. Under these lock-up agreements, subject
to certain exceptions, we and each of these persons may not,
without the prior written consent of UBS Securities LLC, sell,
offer to sell, contract or agree to sell, hypothecate, hedge,
pledge, grant any option to purchase or otherwise dispose of or
agree to dispose of, directly or indirectly, any of our common
stock or any securities convertible into or exercisable or
exchangeable for our common stock, or warrants or other rights
to purchase our common stock. These restrictions will be in
effect for a period of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;days
after the date of this prospectus. At any time and without
public notice, UBS Securities LLC may, in its sole discretion,
release some or all of the affected securities from these
lock-up agreements.
</FONT>

<P align="left">
<FONT size="2">In the event that we issue an earnings release or
a material news event relating to us occurs 15 calendar days
plus three business days prior to or within 15&nbsp;days after
the expiration of the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-day period,
the restrictions imposed on us, our executive officers,
directors and the selling stockholder will continue to apply for
15 calendar days plus three business days after such earnings
release is issued or such material news event occurs.
</FONT>

<P align="left">
<FONT size="2">We and the selling stockholder have agreed to
indemnify the underwriters against certain liabilities,
including certain liabilities under the Securities Act. If we
are unable to provide this indemnification, we have agreed to
contribute to payments the underwriters may be required to make
in respect of those liabilities.
</FONT>

<P align="left">
<B><FONT size="2">NASDAQ NATIONAL MARKET QUOTATION</FONT></B>

<P align="left">
<FONT size="2">We intend to apply to have our shares of common
stock approved for quotation on The Nasdaq National Market under
the symbol &#147;BLDR.&#148;
</FONT>

<P align="left">
<B><FONT size="2">PRICE STABILIZATION, SHORT POSITIONS</FONT></B>

<P align="left">
<FONT size="2">In connection with this offering, the
underwriters may engage in activities that stabilize, maintain
or otherwise affect the price of our common stock, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">stabilizing transactions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">short sales;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">purchases to cover positions created by short
    sales;
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 86</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Underwriting</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">imposition of penalty bids; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">syndicate covering transactions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Stabilizing transactions consist of bids or
purchases made for the purpose of preventing or retarding a
decline in the market price of our common stock while this
offering is in progress. These transactions may also include
making short sales of our common stock, which involve the sale
by the underwriters of a greater number of shares of common
stock than they are required to purchase in this offering and
purchasing shares of common stock on the open market to cover
positions created by short sales. Short sales may be
&#147;covered short sales,&#148; which are short positions in an
amount not greater than the underwriters&#146; over-allotment
option referred to above, or may be &#147;naked short
sales,&#148; which are short positions in excess of that amount.
</FONT>

<P align="left">
<FONT size="2">The underwriters may close out any covered short
position by either exercising their over-allotment option, in
whole or in part, or by purchasing shares in the open market. In
making this determination, the underwriters will consider, among
other things, the price of shares available for purchase in the
open market as compared to the price at which they may purchase
shares through the over-allotment option.
</FONT>

<P align="left">
<FONT size="2">Naked short sales are in excess of the
over-allotment option. The underwriters must close out any naked
short position by purchasing shares in the open market. A naked
short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price
of the common stock in the open market that could adversely
affect investors who purchased in this offering.
</FONT>

<P align="left">
<FONT size="2">The underwriters also may impose a penalty bid.
This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by
it because the representatives have repurchased shares sold by
or for the account of that underwriter in stabilizing or short
covering transactions.
</FONT>

<P align="left">
<FONT size="2">As a result of these activities, the price of our
common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced,
they may be discontinued by the underwriters at any time. The
underwriters may carry out these transactions on The Nasdaq
National Market, in the over-the-counter market or otherwise.
</FONT>

<P align="left">
<B><FONT size="2">DETERMINATION OF OFFERING PRICE</FONT></B>

<P align="left">
<FONT size="2">Prior to this offering, there has been no public
market for our common stock. The initial public offering price
will be determined by negotiation by us and the representatives
of the underwriters. The principal factors to be considered in
determining the initial public offering price include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the information set forth in this prospectus and
    otherwise available to the representatives;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our history and prospects and the history and the
    prospects for the industry in which we compete;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our past and present financial performance and an
    assessment of our management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our prospects for future earnings and the present
    state of our development;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the general condition of the securities markets
    at the time of this offering;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the recent market prices of, and the demand for,
    public traded common stock of generally comparable companies; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">other factors deemed relevant by the underwriters
    and us.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 87</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Underwriting</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">AFFILIATIONS</FONT></B>

<P align="left">
<FONT size="2">Certain of the underwriters and their affiliates
in the past have provided and may provide from time to time
certain commercial banking, financial advisory, investment
banking and other services for us for which they will be
entitled to receive separate fees. The underwriters and their
affiliates may from time to time in the future engage in
transactions with us and perform services for us in the ordinary
course of their business. Each underwriter, or one of its
affiliates, is a lender under our $110.0&nbsp;million revolving
credit facility and our $225.0&nbsp;million term loan. At the
date of this prospectus, the aggregate commitments of the
underwriters and underwriters&#146; affiliates, as applicable,
totaled approximately
$<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;million, or
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>%, of the revolving credit
facility commitments and approximately
$<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;million, or
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>%, of the term loan
commitments. The Company intends to use a portion of the net
proceeds of this offering to repay outstanding indebtedness,
which may include a portion of the outstanding principal,
together with accrued and unpaid interest, under the term loan
facility. The entire $225.0&nbsp;million principal amount of the
term loan is currently outstanding and is expected to be
outstanding immediately prior to payment with the proceeds of
this offering. At the date of this prospectus, there were
$<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
of outstanding borrowings under the revolving credit facility.
The lenders under these credit facilities may transfer their
commitments, subject to certain conditions, so the individual
and aggregate commitments at the time of payoff could also vary
from the amounts set forth above. On February&nbsp;8, 2005, UBS
Securities LLC and Deutsche Bank Securities Inc. acted as
initial purchasers in connection with the issuance of
$275.0&nbsp;million of our second priority senior secured
floating rate notes due 2012.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2"> 88</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Legal matters
</FONT>

<P align="left">
<FONT size="2">The validity of the common stock offered hereby
and certain legal matters in connection with this offering will
be passed upon for us by Skadden, Arps, Slate,
Meagher&nbsp;&#38; Flom LLP. Certain legal matters in connection
with the offering will be passed upon for the initial purchasers
by Latham&nbsp;&#38; Watkins LLP, Los Angeles, California.
</FONT>

<P align="left">
<FONT size="4">Experts
</FONT>

<P align="left">
<FONT size="2">The financial statements as of December&nbsp;31,
2003 and 2002, and for each of the three years in the period
ended December&nbsp;31, 2003, included in this prospectus, have
been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
</FONT>

<P align="left">
<FONT size="4">Where you can find more information
</FONT>

<P align="left">
<FONT size="2">We have filed with the SEC a registration
statement on Form&nbsp;S-1 with respect to the common stock
being sold in this offering. This prospectus, which forms part
of the registration statement, does not contain all of the
information included in that registration statement. For further
information about us and the common stock being sold in this
offering, you should refer to the registration statement and its
exhibits. Statements contained in this prospectus as to the
contents of any agreement, or other document to which we make
reference are not necessarily complete. In each instance, we
refer you to the copy of such agreement, or other document filed
as an exhibit to the registration statement, each such statement
being qualified in all respects by the more complete description
of the matter involved.
</FONT>

<P align="left">
<FONT size="2">Upon completion of this offering, we will become
subject to the reporting and information requirements of the
Securities and Exchange Act of 1934, as amended, and, as a
result, we will file periodic and current reports, proxy
statements, and other information with the SEC. You may read and
copy any document we file with the SEC at the SEC&#146;s Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of these reports and information may be obtained at
prescribed rates from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. In addition, the SEC maintains a
web site that contains reports and other information regarding
registrants, such as us, that file electronically with the SEC.
The address of this web site is <U>http://www.sec.gov.</U> The
other information we file with the SEC is not part of the
registration statement of which this prospectus forms a part.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2"> 89</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<FONT size="4">Index to consolidated financial statements
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Consolidated Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Report of Independent Registered Public
    Accounting Firm
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Consolidated Statements of Operations for the
    years ended December&nbsp;31, 2003,
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2002, and 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Consolidated Balance Sheets at December&nbsp;31,
    2003 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Consolidated Statements of Cash Flows for the
    years ended December&nbsp;31, 2003,
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2002, and 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Consolidated Statements of Changes in
    Shareholders&#146; Equity for the years ended
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">December&nbsp;31, 2003, 2002, and 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Notes to Consolidated Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interim Condensed Consolidated Financial
    Statements (Unaudited)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Unaudited Condensed Consolidated Statements of
    Operations for the Nine-Months Ended
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">September&nbsp;30, 2004 and 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Unaudited Condensed Consolidated Balance Sheets
    as of September&nbsp;30, 2004 and December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Unaudited Condensed Consolidated Statements of
    Cash Flows for the Nine-Months Ended
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">September&nbsp;30, 2004 and 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Unaudited Condensed Consolidated Statements of
    Changes in Shareholders&#146; Equity for the
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Nine-Months Ended September&nbsp;30, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Notes to Condensed Consolidated Financial
    Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 1</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<FONT size="4">Report of Independent Registered Public
Accounting Firm
</FONT>

<P align="left">
<FONT size="2">To the Shareholders of Builders FirstSource, Inc.:
</FONT>

<P align="left">
<FONT size="2">In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, shareholders&#146; equity and cash flows present
fairly, in all material respects, the financial position of
Builders FirstSource, Inc. and its subsidiaries (the
&#147;Company&#148;) at December&nbsp;31, 2003 and 2002, and the
results of their operations and their cash flows for each of the
three years in the period ended December&nbsp;31, 2003, in
conformity with accounting principles generally accepted in the
United States of America. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
</FONT>

<P align="left">
<FONT size="2">As discussed in Notes&nbsp;2 and 4 to the
consolidated financial statements, the Company adopted the
provisions of Statement of Financial Accounting Standards
No.&nbsp;142, &#147;Goodwill and Other Intangible Assets,&#148;
in 2002.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="60%"></TD>
    <TD width="40%"></TD>
</TR>

<TR valign="top">
    <TD align="left">
    <FONT size="2">/s/ PRICEWATERHOUSECOOPERS LLP
    </FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<DIV align="left">
<FONT size="2">Dallas, Texas
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">March&nbsp;30, 2004, except for Note&nbsp;19,
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">as to which the date is February&nbsp;8, 2005
</FONT>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 2</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="14"></TD>
</TR>

<TR>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">(in thousands, except per share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,675,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,500,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,513,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,155,369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,150,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Gross margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">373,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">344,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">363,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">326,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">307,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">323,741</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,283</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other expense, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations before income
    taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Loss from discontinued operations (net of income
    tax benefit of $2,058, $1,605 and $1,331 in 2003, 2002 and 2001,
    respectively)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,822</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,980</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle<BR>
    (net of income tax benefit of $3,556)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,504</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT size="2">Basic and diluted net income (loss) per
    share</FONT></I></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Loss from discontinued operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.01</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.01</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.01</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.08</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT size="2">Weighted average common shares
    outstanding</FONT></I></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,040</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">253,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,320</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">254,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 3</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="0" color="#0000CA" face="">December&nbsp;31,</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="0" color="#0000CA" face="">2003</FONT></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="0" color="#0000CA" face="">2002</FONT></TD>
</TR>

<TR>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="11" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="0" color="#0000CA" face="">(in thousands, except</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="0" color="#0000CA" face="">per&nbsp;share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="11" align="left" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Retained interest in transferred receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">367,673</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">265,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Property, plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,741</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other intangible assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">535,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="11" align="left" valign="top">
    <B><FONT size="2">LIABILITIES AND SHAREHOLDERS&#146;
    EQUITY</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Book overdrafts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,316</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current maturities of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">140,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,797</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Long-term debt, net of current maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">324,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,283</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Commitments and contingencies (Note&nbsp;16)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Shareholders&#146; equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Common stock, $.01&nbsp;par value,
    300,000&nbsp;shares authorized; 251,558 and 253,004 issued and
    outstanding at December&nbsp;31, 2003 and 2002, respectively
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Stock purchase loans receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">301,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total liabilities and shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">535,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 4</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="16"></TD>
</TR>

<TR>
    <TD colspan="16" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows from operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Adjustments to reconcile net income (loss) to net
    cash (used in) provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Amortization of deferred loan costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,954</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,065</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Non-cash facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,853</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,437</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle, net of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Bad debt expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,361</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,491</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Non-cash loss from discontinued operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net gain on sales of assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(975</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,609</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Changes in assets and liabilities, net of effects
    from acquired companies:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(143,630</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Retained interest in transferred accounts
    receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34,409</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,639</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,757</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">628</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other assets and liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,079</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,105</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash (used in) provided by operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,162</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows from investing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Purchases of property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,592</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,061</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,491</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Proceeds from sale of property, plant and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,952</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Proceeds from sale of discontinued operation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Acquisitions, net of cash acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,563</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,651</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,212</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,040</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,311</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,158</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows from financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net borrowings (payments)&nbsp;under revolving
    credit facilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,800</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Payments on long-term debt and other loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,573</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,504</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deferred loan costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,340</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,805</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,677</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Collection of stock purchase loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Book overdrafts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,279</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,676</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,280</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,918</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net (decrease) increase in cash and cash
    equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,061</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash paid during the period for:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,941</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 5</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS&#146; EQUITY</FONT></B>

<DIV align="left">

</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Common stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">purchase</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-In</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">loans</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">receivable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="26"></TD>
</TR>

<TR>
    <TD colspan="26" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><FONT size="1">(in thousands, except share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256,204,523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">254,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(338</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">296,260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">221,557</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,654,611</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,650</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,677</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Collection of stock purchase loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">253,774,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(307</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,529</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">295,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,805,179</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,787</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,805</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Collection of stock purchase loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">253,004,158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,451,684</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,437</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Collection of stock purchase loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,558,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">301,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 6</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">DESCRIPTION OF BUSINESS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Builders FirstSource, Inc. and subsidiaries (the
&#147;Company&#148;) is a leading provider of manufactured
components, building materials and construction services to
professional homebuilders and contractors in the United States.
The Company was formed through an agreement between JLL
Partners, Inc. and certain members of the existing management
team. Affiliates of JLL Partners, Inc. control JLL Building
Products, LLC, which currently owns 94.6% of the Company&#146;s
outstanding common stock. The Company&#146;s manufactured
products include trusses, wall panels, custom millwork, pre-hung
doors and windows, and stairs. Construction services include
turn-key framing, product installation, and project management
for builders. At December&nbsp;31, 2003, the Company had 63
distribution centers and 42 manufacturing operations generally
in co-located facilities in Florida, Georgia, Kentucky,
Maryland, North Carolina, New Jersey, Ohio, South Carolina,
Tennessee, Texas and Virginia.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Principles of Consolidation</FONT></B>

<P align="left">
<FONT size="2">The consolidated financial statements present the
results of operations, financial position, and cash flows of
Builders FirstSource, Inc. and its wholly-owned subsidiaries.
All significant intercompany transactions have been eliminated
in consolidation.
</FONT>

<P align="left">
<B><FONT size="2">Accounting Estimates</FONT></B>

<P align="left">
<FONT size="2">The preparation of financial statements in
conformity with generally accepted accounting principles in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
</FONT>

<P align="left">
<FONT size="2">Estimates are used when accounting for items such
as revenue, vendor rebates, allowance for returns, discounts and
doubtful accounts, employee compensation programs, depreciation
and amortization periods, taxes, inventory values, insurance
programs, goodwill, other intangible assets and long-lived
assets.
</FONT>

<P align="left">
<B><FONT size="2">Sales Recognition</FONT></B>

<P align="left">
<FONT size="2">The Company recognizes sales of building products
upon delivery to the customer. For contracts with service
elements, sales are generally recognized on the completed
contract method as these contracts are usually completed within
30&nbsp;days. Contract costs include all direct material and
labor, equipment costs and those indirect costs related to
contract performance. Provisions for estimated losses on
uncompleted contracts are recognized in the period in which such
losses are determined. Prepayments for materials or services are
deferred until such materials have been delivered or services
have been provided.
</FONT>

<P align="left">
<FONT size="2">All sales recognized are net of allowances for
discounts and estimated returns, based on historical experience.
</FONT>

<P align="left">
<B><FONT size="2">Cash and Cash Equivalents</FONT></B>

<P align="left">
<FONT size="2">The Company considers all highly liquid
investments with an original maturity date of three months or
less to be cash equivalents.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 7</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<B><FONT size="2">Financial Instruments</FONT></B>

<P align="left">
<FONT size="2">The Company uses financial instruments in its
normal course of business as a tool to manage its assets and
liabilities. The Company does not hold or issue financial
instruments for trading purposes.
</FONT>

<P align="left">
<FONT size="2">The carrying amounts of the Company&#146;s
financial instruments, including accounts receivable and
accounts payable approximate fair value due to their short-term
nature. Based on the variability of interest rates, management
believes the carrying value of long-term debt approximates fair
value at December&nbsp;31, 2003.
</FONT>

<P align="left">
<B><FONT size="2">Accounts Receivable</FONT></B>

<P align="left">
<FONT size="2">The Company extends credit to qualified
professional homebuilders and contractors, generally on a
non-collateralized basis. The allowance for doubtful accounts is
based on management&#146;s assessment of the amount which may
become uncollectible in the future and is estimated using
specific review of problem accounts, overall portfolio quality,
current economic conditions that may affect the borrower&#146;s
ability to pay, and historical experience. Accounts receivable
are written off when deemed uncollectible.
</FONT>

<P align="left">
<FONT size="2">The Company previously provided financing for
construction projects through a builder finance program
inherited from a company acquired in 2000. This program was
offered to a select group of customers in a single market. The
notes receivable bear interest at rates ranging from prime plus
1% to 10.5%, generally mature within one year and are secured by
a first mortgage. As of December&nbsp;31, 2003 and 2002, the
outstanding balances aggregated $1.1&nbsp;million and
$2.4&nbsp;million, respectively, and are included in accounts
receivable in the accompanying consolidated balance sheets. This
program was discontinued during 2002. See Note&nbsp;5 for a
discussion of the Company&#146;s accounts receivable
securitization agreement which expired in 2003.
</FONT>

<P align="left">
<FONT size="2">Accounts receivable consist of the following at
December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Trade receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">210,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,096</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">220,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Less allowance for returns and doubtful accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Inventories</FONT></B>

<P align="left">
<FONT size="2">Inventories consist principally of materials
purchased for resale, including lumber, sheet goods, windows,
doors and millwork, and certain manufactured products and are
stated at the lower of cost or market. Cost is determined using
the weighted average method, the use of which approximates the
first-in, first-out method. The Company accrues for shrink based
on the actual historical shrink results of the Company&#146;s
most recent physical inventories adjusted, if necessary, for
current economic conditions. These estimates are compared with
actual results as physical inventory counts are taken and
reconciled to the general ledger.
</FONT>

<P align="left">
<FONT size="2">The Company&#146;s arrangements with vendors
provide for rebates of a specified amount of consideration,
payable when certain measures, generally related to a stipulated
level of purchases, have been achieved. The Company accounts for
estimated rebates as a reduction of the prices of the
vendor&#146;s inventory until the product is sold, at which
time, such rebates reduce cost of sales in the accompanying
consolidated statements of operations. Throughout the year, the
Company estimates the amount of the rebates based
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 8</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">upon the expected level of purchases. The Company
continually revises these estimates based on actual purchase
levels.
</FONT>

<P align="left">
<B><FONT size="2">Shipping and Handling Costs</FONT></B>

<P align="left">
<FONT size="2">Handling costs incurred in manufacturing
activities are included in cost of sales. All other shipping and
handling costs are included in selling, general and
administrative expenses on the accompanying consolidated
statements of operations and aggregated $73.2&nbsp;million,
$65.5&nbsp;million and $65.6&nbsp;million in 2003, 2002 and
2001, respectively.
</FONT>

<P align="left">
<B><FONT size="2">Income Taxes</FONT></B>

<P align="left">
<FONT size="2">The Company accounts for income taxes utilizing
the liability method described in Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;109,
&#147;Accounting for Income Taxes.&#148; Deferred income taxes
are recorded to reflect consequences on future years of
differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year end based on
enacted tax laws and statutory tax rates applicable to the
periods in which differences are expected to affect taxable
earnings. The Company records a valuation allowance to reduce
deferred tax assets if it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
</FONT>

<P align="left">
<B><FONT size="2">Warranty Expense</FONT></B>

<P align="left">
<FONT size="2">The Company has warranty obligations with respect
to most manufactured products, however, the liability for the
warranty obligations is not significant as a result of third
party inspection and acceptance processes.
</FONT>

<P align="left">
<B><FONT size="2">Deferred Loan&nbsp;Costs</FONT></B>

<P align="left">
<FONT size="2">Loan costs are capitalized upon the issuance of
long-term debt and amortized over the life of the related debt
using the effective interest rate method for the Company&#146;s
term notes and the straight-line method for the Company&#146;s
revolving credit facility. Amortization of deferred loan costs
is included in interest expense.
</FONT>

<P align="left">
<B><FONT size="2">Property, Plant and Equipment</FONT></B>

<P align="left">
<FONT size="2">Property, plant and equipment are recorded at
cost and depreciated using the straight-line method over the
estimated useful lives of the assets. The estimated lives of the
various classes of assets are as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">15 to 40&nbsp;years
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Machinery and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">3 to 10&nbsp;years
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Furniture and fixtures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">3 to 5&nbsp;years
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">The lesser of the life of the lease or asset
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Major additions and improvements are capitalized,
while maintenance and repairs that do not extend the useful life
of the property are charged to expense as incurred. Gains or
losses from dispositions of property, plant and equipment are
recorded in the period incurred.
</FONT>

<P align="left">
<FONT size="2">The Company periodically evaluates the commercial
and strategic operation of the land and related buildings and
improvements of its facilities. In connection with these
evaluations, facilities may be consolidated, and others sold or
leased. The Company recorded net gains of $1.0&nbsp;million,
$1.6&nbsp;million and $0.2&nbsp;million in 2003, 2002 and 2001,
respectively, principally from the sale of real estate. These
gains
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 9</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">are recorded as a reduction of selling, general
and administrative expenses in the accompanying consolidated
statements of operations.
</FONT>

<P align="left">
<FONT size="2">The Company capitalizes certain costs of computer
software developed or obtained for internal use, including
interest, provided that those costs are not research and
development, and certain other criteria are met pursuant to
Statement of Position 98-1, &#147;Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use&#148;.
The net carrying value of internal use software costs was
$2.3&nbsp;million and $2.5&nbsp;million as of December&nbsp;31,
2003 and 2002, respectively. These costs are included in
furniture and fixtures in Note&nbsp;10 and are amortized on a
straight-line basis over a period of 3 to 5&nbsp;years.
</FONT>

<P align="left">
<B><FONT size="2">Long-Lived Assets</FONT></B>

<P align="left">
<FONT size="2">The Company evaluates its long-lived assets,
other than goodwill, for impairment when events or changes in
circumstances indicate, in management&#146;s judgment, that the
carrying value of such assets may not be recoverable. The
determination of whether an impairment has occurred is based on
management&#146;s estimate of undiscounted future cash flows
before interest attributable to the assets as compared to the
net carrying value of the assets. If an impairment has occurred,
the amount of the impairment recognized is determined by
estimating the fair value of the assets based on estimated
discounted future cash flows and recording a provision for loss
if the carrying value is greater than estimated fair value. The
net carrying value of assets identified to be disposed of in the
future is compared to their estimated fair value, generally the
quoted market price obtained from an independent third-party,
less the cost to sell to determine if an impairment is required.
Until the assets are disposed of, an estimate of the fair value
is redetermined when related events or circumstances change.
</FONT>

<P align="left">
<B><FONT size="2">Insurance</FONT></B>

<P align="left">
<FONT size="2">The Company has established insurance programs to
cover certain insurable risks consisting primarily of physical
loss to property, business interruptions resulting from such
loss, workers&#146; compensation, employee healthcare,
comprehensive general and auto liability. Third party insurance
coverage is obtained for exposures above predetermined
deductibles as well as those risks required to be insured by law
or contract. Provisions for losses are developed from valuations
that rely upon the Company&#146;s past claims experience, which
considers both the frequency and settlement of claims. The
Company discounts its workers&#146; compensation liability based
upon estimated future payment streams at its risk-free rate.
</FONT>

<P align="left">
<B><FONT size="2">Net Income (Loss) Per Common Share</FONT></B>

<P align="left">
<FONT size="2">Net income (loss) per common share is calculated
in accordance with SFAS No. 128, &#147;Earnings per Share,&#148;
which requires the presentation of basic and dilutive earnings
per share. Basic earnings per share is computed using the
weighted average number of common shares outstanding during the
period. Dilutive earnings per share is computed using the
weighted average number of common shares outstanding during the
period, plus the dilutive effect of common stock equivalents.
Weighted average shares outstanding have been adjusted for
common shares underlying options of 0.5&nbsp;million,
0.5&nbsp;million and 0.5&nbsp;million for the periods ended
December&nbsp;31, 2003, 2002 and 2001, respectively and for
contingently issuable shares of 1.0&nbsp;million for the period
ended December 31, 2001. Options to purchase 29.4&nbsp;million,
28.7&nbsp;million and 29.0&nbsp;million shares of common stock
outstanding at December&nbsp;31, 2003, 2002 and 2001,
respectively, were not included in the computation of diluted
earnings per share because their effect would not be dilutive.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 10</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<B><FONT size="2">Goodwill and other intangible assets</FONT></B>

<P align="left">
<I><FONT size="2">Intangibles subject to amortization</FONT></I>

<DIV align="left">
<FONT size="2">The Company recognizes an acquired intangible
apart from goodwill whenever the intangible arises from
contractual or other legal rights, or whenever it can be
separated or divided from the acquired entity and sold,
transferred, licensed, rented, or exchanged, either individually
or in combination with a related contract, asset, or liability.
Impairment losses are recognized if the carrying value of an
intangible subject to amortization is not recoverable from
expected future cash flows and its carrying amount exceeds its
estimated fair value.
</FONT>
</DIV>

<P align="left">
<I><FONT size="2">Goodwill and intangibles with indefinite
lives</FONT></I>

<DIV align="left">
<FONT size="2">The Company recognizes goodwill as the excess
cost of an acquired entity over the net amount assigned to
assets acquired and liabilities assumed. Prior to
January&nbsp;1, 2002, goodwill was amortized over periods of up
to 40&nbsp;years. Beginning January&nbsp;1, 2002 and pursuant to
SFAS&nbsp;No.&nbsp;142, &#147;Goodwill and Other Intangible
Assets,&#148; goodwill is no longer amortized. Goodwill is
tested for impairment on an annual basis and between annual
tests whenever an impairment is indicated. This annual test
takes place in the fourth quarter of each year. Impairment
losses are recognized whenever the implied fair value of
goodwill is less than its carrying value. Beginning
January&nbsp;1, 2002, intangibles with indefinite lives are no
longer amortized. They are tested for impairment by comparing
their carrying value to fair value annually or whenever an
impairment is indicated. Impairment losses are recognized
whenever the estimated fair value is less than the carrying
value. At December&nbsp;31, 2003, the Company had no indefinite
lived intangibles.
</FONT>
</DIV>

<P align="left">
<FONT size="2">The following reflects adjustments that would be
made to net income and earnings per share for the year ending
December&nbsp;31, 2001, if the non-amortization provisions of
SFAS&nbsp;No.&nbsp;142 had been adopted as of January&nbsp;1,
2001 (in thousands, except per share amounts):
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Reported net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Add back: Goodwill amortization, net of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Adjusted net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,406</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Basic and diluted earnings per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Reported net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Goodwill amortization, net of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Adjusted net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.03</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Stock compensation</FONT></B>

<P align="left">
<FONT size="2">The Company applies Accounting Principles Board
Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees&#148; (&#147;APB&nbsp;25&#148;) and related
interpretations in accounting for employee stock-based
compensation costs related to its stock incentive plan (see
Note&nbsp;14). APB&nbsp;25 is an intrinsic value approach for
measuring stock-based compensation costs.
SFAS&nbsp;No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation,&#148; is a fair value approach for measuring
stock-based compensation costs.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 11</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">Had the compensation cost for the Company&#146;s
stock-based compensation been determined in accordance with
SFAS&nbsp;No.&nbsp;123, the Company&#146;s net income (loss) and
net income (loss) per share for 2003, 2002 and 2001 would
approximate the pro forma amounts below:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="13"></TD>
</TR>

<TR>
    <TD colspan="13" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">(in thousands, except per share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Reported net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deduct: Total stock-based employee compensation
    expense determined under minimum value methods for all awards,
    net of related tax effects
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(877</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(872</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(854</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Pro forma net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Basic and diluted earnings per share&#151; as
    reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Basic and diluted earnings per share&#151; pro
    forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The effects of applying SFAS&nbsp;No.&nbsp;123 in
this pro forma disclosure may not be indicative of future
results.
</FONT>

<P align="left">
<B><FONT size="2">Recently issued accounting
pronouncements</FONT></B>

<P align="left">
<FONT size="2">In October 2001, the FASB issued
SFAS&nbsp;No.&nbsp;144, &#147;Accounting for the Impairment or
Disposal of Long-Lived Assets.&#148; SFAS&nbsp;No.&nbsp;144
provides new guidance on the recognition of impairment losses on
long-lived assets to be held and used or to be disposed of and
also broadens the definition of what constitutes a discontinued
operation and how the results of a discontinued operation are to
be measured and presented. The Company early adopted the
provisions of this statement effective January&nbsp;1, 2001.
</FONT>

<P align="left">
<FONT size="2">In November 2002, the FASB issued FASB
Interpretation No.&nbsp;45 (&#147;FIN&nbsp;45&#148;),
&#147;Guarantor&#146;s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others.&#148; FIN&nbsp;45 requires that guarantors recognize, at
the inception of the guarantee, a liability for the fair value
of the guarantee. In addition, FIN&nbsp;45 clarifies the
disclosures required of guarantors for certain guarantees that
it has issued. The recognition and measurement criteria of this
interpretation are to be applied prospectively to guarantees
issued or modified after December&nbsp;31, 2002. The adoption of
FIN&nbsp;45 did not have a material impact on the Company&#146;s
financial position, results of operations or cash flows.
</FONT>

<P align="left">
<FONT size="2">In January 2003, the FASB issued FASB
Interpretation No.&nbsp;46 (&#147;FIN&nbsp;46&#148;),
&#147;Consolidation of Variable Interest Entities,&#148; an
interpretation of Accounting Research Bulletin&nbsp;No.&nbsp;51,
which was further revised in December 2003. FIN&nbsp;46 requires
certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional
subordinated financial support from other parties. FIN&nbsp;46
also requires disclosure of significant variable interests in
variable interest entities for which a company is not the
primary beneficiary. The Company is required to apply the
revised provisions of FIN&nbsp;46 beginning in fiscal 2004 for
interests in an entity subject to this Interpretation created
after December&nbsp;31, 2003, and in 2005 for interests in all
entities subject to this Interpretation. The application of the
revised Interpretation is not expected to have a material impact
on the Company&#146;s financial position, results of operations
or cash flows.
</FONT>

<P align="left">
<FONT size="2">In March 2003, the consensus of Emerging Issues
Task Force (&#147;EITF&#148;) Issue No.&nbsp;02-16,
&#147;Accounting by a Customer (including a Reseller) for
Certain Consideration Received from a Vendor,&#148; was
published. EITF Issue No.&nbsp;02-16 addresses how a reseller of
a vendor&#146;s products should account for cash consideration
received from a vendor. The provisions of EITF Issue
No.&nbsp;02-16 were effective for new arrangements transacted
after December&nbsp;31, 2002. The Company&#146;s adoption of
EITF No.&nbsp;02-16 did not have a material impact on the
Company&#146;s financial position, results of operations or cash
flows.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 12</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">In March 2003, the consensus of EITF Issue
No.&nbsp;00-21, &#147;Accounting for Revenue Arrangements with
Multiple Deliverables,&#148; was published. EITF Issue
No.&nbsp;00-21 addresses certain aspects of the accounting by a
vendor for arrangements under which it will perform multiple
revenue-generating activities. Specifically, EITF Issue
No.&nbsp;00-21 addresses how to determine whether an arrangement
involving multiple deliverables contains more than one unit of
accounting. The provisions of EITF Issue No.&nbsp;00-21 are
effective for fiscal periods beginning after June&nbsp;15, 2003.
The Company&#146;s adoption of EITF Issue No.&nbsp;00-21 is not
expected to have a material impact on the Company&#146;s
financial position, results of operations or cash flows.
</FONT>

<P align="left">
<FONT size="2">In May 2003, the FASB issued
SFAS&nbsp;No.&nbsp;150, &#147;Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and
Equity.&#148; This statement establishes standards for how an
issuer classifies and measures certain financial arrangements
with characteristics of both liabilities and equity. It requires
that an issuer classify a financial arrangement that is within
its scope as a liability (or an asset in some circumstances).
The provisions of this statement were effective for financial
arrangements entered into or modified after May&nbsp;31, 2003,
and otherwise were effective at the beginning of the first
interim period beginning after June&nbsp;15, 2003. Certain
provisions of this statement have been deferred for an
indefinite period. The Company continues to monitor FASB
deliberations on SFAS&nbsp;No.&nbsp;150 to determine the
ultimate impact on the Company&#146;s financial position,
results of operations and cash flows.
</FONT>

<P align="left">
<B><FONT size="2">Reclassifications</FONT></B>

<P align="left">
<FONT size="2">Prior year amounts have been reclassified to
conform to the current year presentation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.</FONT></B></TD>
    <TD>
    <B><FONT size="2">GOODWILL AND COVENANTS NOT TO
    COMPETE</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<I><FONT size="2">Goodwill</FONT></I>

<DIV align="left">
<FONT size="2">The changes in the net carrying amount of
goodwill for the years ended December&nbsp;31, 2003 and 2002 are
as follows (in thousands):
</FONT>
</DIV>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at January&nbsp;1, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182,489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Acquisitions and other purchase price adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Contingent consideration adjustments(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Impairment losses(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,060</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Acquisitions and other purchase price adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Impairment on discontinued operations(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,181</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(1)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">See Note&nbsp;4 related to the transitional
    impairment analysis.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(2)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">See Note&nbsp;9 related to discontinued
    operations.</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">(3)</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">See Note&nbsp;8 related to
    acquisitions.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<I><FONT size="2">Covenants not to Compete</FONT></I>

<DIV align="left">
<FONT size="2">Intangible assets subject to amortization consist
of covenants not to compete which are amortized over the life of
the non-compete agreement, which is generally three years. The
changes in the net carrying amount
</FONT>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 13</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">of covenants not to compete for the years ended
December&nbsp;31, 2003 and 2002 are as follows (in thousands):
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Net</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Carrying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">carrying</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">amortization</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">amount</FONT></B></TD>
</TR>

<TR>
    <TD colspan="14"></TD>
</TR>

<TR>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at January&nbsp;1, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,995</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Covenants Not to Compete
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,572</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,572</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,567</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Covenants Not to Compete
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(818</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(818</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,385</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Estimated intangible amortization expense is
$0.1&nbsp;million for both 2004 and 2005.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">4.</FONT></B></TD>
    <TD>
    <B><FONT size="2">CHANGE IN ACCOUNTING PRINCIPLE</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The Company adopted SFAS&nbsp;No.&nbsp;142 in
January 2002. This standard required the Company to complete a
transitional impairment analysis of its recorded goodwill and
indefinite lived intangible assets and to record any impairment
charge as a change in accounting principle. This analysis is a
two-step process. The first step requires a comparison of the
book value of net assets to the fair value of the related
operations. If the book value exceeds the fair value, the second
step of the test is performed. The second step requires that the
Company determine an estimate of the implied fair value of
goodwill and compare the estimated implied fair value to the
book value of the related goodwill. The amount of goodwill
impairment, if any, would be the difference between the book
value and the estimated implied fair value of the related
goodwill, as determined by the application of the second step of
the impairment test.
</FONT>

<P align="left">
<FONT size="2">The impairment analysis of goodwill is performed
on a market-by-market basis. The Company performed its
transitional impairment analysis as of January&nbsp;1, 2002. As
a result of the required change in methodology used to evaluate
goodwill for impairment and performing the two-step test
required by SFAS&nbsp;No.&nbsp;142, the Company determined that
its goodwill balance for certain reporting units was impaired
resulting in a charge of $23.1&nbsp;million. The impairment
charge has been recorded as a cumulative effect of a change in
accounting principle, net of tax, in the Company&#146;s
consolidated statements of operations for 2002.
</FONT>

<P align="left">
<FONT size="2">The Company&#146;s reporting units that were
determined to be impaired generated cash flows that have not met
Company expectations and management does not anticipate cash
flows in the future that would support an implied fair value of
goodwill greater than its adjusted carrying value. Possible
reasons for the short-falls include increased competition, a
reduction in residential home building within the geographic
markets that these reporting units serve, or management issues.
In the case of each reporting unit, fair value was estimated
using the expected present value of future cash flows.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.</FONT></B></TD>
    <TD>
    <B><FONT size="2">SECURITIZATION OF TRADE RECEIVABLES</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Prior to September 2003, the Company and certain
of its subsidiaries sold on a non-recourse basis a pool of trade
receivables to a wholly owned bankruptcy-remote special purpose
funding subsidiary (the &#147;Funding Subsidiary&#148;) of the
Company. The Funding Subsidiary, in turn, sold the trade
receivables to a securitization company. The agreement with the
securitization company expired August&nbsp;28, 2003 (the
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 14</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">&#147;Expiration Date&#148;) and the Funding
Subsidiary was dissolved. Prior to the Expiration Date, trade
receivables sold to the securitization company were not
reflected on the Company&#146;s consolidated balance sheets and
any receivables not sold to the securitization company were
recorded as retained interest in the receivables portfolio of
the Funding Subsidiary. The net carrying value of the retained
interest as of December&nbsp;31, 2002 approximated fair value
and is classified as a current asset.
</FONT>

<P align="left">
<FONT size="2">The Company recognized losses on the accounts
receivable sold to the securitization company based on the fair
value of the receivables sold. The fair value of the retained
interest was determined after considering such factors as loss
history, payment discounts, weighted average life and product
returns. From the inception of the securitization to the
Expiration Date, there were no substantive changes in the
Company&#146;s key measurement and valuation assumptions.
Pre-tax losses on these sales, net of servicing fee, totaled
$0.6&nbsp;million, $2.2&nbsp;million and $4.1&nbsp;million in
2003, 2002 and 2001, respectively, and were recorded in other
expense, net in the accompanying consolidated statements of
operations.
</FONT>

<P align="left">
<FONT size="2">During the tenure of the securitization, the
Company received an annual servicing fee of 0.5% of the
securitized account receivables, which amount is recorded in
other expense, net in the accompanying consolidated statements
of operations. The Company recognized no servicing asset or
liability because the servicing fee represented adequate
compensation for the services performed.
</FONT>

<P align="left">
<FONT size="2">The following table summarizes certain cash flows
received from the securitization vehicle during the years ended
December&nbsp;31:
</FONT>

<P align="left">
<B><FONT size="2">Cash flow information:</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="13"></TD>
</TR>

<TR>
    <TD colspan="13" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Proceeds from new securitizations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows received on retained interests
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">332,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">419,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">349,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Proceeds from collections reinvested in revolving
    securitizations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">534,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">958,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">982,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Managed Portfolio Data:</FONT></B>

<DIV align="left">
<FONT size="2">The table below presents information about
year-end securitized receivables and other financial assets
managed together with them. In addition, the table below
summarizes information regarding delinquencies at the end of the
period and net credit losses during 2002.
</FONT>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Securitized balances
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Retained interest in transferred accounts
    receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Owned receivables, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Managed receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">161,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the year ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As&nbsp;of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="21"></TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net charge-offs of managed receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,361</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">n/a</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">n/a</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Delinquency rate at year end
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">n/a</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">n/a</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">n/a</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 15</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">6.</FONT></B></TD>
    <TD>
    <B><FONT size="2">SALE-LEASEBACK OF REAL ESTATE</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">During 2001, the Company sold certain
distribution and manufacturing properties for
$12.6&nbsp;million. These properties were leased back from an
unaffiliated third party for a period of 15&nbsp;years, with two
ten-year option renewal periods at fair market value. The
resulting lease, which does not contain any purchase options or
residual value guarantees, is being accounted for as an
operating lease. The Company incurred a $108,000 loss as a
result of the transaction, which was recognized in selling,
general and administrative expenses in the accompanying
consolidated statements of operations. Future minimum lease
commitments of these operating leases are included in the
summary of the Company&#146;s operating leases in Note&nbsp;16.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">7.</FONT></B></TD>
    <TD>
    <B><FONT size="2">FACILITY CLOSURE COSTS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">During 2003, the Company developed and executed a
plan to close a facility in Texas and one in South Carolina due
to the locations being unable to sustain a consistent level of
profitability. In conjunction with the plan, the Company began
disposing of assets, severing employees, and pursuing sale of
the related real estate. The Company completed the exit plan
prior to December&nbsp;31, 2003. During 2003, the Company
recognized approximately $0.5&nbsp;million in expenses related
to the facility closure, including termination benefits to
severed employees and adjustments to reflect certain asset
balances at net realizable value. The Company also recorded an
impairment charge of approximately $0.6&nbsp;million to adjust
the carrying value of the real estate related to these
operations to its estimated fair value, less reasonable direct
selling costs. The estimated fair value was determined based on
a quoted market price as estimated by an independent third
party. At December&nbsp;31, 2003, the Company classified the
carrying value of the real estate of $1.4&nbsp;million as held
for sale and is included as a component of other assets, net in
the accompanying consolidated balance sheets.
</FONT>

<P align="left">
<FONT size="2">During 2001, the Company developed and executed a
plan to close various facilities in Texas, South Carolina, North
Carolina, and Tennessee. The facility closures were partially
due to the Company consolidating locations from separate
acquisitions within certain markets in an attempt to achieve
economies of scale. The facility closures were also due to
certain locations not being able to achieve the desired levels
of profitability. In conjunction with the plan, the Company
began disposing of assets, severing employees, and exiting the
facilities. The Company completed the exit plan on three
facilities prior to December&nbsp;31, 2001. The exit plans for
the remaining three facilities were completed by
December&nbsp;31, 2002. During 2001, the Company recognized
approximately $4.5&nbsp;million in expenses related to the
facility closure, including the present value of future minimum
rental payments, termination benefits to severed employees, and
adjustments to reflect certain asset balances at net realizable
value. The Company also recognized an impairment charge of
$3.7&nbsp;million to adjust the carrying value of goodwill
pertaining to these operations. During 2002, the Company
recorded $0.8&nbsp;million in expenses related to the final
stages of the exit plan.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 16</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">Facility closure costs on the accompanying
consolidated statements of operations, consisted of the
following:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the year ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="14"></TD>
</TR>

<TR>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Facility and other exit costs, net of estimated
    sub-lease rental income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">491</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Employee severance and termination benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Write-down of assets to net realizable value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">899</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,254</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Goodwill impairment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,747</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total costs related to facility closures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">An analysis of the Company&#146;s facility
closure reserves for the periods reflected is as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="26%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="30"></TD>
</TR>

<TR>
    <TD colspan="30" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Facility and other exit costs, net of estimated
    sub-lease rental income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,496</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">491</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,784</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">43</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(562</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,265</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Employee severance and termination benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">259</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">135</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(394</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">193</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(126</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">67</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">486</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">124</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(309</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">301</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">36</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(337</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="1">Total facility closure reserve
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,241</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">750</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,906</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,085</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">272</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,025</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,332</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The facility and other exit cost reserves of
$3.3&nbsp;million at December&nbsp;31, 2003, of which
$2.3&nbsp;million is recorded as other long-term liabilities,
are primarily related to future minimum lease payments on
vacated facilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">8.</FONT></B></TD>
    <TD>
    <B><FONT size="2">ACQUISITIONS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">During 2003, 2002, and 2001, the Company acquired
various businesses that provide building materials and services
primarily to professional contractors and residential builders
in the United States. The aggregate purchase price (including
final working capital adjustments), consisting of cash
consideration, for these businesses approximated
$4.6&nbsp;million, $1.7&nbsp;million, and $1.2&nbsp;million in
2003, 2002, and 2001, respectively. Of these amounts,
$2.1&nbsp;million and $1.7&nbsp;million were allocated to
goodwill and intangible assets in 2003 and 2002, respectively,
based on the preliminary allocation of the purchase price.
During 2002, the Company also paid approximately
$1.0&nbsp;million of contingent consideration related to a prior
acquisition. The contingent consideration was based on the
achievement of specified earnings targets by the acquired
business as stipulated in the original purchase agreement and
was paid through the issuance of the Company&#146;s common
stock. The amount paid was recorded as goodwill as it was
considered to be additional costs of the acquired business.
</FONT>

<P align="left">
<FONT size="2">These acquisitions have been accounted for by the
purchase method, and accordingly the results of operations of
each have been included in the Company&#146;s consolidated
financial statements from the respective dates of acquisition.
Under this method, the consideration was allocated to the assets
acquired and liabilities assumed based on the estimated fair
values at the date of acquisition. Any excess of the purchase
price over the estimated fair value of the net assets acquired
and liabilities assumed was recorded
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 17</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">as goodwill. Pro forma results of operations have
not been presented due to the immateriality of the acquisitions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">9.</FONT></B></TD>
    <TD>
    <B><FONT size="2">DISCONTINUED OPERATIONS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<I><FONT size="2">Colorado Operations</FONT></I>

<DIV align="left">
<FONT size="2">During 2002 and 2001, the Company closed two
facilities in Colorado as part of a location consolidation in
attempt to achieve certain economies of scale, including reduced
operating costs. The Company recorded $1.2&nbsp;million and
$0.1&nbsp;million in expenses in 2002 and 2001, respectively,
for the closure of these facilities primarily related to future
minimum lease payments due on the vacated facilities. These
amounts are included in loss from discontinued operations in the
accompanying consolidated statements of operations for 2002 and
2001.
</FONT>
</DIV>

<P align="left">
<FONT size="2">In September 2003, based upon several factors
including unfavorable market conditions and a poor competitive
position which prevented the Company from generating profitable
results, the Company announced its intent to exit its operations
in Colorado. The cessation of operations in this market has been
treated as a discontinued operation as it had distinguishable
cash flow and operations that have been eliminated from the
ongoing Company, and the Company currently has no further cash
flows or operations in this market. The Company completed the
exit plan prior to December&nbsp;31, 2003.
</FONT>

<P align="left">
<FONT size="2">As a result of the exit plan, in 2003 the Company
recorded an expense of $1.5&nbsp;million in order to adjust
asset balances to net realizable value, an expense of
$0.2&nbsp;million related to facility exit costs, and an
impairment charge of $1.2&nbsp;million to write-off the carrying
value of goodwill pertaining to these operations. The Company
also recorded an impairment charge of approximately
$0.4&nbsp;million to adjust the carrying value of the real
estate and equipment related to these operations to estimated
fair value, less reasonable direct selling costs. The estimated
fair value was determined based on a quoted market price as
estimated by an independent third party. These amounts are
included in loss from discontinued operations in the
accompanying consolidated statements of operations for 2003. As
of December&nbsp;31, 2003, the Company classified the carrying
value of the real estate and equipment of $1.6&nbsp;million as
held for sale and is included as a component of other assets,
net in the accompanying consolidated balance sheets.
</FONT>

<P align="left">
<FONT size="2">Sales and losses attributable to the Colorado
operations, which are reported as discontinued operations, are
as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="13"></TD>
</TR>

<TR>
    <TD colspan="13" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Sales, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Pre-tax loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 18</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">The major classes of assets and liabilities of
the discontinued Colorado operations in the consolidated balance
sheets as of December&nbsp;31, 2003 are as follows (in
thousands):
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="6"></TD>
</TR>

<TR>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">An analysis of the Company&#146;s reserves
related to the Colorado discontinued operations for the periods
reflected is as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payments</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="29"></TD>
</TR>

<TR>
    <TD colspan="29" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Facility and other exit costs, net of estimated
    sub-lease rental income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(392</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(301</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Employee severance and termination benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total facility closure reserve
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(392</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(301</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The total reserves of $0.8&nbsp;million at
December&nbsp;31, 2003, of which $0.6&nbsp;million is recorded
as other long-term liabilities, are primarily related to future
minimum lease payments on vacated facilities.
</FONT>

<P align="left">
<I><FONT size="2">Indiana Operations</FONT></I>

<DIV align="left">
<FONT size="2">During 2001, management determined that
integration issues at the Indiana operation, largely a result of
its remote location, rendered it incompatible with the
Company&#146;s operating strategies. As a result, on
June&nbsp;8, 2001, the Company sold all of the assets of its
Indiana operations for $5.6&nbsp;million in cash consideration.
In addition, the purchaser assumed substantially all of the
liabilities connected to the operation.
</FONT>
</DIV>

<P align="left">
<FONT size="2">The sale of the operation has been treated as a
discontinued operation as it had distinguishable cash flow and
operations that have been eliminated from the on-going Company
and the Company will have no further involvement in the Indiana
operations. The Company recognized a non-cash loss of $627,000
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 19</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">related to the sale. Sales and losses
attributable to the Indiana operation, which are reported as
discontinued operations, are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><B><FONT size="1">)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1">(in</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">thousands</FONT></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Sales, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Pre-tax loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">10.&nbsp;PROPERTY, PLANT AND
EQUIPMENT</FONT></B>

<P align="left">
<FONT size="2">Property, plant and equipment consist of the
following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="2" align="right" nowrap><B><FONT size="1">2002</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Land
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,166</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Machinery and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,349</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Furniture and fixtures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Construction in progress
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Less accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,318</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,741</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Depreciation expense relating to continuing
operations approximated $18.8&nbsp;million, $18.5&nbsp;million
and $17.6&nbsp;million for 2003, 2002 and 2001, respectively.
</FONT>

<P align="left">
<B><FONT size="2">11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACCRUED
LIABILITIES</FONT></B>

<P align="left">
<FONT size="2">Accrued liabilities consist of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued payroll and other employee related
    expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued property, sales and other taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Insurance self-retention reserves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,079</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Advances from customers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,461</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued federal and state income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 20</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<B><FONT size="2">12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LONG-TERM
DEBT</FONT></B>

<P align="left">
<FONT size="2">Long-term debt consists of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Revolving credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Tranche&nbsp;A term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,292</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Tranche&nbsp;B term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168,533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Less current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">During November of 2003, the Company modified and
extended its credit agreement due to expire in part on
December&nbsp;30, 2003. The extended credit agreement changes
the expiration date of the revolving credit facility
(&#147;Revolver&#148;) to December&nbsp;31, 2004 and increases
its borrowing availability to $175&nbsp;million from
$150&nbsp;million. The maturity date for the Tranche&nbsp;B term
loan remained December&nbsp;30, 2005. In connection with the
extension of the credit agreement, deferred loan costs of
$1.3&nbsp;million were incurred. These costs are included as a
component of other assets, net on the accompanying consolidated
balance sheets as of December&nbsp;31, 2003.
</FONT>

<P align="left">
<FONT size="2">At December&nbsp;31, 2003, the Company had
Revolver availability of $90.5&nbsp;million, net of
$15.6&nbsp;million in outstanding letters of credit. Revolver
borrowings can be limited to a borrowing base equal to 60% of
inventory plus 85% of trade accounts receivable. The borrowing
base is calculated monthly and was $131.9&nbsp;million at
December&nbsp;31, 2003, thereby limiting availability under the
Revolver to a maximum of $47.4&nbsp;million. The Company pays a
commitment fee ranging from 0.325% to 0.50% on the unused amount
of the Revolver. Borrowings under the Revolver bear interest at
a rate based on either the Bank of America base rate or LIBOR
plus an additional spread based upon performance. Currently, the
Revolver rates are Bank of America base rate plus 1.5% and LIBOR
plus 2.5%. The interest rate on the Tranche&nbsp;B term loan is
based on either the Bank of America base rate plus 2.75% or
LIBOR plus 3.75%. The weighted average interest rates during
2003 on the Revolver, Tranche&nbsp;A term loan and
Tranche&nbsp;B term loan were 5.65%, 4.11% and 4.99%,
respectively.
</FONT>

<P align="left">
<FONT size="2">The credit agreement is collateralized by all
tangible and intangible property and interest in property and
proceeds thereof now owned or hereafter acquired by the Company
and its wholly-owned subsidiaries. The agreement contains
covenants providing for the maintenance of certain financial
ratios and conditions including: consolidated net worth; a
coverage ratio that includes earnings before interest, taxes,
depreciation and amortization; a ratio of net funded debt to
earnings before interest, taxes, depreciation and amortization;
and limitations on capital expenditures, among certain other
restrictions. At December&nbsp;31, 2003, management believes it
was in compliance with these covenants and conditions.
</FONT>

<P align="left">
<FONT size="2">The Company also has other notes aggregating
$0.3&nbsp;million and $0.7&nbsp;million at December&nbsp;31,
2003 and 2002, respectively, due at various times through 2010.
</FONT>

<P align="left">
<FONT size="2">Subsequent to December&nbsp;31, 2003, the Company
entered into a new long-term credit agreement. Accordingly,
borrowings under the Revolver have been reclassified to
long-term consistent with the terms of the new agreement. See
Note&nbsp;20.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 21</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">Future maturities of long-term debt as of
December&nbsp;31, 2003 are as follows (in thousands):
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Year ending December&nbsp;31,
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168,533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Theses future maturities reflect the refinancing
of the Company&#146;s credit agreement as discussed in
Note&nbsp;20.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">13.</FONT></B></TD>
    <TD>
    <B><FONT size="2">INCOME TAXES</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The components of income tax expense from
continuing operations are as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="14"></TD>
</TR>

<TR>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">749</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deferred:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(323</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,612</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(644</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(71</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,256</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 22</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">Temporary differences, which give rise to
deferred tax assets and liabilities, are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="10"></TD>
</TR>

<TR>
    <TD colspan="10" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deferred tax assets related to:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,832</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,946</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Operating loss carryforwards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(719</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total deferred tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deferred tax liabilities related to:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,451</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total deferred tax liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net deferred tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,451</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">A reconciliation of the statutory federal income
tax rate to the Company&#146;s effective rate is provided below:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="13"></TD>
</TR>

<TR>
    <TD colspan="13" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Statutory federal income tax rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">State income taxes, net of federal income tax
    benefit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Non-deductible goodwill and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The Company has $26.4&nbsp;million of state
operating loss carryforwards expiring at various dates through
2023.
</FONT>

<P align="left">
<FONT size="2">In assessing the realizability of deferred tax
assets, the Company considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. The Company considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. The Company
concluded that it was appropriate to maintain a valuation
allowance for state net operating losses in certain
jurisdictions where it is more likely than not that the deferred
tax asset will not be realized. The valuation allowance
increased by $0.5&nbsp;million during 2003 to reflect state net
operating losses not benefited in the prior year.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">14.</FONT></B></TD>
    <TD>
    <B><FONT size="2">EMPLOYEE STOCK BASED COMPENSATION</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">During 1998, the Company implemented the Builders
FirstSource, Inc. 1998 Stock Incentive Plan (&#147;the
Plan&#148;), a stock-based incentive compensation plan. Under
the Plan, the Company is authorized to issue shares of common
stock pursuant to &#147;Awards&#148; granted in various forms,
including incentive stock
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 23</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">options (intended to qualify under
Section&nbsp;422 of the Internal Revenue Code of 1986 (as
amended)), non-qualified stock options and other stock-based
awards. The Plan also authorizes the sale of common stock on
terms determined by the Company&#146;s Board of Directors.
</FONT>

<P align="left">
<FONT size="2">The Company has notes receivable from employees
aggregating $196,000 and $209,000 at December&nbsp;31, 2003 and
2002, respectively, in connection with the issuance of common
stock under the Plan. As of December&nbsp;31, 2003, there were
51.9&nbsp;million shares authorized and 12.5&nbsp;million shares
available for issuance.
</FONT>

<P align="left">
<FONT size="2">Options to purchase shares of common stock
generally cliff vest after nine years subject to acceleration at
20%&nbsp;per year if certain return on net assets targets are
met. The expiration date is generally ten years subsequent to
date of issuance. To date, these targets have generally been met.
</FONT>

<P align="left">
<FONT size="2">A summary of the status of the Company&#146;s
stock options as of December&nbsp;31, 2003, 2002 and 2001 and
the changes during the periods is presented below:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">underlying options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercise price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="10"></TD>
</TR>

<TR>
    <TD colspan="10" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(748</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(998</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(879</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted-average fair value of options granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The minimum value of each stock option granted is
estimated on the date of grant using a Black-Scholes
option-pricing model. The following weighted-average assumptions
were used for grants during 2003, 2002 and 2001: expected
term&#151; six years; expected volatility&#151; 0.00%; expected
dividend yield&#151; 0.00%; and risk-free rate&#151; 3.12%,
4.37% and 4.50%, respectively. No adjustment was made for
non-transferability or risk of forfeitures.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 24</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">The following table summarizes information about
employee stock options outstanding at December&nbsp;31, 2003
(options are in thousands):
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Options Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Options Exercisable</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Weighted Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding at</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable at</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT size="1">Range of Exercise Prices</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Life</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="21"></TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">$0.25
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">$1.00
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">$0.25&nbsp;-&nbsp;$1.00
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">15.</FONT></B></TD>
    <TD>
    <B><FONT size="2">EMPLOYEE BENEFIT PLANS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The Company maintains one active defined
contribution 401(k) plan as discussed below:
</FONT>

<P align="left">
<FONT size="2">Employees of the Company are eligible after
completing six months of employment to participate in the
Builders FirstSource, Inc. 401(k) Plan. Participants can
contribute up to 15% of their annual compensation, subject to
federally mandated maximums. The Company will match 50% of
employee contributions up to 6% of employee contributions. The
Company&#146;s matching contributions are subject to a pro-rata
five-year vesting schedule.
</FONT>

<P align="left">
<FONT size="2">The Company recognized expense of
$3.0&nbsp;million, $3.2&nbsp;million and $3.3&nbsp;million in
2003, 2002, and 2001, respectively, for contributions to the
plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">16.</FONT></B></TD>
    <TD>
    <B><FONT size="2">COMMITMENTS AND CONTINGENCIES</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The Company leases certain land, buildings and
equipment used in operations. These leases are accounted for as
operating leases with terms ranging from one to twenty years and
generally contain renewal options. Certain operating leases are
subject to contingent rentals based on various measures. Total
rent expense under operating leases was approximately
$25.9&nbsp;million, $25.3&nbsp;million and $22.2&nbsp;million
for the years ended December&nbsp;31, 2003, 2002 and 2001,
respectively.
</FONT>

<P align="left">
<FONT size="2">In addition, the Company has residual value
guarantees on certain equipment leases. Under these leases the
Company has the option of (a)&nbsp;purchasing the equipment at
the end of the lease term at its then fair market value,
(b)&nbsp;arranging for the sale of the equipment to a third
party, or (c)&nbsp;returning the equipment to the lessor to sell
the equipment. If the sales proceeds in either case are less
than the residual value, the Company is required to reimburse
the lessor for the deficiency up to a specified level as stated
in each lease agreement. If the sales proceeds exceed the
residual value, the Company is entitled to all of such excess
amounts. The guarantees under these leases for the residual
values of equipment at the end of the respective operating lease
periods approximated $7.2&nbsp;million as of December&nbsp;31,
2003. Based upon the expectation that none of these leased
assets will have a residual value at the end of the lease term
that is materially less than the value specified in the related
operating lease agreement or that the Company will purchase the
equipment at the end of the lease term, the Company does not
believe it is probable that it will be required to fund any
amounts under the terms of these guarantee arrangements.
Accordingly, no accruals have been recognized for these
guarantees.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 25</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">Future minimum commitments for noncancelable
operating leases with initial or remaining lease terms in excess
of one year are as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Related party</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total*</FONT></B></TD>
</TR>

<TR>
    <TD colspan="10"></TD>
</TR>

<TR>
    <TD colspan="10" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Year ending December&nbsp;31,
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">143,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><I><FONT size="2">*&nbsp;</FONT></I></TD>
    <TD align="left">
    <I><FONT size="2">Includes related party future minimum
    commitments for noncancelable operating leases.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The Company is a party to various legal
proceedings in the ordinary course of business. Although the
ultimate disposition of these proceedings cannot be predicted
with certainty, management believes the outcome of any claim
that is pending or threatened, either individually or on a
combined basis, will not have a materially adverse effect on the
consolidated financial position, cash flows or operations of the
Company. However, there can be no assurances that future costs
would not be material to the results of operations or liquidity
of the Company for a particular period.
</FONT>

<P align="left">
<FONT size="2">In July 1995, Pelican Companies, Inc., which was
acquired by the Company in December 1998, voluntarily entered
into a consent agreement with the South Carolina Department of
Health and Environmental Control (&#147;SCDHEC&#148;) to address
the impact of wood treatment operations at a site owned by the
Company in Homewood, South Carolina. Extensive environmental
investigation has been conducted at the site, and the Company
has entered into an agreement with the SCDHEC regarding
appropriate remedial measures. The Company does not anticipate
that remaining remedial activities, if any, will have a
significant impact on the consolidated financial position, cash
flows or operations of the Company.
</FONT>

<P align="left">
<FONT size="2">The Company has an agreement with an unrelated
third party to provide an interim financing program (the
&#147;Program&#148;) to its customers in certain markets. Under
this agreement, the Company provides a partial Guaranty
(&#147;Guaranty&#148;) on each loan to a builder pursuant to the
Program. The Guaranty is an amount equal to 10% of the funded
construction loan amount per occurrence, per loan. The maximum
amount of all guarantees is limited to $400,000 in any
twelve-month period. As of December&nbsp;31, 2003, the maximum
amount of all guarantees was $200,000 and the Company had not
paid or been assessed any amounts under the Guaranty. The term
of the Program is through January&nbsp;4, 2004.
</FONT>

<P align="left">
<FONT size="2">During 2001, the Company entered into a
termination agreement (the &#147;Agreement&#148;) with a former
senior executive (the &#147;Executive&#148;). As part of the
Agreement, the Company agreed to repurchase from the Executive
approximately 2.1&nbsp;million shares of Company common stock at
estimated fair market value of $2.1&nbsp;million. The Agreement
provided for 770,000&nbsp;shares to be repurchased upon
execution of the Agreement with the remaining shares to be
repurchased ratably over a 24-month period. At December&nbsp;31,
2003, all obligations under the Agreement had been fulfilled by
the Company.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 26</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">17.</FONT></B></TD>
    <TD>
    <B><FONT size="2">RELATED PARTY TRANSACTIONS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In 2003, 2002 and 2001, the Company paid
approximately $3.3&nbsp;million, $3.2&nbsp;million and
$3.4&nbsp;million, respectively, in rental expense to
shareholders of the Company for leases of land and buildings.
</FONT>

<P align="left">
<FONT size="2">In 2003 and 2002, the Company paid
JLL&nbsp;Partners approximately $0.3&nbsp;million for certain
out-of-pocket expenses incurred. These amounts are recorded in
selling, general, and administrative expenses.
</FONT>

<P align="left">
<FONT size="2">In May 2001, the Company paid approximately
$225,000 to acquire certain assets, consisting primarily of
inventory, from a former owner of an acquired company who is
also a shareholder of the Company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">18.</FONT></B></TD>
    <TD>
    <B><FONT size="2">CONCENTRATIONS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The Company maintains cash at financial
institutions in excess of federally insured limits. Accounts
receivable potentially expose the Company to concentrations of
credit risk. The Company provides credit in its normal course of
business to customers in the residential construction industry.
The Company performs ongoing credit evaluations of its customers
and maintains allowances for potential credit losses.
</FONT>

<P align="left">
<FONT size="2">Because customers are dispersed among the
Company&#146;s various markets, its credit risk to any one
customer or state economy is not significant.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">19.</FONT></B></TD>
    <TD>
    <B><FONT size="2">SALES BY PRODUCT CATEGORY</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Sales by product category for the years ended
December&nbsp;31, 2003 and 2002 were as follows (in thousands):
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Lumber &#38; Lumber Sheet Goods
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">593,693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">515,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Windows &#38; Doors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">354,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">325,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Prefabricated Components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">303,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257,349</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Millwork
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other Building Products and Services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,952</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,675,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,500,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Sales by product category is not available for
2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">20.</FONT></B></TD>
    <TD>
    <B><FONT size="2">SUBSEQUENT EVENT</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">On February&nbsp;25, 2004, the Company entered
into a Credit Agreement that provides for a $90&nbsp;million
revolving credit facility maturing February&nbsp;25, 2009, a
$230&nbsp;million Tranche&nbsp;A term loan due February&nbsp;25,
2010, and a $85&nbsp;million Tranche&nbsp;B term loan due
August&nbsp;25, 2010. The Credit Agreement provides for a letter
of credit subfacility of $25&nbsp;million maturing
February&nbsp;25, 2009. The Credit Agreement contains certain
restrictive covenants, which, among other things, relate to the
payment of dividends, incurrence of indebtedness, repurchase of
common stock or other distributions, and asset sales and also
requires compliance with certain financial covenants with
respect to a maximum total leverage ratio and a minimum interest
coverage ratio. The Company can be required to make mandatory
prepayments of amounts outstanding under the Credit Agreement
based on the results of an excess cash flow calculation that
must be performed annually under the terms of the Agreement.
</FONT>

<P align="left">
<FONT size="2">Proceeds from the new Credit Agreement were used
to retire the Company&#146;s existing debt facility and to pay a
dividend of approximately $139.6&nbsp;million to shareholders
and approximately $0.4&nbsp;million to certain option holders of
record as of February&nbsp;25, 2004. The cash payment to option
holders will be
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 27</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)</FONT></B>

<P align="left">
<FONT size="2">recorded as compensation expense. In addition, in
fiscal 2004 the Company will expense $2.2&nbsp;million in
deferred loan costs in 2004 due to the early retirement of the
debt facility.
</FONT>

<P align="left">
<FONT size="2">Future maturities of long-term debt for the new
Credit Agreement are as follows (in thousands):
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Year ending December&nbsp;31,
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">304,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">315,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 28</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1" color="#0000CA" face="">Nine Months Ended September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1" color="#0000CA">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1" color="#0000CA">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1" color="#0000CA" face="">(unaudited)</FONT></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1" color="#0000CA" face="">(unaudited)</FONT></TD>
</TR>

<TR>
    <TD colspan="10"></TD>
</TR>

<TR>
    <TD colspan="10" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1" color="#0000CA" face="">(in thousands, except</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1" color="#0000CA" face="">per share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,552,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,213,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cost of sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,201,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">940,953</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Gross margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272,507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Selling, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other expense, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations before income
    taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,211</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income (loss) from discontinued operations (net
    of income tax (expense) benefit of ($56) and $1,422 in 2004 and
    2003, respectively)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,641</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT size="2">Basic net income per share</FONT></I></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income (loss) from discontinued operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.01</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT size="2">Diluted net income per share</FONT></I></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income from continuing operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Income (loss) from discontinued operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.01</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT size="2">Weighted average common shares
    outstanding</FONT></I></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The accompanying notes are an integral part of
these condensed consolidated financial statements.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 29</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">CONDENSED CONSOLIDATED BALANCE
SHEETS</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1">(unaudited)</FONT></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands, except</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">per share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">ASSETS</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,378</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">467,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">367,673</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Property, plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">734,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT size="2">LIABILITIES AND SHAREHOLDERS&#146;
    EQUITY</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="11"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Book overdrafts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Current maturities of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">210,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">140,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Long-term debt, net of current maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">537,723</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">324,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Commitments and contingencies (Note&nbsp;6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Shareholders&#146; equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Common stock, $.01&nbsp;par value,
    300,000&nbsp;shares authorized; 251,339 and 251,558 issued and
    outstanding, at September&nbsp;30, 2004 and December&nbsp;31,
    2003, respectively
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,513</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Stock purchase loans receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">301,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total liabilities and shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">734,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The accompanying notes are an integral part of
these condensed consolidated financial statements.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 30</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1">(unaudited)</FONT></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1">(unaudited)</FONT></TD>
</TR>

<TR>
    <TD colspan="12"></TD>
</TR>

<TR>
    <TD colspan="12" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows from operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,942</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Amortization of deferred loan costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,498</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Bad debt expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Non-cash (gain)&nbsp;loss from discontinued
    operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(159</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net gain on sale of assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Non-cash facility closure costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Changes in assets and liabilities, net of effects
    from acquired companies:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53,924</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(164,393</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Retained interest in transferred accounts
    receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Inventories
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31,226</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,025</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,488</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other assets and liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(324</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">730</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accrued liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,892</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash (used in) provided by operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,007</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows from investing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Purchases of property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,394</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,019</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Proceeds from sale of property, plant and
    equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,571</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Acquisitions, net of cash acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(504</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,823</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,307</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash flows from financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net borrowings (payments)&nbsp;under revolving
    credit facilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(68,900</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Proceeds from long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">315,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Payments on long-term debt and other notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(100,578</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,317</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deferred loan costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,989</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Payment of dividend
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(139,592</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(351</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,402</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Collection of stock purchase loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Book overdrafts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,092</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,819</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net cash provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29,292</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net increase in cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,061</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The accompanying notes are an integral part of
these condensed consolidated financial statements.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 31</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS&#146; EQUITY</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="30%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">&nbsp;Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">purchase</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">loans</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">receivable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><FONT size="1">(unaudited)</FONT></TD>
</TR>

<TR>
    <TD colspan="26"></TD>
</TR>

<TR>
    <TD colspan="26" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><FONT size="1">(in thousands, except share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,558,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">301,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(350,154</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(347</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(351</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash dividend
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(88,917</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(50,675</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(139,592</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Collection of stock purchase loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Balance at September&nbsp;30, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,339,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,513</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The accompanying notes are an integral part of
these condensed consolidated financial statements.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 32</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">BASIS OF PRESENTATION</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Builders FirstSource, Inc. and subsidiaries (the
&#147;Company&#148;) is a leading provider of manufactured
components, building materials and construction services to
professional homebuilders and contractors in the United States.
</FONT>

<P align="left">
<FONT size="2">In the opinion of management, the accompanying
unaudited condensed consolidated financial statements include
all recurring adjustments and normal accruals necessary for a
fair statement of the Company&#146;s financial position and its
results of operations and cash flows for the dates and periods
presented. Results for interim periods are not necessarily
indicative of the results to be expected during the remainder of
the current year or for any future period. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
</FONT>

<P align="left">
<FONT size="2">These unaudited condensed consolidated financial
statements should be read in conjunction with the more detailed
audited consolidated financial statements for the years ended
December&nbsp;31, 2003, 2002, and 2001 presented herein.
Accounting policies used in the preparation of these unaudited
condensed consolidated financial statements are consistent in
all material respects with the accounting policies described in
the Notes to Consolidated Financial Statements included in the
audited consolidated financial statements.
</FONT>

<P align="left">
<B><FONT size="2">Accounting estimates</FONT></B>

<P align="left">
<FONT size="2">The preparation of financial statements in
conformity with generally accepted accounting principles in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
</FONT>

<P align="left">
<FONT size="2">Estimates are used when accounting for items such
as revenue, vendor rebates, allowance for returns, discounts and
doubtful accounts, employee compensation programs, depreciation
and amortization periods, taxes, inventory values, insurance
programs, goodwill, other intangible assets and long-lived
assets.
</FONT>

<P align="left">
<B><FONT size="2">Accounts Receivable</FONT></B>

<P align="left">
<FONT size="2">The Company extends credit to qualified
professional homebuilders and contractors, generally on a
non-collateralized basis. The allowance for doubtful accounts is
based on management&#146;s assessment of the amount which may
become uncollectible in the future and is estimated using
specific review of problem accounts, overall portfolio quality,
current economic conditions that may affect the borrower&#146;s
ability to pay, and historical experience.
</FONT>

<P align="left">
<FONT size="2">Accounts receivable consist of the following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Trade receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">210,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272,868</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">220,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Less allowance for returns and doubtful accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 33</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)</FONT></B>

<P align="left">
<B><FONT size="2">Net Income Per Common Share</FONT></B>

<P align="left">
<FONT size="2">Net income per common share is calculated in
accordance with SFAS&nbsp;No.&nbsp;128, &#147;Earnings per
Share,&#148; which requires the presentation of basic and
dilutive earnings per share. Basic earnings per share is
computed using the weighted average number of common shares
outstanding during the period. Dilutive earnings per share is
computed using the weighted average number of common shares
outstanding during the period, plus the dilutive effect of
common stock equivalents. Weighted average shares outstanding
have been adjusted for common shares underlying options of
13.4&nbsp;million and 0.5&nbsp;million for the nine month
periods ended September&nbsp;30, 2004 and 2003, respectively.
Options to purchase&nbsp;29.7&nbsp;million shares of common
stock outstanding at September&nbsp;30, 2003 were not included
in the computation of diluted earnings per share.
</FONT>

<P align="left">
<B><FONT size="2">Stock Compensation</FONT></B>

<P align="left">
<FONT size="2">The Company applies Accounting Principles Board
Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees&#148; (&#147;APB&nbsp;25&#148;) and related
interpretations in accounting for employee stock-based
compensation costs related to its stock incentive plan.
APB&nbsp;25 is an intrinsic value approach for measuring
stock-based compensation costs. SFAS&nbsp;No.&nbsp;123,
&#147;Accounting for Stock-Based Compensation,&#148; is a fair
value approach for measuring stock-based compensation costs.
</FONT>

<P align="left">
<FONT size="2">Had the compensation cost for the Company&#146;s
stock-based compensation been determined in accordance with
SFAS&nbsp;No.&nbsp;123, the Company&#146;s net income and net
income per share for the nine month periods ended
September&nbsp;30, 2004 and 2003 would approximate the pro forma
amounts below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">thousands,</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">except per</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">share amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Reported net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Deduct: Total stock-based employee compensation
    expense determined under minimum value methods for all awards,
    net of related tax effects
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(639</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(665</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Pro forma net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,649</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Basic earnings per share&#151;as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Basic earnings per share&#151;pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Diluted earnings per share&#151;as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Diluted earnings per share&#151;pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The effects of applying SFAS&nbsp;No.&nbsp;123 in
this pro forma disclosure may not be indicative of future
results.
</FONT>

<P align="left">
<B><FONT size="2">Recently Issued Accounting
Pronouncements</FONT></B>

<P align="left">
<FONT size="2">In December 2004, the FASB issued
SFAS&nbsp;No.&nbsp;123 (Revised 2004) &#147;Share Based
Payment&#148; (&#147;SFAS&nbsp;123R&#148;), which is a revision
of SFAS&nbsp;123 and supersedes APB&nbsp;25 and SFAS&nbsp;148.
This statement requires that the cost resulting from all
share-based payment transactions be recognized in the financial
statements. This statement establishes fair value as the
measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair value
based measurement method in accounting for share-based payment
transactions with employees except for equity instruments held
by employee share ownership plans.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 34</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)</FONT></B>

<P align="left">
<FONT size="2">SFAS&nbsp;123R applies to all awards granted
after the required effective date (the beginning of the first
interim or annual reporting period that begins after
June&nbsp;15, 2005) and to awards modified, repurchased, or
cancelled after that date. As of the required effective date,
all public entities that used the fair value based method for
either recognition or disclosure under Statement&nbsp;123 will
apply this Statement using a modified version of prospective
application. Under that transition method, compensation cost is
recognized on or after the required effective date for the
portion of outstanding awards for which the requisite service
has not yet been rendered, based on the grant-date fair value of
those awards calculated under Statement&nbsp;123 for either
recognition or pro forma disclosures. For periods before the
required effective date, those entities may elect to apply a
modified version of the retrospective application under which
financial statements for prior periods are adjusted on a basis
consistent with the pro forma disclosures required for those
periods by Statement&nbsp;123. The Company previously used the
minimum value method under SFAS&nbsp;123 to calculate the value
of its options and will apply the prospective transition method
as of the required effective date. The Company will continue to
account for the currently outstanding options under APB&nbsp;25
and will apply the provisions of SFAS&nbsp;123R prospectively to
new awards and to awards modified, repurchased, or cancelled
after adoption of this statement.
</FONT>

<P align="left">
<FONT size="2">In November 2004, the FASB issued
SFAS&nbsp;No.&nbsp;151, <I>Inventory Costs&#151; an amendment of
ARB No.&nbsp;43, Chapter&nbsp;4
</I>(&#147;SFAS&nbsp;No.&nbsp;151&#148;). SFAS&nbsp;No.&nbsp;151
amends the guidance in ARB No.&nbsp;43, Chapter&nbsp;4,
&#147;Inventory Pricing,&#148; to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). SFAS&nbsp;No.&nbsp;151
requires that those items be recognized as current period
charges. In addition, SFAS&nbsp;No.&nbsp;151 requires that
allocation of fixed production overhead to the costs of
inventory be based on the normal capacity of the production
facilities. This new standard is effective for inventory costs
incurred during fiscal years beginning after June&nbsp;15, 2005.
Earlier application is permitted for inventory costs incurred
during fiscal years beginning after November&nbsp;23, 2004. The
Company does not anticipate the adoption of this statement to
have a significant impact on its financial position or results
of operations.
</FONT>

<P align="left">
<FONT size="2">In December 2004, the FASB issued Statement
No.&nbsp;153, <I>Exchanges of Nonmonetary Assets</I>, an
amendment of APB Opinion No.&nbsp;29, <I>Accounting for
Nonmonetary Transactions
</I>(&#147;SFAS&nbsp;No.&nbsp;153&#148;). The amendments made by
SFAS&nbsp;No.&nbsp;153 are based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value
of the assets exchanged. Further, the amendments eliminate the
narrow exception for nonmonetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of
nonmonetary assets that do not have commercial substance.
Previously, APB Opinion No.&nbsp;29 required that the accounting
for an exchange of a productive asset for a similar productive
asset or an equivalent interest in the same or similar
productive asset should be based on the recorded amount of the
asset relinquished. By focusing the exception on exchanges that
lack commercial substance, the Board believes
SFAS&nbsp;No.&nbsp;153 produces financial reporting that more
faithfully represents the economics of the transactions. This
statement is effective for nonmonetary asset exchanges occurring
in fiscal periods beginning after June&nbsp;15, 2005. The
Company does not believe the adoption of this new statement will
have a material impact on its financial condition or results of
operations.
</FONT>

<P align="left">
<FONT size="2">In September 2004, the Emerging Issues Task Force
(&#147;EITF&#148;) reached a consensus on EITF Issue
No.&nbsp;04-8, &#147;The Effect of Contingently Convertible Debt
on Diluted Earnings Per Share,&#148; which requires shares
associated with contingently convertible debt instruments with
market price triggers to be included in the computation of
diluted earnings per share (&#147;EPS&#148;) regardless of
whether the market price trigger has been met. EITF&nbsp;04-8
also requires that prior period diluted EPS amounts presented
for comparative purposes be restated. EITF&nbsp;04-8 is
effective for reporting periods ending after
December&nbsp;&nbsp;15, 2004. The Company does
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 35</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)</FONT></B>

<P align="left">
<FONT size="2">not believe the adoption of this new statement
will have a material impact on its financial condition or
results of operations.
</FONT>

<P align="left">
<B><FONT size="2">Reclassifications</FONT></B>

<P align="left">
<FONT size="2">Prior year amounts have been reclassified to
conform to the current year presentation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">LONG-TERM DEBT</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Long-term debt consists of the following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Revolving credit facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Tranche&nbsp;A term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">228,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Tranche&nbsp;B term loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168,533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Less current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">On February&nbsp;25, 2004, the Company entered
into a $405.0&nbsp;million senior secured credit agreement (the
&#147;Credit Agreement&#148;) with a syndicate of banks. The
Credit Agreement was initially comprised of a $90.0&nbsp;million
long-term revolver due February&nbsp;25, 2009; a
$230.0&nbsp;million Tranche&nbsp;A term loan due in quarterly
installments of $0.6&nbsp;million beginning June&nbsp;30, 2004
and ending March&nbsp;31, 2009 and quarterly installments of
$54.6&nbsp;million beginning June&nbsp;30, 2009 and ending
February&nbsp;25, 2010; and an $85.0&nbsp;million Tranche&nbsp;B
term loan due on August&nbsp;25, 2010. During 2004, the Company
paid down approximately $1.2&nbsp;million under the term loan
which permanently reduced the borrowing capacity under the
Credit Agreement.
</FONT>

<P align="left">
<FONT size="2">Interest rates under the credit agreement for the
revolving loans and the Tranche&nbsp;A term loan are based on
the prime rate in the United States or LIBOR (plus a margin, or
&#147;LIBOR spread,&#148; based on leverage ratios, which is
currently 1.75% for revolving loans and 3.25% for the
Tranche&nbsp;A term loan), at the Company&#146;s option at the
time of borrowing. Interest rates under the credit agreement for
the Tranche&nbsp;B term loan are based on the prime rate in the
United States or LIBOR (plus a fixed margin, or &#147;LIBOR
spread,&#148; which is 8.50%), at our option at the time of
borrowing provided that the base interest rate shall in no event
be less than 2.0%. The weighted-average interest rate at
September&nbsp;30, 2004 for borrowings under the Credit
Agreement, was 6.2%. A variable commitment fee based on the
total leverage ratio is charged on the unused amount of the
revolver (0.50% at September&nbsp;30, 2004). At
September&nbsp;30, 2004 the available borrowing capacity of the
revolver totaled $73.8&nbsp;million after being reduced by
outstanding letters of credit of approximately
$16.2&nbsp;million.
</FONT>

<P align="left">
<FONT size="2">The Credit Agreement is collateralized by all
tangible and intangible property and interest in property and
proceeds thereof now owned or hereafter acquired by the Company
and its wholly-owned subsidiaries. The Credit Agreement also
contains certain restrictive covenants, which, among other
things, relate to the payment of dividends, incurrence of
indebtedness, repurchase of common stock or other distributions,
and asset sales and also require compliance with certain
financial covenants with respect to a maximum total leverage
ratio and a minimum interest coverage ratio. At
September&nbsp;30, 2004, management believes they
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 36</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)</FONT></B>

<P align="left">
<FONT size="2">were in compliance with all covenants under the
Credit Agreement. The Company can be required to make mandatory
prepayments of amounts outstanding under the Credit Agreement
based on the results of an excess cash flow calculation that
must be performed annually under the terms of the Agreement. At
September&nbsp;30, 2004, the Company estimates that it will be
required to permanently retire approximately $3.0&nbsp;million
of the Tranche&nbsp;A term loan during the first quarter of 2005
in accordance with the excess cash flow provision. Accordingly,
this amount has been reclassified to current on the accompanying
condensed consolidated balance sheets as of September&nbsp;30,
2004.
</FONT>

<P align="left">
<FONT size="2">Proceeds from the new Credit Agreement were used
to retire the Company&#146;s existing debt facility and to pay a
cash dividend, as discussed in Note&nbsp;3. In connection with
the refinancing, the Company incurred fees and expenses
aggregating $11.0&nbsp;million, which are included as a
component of other assets, net on the condensed consolidated
balance sheets at September&nbsp;30, 2004 and are being
amortized over the term of the Credit Agreement. In addition,
the Company expensed $2.2&nbsp;million in deferred loan costs in
2004 due to the early retirement of the prior debt facility.
This amount is included in interest expense in the accompanying
condensed statements of operations for the nine month period
ended September&nbsp;30, 2004.
</FONT>

<P align="left">
<FONT size="2">At December&nbsp;31, 2003, the Company had a
revolving credit facility of $175.0&nbsp;million (the
&#147;Revolver&#148;) which was scheduled to expire on
December&nbsp;31, 2004. The availability under the Revolver was
$90.5&nbsp;million, net of $15.6&nbsp;million in outstanding
letters of credit. Revolver borrowings were limited to a
borrowing base equal to 60% of inventory plus 85% of trade
accounts receivable. The borrowing base was calculated monthly
and was $131.9&nbsp;million at December&nbsp;31, 2003, thereby
limiting availability under the Revolver to a maximum of
$47.4&nbsp;million. The Company paid a commitment fee ranging
from 0.325% to 0.50% on the unused amount of the Revolver.
Borrowings under the Revolver bore interest at a rate based on
either the Bank of America base rate or LIBOR plus an additional
spread based upon performance. At December&nbsp;31, 2003, the
Revolver rates were Bank of America base rate plus 1.5% and
LIBOR plus 2.5%. At December&nbsp;31, 2003, the Company also had
$99.4&nbsp;million Tranche&nbsp;B Term loan outstanding which
was scheduled to expire on December&nbsp;30, 2005. The interest
rate on the Tranche&nbsp;B term loan was based on either the
Bank of America base rate plus 2.75% or LIBOR plus 3.75%.
</FONT>

<P align="left">
<FONT size="2">The Company also has other notes aggregating
$0.2&nbsp;million and $0.3&nbsp;million at September&nbsp;30,
2004 and December&nbsp;31, 2003, respectively, due at various
times through 2010.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.</FONT></B></TD>
    <TD>
    <B><FONT size="2">EMPLOYEE STOCK BASED COMPENSATION</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">On February&nbsp;25, 2004, the Company&#146;s
Board of Directors declared a special cash dividend of
$0.56&nbsp;per common share, or $139.6&nbsp;million to
shareholders of record as of February&nbsp;25, 2004. The Company
fully reduced retained earnings by $50.7&nbsp;million and
reduced additional paid-in capital by $88.9&nbsp;million for the
remainder of the dividend. As a result of the special dividend,
the Board of Directors exercised its discretion under the
anti-dilution provisions of the employee stock plan to adjust
the exercise price of stock options to reflect the change in the
share value on the dividend date. The Company did not record any
expense related to adjustment of the exercise price as the
modification did not increase the aggregate
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 37</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)</FONT></B>

<P align="left">
<FONT size="2">intrinsic value of any award and the ratio of the
exercise price per share to the market value per share was not
reduced. The effect of this anti-dilution adjustment is
presented below:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of dividend date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Prior to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">adjustment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="14"></TD>
</TR>

<TR>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">(in thousands, except per share</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><FONT size="1">amounts)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Options outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Options exercisable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Weighted average exercise price:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Options outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Options exercisable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">Approximately $0.4&nbsp;million was also paid to
certain option holders whose exercise price could not be
adjusted for the dividend. The cash payment to these option
holders was expensed and is included in selling, general, and
administrative expenses in the accompanying condensed
consolidated statements of operations for the nine month period
ended September&nbsp;30, 2004. The Company also granted
approximately 15.1&nbsp;million stock options to various
employees during the nine month period ended September&nbsp;30,
2004. These options were granted with an exercise price equal to
the estimated fair market value of the Company&#146;s stock on
the grant dates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">4.</FONT></B></TD>
    <TD>
    <B><FONT size="2">FACILITY CLOSURE COSTS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">During 2003, the Company developed and executed a
plan to close a facility in Texas due to the location being
unable to sustain a consistent level of profitability. In
conjunction with the plan, the Company began disposing of
assets, severing employees, and pursuing sale of the related
real estate. The Company completed the exit plan prior to
December&nbsp;31, 2003. During the nine month period ended
September&nbsp;30, 2003, the Company recognized approximately
$0.4&nbsp;million in expenses related to the facility closure,
including termination benefits to severed employees and
adjustments to reflect certain asset balances at net realizable
value. The Company also recorded an impairment charge of
approximately $0.6&nbsp;million to adjust the carrying value of
the real estate related to these operations to its estimated
fair value, less reasonable direct selling costs. The estimated
fair value was determined based on a quoted market price as
estimated by an independent third party. At September&nbsp;30,
2004 and December&nbsp;31, 2003, the Company classified the
carrying value of the real estate of $1.4&nbsp;million as held
for sale and is included as a component of other assets, net in
the accompanying condensed consolidated balance sheets.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.</FONT></B></TD>
    <TD>
    <B><FONT size="2">DISCONTINUED OPERATIONS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In September 2003, based upon several factors
including unfavorable market conditions and a poor competitive
position which prevented the Company from generating profitable
results, the Company announced its intent to exit its operations
in Colorado. The cessation of operations in this market has been
treated as a discontinued operation as it had distinguishable
cash flow and operations that have been eliminated from the
on-going Company and the Company will have no further cash flows
or operations in this market. The Company completed the exit
plan prior to December&nbsp;31, 2003.
</FONT>

<P align="left">
<FONT size="2">As a result of the exit plan, in September 2003
the Company recorded an expense of $1.2&nbsp;million in order to
adjust asset balances, primarily inventory, to net realizable
value and an impairment charge of $1.2&nbsp;million to write-off
the carrying value of goodwill pertaining to these operations.
The Company also recorded an impairment charge of approximately
$0.4&nbsp;million to adjust the carrying value of the real
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 38</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)</FONT></B>

<P align="left">
<FONT size="2">estate and equipment related to these operations
to its estimated fair value, less reasonable direct selling
costs. The estimated fair value was determined based on a quoted
market price as estimated by an independent third party. These
amounts are included in income (loss) from discontinued
operations in the accompanying condensed consolidated statements
of operations for the nine month period ended September&nbsp;30,
2003. As of December&nbsp;31, 2003, the Company classified the
carrying value of the real estate and equipment of
$1.6&nbsp;million as held for sale and is included as a
component of other assets, net in the accompanying condensed
consolidated balance sheets.
</FONT>

<P align="left">
<FONT size="2">During 2004, the Company received an updated
estimated market price from an independent third party for the
real estate and based on the revised estimate, recorded an
additional impairment of approximately $0.2&nbsp;million based
on the results of the valuation. The Company also favorably
settled an outstanding lease obligation and collected several
customer balances that were previously written-off. The Company
reduced expenses by approximately $0.4&nbsp;million related to
these items. These amounts are included in income (loss) from
discontinued operations in the accompanying condensed
consolidated statements of operations for the nine month period
ended September&nbsp;30, 2004. As of September&nbsp;30, 2004,
the Company classified the carrying value of the real estate of
$1.0&nbsp;million as held for sale and is included as a
component of other assets, net in the accompanying condensed
consolidated balance sheets.
</FONT>

<P align="left">
<FONT size="2">Sales and pre-tax losses attributable to the
Colorado operations were $23.2&nbsp;million and
$4.1&nbsp;million, respectively for the nine month period ended
September&nbsp;30, 2003. For the nine month period ended
September&nbsp;30, 2004, the Company recorded no sales and
recognized $0.2&nbsp;million in pre-tax income due to the items
discussed above.
</FONT>

<P align="left">
<FONT size="2">The major classes of assets and liabilities of
the discontinued Colorado operations in the condensed
consolidated balance sheets as of September&nbsp;30, 2004 and
December&nbsp;31, 2003 are as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="10"></TD>
</TR>

<TR>
    <TD colspan="10" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Net assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">6.</FONT></B></TD>
    <TD>
    <B><FONT size="2">COMMITMENTS AND CONTINGENCIES</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">The Company is a party to various legal
proceedings in the ordinary course of business. Although the
ultimate disposition of these proceedings cannot be predicted
with certainty, management believes the outcome of any claim
that is pending or threatened, either individually or on a
combined basis, will not have a materially adverse effect on the
consolidated financial position, cash flows or operations of the
Company. However, there can be no assurances that future costs
would not be material to the results of operations or liquidity
of the Company for a particular period.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 39</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)</FONT></B>

<P align="left">
<FONT size="2">In July 1995, Pelican Companies, Inc., which was
acquired by the Company in December 1998, voluntarily entered
into a consent agreement with the South Carolina Department of
Health and Environmental Control (&#147;SCDHEC&#148;) to address
the impact of wood treatment operations at a site owned by the
company in Homewood, South Carolina. Extensive environmental
investigation has been conducted at the site, and the Company
has entered into an agreement with the SCDHEC regarding
appropriate remedial measures. The Company does not anticipate
that remaining remedial activities, if any, will have a
significant impact on the consolidated financial position, cash
flows or operations of the Company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">7.</FONT></B></TD>
    <TD>
    <B><FONT size="2">RELATED PARTY TRANSACTIONS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">For the nine month periods ended
September&nbsp;30, 2004 and 2003, the Company paid approximately
$1.8&nbsp;million and $2.4&nbsp;million, respectively, in rental
expense for leases of land and buildings to shareholders of the
Company.
</FONT>

<P align="left">
<FONT size="2">For the nine month periods ended
September&nbsp;30, 2004 and 2003, the Company paid
JLL&nbsp;Partners approximately $0.2&nbsp;million for certain
out-of-pocket expenses incurred. These amounts are recorded in
selling, general, and administrative expenses.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">8.</FONT></B></TD>
    <TD>
    <B><FONT size="2">SALES BY PRODUCT CATEGORY</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Sales by product category for the nine-months
ended September&nbsp;30, 2004 and 2003 were as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><FONT size="1">(in thousands)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Lumber &#38; Lumber Sheet Goods
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">624,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">414,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Windows &#38; Doors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">291,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">260,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Prefabricated Components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287,286</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">223,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Millwork
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Other Building Products and Services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">218,393</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197,554</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,552,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,213,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">9.</FONT></B></TD>
    <TD>
    <B><FONT size="2">SUBSEQUENT EVENT</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">On February&nbsp;11, 2005, the Company entered
into a $350.0&nbsp;million senior secured credit facility with a
syndicate of banks. The senior secured credit facility is
comprised of a $110.0&nbsp;million long-term revolver due
February&nbsp;11, 2010; a $225.0&nbsp;million term loan due in
quarterly installments of $0.6&nbsp;million beginning
June&nbsp;30, 2005 and ending June&nbsp;30, 2011 and a final
payment of $210.9&nbsp;million on August&nbsp;11, 2011; and a
$15.0&nbsp;million prefunded letter of credit facility due
August&nbsp;11, 2011.
</FONT>

<P align="left">
<FONT size="2">The senior secured credit facility is
collateralized by all tangible and intangible property and
interest in property and proceeds thereof now owned or hereafter
acquired by the Company and its wholly-owned subsidiaries. The
credit facility also contains certain restrictive covenants,
which, among other things, relate to the payment of dividends,
incurrence of indebtedness, repurchase of common stock or other
distributions, and asset sales and also require compliance with
certain financial covenants with respect to a maximum total
leverage ratio and a minimum interest coverage ratio. The
Company can be required to make mandatory prepayments of amounts
outstanding under the agreement based on the results of an
excess cash flow calculation that must be performed annually
under the terms of the facility.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">F- 40</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<B><FONT size="2">Builders FirstSource, Inc. and
Subsidiaries</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)</FONT></B>

<P align="left">
<FONT size="2">On February&nbsp;11, 2005, the Company also
issued $275.0&nbsp;million in aggregate principal amount of
floating rate notes. The floating rate notes mature on
February&nbsp;15, 2012. Interest accrues at a rate of LIBOR plus
4.25%. LIBOR is reset at the beginning of each quarter. Interest
on the floating rate notes is payable quarterly in arrears
beginning May&nbsp;15, 2005. At any time on or after
February&nbsp;15, 2007, the Company can redeem some or all of
the notes at a redemption price equal to par plus a specified
premium that declines ratably to par. At any time before
February&nbsp;15, 2007, the Company can redeem the notes, in
whole or in part, at a redemption price equal to par, plus a
make whole premium. The Company may also redeem up to 35% of the
aggregate principal amount of the notes with the proceeds of
certain equity offerings any time before February&nbsp;15, 2007.
In the event of a change in control, the Company may be required
to offer to purchase the notes at a purchase price equal to 101%
of the principal, plus accrued and unpaid interest.
</FONT>

<P align="left">
<FONT size="2">The notes are secured by a second priority lien
on all tangible and intangible property and interest in property
and proceeds thereof now owned or hereafter acquired by the
Company and its wholly-owned subsidiaries. The indenture
covering the notes contains certain restrictive covenants,
which, among other things, relate to the payment of dividends,
incurrence of indebtedness, repurchase of common stock or other
distributions, asset sales and investments.
</FONT>

<P align="left">
<FONT size="2">Proceeds from the new senior secured credit
agreement and the issuance of the floating rate notes were used
to retire the Company&#146;s existing debt facility, pay a cash
dividend to shareholders of $201.2&nbsp;million, and make a cash
payment of approximately $35.8&nbsp;million to stock option
holders in-lieu of adjusting the exercise price. In connection
with the refinancing, the Company incurred estimated fees and
expenses aggregating $20.7&nbsp;million. In addition, the
Company paid a $1.7&nbsp;million early termination penalty and
the Company had approximately $7.8&nbsp;million in unamortized
deferred loan costs remaining at the refinancing date related to
the prior debt facility. Costs that will be expensed in the
first quarter of 2005 will include $35.8&nbsp;million cash paid
to option holders as well as a portion of the remaining
unamortized deferred loan costs related to the prior debt
facility, fees and expenses related to the new credit facility
and floating rate notes, and the early termination penalties. A
portion of these fees will be capitalized over the term of the
new credit facility and floating rate notes. The final syndicate
of banks has not been determined and therefore, the estimated
amount of financing costs that will be deferred or expensed is
subject to change upon final allocation and participation of the
applicable banks.
</FONT>

<P align="left">
<FONT size="2">Future maturities of long-term debt are as
follows (in thousands):
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Year ending December&nbsp;31,
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">2009
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">489,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">F- 41</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

<DIV align="left">
<HR size="1" noshade color="#000000" style="margin-top: -10px">
</DIV>

<P align="left">
<HR size="1" noshade color="#000000" style="margin-top: -2px">

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

<DIV align="left">
<HR size="1" noshade color="#000000" style="margin-top: -10px">
</DIV>

<P align="center">


<P align="center">
<FONT size="4">LOGO
</FONT>

<P align="center">
<FONT size="5">Builders FirstSource, Inc.
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<FONT size="4">Common Stock
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">


<P align="center">


<P align="left">
<HR size="1" noshade color="#000000" style="margin-top: -2px">

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV>&nbsp;</DIV>

<!-- link1 "PART II" -->

<DIV align="center">
<B><FONT size="2">PART II</FONT></B>
</DIV>

<!-- link1 "INFORMATION NOT REQUIRED IN THE PROSPECTUS" -->

<P align="center">
<B><FONT size="2">INFORMATION NOT REQUIRED IN THE
PROSPECTUS</FONT></B>

<P align="left">
<B><FONT size="2">Item&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
Expenses of Issuance and Distribution</FONT></B>

<P align="left">
<FONT size="2">The following table sets forth the costs and
expenses, other than underwriting discounts and commissions,
payable by the Registrant in connection with the sale of common
stock being registered.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">SEC Registration Fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">NASD Fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Nasdaq National Market Listing Fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Printing and Engraving Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Legal Fees and Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Accounting Fees and Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Blue Sky Fees and Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Transfer Agent and Registrar Fees and Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Miscellaneous
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The registrant will bear all of the expenses
shown above.
</FONT>

<P align="left">
<B><FONT size="2">Item&nbsp;14. Indemnification of Officers and
Directors</FONT></B>

<P align="left">
<FONT size="2">Section&nbsp;145 of the Delaware General
Corporation Law (the &#147;DGCL&#148;) provides, in summary,
that directors and officers of Delaware corporations are
entitled, under certain circumstances, to be indemnified against
all expenses and liabilities (including attorneys&#146; fees)
incurred by them as a result of suits brought against them in
their capacity as directors or officers, if they acted in good
faith and in a manner they reasonably believed to be in or not
opposed to our best interests, and, with respect to any criminal
action or proceeding, if they had no reasonable cause to believe
their conduct was unlawful; provided that no indemnification may
be made against expenses in respect of any claim, issue, or
matter as to which they shall have been adjudged to be liable to
us, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, they are fairly and reasonably
entitled to indemnity for such expenses as the court shall deem
proper. Any such indemnification may be made by us only as
authorized in each specific case upon a determination by the
stockholders, disinterested directors or independent legal
counsel that indemnification is proper because the indemnitee
has met the applicable standard of conduct.
</FONT>

<P align="left">
<FONT size="2">Section&nbsp;102(b)(7) of the DGCL permits a
corporation to provide in its certificate of incorporation that
a director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for
any breach of the director&#146;s duty of loyalty to the
corporation or its stockholders, for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, for unlawful payments of dividends or unlawful
stock repurchases, redemptions or other distributions, or for
any transaction from which the director derived an improper
personal benefit.
</FONT>

<P align="left">
<FONT size="2">Our amended and restated certificate of
incorporation and amended and restated by-laws provide that we
shall indemnify our directors and officers to the fullest extent
permitted by law and that no director shall be liable for
monetary damages to us or our stockholders for any breach of
fiduciary duty, except to the extent provided by applicable law.
We currently maintain liability insurance for our directors and
officers.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">II- 1</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="left">
<B><FONT size="2">ITEM 15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent
Sales of Unregistered Securities</FONT></B>

<P align="left">
<FONT size="2">In the three years preceding the filing of this
Registration Statement, the Registrant has issued the following
securities that were not registered under the Securities Act:
</FONT>

<P align="left">
<FONT size="2">On February&nbsp;11, 2005, we issued
$275.0&nbsp;million aggregate principal amount of second
priority senior secured floating rate notes due 2012. These
securities were issued only to qualified institutional buyers in
accordance with Rule&nbsp;144A and to non-U.S. persons outside
the U.S. in accordance with Regulation&nbsp;S under the
Securities Act. The securities were issued to UBS Securities LLC
and Deutsche Bank Securities Inc. as initial purchasers. We and
the guarantors have agreed to use all commercially reasonable
efforts to file a registration statement enabling holders of
these floating rate notes to exchange their privately placed
floating rate notes for publicly registered notes with
substantially identical terms as the floating rate notes; cause
the registration statement to be declared effective by the SEC
on or prior to 240&nbsp;days after the issue date; and complete
the exchange offer within 30 business days after the date on
which the registration statement is declared effective, subject
to certain exceptions. In addition, in certain circumstances, we
will agree to file a &#147;shelf registration statement&#148;
that would allow some or all of the floating rate notes to be
offered to the public and to use all commercially reasonable
efforts to cause such a shelf registration statement to be
declared effective by the SEC.
</FONT>

<P align="left">
<FONT size="2">In the past three calendar years, the Company has
granted stock options to employees under its 1998 Stock
Incentive Plan, as amended, covering an aggregate of 17,637,034
shares. Of these options, 2,512,000 were issued at an exercise
price of $1.00 per share, and 15,125,034 options were issued at
an exercise price of $0.315&nbsp;per share. All of the options
were issued pursuant to the Company&#146;s stock incentive plan
in reliance on Rule&nbsp;701 of the Securities Act.
</FONT>

<P align="left">
<FONT size="2">On February&nbsp;25, 2004, the Company&#146;s
board of directors declared a special cash dividend of $0.56 per
common share, or an aggregate of $139.6&nbsp;million, to
shareholders of record as of February&nbsp;25, 2004. As a result
of the special dividend, the board of directors exercised its
discretion under the anti-dilution provisions of the employee
stock plan to adjust the exercise price of stock options from
$1.00&nbsp;per common share to $0.315&nbsp;per share and to
adjust certain other options from $0.25&nbsp;per common share to
$0.1125&nbsp;per common share to reflect the change in the share
value on the dividend date. Approximately $0.4&nbsp;million was
also paid to certain option holders whose exercise price could
not be adjusted for the dividend.
</FONT>

<P align="left">
<B><FONT size="2">ITEM
16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Certificate of
    Incorporation of Builders FirstSource, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated By-Laws of Builders
    FirstSource, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture, dated as of February&nbsp;11, 2005,
    among Builders FirstSource, Inc., the Subsidiary Guarantors
    thereto, and The Wilmington Trust Corporation, as Trustee
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Specimen Certificate
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Registration Rights Agreement, dated as of
    February&nbsp;8, 2005, among Builders FirstSource, Inc., the
    Guarantors named therein, and UBS Securities LLC and Deutsche
    Bank Securities Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Skadden, Arps, Slate, Meagher &#38;
    Flom LLP, regarding the legality of the common stock being issued
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">8</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Skadden, Arps, Slate, Meagher &#38;
    Flom LLP, regarding certain tax matters
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Credit Agreement, dated as of February&nbsp;11,
    2005, among Builders FirstSource, Inc., as borrower, JLL
    Building Products, LLC, and the guarantors party thereto, the
    lenders party thereto, UBS Securities LLC, as joint arranger and
    joint book runner, UBS AG, Stamford Branch, as issuing bank,
    administrative agent, and collateral trustee for the secured
    parties, UBS Loan&nbsp;Finance LLC as swingline lender, and
    Deutsche Bank Securities Inc. as joint arranger, joint
    book-runner, and syndication agent
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Builders FirstSource, Inc. 1998 Stock Incentive
    Plan, as amended
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<B><FONT size="2">II- 2</FONT></B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Builders FirstSource, Inc. 1998 Stock
    Incentive Plan Nonqualified Stock Option Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Builders FirstSource, Inc. 2005 Cash Incentive
    Bonus Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Builders FirstSource, Inc. 2004 Cash Incentive
    Bonus Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated September&nbsp;1,
    2001, between Builders FirstSource and Floyd F. Sherman
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated January&nbsp;15,
    2004, between Builders FirstSource and Kevin P. O&#146;Meara
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated January&nbsp;15,
    2004, between Builders FirstSource and Charles L. Horn
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated January&nbsp;15,
    2004, between Builders FirstSource and Donald F. McAleenan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of PricewaterhouseCoopers LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#134;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Filed herewith.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">ITEM
17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undertakings</FONT></B>

<P align="left">
<FONT size="2">The undersigned registrant hereby undertakes to
provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and
registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
</FONT>

<P align="left">
<FONT size="2">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful
defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
</FONT>

<P align="left">
<FONT size="2">The undersigned registrant hereby undertakes that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;For purposes of determining any
    liability under the Securities Act of 1933, the information
    omitted from the form of prospectus filed as part of this
    registration statement in reliance upon Rule&nbsp;430A and
    contained in a form of prospectus filed by the registrant
    pursuant to Rule&nbsp;424(b)(1) or (4)or 497(h) under the
    Securities Act shall be deemed to be part of this registration
    statement as of the time it was declared effective.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;For the purpose of determining any
    liability under the Securities Act of 1933, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="right">
<B><FONT size="2">II- 3</FONT></B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">

</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV>&nbsp;</DIV>

<!-- link1 "SIGNATURES" -->

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, the Builders FirstSource, Inc. has duly caused this
registration statement on Form&nbsp;S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Dallas, State of Texas, on February&nbsp;14, 2005.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">BUILDERS FIRSTSOURCE, INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="center">
    <FONT size="2">/s/ FLOYD F. SHERMAN
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">Floyd F. Sherman,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I><FONT size="2">Chairman, President, and Chief Executive
    Officer</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="15%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ FLOYD F. SHERMAN<BR>
    <HR size="1" noshade>Floyd F. Sherman
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chairman, President, and Chief Executive
    Officer<BR>
    (Principal Executive Officer and Director)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;14, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ CHARLES L. HORN<BR>
    <HR size="1" noshade>Charles L. Horn
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Senior Vice President&#151;Finance and Chief
    Financial Officer<BR>
    (Principal Financial Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;14, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ M. CHAD CROW<BR>
    <HR size="1" noshade>M. Chad Crow
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Vice President&#151;Finance and Controller<BR>
    (Controller)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;14, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ ALEXANDER R. CASTALDI<BR>
    <HR size="1" noshade>Alexander R. Castaldi
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;14, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ RAMSEY A. FRANK<BR>
    <HR size="1" noshade>Ramsey A. Frank
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;14, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ PAUL S. LEVY<BR>
    <HR size="1" noshade>Paul S. Levy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;14, 2005
    </FONT></TD>
</TR>

<TR>
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    <FONT size="2">/s/ BRETT N. MILGRIM<BR>
    <HR size="1" noshade>Brett N. Milgrim
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;14, 2005
    </FONT></TD>
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S-1
As filed with the Securities and Exchange
Commission on February 14, 2005
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Builders FirstSource, Inc.
(Exact name of registrant as specified in its
charter)
Delaware
5211
52-2084569
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
2001 Bryan Street, Suite 1600
Dallas, Texas 75201
(214) 880-3500
(Address, including zip code, and telephone
number, including
area code, of registrant's principal
executive offices)
Donald F. McAleenan, Esq.
Senior Vice President and General
Counsel
Builders FirstSource, Inc.
2001 Bryan Street, Suite 1600
Dallas, Texas 75201
(214) 880-3500
(Names and addresses, including zip codes, and
telephone
numbers, including area codes, of agents for
service)
Robert B. Pincus, Esq.
Allison L. Amorison, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square, P.O. Box 636
Wilmington, Delaware 19899-0636
(302) 651-3000
J. Scott Hodgkins, Esq.
Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
(213) 485-1234
Approximate
date of commencement of proposed sale to the public:
As soon
as practicable after this registration statement becomes
effective.
If
any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If
this Form is filed to register additional securities for an
offering pursuant to Rule 462(c) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If
this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Title of Each Class of
Aggregate
Amount of
Securities to be Registered
Offering Price(1)
Registration Fee(2)
Common Stock
$275,000,000
$32,368
(1)
Includes shares of common stock that the
    underwriters will have the right to purchase to cover
    over-allotments, if any.
(2)
Estimated solely for the purpose of
    calculating the registration fee in accordance with
    Rule 457(o) under the Securities Act of 1933.
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further
amendment which specifically states that this registration
statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this
registration statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities, and it is not soliciting an offer to buy these
securities, in any jurisdiction where the offer or sale is not
permitted.
PRELIMINARY PROSPECTUS
, 2005
Subject to
Completion, dated
Shares
Common Stock
This is the initial public offering of shares of
our common stock. No public market currently exists for our
common stock. We are
offering           shares
and the selling stockholder is offering  shares of our
common stock. We expect the public offering price to be between
$          and
$           per
share. We will not receive any proceeds from the sale of any
shares of our common stock sold by the selling stockholder.
We intend to apply to have our common stock
approved for listing on The Nasdaq National Market under the
symbol "BLDR."
Investing in our common stock involves a high
degree of risk. Before buying any shares, you should carefully
read the discussion of material risks of investing in our common
stock under "Risk factors" beginning on
page      of this
prospectus.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
Per Share
Total
Public offering price
$
$
Underwriting discounts and
    commissions
$
$
Proceeds, before expenses,
    to us
$
$
Proceeds, before expenses,
    to selling stockholder
$
$
The underwriters may also purchase up to an
additional                shares
of our common stock from us and from the selling stockholder at
the public offering price, less underwriting discounts and
commissions payable by us and the selling stockholder, to cover
over-allotments, if any, within 30 days from the date of
this prospectus. If the underwriters exercise this option in
full, the total underwriting discounts and commissions will be
$          ,
our total proceeds, before expenses, will be
$          and
the total proceeds, before expenses, to the selling stockholder
will be
$           .
The underwriters are offering the common stock as
set forth under "Underwriting." Delivery of the shares
of common stock will be made on or
about                     ,
2005.
Joint Book-Running
Managers
UBS Investment Bank
Deutsche Bank Securities
________________________________________________________________________________
You should rely only on the information contained
in this prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with additional information or
information different from that contained in this prospectus. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where those offers and sales
are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of our
common stock.
TABLE OF CONTENTS
About this prospectus
i
Prospectus summary
1
Risk factors
10
Forward-looking statements
21
Non-GAAP financial measures
22
Use of proceeds
23
Dividend policy
23
Capitalization
24
Dilution
25
Selected historical consolidated financial data
32
Management's discussion and analysis of
    financial condition and results of operations
34
Industry overview and trends
49
Business
53
Management
64
Executive compensation
67
Principal and selling stockholders
71
Certain related party transactions
73
Description of capital stock
74
Description of certain indebtedness
77
Shares eligible for future sale
80
Certain material U.S. income tax
    consequences for non-U.S. holders
82
Underwriting
85
Legal matters
89
Experts
89
Where you can find more information
89
Index to consolidated financial statements
F-1
Through and
including                     ,
2005 (the 25th day after the date of this prospectus), federal
securities law may require all dealers that effect transactions
in our common stock, whether or not participating in this
offering, to deliver a prospectus. This requirement is in
addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.
About this prospectus
As used in this prospectus, unless the context
requires otherwise, "we," "us,"
"our," or the "Company" refers to Builders
FirstSource, Inc. and its consolidated subsidiaries. All
references to fiscal years of the Company in this prospectus
refer to years commencing on January 1 of that year and
ending on December 31. Unless otherwise indicated, the
information in this prospectus assumes no exercise of the
Underwriters' over-allotment option.
Market data and other statistical information
used throughout this prospectus are based on independent
industry publications, government publications, reports by
independent market research firms, or other published
independent sources. Some data are based on our good faith
estimates that are derived from our review of internal surveys
and independent sources. Although we believe that all of the
foregoing sources are reliable, we have not independently
verified the information and cannot guarantee its accuracy and
completeness. Statements as to our market position relative to
our competitors are generally based on management estimates as
of the end of the third quarter of fiscal year 2004. We cannot
assure you that more recent data would not produce different
estimates of our market position.
i
Prospectus summary
The following summary contains basic
information about us and this offering. It likely does not
contain all the information that is important to you. For a more
complete understanding of us and this offering, we encourage you
to read this entire document carefully, including the "Risk
Factors" section beginning on
page      and the financial
statements that are included elsewhere in this
prospectus.
OUR COMPANY
We are a leading supplier and a fast-growing
manufacturer of structural and related building products for
residential new construction in the U.S. We are one of the top
two suppliers of our product categories to Production
Homebuilders, which we define as those U.S. homebuilders
that build more than 100 homes per year. Our large scale, full
product and service offerings, and unique business model
position us to continue growing our sales to Production
Homebuilders, the fastest-growing segment of residential
homebuilders. We have operations principally in the southern and
eastern U.S. with 63 distribution centers and 42 manufacturing
facilities. For the year ended December 31, 2004, we
generated sales of
$           million,
net income of
$           million,
and EBITDA of
$           million.
EBITDA is defined in "Non-GAAP financial measures"
included elsewhere in this prospectus.
We provide an integrated solution to our
customers that combines the manufacturing, supply, and
installation of a full range of structural and related building
products. Over the past several years, we have significantly
increased our sales of products that we manufacture. These
products include our factory-built roof and floor trusses, wall
panels and stairs, as well as engineered wood products that we
design and cut for each home (collectively "Prefabricated
Components"). We also manufacture custom millwork and trim
that we market under the Synboard® brand name, as well as
aluminum and vinyl windows, and we assemble interior and
exterior doors into pre-hung units. Our revenue from these
manufactured products totaled
$           million
for the year ended December 31, 2004,
representing       % of total
sales. In addition, we supply our customers with a broad
offering of professional grade building products not
manufactured by us such as dimensional lumber and lumber sheet
goods, various window, door and millwork lines, as well as
cabinets, roofing, and gypsum wallboard. Our full range of
construction-related services includes professional
installation, turn-key framing and shell construction, and spans
all our product categories.
We group our building products and services into
five principal product categories: Prefabricated Components,
Windows & Doors, Lumber & Lumber Sheet Goods, Millwork,
and Other Building Products & Services. Over the past five
years we have more than doubled the sales of our Prefabricated
Components, Windows & Doors, and Millwork product
categories, each of which includes both manufactured and
distributed products. Products in these categories typically
carry a higher margin and provide us with opportunities to
cross-sell other products and services, thereby increasing
customer
1
penetration. The chart below provides a breakdown
of each product category's contribution to sales in the
year ended December 31, 2004.
Sales by Product Category—Year Ended
December 31, 2004
Total
Sales—$           million
* Includes both manufactured and
distributed products
We serve a broad customer base ranging from
Production Homebuilders to small custom homebuilders and believe
that we are the number one or two building products supplier for
single-family residential new construction in approximately 75%
of the geographic markets in which we operate. According to 2003
U.S. Census data, we have operations in 20 of the top 50 U.S.
Metropolitan Statistical Areas, as ranked by single family
housing permits, and approximately 44% of U.S. housing starts
occurred in states in which we operate. Our comprehensive
product offering featuring over 250,000 SKUs company-wide and
our full range of construction services, combined with our scale
and experienced sales force, have driven market share gains,
particularly with Production Homebuilders.
INDUSTRY OVERVIEW AND TRENDS
Our Industry.
We compete in the professional
segment ("Pro Segment") of the U.S. residential new
construction building products supply market, which has
estimated 2004 annual sales of $117 billion. The Pro
Segment of this market is highly fragmented, with the top ten
suppliers accounting for less than 15% of the total market. This
segment consists predominantly of small, privately owned
companies, most of which have limited access to capital and
manufacturing capabilities, and lack the ability to provide a
full range of construction services. The industry's
fragmentation is due to the large overall size of the market,
the diversity of the target customer base, and variations in
local building preferences and practices. We focus on a
distinctly different target market than that of home center
retailers, such as Home Depot and Lowe's, who primarily
serve do-it-yourself and professional remodeling customers. By
contrast, our customers consist of professional homebuilders and
those that provide construction services to them, with whom we
develop strong relationships.
Housing.
Our
business is driven primarily by the residential new construction
market. According to the National Association of Homebuilders,
U.S. housing starts were 1.85 million in 2003 and are
projected to be 1.95 million in 2004 and 1.88 million
in 2005. While these levels are above the historical average of
1.62 million over the past ten years, several industry
sources expect that strong housing demand will continue to be
driven over the next decade by new household formations,
increasing homeownership rates, the size and age of the
population, an aging housing stock (approximately 36% of
existing homes were built before 1960), improved financing
options for buyers, and immigration trends. The Homeownership
Alliance, for example, predicts that these demand drivers will
lead to 1.85 million to 2.17 million new U.S. housing
starts per year through 2014. Over the past decade, the
homebuilding sector has undergone significant structural changes
that we believe have contributed to greater stability in
2
the industry. These developments include the
introduction of more professional management teams, a reduction
in speculative land positions, lower levels of unsold inventory,
more conservatively financed balance sheets, geographic
diversification and increased consolidation. As a result of the
recent consolidation activity within the homebuilding industry
and market share gains of the larger builders, our customer base
has shifted increasingly to Production Homebuilders. The market
share of the ten largest Production Homebuilders tripled from
approximately 7% in 1990 to a projected 22% in 2004 and is
expected to increase to 40% by 2010. While Production
Homebuilders have continued to consolidate their industry,
homebuilding remains a locally oriented business, even within
the Production Homebuilders' organizations, as building
codes and architectural preferences vary widely by locale. For
example, building codes in coastal areas are generally much
different from codes in inland areas or those in earthquake
zones, requiring different products and construction techniques.
One of our key success factors is to maintain the local
flexibility required to meet customer demand while maximizing
the benefits of operating a large-scale, integrated company.
Prefabricated Components.
The growing use of Prefabricated
Components in the homebuilding process represents a major trend
within the residential new construction building products supply
market. According to the Engineered Wood Association, the use of
manufactured panels in new homes increased by over 60% from 1997
to 2003. In addition, according to the USDA Forest Service, roof
trusses, the largest component of our Prefabricated Components
category, have replaced conventional site-built roof framing in
approximately 70% of all single-family construction today. In
response to this trend, we have increased our manufacturing
capacity and our ability to provide customers with Prefabricated
Components such as roof and floor trusses, stairs, wall panels,
and engineered wood. Builders value the many benefits of using
these products, including reduced cycle time and carrying costs,
increased product quality, and cost savings from the reduction
of expensive on-site labor and material waste. Once established
as a preferred supplier of Prefabricated Components, we are
typically able to cross-sell additional products and services as
our customers increasingly seek integrated solutions.
OUR COMPETITIVE STRENGTHS
We believe our sales, earnings and cash flow will
be driven by our competitive strengths:
Leading Positions in Growing
Markets.
We believe that we are
the number one or two building products supplier for
single-family residential new construction in approximately 75%
of the geographic markets in which we operate. We are also the
largest supplier of our product categories to the Production
Homebuilders in our geographic markets as a whole. These leading
market positions allow us to develop and sustain strong
relationships with local customers and attain economies of scale
that enhance profitability and reduce the risk of losing
customers to our competitors. This in turn positions us
favorably to continue to gain market share. Our facilities are
strategically located in many of the fastest-growing markets in
the southern and eastern U.S., where we expect continued growth.
We believe that we are well positioned to grow with the
Production Homebuilders as they increase their market share in
these growing markets.
Unique Business Model.
Our unique business model allows
us to cost-effectively supply our customers and target
Production Homebuilders, the fastest-growing segment of our
customer base. We operate an integrated business model across
our network of 63 distribution centers and
42 manufacturing facilities that differentiates us from
many of our competitors who operate in a decentralized manner
with a collection of facilities. This has enabled us to achieve
an appropriate balance of maximizing the benefits of a centrally
directed, large-scale company while maintaining the flexibility
to build strong customer relationships and provide superior
customer service at the local market level. The key components
of our business model are the following:
•
We operate a highly customized, proprietary
    information technology system that drives internal efficiencies
    while allowing us to rapidly respond to our customers and reduce
    their administrative costs.
3
•
We tailor the size of our facilities to each
    market to meet the needs of our customers, offering large-scale,
    full-service branches in larger markets and smaller, more
    tailored facilities in secondary markets.
•
We offer our customers a "one-stop-shop
    approach" that combines a full line of manufactured
    structural building products, lumber and lumber sheet goods, and
    turn-key construction services; this integrated approach
    substantially reduces the administrative burden and cost to our
    customers of dealing with multiple suppliers.
Full Offering of Manufactured Products and
Construction Services.
Over the
past several years, we have significantly increased our sales of
manufactured products, which provide us with higher margins and
increased opportunities to cross-sell other products to our
customers. Our ability to supply our own manufactured products,
including Prefabricated Components, windows, pre-hung doors and
our branded Synboard® millwork products, strengthens our
customer relationships by helping homebuilders reduce costs and
cycle time while ensuring high quality. We also provide our
customers with a full range of services, including professional
installation, turn-key framing and shell construction, and
design. This combination of manufactured products and
construction services offers competitive advantages versus the
traditional single-product, "sell-and-deliver"
business model employed by many of our competitors.
Superior Customer
Service.
We offer our customers
superior service through our experienced sales force and
reliable delivery capabilities. Our salespeople act as trusted
advisors and on-site consultants to the homebuilder and are
involved in each important step of the construction process to
ensure constant communication and rapidly resolve any issues
that may arise. We typically deploy a salesperson to the job
site to take measurements, interpret blueprints, assist in
product selection and help oversee product installation. Drawing
on a deep base of experience and knowledge, our representatives
advise on regional aesthetic preferences and opportunities for
cost reductions. In addition, our large delivery fleet and
comprehensive inventory management system enable us to provide
"just-in-time" product delivery, ensuring a smoother
and faster production cycle for the homebuilder.
Attractive Cost and Working Capital
Position.
We have used our
position as one of the few large-scale competitors in our
industry to create an attractive cost position. We have
generated substantial savings over time by implementing
centralized corporate purchasing agreements. Approximately 80%
of our non-lumber product purchases are made pursuant to
company-wide purchase agreements. Our distribution centers
average $32.6 million of annual sales, which is higher than any
of our competitors that have annual sales in excess of
$1 billion. This scale allows us to leverage our fixed
costs, including occupancy, location management, supervisory
labor and corporate overhead, to lower our costs per sales
dollar. We measure location productivity at a detailed level and
actively manage efficiency and cost. We have implemented a
comprehensive efficiency measurement system in our truss and
wall panel plants and this system has enabled us to
significantly improve productivity. We aggressively manage every
component of working capital, including accounts receivable,
inventory, and accounts payable, and we have improved our
working capital, expressed as a percentage of sales, from 1999
as compared to the nine-month period ended September 30,
2004. All of these activities are designed to ensure that we
serve our customers at the lowest cost possible.
Experienced Management
Team.
We have a dedicated
management team with extensive experience and expertise in the
manufacturing, distribution, and marketing of building products.
Our senior management team, including our three regional group
presidents, has a total of over 175 years of industry
experience. This team has successfully led us through various
industry cycles, economic conditions and capital structures, and
has demonstrated the ability to grow manufacturing businesses,
introduce new product lines, expand into new geographic markets,
and target and integrate acquisitions, while improving
operational and working capital efficiencies. Our seasoned
operational team is led by three regional group presidents who
average over 25 years of industry experience. Local
facility management and sales representatives are knowledgeable
about homebuilding and generally have longstanding relationships
with the builders in their respective markets.
4
OUR STRATEGY
Our strategy is to leverage our competitive
strengths to grow sales, earnings, and cash flow and remain the
preferred supplier to the homebuilding industry.
Increase Customer Penetration Through
Incremental Sales of Manufactured Products and
Services.
We plan to organically
grow our unit volumes and revenues through further penetration
of our customer base by providing existing customers with
incremental value-added products and services. As part of this
strategy, we intend to increase sales of manufactured products,
which are higher margin and less price sensitive than lumber
products, and are growing in demand by homebuilders.
Prefabricated Components, such as trusses, wall panels, stairs
and engineered wood, are highly valued by our customers,
especially Production Homebuilders, because they reduce
builders' cycle times and carrying costs and generate cost
savings through the reduction of on-site labor and lumber waste.
Once established as a manufacturer of these products by our
customers, we are generally able to cross-sell additional
products. We also intend to grow our sales of construction
services, such as professional installation, turn-key framing
and shell construction, and design, as a complement to our
existing product offerings. Our ability to provide full product
and service solutions further strengthens customer loyalty and
enables us to retain an advantage over our competitors.
Target Production Homebuilders.
We intend to leverage our unique
business model, geographic breadth, and scale to continue to
grow our sales to the Production Homebuilders as they continue
to gain market share. The ten largest Production Homebuilders,
as measured by homes sold, tripled their market share from
approximately 7% in 1990 to a projected 22% in 2004, and are
expected to increase their market share to 40% by 2010. We have
grown our sales to this group at an even faster rate. For
example, from 2001 to 2004, the ten largest Production
Homebuilders increased their market share from approximately 18%
to a projected 22%. Over approximately the same period, we
increased our sales to this customer group by
approximately      % from
$262.9 million in 2001 to
$           million
for the year ended December 31, 2004.
Expand through New Manufacturing and
Distribution Centers in Existing and Contiguous
Markets.
We believe that several
key markets in which we currently operate require increased
manufacturing capacity or incremental distribution facilities to
reach their full sales potential. In many locations, we believe
that we can increase market penetration through the introduction
of additional distribution and manufacturing facilities. In
addition, we have identified several markets that we believe we
can enter with a strong market share from the onset by
leveraging our existing nearby facilities, customer
relationships and local knowledge. We will also selectively seek
expansion opportunities that will enable us to grow in the
multi-family and commercial end markets where we currently have
a limited presence. We expect these expansions can be realized
with capital expenditures consistent with historical levels.
Focus on Cost, Working Capital and
Operating Improvements.
We are
extremely focused on expenses and working capital to remain a
low cost supplier. We maintain a continuous improvement,
"best practices" operating philosophy and regularly
implement new initiatives to reduce costs, increase efficiency
and reduce working capital, thereby enhancing profitability and
cash flow. For example, we are beginning to link our computer
system to those of our customers to streamline the
administrative aspects of the quoting, invoicing and billing
processes. We are also analyzing our workforce productivity to
determine the optimal labor mix that minimizes cost, and
examining our logistics function to reduce the cost of inbound
freight. Our focus on cost controls and our strategy of shifting
the sales mix to value-added products and services have
significantly improved profitability. Selling, general and
administrative expenses have declined as a percentage of sales
from 21.4% in 2001
to           %
for the year ended December 31, 2004. We have also improved
our working capital, expressed as a percentage of sales, from
1999 as compared to the nine-month period ended
September 30, 2004.
Pursue Strategic
Acquisitions.
The highly
fragmented nature of the Pro Segment presents substantial
acquisition opportunities. Our acquisition strategy centers on
geographic expansion and continued growth of our Prefabricated
Components business. First, there are a number of attractive
homebuilding markets, including in the western and southwestern
U.S. and parts of the Midwest, where we do not
5
currently operate. We believe that our proven
operating model can be successfully adapted to these markets and
the homebuilders in these markets, many of whom we currently
serve elsewhere, and who value our broad product and service
offering, professional expertise, and superior customer service.
When entering a new market, our strategy is to acquire
market-leading suppliers and subsequently expand their product
offerings and/or add manufacturing facilities while integrating
their operations into our centralized platform. This strategy
allows us to quickly achieve the scale required to maximize
profitability and leverage existing customer relationships in
the local market. Second, we will selectively seek to acquire
companies that manufacture Prefabricated Components such as roof
and floor trusses, wall panels, stairs, and engineered wood, as
well as other building products such as millwork. Prefabricated
Components are growing in popularity with homebuilders and
provide us with cross-selling opportunities and higher margins.
Our senior management team has the experience and ability to
identify acquisition candidates and integrate acquisitions,
having acquired and integrated 23 companies since 1998.
OUR BACKGROUND
Our company was formed in 1998 through a
partnership between JLL Partners, Inc. ("JLL
Partners"), and certain members of the existing management
team. Through strategic acquisitions and organic growth, we
quickly grew into one of the nation's largest suppliers of
structural and related building products to homebuilders. Under
the leadership of our experienced senior management team, we
evolved from a portfolio of 23 acquired businesses into an
integrated operating company organized into three regional
operating groups with strong, centralized financial and
operational oversight.
OUR PRINCIPAL INVESTORS
Affiliates of JLL Partners, Inc. control JLL
Building Products, LLC which owns 94.6% of our outstanding
common stock. Founded in 1988, JLL Partners is among the leading
private equity investment firms in the country with
$2.2 billion in committed capital currently under
management. JLL's investment philosophy is to partner with
exceptional managers to grow and improve quality companies. JLL
has invested in a wide variety of sectors, with portfolio
companies that have included AdvancePCS, C.H.I. Overhead Doors,
Foodbrands America, IASIS Healthcare, Mosaic Sales Solutions,
Motor Coach Industries, and PGT Industries.
RECENT DEVELOPMENTS
On February 11, 2005 we entered into a
$350.0 million senior secured credit facility with a
syndicate of banks. The new credit facility is composed of a
$225.0 million six-and-a-half year term loan, a
$110.0 million five-year revolver, and a $15.0 million
pre-funded letter of credit facility to be available at any time
and from time to time during the six-and-a-half year term. In
addition, on February 11, 2005, we issued
$275.0 million aggregate principal amount of second
priority senior secured floating rate notes due 2012. See
"Description of Certain Indebtedness" for a summary of
the terms of the new credit facility and the floating rate
notes. With the proceeds from these transactions, we repaid
existing indebtedness and paid a $201.2 million dividend to
stockholders and a $35.8 million payment to holders of
stock options, as well as expenses of the new credit facility
and floating rate notes.
Our principal executive offices are located at
2001 Bryan Street, Suite 1600, Dallas, Texas 75201,
and our telephone number is (214) 880-3500.
6
The offering
Common stock offered by Builders
FirstSource, Inc.
shares
    (                    shares
    if the underwriters exercise their over-allotment option in full)
Common stock offered by the selling stockholder
shares
    (                    shares
    if the underwriters exercise their over-allotment option in full)
Common stock to be outstanding after this offering
shares
    (                    shares
    if the underwriters exercise their over-allotment option in full)
Use of Proceeds
We intend to use the net proceeds that we receive
    in this offering to repay a portion of our outstanding debt and
    for general corporate purposes. We will not receive any of the
    proceeds from the sale of our common stock by the selling
    stockholder.
Proposed Nasdaq symbol
"BLDR."
7
Summary of historical financial information and
other data
The following table sets forth a summary of
consolidated financial information and other data for each of
the periods or at each date indicated. The summary historical
consolidated statement of operations and balance sheet data as
of December 31, 2003 and 2002 and for each of the three
fiscal years ended December 31, 2003 has been derived from
the consolidated financial statements of the Company, which have
been audited by PricewaterhouseCoopers LLP, independent
registered public accounting firm for the Company. The selected
balance sheet data as of December 31, 2001 has been derived
from our audited consolidated financial statements not included
herein. The summary historical financial information for the
nine months ended September 30, 2003 and as of and for the
nine months ended September 30, 2004 has been derived from
the unaudited condensed consolidated financial statements of the
Company included elsewhere herein and reflects all adjustments
that, in the opinion of the management of the Company, are
necessary for a fair presentation of such information.
All information included in the following tables
should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and with the consolidated financial statements
and related notes, included elsewhere in this prospectus.
Nine months ended
or at September 30,
Year ended or at December 31,
2004
2003
2003
2002
2001
(in thousands, except per share amounts)
Statement of operations data:
Sales
$
1,552,453
$
1,213,460
$
1,675,093
$
1,500,006
$
1,513,545
Cost of sales
1,201,004
940,953
1,301,728
1,155,369
1,150,233
Gross margin
351,449
272,507
373,365
344,637
363,312
Selling, general and administrative expenses
275,551
240,893
326,419
307,317
323,741
Facility closure costs
—
1,051
1,171
750
8,288
Income from operations
75,898
30,563
45,775
36,570
31,283
Other expense, net
—
901
620
2,220
4,067
Interest expense
18,687
7,935
11,124
12,055
20,581
Income from continuing operations before income
    taxes
57,211
21,727
34,031
22,295
6,635
Income tax expense
22,026
8,330
13,048
8,955
2,609
Income from continuing operations
35,185
13,397
20,983
13,340
4,026
Income (loss) from discontinued operations, net
    of tax
103
(2,641
)
(3,822
)
(2,980
)
(2,120
)
Cumulative effect of change in accounting
    principle, net of tax
—
—
—
(19,504
)
—
Net income (loss)
$
35,288
$
10,756
$
17,161
$
(9,144
)
$
1,906
Income from continuing operations per share—
    basic
$
0.14
$
0.05
$
0.08
$
0.05
$
0.02
Income from continuing operations per share—
    diluted
0.13
0.05
0.08
0.05
0.02
Weighted average shares outstanding— basic
251,321
252,215
252,040
253,629
255,320
Weighted average shares outstanding— diluted
264,738
252,701
252,519
254,108
256,816
Balance sheet data (end of period):
Cash and cash equivalents
$
22,799
$
5,585
$
2,248
$
3,309
Total assets
734,909
626,161
535,185
567,729
Total debt, including current portion
314,055
168,533
129,706
154,010
Shareholders' equity
197,186
301,631
285,902
295,743
Cash flow data:
Net cash provided by (used in) operating
    activities
$
61,329
$
(27,007
)
$
(40,162
)
$
48,530
$
78,039
Net cash used in investing activities
(14,823
)
(5,307
)
(13,040
)
(10,311
)
(2,158
)
Net cash provided by (used in) financing
    activities
(29,292
)
34,375
56,539
(39,280
)
(74,918
)
Other financial data:
Depreciation and amortization (excluding
    discontinued operations)
$
13,998
$
14,942
$
19,579
$
20,002
$
24,543
EBITDA(1)
89,896
45,505
65,354
56,572
55,826
Capital expenditures (excluding acquisitions)
16,394
11,019
15,592
15,061
22,491
(1)
EBITDA, a non-GAAP financial measure used by
    management to measure operating performance, is defined as net
    income (loss) plus income taxes, interest, depreciation,
    amortization, cumulative effect of change in accounting
    principle, other expense (net) and income (loss) from
    discontinued operations. We reference this non-GAAP financial
    measure as a management group frequently in our decision-making
    because it provides meaningful information regarding our
    operating performance and cash flows and facilitates comparisons
    to our historical operating results. For a reconciliation of
    EBITDA to net income, see "Selected Historical Consolidated
    Financial Information"
8
EBITDA is not a recognized term under GAAP and
    does not purport to be an alternative to net income as an
    indicator of operating performance or to cash flows from
    operating activities as a measure of liquidity. Because not all
    companies use identical calculations, the presentation of EBITDA
    may not be comparable to other similarly titled measures of
    other companies. Additionally, EBITDA is not intended to be a
    measure of free cash flow for management's discretionary
    use because it does not reflect certain cash requirements such
    as interest payments, income tax payments, and debt service
    requirements.
9
Risk factors
An investment in shares of our common stock
involves risks. You should consider carefully the following
information about these risks, together with the other
information contained in this prospectus, before deciding to buy
shares of our common stock. If any of the following risks
actually occurs, our business, financial condition, results of
operations, and future growth prospects could be materially and
adversely affected. In these circumstances, the market price of
our common stock could decline, and you may lose all or part of
the money you paid to buy shares of our common stock. The risks
and uncertainties described below are not the only ones we
face.
RISKS RELATING TO OUR BUSINESS AND
INDUSTRY
The Industry in Which We Operate Is Dependent
upon the Homebuilding Industry, the Economy, and Other Important
Factors.
The building products supply industry is highly
dependent on new home construction, which in turn is dependent
upon a number of factors, including demographic trends, interest
rates, tax policy, employment levels, consumer confidence, and
the economy generally. Unfavorable changes in demographics or a
weakening of the national economy or of any regional or local
economy in which we operate could adversely affect consumer
spending, result in decreased demand for homes, and adversely
affect our business. Production of new homes may also decline
because of shortages of qualified tradesmen, reliance on
inadequately capitalized sub-contractors, and shortages of
materials. In addition, the homebuilding industry is subject to
various local, state, and federal statutes, ordinances, rules,
and regulations concerning zoning, building design and safety,
construction, and similar matters, including regulations that
impose restrictive zoning and density requirements in order to
limit the number of homes that can be built within the
boundaries of a particular area. Increased regulatory
restrictions could limit demand for new homes and could
negatively affect our sales and earnings. Because we have
substantial fixed costs, relatively modest declines in our
customers' production levels could have a significant
adverse impact on our financial condition, results of operations
and cash flows.
The Building Supply Industry Is Cyclical and
Seasonal.
The building products supply industry is subject
to cyclical market pressures. Prices of building products are
subject to fluctuations arising from changes in supply and
demand, national and international economic conditions, labor
costs, competition, market speculation, government regulation,
and trade policies, as well as from periodic delays in the
delivery of lumber and other products. For example, prices of
wood products, including lumber and panel products, are subject
to significant volatility and directly affect our sales and
earnings. Our Lumber & Lumber Sheet Goods product category
represented        % of total
sales in the year ended December 31, 2004. We have no
ability to control the timing and amount of pricing changes for
building products. In addition, the supply of building products
fluctuates based on available manufacturing capacity, and a
shortage of capacity or excess capacity in the industry can
result in significant increases or declines in market prices for
those products, often within a short period of time. Such price
fluctuations can adversely affect our financial condition,
results of operations and cash flows.
In addition, although weather patterns affect our
results of operations throughout the year, adverse weather
historically has reduced construction activity in the first and
fourth quarters in our markets. To the extent that hurricanes,
severe storms, floods, or other natural disasters or similar
events occur in the markets in which we operate, our business
may be adversely affected. We anticipate that fluctuations from
period to period will continue in the future.
10
Risk factors
Product Shortages, Loss of Key Suppliers, and
Our Dependence on Third-Party Suppliers and Manufacturers Could
Affect Our Financial Health.
Our ability to offer a wide variety of products
to our customers is dependent upon our ability to obtain
adequate product supply from manufacturers and other suppliers.
Generally, our products are obtainable from various sources and
in sufficient quantities. However, the loss of, or a substantial
decrease in the availability of, products from our suppliers or
the loss of key supplier arrangements could adversely impact our
financial condition, results of operations and cash flows.
Although in many instances we have agreements
with our suppliers, these agreements are generally terminable by
either party on limited notice. Failure by our suppliers to
continue to supply us with products on commercially reasonable
terms, or at all, could have a material adverse effect on our
financial condition, results of operations and cash flows.
The Loss of Any of Our Significant Customers
Could Affect Our Financial Health.
Our 10 largest customers generated
approximately      % of our sales in
the year ended December 31, 2004, and our largest customer
accounted for almost  % of our sales in that same period.
We cannot guarantee that we will maintain or improve our
relationships with these customers or that we will continue to
supply these customers at current levels. Production
Homebuilders and other customers may seek to purchase some of
the products that we currently sell directly from manufacturers,
or they may elect to establish their own building products
manufacturing and distribution facilities. In addition,
continued consolidation among Production Homebuilders could also
result in a loss of some of our present customers to our
competitors, and the loss of one or more of our significant
customers or a deterioration in our relations with any of them
could significantly affect our financial condition, results of
operations and cash flows. Furthermore, our customers are not
required to purchase any minimum amount of products from us. The
contracts into which we have entered with most of our
professional customers typically provide that we supply
particular products or services for a certain period of time
when and if ordered by the customer. Should our customers
purchase our products in significantly lower quantities than
they have in the past, such decreased purchases could have a
material adverse effect on our financial condition, results of
operations and cash flows.
Our Industry is Highly Fragmented and
Competitive, and Increased Competitive Pressure May Adversely
Affect Our Results.
The building products supply industry is highly
fragmented and competitive. We face significant competition from
local and regional building materials chains, as well as from
privately-owned single site enterprises. Any of these
competitors may (i) foresee the course of market
development more accurately than do we, (ii) develop
products that are superior to our products, (iii) have the
ability to produce similar products at a lower cost,
(iv) develop stronger relationships with local
homebuilders, or (v) adapt more quickly to new technologies
or evolving customer requirements than do we. As a result, we
may not be able to compete successfully with them. In addition,
home center retailers, which have historically concentrated
their sales efforts on retail consumers and small contractors,
may in the future intensify their marketing efforts to
professional homebuilders. Furthermore, certain product
manufacturers sell and distribute their products directly to
Production Homebuilders, and the volume of such direct sales
could increase in the future. Additional manufacturers of
products distributed by us may elect to sell and distribute
directly to homebuilders in the future or enter into exclusive
supplier arrangements with other distributors. Finally, we may
not be able to maintain our costs at a level sufficiently low
for us to compete effectively. If we are unable to compete
effectively, our financial condition, results of operations and
cash flows will be adversely affected.
11
Risk factors
We Are Subject to Competitive Pricing Pressure
From Our Customers.
Production Homebuilders historically have exerted
significant pressure on their outside suppliers to keep prices
low because of their increasing market share and their ability
to leverage such market share in the highly fragmented building
products supply industry. Continued consolidation among
Production Homebuilders, and changes in Production
Homebuilders' purchasing policies or payment practices,
could result in increased pricing pressure. If we are unable to
generate sufficient cost savings in the future to offset any
price reductions, our financial condition, results of
operations, and cash flows may be adversely affected.
Our Level of Indebtedness Could Adversely
Affect our Ability to Raise Additional Capital to Fund Our
Operations, Limit Our Ability to React to Changes in the Economy
or Our Industry, and Prevent Us from Meeting Our Obligations
under Our Debt Instruments.
As of September 30, 2004, after giving
effect to the application of the net proceeds of this offering,
our new senior secured credit facility, our floating rate notes,
and the application of the net proceeds therefrom, our total
indebtedness would have been
$     million. See
"Capitalization" for additional information.
Our substantial debt could have important
consequences for you, including:
•
increasing our vulnerability to general economic
    and industry conditions;
•
requiring a substantial portion of our cash flow
    from operations to be dedicated to the payment of principal and
    interest on our indebtedness, therefore reducing our ability to
    use our cash flow to fund our operations, capital expenditures,
    and future business opportunities;
•
exposing us to the risk of increased interest
    rates because certain of our borrowings, including the floating
    rate notes and borrowings under the new senior secured credit
    facility, will be at variable rates of interest;
•
limiting our ability to obtain additional
    financing for working capital, capital expenditures, debt
    service requirements, acquisitions, and general corporate or
    other purposes; and
•
limiting our ability to adjust to changing market
    conditions and placing us at a competitive disadvantage compared
    to our competitors who have less debt.
We May Incur Additional Indebtedness
We may incur additional indebtedness under our
new senior secured credit facility, which provides for up to
$110 million of revolving credit borrowings and a
$15 million pre-funded letter of credit facility. In
addition, we and our subsidiaries may be able to incur
substantial additional indebtedness in the future, including
secured debt, subject to the restrictions contained in the
credit agreement governing our new senior secured credit
facility and the indenture relating to our floating rate notes.
See "Description of Certain Indebtedness." If new debt
is added to our current debt levels, the related risks that we
now face could intensify.
Our Debt Instruments Contain Various Covenants
That Limit Our Ability to Operate Our Business.
Our financing arrangements, including our new
senior secured credit facility and the indenture governing our
floating rate notes, contain various provisions that limit our
ability to, among other things:
•
transfer or sell assets, including the equity
    interests of our restricted subsidiaries, or use asset sale
    proceeds;
•
incur additional debt;
12
Risk factors
•
pay dividends or distributions on our capital
    stock or repurchase our capital stock;
•
make certain restricted payments or investments;
•
create liens to secure debt;
•
enter into transactions with affiliates;
•
merge or consolidate with another company; and
•
engage in unrelated business activities.
In addition, our new senior secured credit
facility will require us to meet specified financial ratios.
These covenants may restrict our ability to expand or fully
pursue our business strategies. Our ability to comply with these
and other provisions of the indenture governing our floating
rate notes and the new senior secured credit facility may be
affected by changes in our operating and financial performance,
changes in general business and economic conditions, adverse
regulatory developments, or other events beyond our control. The
breach of any of these covenants, including those contained in
our new senior secured credit facility and the indenture
governing our floating rate notes, could result in a default
under our indebtedness, which could cause those and other
obligations to become due and payable. If any of our
indebtedness is accelerated, we may not be able to repay it.
We Are a Holding Company and Conduct All of
Our Operations through Our Subsidiaries. Therefore, We Rely on
Dividends, Interest, and Other Payments, Advances, and Transfers
of Funds from Our Subsidiaries to Meet Our Debt Service and
Other Obligations. As a Result, We May Not Be Able to Generate
Sufficient Cash to Service All of Our Indebtedness and May Be
Forced to Take Other Actions to Satisfy Our Obligations under
Our Indebtedness, Which May Not Be Successful.
We are a holding company that derives all of our
operating income from our subsidiaries. All of our assets are
held by our direct and indirect subsidiaries, and we rely on the
earnings and cash flows of our subsidiaries, which are paid to
us by our subsidiaries in the form of dividends and other
payments or distributions, to meet our debt service obligations.
The ability of our subsidiaries to pay dividends or make other
payments or distributions to us will depend on their respective
operating results and may be restricted by, among other things,
the laws of their jurisdiction of organization (which may limit
the amount of funds available for the payment of dividends and
other distributions to us), the terms of existing and future
indebtedness and other agreements of our subsidiaries, the new
senior secured credit facility, the terms of the indenture
governing the floating rate notes, and the covenants of any
future outstanding indebtedness we or our subsidiaries incur.
Our financial condition and operating performance
and that of our subsidiaries is also subject to prevailing
economic and competitive conditions and to certain financial,
business, and other factors beyond our control. We cannot assure
you that we will maintain a level of cash flows from operating
activities sufficient to permit us to pay the principal, premium
and liquidated damages, if any, and interest on our indebtedness.
If our cash flows and capital resources are
insufficient to fund our debt service obligations, we may be
forced to reduce or delay capital expenditures, sell assets,
seek additional capital, or restructure or refinance our
indebtedness. These alternative measures may not be successful
and may not permit us to meet our scheduled debt service
obligations. In the absence of such operating results and
resources, we could face substantial liquidity problems and
might be required to dispose of material assets or operations to
meet our debt service and other obligations. The credit
agreement governing our new senior secured credit facility and
the indenture governing the floating rate notes will restrict
our ability to dispose of assets and use the proceeds from such
disposition. We may not be able to consummate those dispositions
13
Risk factors
or be able to obtain the proceeds that we could
realize from them, and these proceeds may not be adequate to
meet any debt service obligations then due.
Our Continued Success Will Depend on Our
Ability to Retain Our Key Employees and to Attract and Retain
New Qualified Employees.
Our success depends in part on our ability to
attract, hire, train, and retain qualified managerial, sales,
and marketing personnel. We face significant competition for
these types of employees in our industry. We may be unsuccessful
in attracting and retaining the personnel we require to conduct
and expand our operations successfully. In addition, key
personnel may leave us and compete against us. Our success also
depends to a significant extent on the continued service of our
senior management team. We may be unsuccessful in replacing key
managers who either quit or retire. The loss of any member of
our senior management team or other experienced, senior
employees could impair our ability to execute our business plan
and growth strategy, cause us to lose customers and reduce our
net sales, or lead to employee morale problems and/or the loss
of other key employees. In any such event, our financial
condition, results of operations, and cash flows could be
adversely affected.
The Nature of Our Business Exposes Us to
Product Liability and Warranty Claims and Other Legal
Proceedings.
We are involved in product liability and product
warranty claims relating to the products we manufacture and
distribute that, if adversely determined, could adversely affect
our financial condition, results of operations and cash flows.
We rely on manufacturers and other suppliers to provide us with
many of the products we sell and distribute. Because we do not
have direct control over the quality of such products
manufactured or supplied by such third party suppliers, we are
exposed to risks relating to the quality of such products. In
addition, we are exposed to potential claims arising from the
conduct of home builders and their sub-contractors, for which we
may be contractually liable. Although we currently maintain what
we believe to be suitable and adequate insurance in excess of
our self-insured amounts, there can be no assurance that we will
be able to maintain such insurance on acceptable terms or that
such insurance will provide adequate protection against
potential liabilities. Product liability claims can be expensive
to defend and can divert the attention of management and other
personnel for significant periods, regardless of the ultimate
outcome. Claims of this nature could also have a negative impact
on customer confidence in our products and our company. In
addition, we are involved on an ongoing basis in other legal
proceedings. We cannot assure you that any current or future
claims will not adversely affect our financial condition,
results of operations, and cash flows.
A Range of Factors May Make Our Quarterly
Revenues and Earnings Variable.
We have historically experienced, and in the
future will continue to experience, variability in revenues and
earnings on a quarterly basis. The factors expected to
contribute to this variability include, among others,
(i) the volatility of prices of lumber and wood products,
(ii) the cyclical nature of the homebuilding industry,
(iii) general economic conditions in the various local
markets in which we compete, (iv) the pricing policies of
our competitors, (v) the production schedules of our
customers, and (vi) the effects of the weather. These
factors, among others, make it difficult to project our
operating results on a consistent basis.
We May be Adversely Affected by Any Disruption
in Our Information Technology Systems.
Our operations are dependent upon our information
technology systems, which encompass all of our major business
functions. Our centralized financial reporting system currently
draws data from our two enterprise resource planning
("ERP") systems. We rely upon such information
technology systems to manage and replenish inventory, to fill
and ship customer orders on a timely basis, and to coordinate our
14
Risk factors
sales activities across all of our products and
services. A substantial disruption in our information technology
systems for any prolonged time period could result in delays in
receiving inventory and supplies or filling customer orders and
adversely affect our customer service and relationships. As part
of our continuing integration of our computer systems, we plan
to integrate our two ERPs into a single system. This integration
may divert management's attention from our core businesses.
In addition, we may experience delays in such integration or
problems with the functionality of the integrated system, which
could increase the expected cost of the integration. There can
be no assurance that such delays, problems, or costs will not
have a material adverse effect on our financial condition,
results of operations or cash flows.
We May be Adversely Affected by Any Natural or
Man-Made Disruptions to Our Distribution and Manufacturing
Facilities.
We currently maintain a broad network of
distribution and manufacturing facilities throughout the
southern and eastern U.S. Any serious disruption to our
facilities resulting from fire, earthquake, weather-related
events, an act of terrorism, or any other cause could damage a
significant portion of our inventory and could materially impair
our ability to distribute our products to customers. In
addition, we could incur significantly higher costs and longer
lead times associated with distributing our products to our
customers during the time that it takes for us to reopen or
replace a damaged facility. If any of these events were to
occur, our financial condition, results of operations and cash
flows could be materially adversely affected.
We May be Unable to Successfully Implement Our
Expansion Plans Included in Our Business Strategy.
Our business plan provides for continued growth
through acquisitions, particularly in the western and
southwestern U.S., and organic growth (see
"Business—Our Strategy"). Failure to identify and
acquire suitable acquisition candidates on appropriate terms
could have a material adverse effect on our growth strategy.
Moreover, a significant change in our business or the economy,
an unexpected decrease in our cash flow for any reason, or the
requirements of our new senior secured credit facility could
result in an inability to obtain the capital required to effect
new acquisitions or expansions of existing facilities. Our
failure to make successful acquisitions or to build or expand
facilities, including manufacturing facilities, produce saleable
product, or meet customer demand in a timely manner could result
in damage to or loss of customer relationships. In addition,
although we have been successful in the past in integrating 23
acquisitions, we may not be able to integrate the operations of
future acquired businesses with our own in an efficient and
cost-effective manner or without significant disruption to our
existing operations. Acquisitions, moreover, involve significant
risks and uncertainties, including difficulties integrating
acquired personnel and other corporate cultures into our
business, the potential loss of key employees, customers, or
suppliers, difficulties in integrating different computer and
accounting systems, and exposure to unforeseen liabilities of
acquired companies, and the diversion of management attention
and resources from existing operations. We may also be required
to incur additional debt in order to consummate acquisitions in
the future, which debt may be substantial and may limit our
flexibility in using our cash flow from operations. Our failure
to integrate future acquired businesses effectively or to manage
other consequences of our acquisitions, including increased
indebtedness, could prevent us from remaining competitive and,
ultimately, could adversely affect our financial condition,
results of operations and cash flows.
Federal and State Regulations Could Impose
Substantial Costs and/or Restrictions on Our Operations That
Would Reduce Our Net Income.
We are subject to various federal, state, and
local regulations, including, among other things, regulations
promulgated by the Department of Transportation and applicable
to our fleet of delivery trucks, work
15
Risk factors
safety regulations promulgated by the Department
of Labor's Occupational Safety and Health Administration,
employment regulations promulgated by the United States Equal
Employment Opportunity Commission, and state and local zoning
restrictions and building codes. More burdensome regulatory
requirements in these or other areas may increase our general
and administrative costs and adversely affect our financial
condition, results of operations, and cash flows.
We are Subject to Potential Exposure to
Environmental Liabilities and Are Subject to Environmental
Regulation.
We are subject to various federal, state, and
local environmental laws, ordinances, and regulations. Although
we believe that our facilities are in material compliance with
such laws, ordinances, and regulations, as owners and lessees of
real property, we can be held liable for the investigation or
remediation of contamination on such properties, in some
circumstances, without regard to whether we knew of or were
responsible for such contamination. No assurance can be provided
that remediation may not be required in the future as a result
of spills or releases of petroleum products or hazardous
substances, the discovery of unknown environmental conditions or
more stringent standards regarding existing residual
contamination. More burdensome environmental regulatory
requirements may increase our general and administrative costs
and adversely affect our financial condition, results of
operations, and cash flows.
We May be Adversely Affected by Uncertainty in
the Economy and Financial Markets, Including as a Result of
Terrorism and the War in the Middle East.
Instability in the economy and financial markets,
including as a result of terrorism and the war in the Middle
East, may result in a decrease in housing starts, which would
adversely affect our business. In addition, the war, related
setbacks, or adverse developments, including a retaliatory
military strike or terrorist attack, may cause unpredictable or
unfavorable economic conditions and could have a material
adverse effect on our operating results and financial condition
and on our ability to raise capital. Terrorist attacks similar
to the ones committed on September 11, 2001, may directly
affect our ability to keep our operations and services
functioning properly and could have a material adverse effect on
our financial condition, results of operations, and cash flows.
Being a Public Company Will Increase Our
Administrative Costs.
As a public company, we will incur significant
legal, accounting, and other expenses that we did not incur as a
private company. Under the SEC rules and regulations, as well as
those of Nasdaq, our financial compliance costs will increase.
Such rules may also make it more difficult and more expensive to
obtain director and officer liability insurance, and we may be
forced to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar
coverage. These rules and regulations could also make it more
difficult for us to attract and retain qualified members of our
board of directors, particularly to serve on our audit
committee, and qualified executive officers.
Investor Confidence and the Price of Our
Common Stock May Be Adversely Affected if We Are Unable to
Comply with Section 404 of the Sarbanes-Oxley Act of
2002.
Upon completion of this offering, we will become
an SEC reporting company. As a reporting company, we will be
subject to rules adopted by the SEC pursuant to Section 404
of the Sarbanes-Oxley Act of 2002, which require us to include
in our annual report on Form 10-K our management's
report on, and assessment of, the effectiveness of our internal
controls over financial reporting. In addition, our independent
auditors must attest to and report on management's
assessment of the effectiveness of our internal controls over
financial reporting and the effectiveness of such internal
controls. These requirements will first apply to our annual
report for the fiscal year ending December 31, 2005. If we
fail
16
Risk factors
to properly assess and/or achieve and maintain
the adequacy of our internal controls, there is a risk that we
will not comply with all of the requirements imposed by
Section 404. Moreover, effective internal controls are
necessary for us to produce reliable financial reports and are
important to help prevent financial fraud. Any of these possible
outcomes could result in an adverse reaction in the financial
marketplace due to a loss of investor confidence in the
reliability of our financial statements, which ultimately could
harm our business and could negatively impact the market price
of our securities.
Risks Related to the Offering
There Has Been No Prior Public Market for Our
Common Stock, and an Active Trading Market May Not
Develop.
Prior to this offering, there has been no public
market for our common stock. An active trading market may not
develop following completion of this offering or, if developed,
may not be sustained. The lack of an active market may impair
your ability to sell your shares at the time you wish to sell
them or at a price that you consider reasonable. The lack of an
active market may also reduce the fair market value of your
shares. An inactive market may also impair our ability to raise
capital by selling shares of capital stock and may impair our
ability to acquire other companies by using our shares as
consideration.
Our Stock Price May Be Volatile, and You May
Lose All or Part of Your Investment.
The initial public offering price for the shares
of our common stock sold in this offering has been determined by
negotiation among the representatives of the underwriters and
us. This price may not reflect the market price of our common
stock following this offering and the price of our common stock
may decline. In addition, the market price of our common stock
could be highly volatile and may fluctuate substantially due to
many factors, including:
•
actual or anticipated fluctuations in our results
    of operations;
•
variance in our financial performance from the
    expectations of market analysts;
•
announcements by us or our competitors of
    significant business developments, changes in customer
    relationships, acquisitions or expansion plans;
•
changes in the prices of products we sell;
•
our involvement in litigation;
•
our sale of common stock or other securities in
    the future;
•
market conditions in our industry;
•
changes in key personnel;
•
changes in market valuation or earnings of our
    competitors;
•
the trading volume of our common stock;
•
changes in the estimation of the future size and
    growth rate of our markets; and
•
general economic and market conditions.
In addition, the stock markets have experienced
extreme price and volume fluctuations. Broad market and industry
factors may materially harm the market price of our common
stock, regardless of our operating performance. In the past,
following periods of volatility in the market price of a
company's securities, securities class action litigation
has often been instituted against that company. If we were
involved in any similar litigation we could incur substantial
costs and our management's attention and resources could be
diverted, which could adversely impact our financial condition,
results of operations and cash flows.
17
Risk factors
Investors in This Offering Will Suffer
Immediate and Substantial Dilution.
The initial public offering price of our common
stock is substantially higher than the net tangible book value
per share of our common stock. Purchasers of our common stock in
this offering will experience immediate and substantial
dilution, and the exercise of stock options subsequent to this
offering will cause investors to experience further dilution,
which means that:
•
you will pay a price per share that substantially
    exceeds the per share book value of our assets immediately
    following the offering after subtracting our
    liabilities; and
•
the purchasers in this offering will have
    contributed           %
    of the total amount to fund us but will own
    only           %
    of our outstanding shares.
If We Fail to Meet the Requirements of The
Nasdaq National Market, Our Stock Could Be Delisted, and the
Market for Our Stock Could Be Less Liquid.
We are proposing to apply to list our common
stock on The Nasdaq National Market. There are continuing
eligibility requirements of companies listed on The Nasdaq
National Market. If we are not able to continue to satisfy the
eligibility requirements for The Nasdaq National Market, then
our stock may be delisted. Delisting could result in a lower
price of our common stock and may limit the ability of our
stockholders to sell our stock.
If Securities or Industry Analysts Do Not
Publish Research or Reports about Our Business, Our Stock Price
and Trading Volume Could Decline.
The trading market for our common stock will
likely be significantly influenced by the research and reports
that securities or industry analysts publish about us and our
business. We do not have any control over these analysts. If one
or more of the analysts who cover us downgrade our stock, our
stock price would likely decline. In addition, if one or more of
these analysts cease coverage of our company or fail to
regularly publish reports on us, we could lose visibility in the
financial markets, which could cause our stock price or trading
volume to decline.
The Market Price of Our Common Stock Could Be
Negatively Affected by Future Sales of Our Common
Stock.
Sales by us or our stockholders of a substantial
number of shares of our common stock in the public market
following this offering, or the perception that these sales
might occur, could cause the market price of our common stock to
decline or could impair our ability to raise capital through a
future sale of, or pay for acquisitions using, our equity
securities. The shares held by certain of our current officers,
and by our directors and principal stockholder following this
offering will be subject to lock-up agreements and may not be
sold to the public during
the        -day period
following the date of this prospectus without the consent of the
underwriters. UBS Investment Bank, as the representative of the
underwriters, may, in its sole discretion and at any time
without notice, release all or any portion of the shares subject
to these lock-up agreements. For more information about these
lock-up agreements, see "Underwriting." Shares held by
our officers, directors and principal stockholder will be
considered "restricted securities" within the meaning
of Rule 144 under the Securities Act and, after the lock-up
period, will be eligible for resale subject to certain
limitations of Rule 144.
The holders of an aggregate
of            shares
of our common stock, or their permitted transferees, are
entitled to rights with respect to the registration of these
shares under the Securities Act of 1933. See "Description
of Capital Stock— Registration Rights." In addition to
outstanding shares eligible for future
sale,            shares
of our common stock are issuable under currently outstanding
stock options granted to several officers, directors and
employees. Following this offering, we intend to file a
registration statement under the Securities Act
registering            shares
under our stock incentive plan. Shares included in such
18
Risk factors
registration statement will be available for sale
in the public market immediately except for shares held by
affiliates who will have certain restrictions on their ability
to sell. Sales of substantial amounts of common stock in the
public market, or the perception that these sales may occur,
could materially adversely affect the prevailing market price of
our common stock and our ability to raise capital through a
public offering of our equity securities. See "Shares
Eligible for Future Sale."
The Controlling Position of Affiliates of JLL
Partners Will Limit Your Ability to Influence Corporate
Matters.
Affiliates of JLL Partners control JLL Building
Products, LLC, the selling stockholder, which, prior to this
offering, owns 94.6% of our outstanding common stock and, after
this offering, is expected to
own      % of our outstanding common
stock. Accordingly, following this offering, such affiliates of
JLL Partners will have significant influence over our management
and affairs and over all matters requiring stockholder approval,
including the election of directors and significant corporate
transactions, such as a merger or other sale of our company or
its assets, for the foreseeable future. This concentrated
control will limit your ability to influence corporate matters
and, as a result, we may take actions that some of our
stockholders do not view as beneficial. As a result, the market
price of our common stock could be adversely affected.
Provisions in Our Charter Documents Could
Discourage a Takeover That Stockholders May Consider
Favorable.
Provisions in our certificate of incorporation
and bylaws, as amended and restated upon the closing of this
offering, may have the effect of delaying or preventing a change
of control or changes in our management. These provisions
include the following:
•
Our stockholders may not remove a director
    without cause, and our certificate of incorporation provides for
    a classified board of directors with staggered, three-year
    terms. As a result, it could take up to three years for
    stockholders to replace the entire board.
•
Our board of directors has the exclusive right to
    elect directors to fill a vacancy created by the expansion of
    the board of directors or the resignation, death or removal of a
    director, which prevents stockholders from being able to fill
    vacancies on our board of directors.
•
Our stockholders may not act by written consent.
    As a result, holders of our capital stock would be able to take
    actions only at a stockholders' meeting.
•
No stockholder may call a special meeting of
    stockholders. This may make it more difficult for stockholders
    to take certain actions.
•
We do not have cumulative voting in the election
    of directors. This limits the ability of minority stockholders
    to elect director candidates.
•
Stockholders must provide advance notice to
    nominate individuals for election to the board of directors or
    to propose matters that can be acted upon at a
    stockholders' meeting. These provisions may discourage or
    deter a potential acquirer from conducting a solicitation of
    proxies to elect the acquirer's own slate of directors or
    otherwise attempting to obtain control of our company.
•
Our board of directors may issue, without
    stockholder approval, shares of undesignated preferred stock.
    The ability to authorize undesignated preferred stock makes it
    possible for our board of directors to issue preferred stock
    with voting or other rights or preferences that could impede the
    success of any attempt to acquire us.
19
Risk factors
Our Management Team May Invest or Spend the
Proceeds of This Offering in Ways with Which You May Not Agree
or in Ways That May Not Yield a Return.
Presently, anticipated uses of the proceeds of
this offering include repaying some of our outstanding debt and
for other general corporate purposes. Other than with respect to
repaying our outstanding debt in the manner described in the
"Use of Proceeds," we cannot specify with certainty
how we will use the net proceeds of this offering. Accordingly,
our management will have considerable discretion in the
application of the net proceeds, and you will not have the
opportunity to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate
purposes that do not increase our operating results or market
value. Until the net proceeds are used, they may be placed in
investments that do not produce income or that lose value.
20
Forward-looking statements
This prospectus includes or incorporates
forward-looking statements regarding, among other things, our
financial condition and business strategy. We have based these
forward-looking statements on our current expectations and
projections about future events. All statements other than
statements of historical facts included in this prospectus,
including, without limitation, statements under the headings
"Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," and
"Business," and located elsewhere in this prospectus
regarding the prospects of our industry and our prospects,
plans, financial position, and business strategy may constitute
forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of
forward-looking terminology such as "may,"
"will," "expect," "intend,"
"estimate," "anticipate," "plan,"
"foresee," "believe," or
"continue," or the negatives of these terms or
variations of them or similar terminology. Although we believe
that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these
expectations will prove to be correct. Important factors that
could cause actual results to differ materially from our
expectations are disclosed in this prospectus, including in
conjunction with the forward-looking statements included in this
prospectus and under "Risk Factors." All subsequent
written and oral forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified in their
entirety by the cautionary statements included in this document.
These forward-looking statements speak only as of the date of
this prospectus. We will not update these statements except as
may be required by applicable securities laws. Factors, risks,
and uncertainties that could cause actual outcomes and results
to be materially different from those projected include, among
others:
•
Dependence on the homebuilding industry, the
    economy, and other important factors;
•
Cyclical and seasonal nature of the building
    products supply industry;
•
Product shortages, loss of key suppliers, and our
    dependence on third-party suppliers and manufacturers;
•
Loss of significant customers;
•
Competition in the highly fragmented building
    products supply industry;
•
Pricing pressure from our customers;
•
Our level of indebtedness;
•
Our incurrence of additional indebtedness;
•
Our inability to take certain actions because of
    restrictions in our debt agreements;
•
Our reliance on our subsidiaries;
•
Dependence on key personnel;
•
Exposure to product liability and warranty claims;
•
Variability of our quarterly revenues and
    earnings;
•
Disruptions in our information technology systems;
•
Disruptions at our facilities;
•
Our ability to execute our strategic plans;
•
Effects of regulatory conditions on our
    operations;
•
Exposure to environmental liabilities and
    regulation;
•
Economic and financial uncertainty resulting from
    terrorism and war;
•
Costs incurred as a result of becoming a public
    company; and
•
Our ability to meet the requirements of the
    Sarbanes-Oxley Act of 2002.
21
Forward-looking statements
Non-GAAP financial measures
EBITDA, as presented in this prospectus, is a
supplemental measure of our performance that is not required by,
or presented in accordance with, GAAP. It is not a measurement
of our financial performance under GAAP and should not be
considered as an alternative to net income or any other
performance measures derived in accordance with GAAP or as
alternatives to cash flows from operating activities as measures
of our liquidity. We define EBITDA as net income (loss) plus
income taxes, interest, depreciation, amortization, cumulative
effect of change in accounting principle, other expense (net)
and income (loss) from discontinued operations. We believe
EBITDA provides investors with meaningful information with
respect to our operating performance and cash flows and
facilitates comparisons to our historical operating results. We
include it to provide additional information with respect to our
ability to meet our future debt service, capital expenditures
and working capital requirements. In addition, in evaluating
this non-GAAP measure, you should be aware that in the future we
will incur expenses such as those used in calculating EBITDA. In
addition, our presentation of this measure should not be
construed as an inference that our future results will be
unaffected by unusual or nonrecurring items. Our EBITDA measure
has limitations as an analytical tool, and you should not
consider it in isolation, or as a substitute for analysis of our
results as reported under GAAP. Some of these limitations are:
•
it does not reflect our cash expenditures, or
    future requirements, for capital expenditures or contractual
    commitments,
•
it does not reflect changes in, or cash
    requirements for, our working capital needs,
•
it does not reflect the significant interest
    expense, or the cash requirements necessary to service interest
    or principal payments, on our debt,
•
it does not reflect any cash income taxes we may
    be required to pay,
•
although depreciation and amortization are
    non-cash charges, the assets being depreciated and amortized
    will often have to be replaced in the future, and this measure
    does not reflect any cash requirements for such replacements,
•
it is not adjusted for all non-cash income or
    expense items that are reflected in our statements of cash flows,
•
it does not reflect the impact of earnings or
    charges resulting from matters we do not consider to be
    indicative of our ongoing operations, and
•
other companies in our industry may calculate
    this measure differently than we do, which limits its usefulness
    as a comparative measure.
Because of these limitations, our EBITDA measure
should not be considered a measure of discretionary cash
available to us to invest in the growth of our business or as a
measure of cash that will be available to us to meet our
obligations. You should compensate for these limitations by
relying primarily on our GAAP results and using our EBITDA
measure supplementally. See our consolidated financial
statements and the related notes included elsewhere in this
prospectus.
22
Use of proceeds
We estimate that we will receive net proceeds
from this offering of approximately
$           million,
or approximately
$           million
if the underwriters exercise their over-allotment option in
full, based on an assumed initial public offering price of
$          per
share, and after deducting estimated underwriting discounts and
commissions and our estimated offering expenses. We will not
receive any proceeds from the sale of shares of common stock by
the selling stockholder.
We intend to use the net proceeds of this
offering:
•
to repay approximately
    $           million
    of indebtedness;
•
to pay the fees and expenses of this
    offering; and
•
for working capital and general corporate
    purposes.
Pending the uses described above, we intend to
invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
Dividend policy
We have not paid regular dividends in the past;
and any future determination relating to dividend policy will be
made at the discretion of our board of directors and will depend
on a number of factors, including restrictions in our debt
instruments, our future earnings, capital requirements,
financial condition, future prospects, and other factors that
our board of directors may deem relevant. The terms of our new
senior secured credit facility and the indenture governing our
floating rate notes restrict our ability to pay dividends.
Although we have not paid regular dividends in
the past, a dividend was paid to stockholders in the first
quarter of 2005 in an aggregate amount of $201.2 million
(or $0.80 per share) in connection with the closing of our
new senior secured credit facility and floating rate notes, and
an aggregate of $139.6 million (or $0.56 per share) of
dividends was paid in 2004.
23
Capitalization
The following table sets forth our consolidated
cash and cash equivalents and capitalization as of
September 30, 2004, on an actual basis and as adjusted to
give effect to this offering, our new senior secured credit
facility, the issuance of our floating rate notes, and the
application of the net proceeds from this offering, the new
senior secured credit facility, and our floating rate notes as
if they had occurred on September 30, 2004. You should read
this table in conjunction with "Use of Proceeds,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Unaudited Pro
Forma Financial Data" and our consolidated financial
statements and the notes thereto, each included elsewhere in
this prospectus.
September 30, 2004
Actual
Adjusted
(in millions
Cash and cash equivalents
$
22.8
$
Debt
Existing first lien term loan
$
228.9
$
Existing second lien term loan
85.0
Existing other debt
0.2
New revolving credit facility(1)
New senior secured credit facility
Floating rate notes
Total debt
314.1
Shareholders' equity:
Common stock ($0.01 par value, 300,000 shares
    authorized, 251,339 and      issued and
    outstanding at Actual and Adjusted September 30, 2004,
    respectively)
2.5
Additional paid-in capital
160.5
Retained earnings
34.2
Total shareholders' equity
197.2
Total capitalization
$
511.3
$
(1)
$110.0 million of unfunded revolving
    facility commitment; $15.0 million pre-funded letter of
    credit facility will not be reflected on the balance sheet until
    drawn upon.
24
Dilution
If you invest in our common stock, your interest
will be diluted to the extent of the difference between the
public offering price per share of our common stock and the pro
forma net tangible book value per share of our common stock
after giving effect to this offering. After giving effect to the
new senior secured credit facility and the floating rate notes,
the net tangible book value of our common stock as of
September 30, 2004 would have been approximately
$(147.6) million, or approximately $(0.59) per share.
After giving effect to our sale
of                      shares
of our common stock in this offering at an assumed initial
public offering price of
$           per
share, and after deducting estimated underwriting discounts and
commissions and our estimated offering expenses, our pro forma
as adjusted net tangible book value as
of                     ,
2005 would have been approximately
$           million,
or approximately
$           per
share. The difference represents an immediate increase in pro
forma net tangible book value of
$           per
share to our existing stockholders and an immediate dilution in
pro forma net tangible book value of
$           per
share to new investors.
The following table illustrates the per share
dilution to the new investors:
Per Share
Assumed initial public offering price per share
$
Net tangible book value per share as
    of           ,
    2004
$
Increase in net tangible book value per share
    attributable to this offering
$
Pro forma net tangible book value per share after
    this offering
$
Dilution per share to new investors in this
    offering
$
If the underwriters exercise their over-allotment
option in full, the pro forma net tangible book value per share
would increase to
$           per
share, and the dilution per share to new investors would be
$          .
The following table summarizes, on a pro forma
basis as
of                     ,
2004, the differences between our existing stockholders and
investors in this offering with respect to the total number of
shares of common stock purchased from us, the total
consideration paid to us, and the average price per share paid
by our existing stockholders and the price per share paid by
investors in this offering before deducting estimated
underwriting discounts and commissions and our estimated
offering expenses:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing Stockholders
$
$
New Investors
Total
100
%
100
%
If the underwriters exercise their over-allotment
option in full, our existing stockholders would
own      % and our new investors would
own      % of the total number of
shares of our common stock outstanding after this offering.
The discussion and tables above
exclude                      shares
of our common stock issuable upon exercise of outstanding
options with exercise prices ranging from
$          per
share to
$          per
share,
and                      shares
of our common stock available for future grant or issuance under
our stock incentive plan. Because the exercise prices of the
outstanding options are significantly below the assumed initial
offering price, investors purchasing common stock in this
offering will suffer additional dilution when and if these
options are exercised.
25
Unaudited pro forma financial data
The following unaudited pro forma condensed
consolidated balance sheet as of September 30, 2004 is
based on the unaudited historical condensed consolidated balance
sheet as of September 30, 2004 of Builders FirstSource,
Inc. and gives effect to this offering, the new senior secured
credit facility, the floating rate notes, and the use of
proceeds therefrom as if they had occurred on September 30,
2004.
The unaudited pro forma condensed consolidated
statement of operations for the year ended December 31,
2003 has been derived from our audited consolidated financial
statements for the year ended December 31, 2003. The
unaudited pro forma condensed consolidated statement of
operations for the nine-month period ended September 30,
2004 has been derived from our unaudited condensed consolidated
financial statements for the nine-month period
September 30, 2004. The pro forma consolidated statements
of operations give effect to the following events (the
"Transactions") as if each occurred on January 1,
2003, for the year ended December 31, 2003 and
January 1, 2004 for the nine months ended
September 30, 2004.
Debt financing (closed February 11, 2005):
•
We entered into a new $350.0 million senior
    secured credit facility with a syndicate of banks.
•
We issued $275.0 million of the floating
    rate notes.
•
We paid a dividend of $201.2 million to
    stockholders and we paid $35.8 million to holders of stock
    options.
•
We paid the fees and expenses relating to the
    floating rate notes and the new senior secured credit facility.
Offering:
•
We
    issued           shares
    of common stock in this offering.
•
We repaid
    $          of
    indebtedness with the net proceeds of this offering.
•
We paid the fees and expenses related to this
    offering.
The unaudited pro forma financial statements
should be read in conjunction with the accompanying notes, our
historical financial statements and related notes,
"Management's Discussion and Analysis of Financial
Condition and Results of Operations", and other financial
information contained in this prospectus. The pro forma
information presented herein does not purport to be indicative
of the financial position or results of operations that would
have actually occurred had the Transactions taken place on the
dates indicated or which may occur in the future. All pro forma
adjustments are based on preliminary estimates and assumptions
and are subject to revision upon completion of the Transactions.
We believe the estimates and assumptions used to
prepare the unaudited pro forma consolidated financial data
provide a reasonable basis for presenting the significant
effects of the Transactions and that the pro forma adjustments
give appropriate effect to the estimates and assumptions and are
properly applied in the unaudited pro forma consolidated
financial data.
26
Unaudited pro forma financial data
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
As of September 30, 2004
Pro forma
Pro forma
before
Pro forma
debt
Offering
Offering
Historical
adjustments
adjustments
adjustments
Pro forma
(in thousands)
Assets
Current assets:
Cash and cash equivalents
$
22,799
$
(22,799
)(a)
$
—
Accounts receivable, net
266,438
—
266,438
Inventories
156,378
—
156,378
Other current assets
21,545
—
21,545
Total current assets
467,160
(22,799
)
444,361
Property, plant and equipment, net
91,006
—
91,006
Goodwill
163,059
—
163,059
Other assets, net
13,684
20,675
(b)
26,519
(7,840
)(c)
Total assets
$
734,909
$
(9,964
)
$
724,945
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
$
120,827
$
—
$
120,827
Accrued liabilities
85,002
(14,565
)(i)
70,437
Book overdrafts
708
—
708
Current maturities of long-term debt
3,575
(1,325
)(d)
2,250
Total current liabilities
210,112
(15,890
)
194,222
Long-term debt, less current maturities
310,480
187,470
(d)
497,950
Other long-term liabilities
17,131
—
17,131
537,723
171,580
709,303
Commitments and contingencies
Shareholders' equity:
Common stock
2,513
—
2,513
Additional paid-in capital
160,514
(147,385
)(f)(h)
13,129
Stock purchase loans receivable
—
—
—
Retained earnings
34,159
(7,840
)(c)
—
(1,700
)(e)
(10,894
)(f)(h)
(28,290
)(g)(h)
14,565
(i)
Total shareholders' equity
197,186
(181,544
)
15,642
Total liabilities and shareholders' equity
$
734,909
$
(9,964
)
$
724,945
27
Unaudited pro forma financial data
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
Debt Financing (closed February 11, 2005):
(a)
Total available cash and cash equivalents balance
    was used as a source of funds for the payments discussed in
    notes (f) and (g) below.
(b)
Represents $20.7 million of capitalized
    financing costs related to the new senior secured credit
    facility and the issuance of the floating rate notes. The final
    syndicate of banks has not been determined and, therefore, the
    estimated amount of financing costs that will be deferred is
    subject to change depending on final allocation and
    participation of applicable banks.
(c)
Represents the reduction in deferred financing
    costs and shareholders' equity for the write-off of costs
    incurred related to the Company's prior credit facility
    which is being refinanced. As discussed in note (b) above,
    this amount is subject to change depending on the final make-up
    of the lending bank syndicate. At September 30, 2004, the
    Company had a balance of $10.0 million of unamortized
    deferred financing costs, of which $2.2 million related to
    the revolving line of credit under the prior credit facility.
    The costs related to the revolving line of credit were not
    written off in the pro forma condensed consolidated balance
    sheet since the revolving line of credit under the new credit
    facility will increase the Company's borrowing capacity.
    The remaining unamortized balance of deferred financing costs
    related to the prior revolving line of credit will be combined
    with costs incurred to secure the new revolving credit and
    amortized over the life of the new revolving credit agreement.
(d)
Represents the $275.0 million of floating
    rate notes plus the $225.0 million borrowed under the
    Company's new senior secured credit facility, net of the
    repayment of the Company's prior credit facility of
    $313.9 million. The new credit facility requires
    consecutive quarterly payments equal to 1.0% of the original
    principal amount of the loan. Therefore, $2.3 million is
    included in current maturities of long-term debt in the
    accompanying pro forma condensed consolidated balance sheet as
    of September 30, 2004.
(e)
Represents a $1.7 million termination
    payment to be paid related to the prepayment of the
    Tranche B term loan under the prior credit facility which
    was expensed.
(f)
Represents the dividend of $158.3 million
    paid to stockholders as part of the debt financing, assuming
    such payment was made on September 30, 2004. Retained
    earnings was fully reduced by $10.9 million and additional
    paid-in capital was reduced by $147.4 million for the
    remainder of the dividend as discussed in note (h) below.
(g)
Represents the payment made to option holders of
    $28.3 million as part of the debt financing, assuming such
    payment was made on September 30, 2004, in-lieu of
    adjusting the option exercise price.
(h)
The dividend paid to stockholders and the payment
    made to stock option holders were dependent upon the
    Company's level of debt and cash and cash equivalents at
    the date of the closing (February 11, 2005) of the debt
    financing. The following is a reconciliation of the dividends
    paid to stockholders and the payment made to stock option
    holders on February 11, 2005 to the amount of those
    payments assuming the payments occurred on September 30,
    2004.
February 11,
Pro-rata
September 30,
2005
Reduction
2004
Dividend to stockholders
$
201.2
$
(42.9
)
$
158.3
Payment to option holders
$
35.8
$
(7.5
)
$
28.3
(i)
Represents the tax effect of the pro-forma
    adjustments (c), (e) and (g) at a 38.5% tax rate.
28
Unaudited pro forma financial data
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Nine Month Period Ended
September 30, 2004
Pro forma
Pro forma
before
Pro forma
debt
Offering
Offering
Historical
adjustments
adjustments
adjustments
Pro forma
(in thousands, except per share amounts)
Sales
$
1,552,453
$
—
$
1,552,453
Cost of sales
1,201,004
—
1,201,004
Gross margin
351,449
—
351,449
Selling, general and administrative expenses
275,551
—
275,551
Income from operations
75,898
—
75,898
Interest expense
18,687
9,193
(a)
27,880
Income from continuing operations before income
    taxes
57,211
(9,193
)
48,018
Income tax expense
22,026
(3,539
)(b)
18,487
Income from continuing operations
$
35,185
$
(5,654
)
$
29,531
Income from continuing operations per
    share — basic
$
0.14
$
—
Income from continuing operations per
    share — diluted
$
0.13
$
—
Weighted average shares outstanding —
    basic
251,321
—
Weighted average shares outstanding —
    diluted
264,738
—
29
Unaudited pro forma financial data
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2003
Pro forma
Pro forma
before
Pro forma
debt
Offering
Offering
Historical
adjustments
adjustments
adjustments
Pro forma
(In thousands, except per share amounts)
Sales
$
1,675,093
$
—
$
1,675,093
Cost of sales
1,301,728
—
1,301,728
Gross margin
373,365
—
373,365
Selling, general and administrative expenses
326,419
—
326,419
Facility closure costs
1,171
—
1,171
Income from operations
45,775
—
45,775
Other expense, net
620
—
620
Interest expense
11,124
25,707
(a)
36,831
Income from continuing operations before income
    taxes
34,031
(25,707
)
8,324
Income tax expense
13,048
(9,846
)(b)
3,202
Income from continuing operations
$
20,983
$
(15,861
)
$
5,122
Income from continuing operations per
    share — basic
$
0.08
$
—
Income from continuing operations per
    share — diluted
$
0.08
$
—
Weighted average shares outstanding —
    basic
252,040
—
Weighted average shares outstanding —
    diluted
252,519
—
30
Unaudited pro forma financial data
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(a)
Represents the adjustment to historical interest
    expense on debt to be issued or incurred in connection with the
    debt financing, as presented in the following table.
Nine Months
Ended
Year Ended
September 30,
December 31,
2004
2003
(In thousands)
Historical interest expense
$
18,687
$
11,124
Interest expense resulting from the floating rate
    notes
14,479
19,305
Interest expense resulting from borrowings under
    the new senior secured credit facility
9,615
12,821
Interest expense resulting from borrowings under
    the old credit facilities
(13,816
)
(7,683
)
Total cash interest expense
28,965
35,567
Amortization of additional deferred financing
    costs related to the floating rate notes
1,169
1,559
Amortization of deferred financing costs
    associated with the new senior secured credit facility
1,244
1,659
Amortization of deferred financing costs
    associated with the old credit facilities
(3,498
)
(1,954
)
Total pro forma interest expense
$
27,880
$
36,831
As of September 30, 2004, the pro forma
    balance on the new senior secured credit facility was
    $225.0 million and the pro forma balance on the floating
    rate notes was $275.0 million. The assumed interest rate on
    the new senior secured credit facility was 5.27% (LIBOR plus
    2.50%) and the interest rate on the floating rate notes was
    7.02% (LIBOR plus 4.25%). The new senior secured credit facility
    also includes a letter of credit fee of 2.75% on outstanding
    borrowings and a 0.50% commitment fee on the revolving line of
    credit. For each 1/8% change in the assumed interest rate of the
    new credit facility and notes, interest expense would increase
    by approximately $0.6 million and $0.5 million for the
    year ended December 31, 2003 and the nine-month period
    ended September 30, 2004, respectively.
The average outstanding balance of the old senior
    secured credit facility during the nine month period ended
    September 30, 2004 was approximately $315 million at
    an average interest rate of 6.17%. The old credit facility also
    included a letter of credit fee of 2.75% on outstanding
    borrowings and a 0.50% commitment fee on the revolving line of
    credit. The nine month period ended September 30, 2004 also
    included interest from the 2003 credit facility which was
    refinanced in February 2004.
The average outstanding balance of the credit
    facility in existence in 2003 for the year ended
    December 31, 2003 was approximately $135 million at an
    average interest rate of 5.10%. This credit facility also
    included a letter of credit fee ranging from 2.50% to 2.75% on
    outstanding borrowings and a commitment fee on the revolving
    line of credit ranging from 0.325% to 0.375%.
(b)
Represents the income tax effect of the pro forma
    adjustments assuming a tax rate of 38.5% and 38.3% for the nine
    month period ended September 30, 2004 and the year ended
    December 31, 2003, respectively.
31
Selected historical consolidated financial
information
The following table sets forth our selected
historical consolidated financial information for each of the
periods or as of the date indicated. The selected statement of
operations and balance sheet data as of December 31, 2003
and 2002 and for each of the three fiscal years ended
December 31, 2003 has been derived from our consolidated
financial statements, included elsewhere herein which have been
audited by PricewaterhouseCoopers, LLP, our independent
Registered Public Accounting Firm. The selected statement of
operations and balance sheet data as of December 31, 2001,
2000 and 1999 and for the fiscal years ended December 31,
2000 and 1999 has been derived from our audited consolidated
financial statements not included herein. The selected financial
information for the nine months ended September 30, 2003
and as of and for the nine months ended September 30, 2004
has been derived from our unaudited consolidated financial
statements included elsewhere herein and reflects all
adjustments that, in the opinion of our management, are
necessary for a fair presentation of such information.
All information included in the following tables
should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements and
related notes and other financial information, included
elsewhere in this prospectus.
Nine months ended
September 30,
Year ended December 31,
2004
2003
2003
2002
2001
2000
1999
(in thousands, except per share amounts)
Statement of operations data:
Sales
$
1,552,453
$
1,213,460
$
1,675,093
$
1,500,006
$
1,513,545
$
1,513,086
$
1,202,846
Cost of sales
1,201,004
940,953
1,301,728
1,155,369
1,150,233
1,141,658
935,468
Gross margin
351,449
272,507
373,365
344,637
363,312
371,428
267,378
Selling, general and administrative expenses
275,551
240,893
326,419
307,317
323,741
308,574
209,667
Facility closure costs
—
1,051
1,171
750
8,288
—
—
Income from operations
75,898
30,563
45,775
36,570
31,283
62,854
57,711
Other (income) expense, net
—
901
620
2,220
4,067
3,567
(74
)
Interest expense
18,687
7,935
11,124
12,055
20,581
30,891
22,757
Income from continuing operations before income
    taxes
57,211
21,727
34,031
22,295
6,635
28,396
35,028
Income tax expense
22,026
8,330
13,048
8,955
2,609
11,805
15,051
Income from continuing operations
35,185
13,397
20,983
13,340
4,026
16,591
19,977
Income (loss) from discontinued operations, net
    of tax
103
(2,641
)
(3,822
)
(2,980
)
(2,120
)
292
555
Cumulative effect of change in accounting
    principle, net of tax
—
—
—
(19,504
)
—
—
—
Net income (loss)
$
35,288
$
10,756
$
17,161
$
(9,144
)
$
1,906
$
16,883
$
20,532
Income from continuing operations
per share— basic
$
0.14
$
0.05
$
0.08
$
0.05
$
0.02
$
0.08
$
0.15
Income from continuing operations
per share— diluted
$
0.13
$
0.05
$
0.08
$
0.05
$
0.02
$
0.08
$
0.15
Weighted average shares outstanding— basic
251,321
252,215
252,040
253,629
255,320
222,676
138,472
Weighted average shares outstanding— diluted
264,738
252,701
252,519
254,108
256,816
224,322
139,238
32
Nine months ended
September 30,
Year ended December 31,
2004
2003
2003
2002
2001
2000
1999
(in thousands, except per share amounts)
Balance sheet data (end of period):
Cash and cash equivalents
$
22,799
$
5,585
$
2,248
$
3,309
$
2,346
$
6,202
Total assets
734,909
626,161
535,185
567,729
637,911
601,963
Total debt, including current portion
314,055
168,533
129,706
154,010
223,829
298,923
Shareholders' equity
197,186
301,631
285,902
295,743
296,260
194,928
Cash flow data:
Net cash provided by (used in) operating
    activities
$
61,329
$
(27,007
)
$
(40,162
)
$
48,530
$
78,039
$
102,932
$
12,385
Net cash used in investing activities
(14,823
)
(5,307
)
(13,040
)
(10,311
)
(2,158
)
(127,126
)
(208,661
)
Net cash provided by (used in) financing
    activities
(29,292
)
34,375
56,539
(39,280
)
(74,918
)
20,338
200,716
Other financial data:
Depreciation and amortization (excluding
    discontinued operations)
$
13,998
$
14,942
$
19,579
$
20,002
$
24,543
$
20,880
$
13,811
EBITDA(1)
89,896
45,505
65,354
56,572
55,826
83,734
71,522
Capital expenditures (excluding acquisitions)
16,394
11,019
15,592
15,061
22,491
23,123
17,120
(1)
EBITDA, a non-GAAP measure used by management
    to measure operating performance, is defined as net income
    (loss) plus income taxes, interest, depreciation, amortization,
    cumulative effect of changes in accounting principle, other
    (income) expense (net) and income (loss) from discontinued
    operations. We reference this non-GAAP financial measure as a
    management group frequently in our decision-making because it
    provides meaningful information regarding our operating
    performance and cash flows and facilitates comparisons to our
    historical operating results.
EBITDA is not a recognized term under GAAP and
    does not purport to be an alternative to net income as an
    indicator of operating performance or to cash flows from
    operating activities as a measure of liquidity. Because not all
    companies use identical calculations, the presentation of EBITDA
    may not be comparable to other similarly titled measures of
    other companies. Additionally, EBITDA is not intended to be a
    measure of free cash flow for management's discretionary
    use because it does not reflect certain cash requirements such
    as interest payments, income tax payments, and debt service
    requirements.
Below is a table reconciling EBITDA to net
    income (loss):
Nine months ended
September 30,
For the year ended December 31,
2004
2003
2003
2002
2001
2000
1999
(in thousands)
Net income (loss)
$
35,288
$
10,756
$
17,161
$
(9,144
)
$
1,906
$
16,883
$
20,532
Cumulative effect of change in accounting
    principle, net of tax
—
—
—
19,504
—
—
—
(Income) loss from discontinued operations, net
    of tax
(103
)
2,641
3,822
2,980
2,120
(292
)
(555
)
Income tax expense
22,026
8,330
13,048
8,955
2,609
11,805
15,051
Interest expense
18,687
7,935
11,124
12,055
20,581
30,891
22,757
Other (income) expense, net
—
901
620
2,220
4,067
3,567
(74
)
Depreciation expense (excluding discontinued
    operations)
13,875
14,172
18,758
18,512
17,607
15,244
10,407
Amortization expense
123
770
821
1,490
6,936
5,636
3,404
EBITDA
$
89,896
$
45,505
$
65,354
$
56,572
$
55,826
$
83,734
$
71,522
33
Management's discussion and analysis of
financial condition
and results of operations
The following discussion of our financial
condition and results of operations should be read in
conjunction with all of the consolidated historical financial
statements and the notes thereto included elsewhere in this
prospectus. This discussion contains forward-looking statements.
Please see "Risk Factors" and "Forward-Looking
Statements" for a discussion of certain of the
uncertainties, risks and assumptions associated with these
statements.
OVERVIEW
We are a leading supplier and a fast-growing
manufacturer of structural and related building products for
residential new construction in the U.S. Our manufactured
products include our factory-built roof and floor trusses, wall
panels and stairs, as well as engineered wood that we design and
cut for each home. We also manufacture custom millwork and trim
that we market under the Synboard® brand name, as well as
aluminum and vinyl windows, and we assemble interior and
exterior doors into pre-hung units. In addition, we supply our
customers with a broad offering of professional grade building
products not manufactured by us, such as dimensional lumber and
lumber sheet goods, various window, door and millwork lines, as
well as cabinets, roofing, and gypsum wallboard. Our full range
of construction-related services includes professional
installation, turn-key framing and shell construction, and spans
all our product categories.
We manage our business as a single operating
segment. We group our building products and services into five
principal product categories: Prefabricated Components,
Windows & Doors, Lumber & Lumber Sheet Goods,
Millwork, and Other Building Products & Services.
Prefabricated Components consist of factory-built floor and roof
trusses, wall panels, stairs, as well as engineered wood that we
design and cut for each home. The Windows & Doors
category is comprised of the manufacturing, assembly and
distribution of windows, and the assembly and distribution of
interior and exterior door units. Lumber & Lumber Sheet
Goods include dimensional lumber, plywood and oriented strand
board ("OSB") products used in on-site house framing.
Millwork includes interior and exterior trim, columns, and posts
that we distribute, as well as custom exterior features that we
manufacture under the Synboard® brand name. The Other
Building Products & Services category is comprised of
products including cabinets, gypsum, roofing, and insulation,
and services including turn-key framing and shell construction,
design assistance, and the professional installation of
products, which spans all of our product categories.
Factors influencing future results of
operations
Our future results of operations will be impacted
by the following factors, some of which are beyond our control.
Homebuilding
Industry.
Our business is driven
primarily by the residential new construction market. According
to the National Association of Homebuilders, U.S. housing
starts were 1.85 million in 2003 and are projected to be
1.95 million in 2004 and 1.88 million in 2005. While
these levels are above the historical average of
1.62 million over the past ten years, several industry
sources expect that strong housing demand will continue to be
driven over the next decade by new household formations,
increasing homeownership rates, the size and age of the
population, an aging housing stock (approximately 36% of
existing homes were built before 1960), improved financing
options for buyers, and immigration trends. In recent years, the
homebuilding industry has undergone significant consolidation,
with the larger homebuilders substantially increasing their
market share. In accordance with this trend, our customer base
has increasingly shifted to Production Homebuilders, the fastest
growing segment of residential homebuilders.
34
Management's discussion and analysis of
financial condition and results of operations
The growing use of Prefabricated Components in
the homebuilding process represents a major trend within the
residential new construction building products supply market.
Builders value the many benefits of using these products,
including reduced cycle time and carrying costs, increased
product quality, and cost savings from the reduction of
expensive on-site labor and material waste. In response to this
trend, we have continued to increase our manufacturing capacity
and our ability to provide customers with Prefabricated
Components such as roof and floor trusses, wall panels, stairs
and engineered wood, as well as windows, pre-hung doors and our
branded Synboard® millwork products.
Economic
Conditions.
Our financial
performance will be impacted by economic changes nationally and
locally in the markets we serve. The building products supply
industry is dependent on new home construction and subject to
cyclical market pressures. Our operations are subject to
fluctuations arising from changes in supply and demand, national
and international economic conditions, labor costs, competition,
government regulation, trade policies, and other factors that
affect the homebuilding industry such as demographic trends,
interest rates, single-family housing starts, employment levels,
consumer confidence, and the availability of credit to
homebuilders, contractors and homeowners.
Cost of
Materials.
Prices of wood
products, which are subject to cyclical market pressures,
adversely impact operating income when prices rapidly rise or
fall within a relatively short period of time. We purchase
certain materials, including lumber products which are then sold
to customers as well as used as direct production inputs for our
manufactured products. Short term changes in the cost of these
materials, some of which are subject to significant
fluctuations, are sometimes passed on to our customers, but our
pricing quotation periods may limit our ability to pass on such
price changes. Our inability to pass on material price increases
to our customers could adversely impact operating income.
Recapitalization.
In connection with our new senior secured credit facility, our
floating rate notes, and the use of proceeds therefrom, we will
recognize certain expenses in the first quarter of 2005. The
payment to our option holders will be recorded as compensation
expense reducing pre-tax income by approximately
$35.8 million. We expect to pay approximately
$22.4 million in fees in connection with the issuance of
the floating rate notes and our new senior secured credit
facility. The amount of fees that will be capitalized or
expensed, as well as the amount of previously deferred loan
costs that will be expensed, is dependent upon the ultimate
participation of banks in our new senior secured credit
facility, in relation to their participation in our 2004 credit
facility. To date, the banks' level of participation has
not been determined. As a result of these payments, we expect to
report a net loss for the first quarter of 2005.
Selling, General and Administrative
Expense.
On January 18, 2005,
we announced that we are planning to prepare for an underwritten
initial public offering of our common stock, which we expect to
complete in the second quarter of 2005. Following consummation
of our proposed initial public offering, we would incur certain
incremental costs and expenses as a result of being a public
company, including costs associated with our reporting
requirements.
CRITICAL ACCOUNTING POLICIES AND
ESTIMATES
Critical accounting policies are those that both
are important to the accurate portrayal of a company's
financial condition and results, and require subjective or
complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently
uncertain.
In order to prepare financial statements that
conform to accounting principles generally accepted in the
United States, commonly referred to as GAAP, we make estimates
and assumptions that affect the amounts reported in our
financial statements and accompanying notes. Certain estimates
are particularly sensitive due to their significance to the
financial statements and the possibility that future events may
be significantly different from our expectations.
35
Management's discussion and analysis of
financial condition and results of operations
We have identified the following accounting
policies that require us to make the most subjective or complex
judgments in order to fairly present our consolidated financial
position and results of operations.
Sales.
We
recognize sales when the following criteria are met: persuasive
evidence of an arrangement exists, delivery has occurred or
services have been rendered, our price to the buyer is fixed and
determinable, and collectibility is reasonably assured. We
generally recognize sales upon delivery to the customer's
delivery site. We use the completed contract method to recognize
sales for certain construction and installation contracts. All
sales recognized are net of allowances for cash discounts and
estimated returns, which are estimated using historical
experience.
Vendor
Rebates.
Many of our arrangements
with our vendors provide for us to receive a rebate of a
specified amount payable to us when we achieve any of a number
of measures, generally related to the volume of purchases from
our vendors. We account for these rebates as a reduction of the
prices of the vendor's products, which reduces inventory
until we sell the product, at which time these rebates reduce
cost of sales. Throughout the year, we estimate the amount of
rebates based upon our historical level of purchases. We
continually revise these estimates to reflect actual purchase
levels.
If market conditions were to change, vendors may
change the terms of some or all of these programs. Although
these changes would not affect the amounts which we have
recorded related to product already purchased, it may impact our
gross margins on products we sell or sales earned in future
periods.
Allowance for Doubtful Accounts and Related
Reserves.
We maintain an allowance
for doubtful accounts for estimated losses due to the failure of
our customers to make required payments. We perform periodic
credit evaluations of our customers and typically do not require
collateral. Consistent with industry practices, we generally
require payment from most customers within 30 days. As our
business is seasonal in certain regions, our customers'
businesses are also seasonal. Sales are lowest in the winter
months, and our past due accounts receivable balance as a
percentage of total receivables generally increases during this
time. Throughout the year, we record estimated reserves based
upon our historical write-offs of uncollectible accounts, taking
into consideration certain factors, such as aging statistics and
trends, customer payment history, independent credit reports,
and discussions with customers.
Periodically, we perform a specific analysis of
all accounts past due and write off account balances when we
have exhausted reasonable collection efforts and determined that
the likelihood of collection is remote. We charge these
write-offs against our allowance for doubtful accounts.
Impairment of Long-Lived
Assets.
Long-lived assets,
including property and equipment, are reviewed for possible
impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. Our judgment
regarding the existence of impairment indicators is based on
market and operational performance. Determining whether an
impairment has occurred typically requires various estimates and
assumptions, including determining which cash flows are directly
related to the potentially impaired asset, the useful life over
which cash flows will occur, their amount, and the asset's
residual value, if any. In turn, measurement of an impairment
loss requires a determination of fair value, which is based on
the best information available. We use internal cash flow
estimates, quoted market prices when available and independent
appraisals as appropriate to determine fair value. We derive the
required cash flow estimates from our historical experience and
our internal business plans and apply an appropriate discount
rate. If these projected cash flows are less than the carrying
amount, an impairment loss is recognized based on the fair value
of the asset less any costs of disposition.
Goodwill.
Goodwill represents the excess of the amount we paid to acquire
businesses over the estimated fair value of tangible assets and
identifiable intangible assets acquired, less liabilities
assumed. At September 30, 2004, our net goodwill balance
was approximately $163.1 million, representing
approximately 22.2% of our total assets.
36
Management's discussion and analysis of
financial condition and results of operations
In fiscal 2002, we adopted the provisions of
SFAS 142,
Goodwill and Other Intangible Assets.
Under these rules, we test goodwill for impairment in the fourth
quarter of each fiscal year or at any other time when impairment
indicators exist. Examples of such indicators that would cause
us to test goodwill for impairment between annual tests include
a significant change in the business climate, unexpected
competition, significant deterioration in market share or a loss
of key personnel. We determine fair value using a discounted
cash flow approach to value our reporting units.
If circumstances change or events occur to
indicate that our fair market value on a reporting unit basis
has fallen below its net book value, we will compare the
estimated implied value of the goodwill to its book value. If
the book value of goodwill exceeds the estimated implied value
of goodwill, we will recognize the difference as an impairment
loss in operating income.
Inventories.
Inventories consist principally of materials purchased for
resale, including lumber, sheet goods, windows, doors and
millwork, and raw materials for certain manufactured products
and are stated at the lower of cost or market. Cost is
determined using the weighted average method, the use of which
approximates the first-in, first-out method. We accrue for
shrink based on the actual historical shrink results of our most
recent physical inventories adjusted, if necessary, for current
economic conditions. These estimates are compared with actual
results as physical inventory counts are taken and reconciled to
the general ledger.
During the year, we monitor our inventory levels
by location and record provisions for excess inventories based
on slower moving inventory. We define potential excess inventory
as the amount of inventory on hand in excess of the historical
usage, excluding special order items purchased in the last three
months. We then apply our judgment as to forecasted demand and
other factors, including liquidation value, to determine the
required adjustments to net realizable value. Our inventories
are generally not susceptible to technological obsolescence.
Deferred Income
Taxes.
We assess whether it is
more likely than not that some or all of our deferred tax assets
will not be realized. We consider the reversal of existing
deferred tax liabilities, future taxable income, and tax
planning strategies in our assessment. We have certain state
income tax carryforwards where we believe it is unlikely that we
will realize the benefits associated with these tax
carryforwards and have established a valuation allowance against
our deferred tax assets. Changes in our estimates of future
taxable income and tax planning strategies will affect our
estimate of the realization of the tax benefits of these tax
carryforwards.
Insurance Deductible
Reserve.
We have large deductibles
for general liability, auto liability and workers'
compensation insurance. The expected liability for unpaid claims
falling within our deductible, including incurred but not
reported losses, is determined using the assistance of a
third-party actuary. This amount is reflected on our balance
sheet as an accrued liability. Our accounting policy includes an
internal evaluation and adjustment of our reserve for all
insurance-related liabilities on a quarterly basis. At least on
an annual basis, we engage an external actuarial professional to
independently assess and estimate the total liability
outstanding, which is compared to the actual reserve balance at
that time and adjusted accordingly.
RESULTS OF OPERATIONS
The following discussion and analysis provides
information that management believes is relevant to an
assessment and understanding of our consolidated results of
operations for the years ended December 31, 2003, 2002 and
2001 and the nine-month periods ended September 30, 2004
and 2003 and our financial condition as of December 31,
2003 and 2002 and September 30, 2004.
37
Management's discussion and analysis of
financial condition and results of operations
The following table sets forth, for the years
ended December 31, 2003, 2002 and 2001 and the nine-month
periods ended September 30, 2004 and 2003 the percentage
relationship to sales of certain costs, expenses and income
items:
Nine Months
ended
September 30,
Years ended December 31,
2004
2003
2003
2002
2001
Sales
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Cost and operating expenses
Cost of sales
77.4
77.5
77.7
77.0
76.0
Gross margin
22.6
22.5
22.3
23.0
24.0
Selling, general and administrative expenses
17.7
19.9
19.5
20.5
21.4
Facility closure costs
—
0.1
0.1
0.1
0.5
Income from operations
4.9
2.5
2.7
2.4
2.1
Interest expense
1.2
0.7
0.7
0.8
1.4
Other expense, net
—
0.1
0.0
0.1
0.3
Income tax expense
1.4
0.7
0.8
0.6
0.2
(Income) Loss from discontinued operations, net
    of tax
—
0.2
0.2
0.2
0.1
Cumulative effect of change in accounting
    principle, net of tax
—
—
—
1.3
—
Net income (loss)
2.3
%
0.8
%
1.0
%
(0.6
)%
0.1
%
Nine months ended September 30, 2004
compared with the nine months ended September 30,
2003
Sales.
Sales
for the nine-month period ended September 30, 2004 were
$1,552.5 million, a $339.0 million, or 27.9%, increase
over sales of $1,213.5 million in the same period of 2003.
Sales benefited from strong homebuilding activity in all our
geographic markets. Our sales management initiatives, including
incentive and training programs, have allowed the Company to
grow sales in all product categories at a faster rate than
reported growth in residential housing starts during the same
period. In addition, the growth rate of Prefabricated Components
reflects the success of our strategy of diversifying into more
value-added product sales.
The following table shows sales classified by
major product category (in millions):
Nine-Months Ended September 30,
2004
2003
% of
% of
%
Sales
Sales
Sales
Sales
Growth
Prefabricated Components
$
287.3
18.5
%
$
223.8
18.4
%
28.4
%
Windows & Doors
291.6
18.8
%
260.3
21.5
%
12.0
%
Lumber & Lumber Sheet Goods
624.5
40.2
%
414.4
34.2
%
50.7
%
Millwork
130.7
8.4
%
117.3
9.7
%
11.4
%
Other Building Products & Services
218.4
14.1
%
197.7
16.2
%
10.5
%
Total
$
1,552.5
100.0
%
$
1,213.5
100.0
%
27.9
%
38
Management's discussion and analysis of
financial condition and results of operations
Sales of Prefabricated Components increased
$63.5 million or 28.4%, from $223.8 million for the
nine-month period ended September 30, 2003 to
$287.3 million for the nine-month period ended
September 30, 2004. This was largely attributable to the
increase in truss and panel sales of $46.2 million
resulting from usage of Prefabricated Components by Production
Homebuilders.
Sales of Windows & Doors increased
$31.3 million, or 12.0%, from $260.3 million for the
nine-month period ended September 30, 2003 to
$291.6 million for the nine-month period ended
September 30, 2004. This was attributable to increased
sales of assembled and distributed window products.
Sales of Lumber & Lumber Sheet Goods
increased $210.1 million, or 50.7%, from
$414.4 million for the nine-month period ended
September 30, 2003 to $624.5 million for the
nine-month period ended September 30, 2004. This increase
was largely attributable to price increases of approximately
$189.0 million and unit volume increases of
$21.1 million. Sales were favorably impacted by
significantly higher prices for Lumber & Lumber Sheet
Goods due to increases in demand coupled with limited capacity
additions by manufacturers over the last several years.
Sales of Millwork products increased
$13.4 million, or 11.4%, from $117.3 million for the
nine-month period ended September 30, 2003 to
$130.7 million for the nine-month period ended
September 30, 2004. This increase was largely attributable
to our new sales management programs.
Sales of Other Building Products &
Services increased $20.7 million, or 10.5%, from
$197.7 million for the nine-month period ended
September 30, 2003 to $218.4 million for the
nine-month period ended September 30, 2004. This increase
was largely attributable to increases in installation services,
and higher sales volume of gypsum, insulation and hardware
products.
Gross Margin.
Gross margin increased $78.9 million, or 29.0%, from
$272.5 million for the nine-month period ended
September 30, 2003 to $351.4 million for the
nine-month period ended September 30, 2004. The gross
margin percentage increased from 22.5% for the nine-month period
ended September 30, 2003 to 22.6% for the nine-month period
ended September 30, 2004. Contributing to this increase was
an $18.6 million, or 32.0%, increase in gross margins in
Prefabricated Components. This increase was primarily a result
of labor efficiencies and increased sales volume which resulted
in the more efficient absorption of fixed costs, partially
offset by increased raw materials costs. In addition, the
overall gross margin increase was attributed to a
$41.3 million, or 59.8%, increase in Lumber &
Lumber Sheet Goods gross margins, and a corresponding increase
in Lumber & Lumber Sheet Goods gross margin percentage
from 16.7% for the nine-month period ended September 30,
2003 to 17.7% for the nine-month period ended September 30,
2004. This gross margin increase was a result of higher sales
levels while purchasing programs implemented in 2004 were the
predominant reason for the improvement in gross margin
percentage.
Selling, General and Administrative
Expenses.
Selling, general and
administrative expenses increased by $34.7 million, or
14.4%, from $240.9 million for the nine-months ended
September 2003 to $275.6 million for the nine-months ended
September 2004. The increase was attributable to a
$23.9 million increase in salaries and benefits expense,
largely as a result of higher commission and bonus expense
related primarily to increased sales and profitability, a
$1.5 million increase in fuel costs and a $2.2 million
increase in shipping costs. As a percentage of sales, selling,
general and administrative expenses decreased from 19.9% for the
nine months ended September 2003 to 17.7% for the nine months
ended September 2004. This decrease was due to labor
efficiencies and leveraging fixed operating costs.
Interest
Expense.
Interest expense
increased by $10.8 million from $7.9 million for the
nine-month period ended September 30, 2003 to
$18.7 million for the nine-month period ended
September 30, 2004. The increase was the result of higher
average debt levels as well as higher average interest rates
during the nine-month period ended September 30, 2004
following the recapitalization completed in February 2004.
39
Management's discussion and analysis of
financial condition and results of operations
Interest expense in 2003 and 2004 included
$1.6 million and $1.3 million of debt issue cost
amortization, respectively, and 2004 included the write-off of
$2.2 million of previously deferred loan costs.
Provision for Income
Taxes.
The effective combined
federal and state tax rate was 38.5% and 38.3% for the
nine-month period ended September 30, 2004 and the same
period of 2003, respectively.
Income (Loss) from Discontinued Operations,
Net of Tax.
During the nine months
ended September 30, 2003, the Company recognized an expense
of $1.6 million in order to adjust asset balances to their
estimated net realizable value and an impairment charge of $1.2
million to write-off the carrying value of goodwill pertaining
to these operations as a result of the exit plan in
September 2003. The Company completed the exit plan prior
to December 31, 2003.
2003 compared with 2002
Sales.
Sales
for the year ended 2003 were $1,675.1 million, a
$175.1 million, or 11.7%, increase over sales of
$1,500.0 million for the year ended 2002. Overall, sales
benefited from improved economic conditions and low interest
rates.
The following table shows sales by major product
category (millions):
Year Ended
2003
2002
Sales
% of Sales
Sales
% of Sales
% Growth
Prefabricated Components
$
303.4
18.1
%
$
257.3
17.2
%
17.9
%
Windows & Doors
354.6
21.2
325.2
21.7
9.0
Lumber & Lumber Sheet Goods
593.7
35.4
515.4
34.3
15.2
Millwork
158.7
9.5
151.1
10.1
5.0
Other Building Products & Services
264.7
15.8
251.0
16.7
5.5
Total
$
1,675.1
100.0
%
$
1,500.0
100.0
%
11.7
%
Sales of Prefabricated Components increased
$46.1 million, or 17.9%, from $257.3 million for the
year ended 2002 to $303.4 million for the year ended 2003.
In particular, truss and panel sales grew $33.7 million as
we continued our strategy of opening new plants and modernizing
and expanding our existing plants.
Sales of Windows & Doors increased
$29.4 million, or 9.0%, from $325.2 million for the
year ended 2002 to $354.6 million for the year ended 2003.
Sales of manufactured aluminum and vinyl windows increased
$16.0 million as we continued to expand this product
offering.
Sales of Lumber & Lumber Sheet Goods
increased $78.3 million, or 15.2%, from $515.4 million
for the year ended 2002 to $593.7 million for the year
ended 2003. Higher prices contributed approximately
$57.0 million of the increase while increased unit volumes
amounted to approximately $21.3 million. Sales prices were
favorably impacted, particularly in the second half of 2003, by
higher market prices for panel and lumber products due to
increases in demand coupled with minimal increases in capacity
by the major manufacturers.
Sales of Millwork products increased
$7.6 million, or 5.0%, from $151.1 million for the
year ended 2002 compared to $158.7 million for the year
ended 2003.
Sales of Other Building Products &
Services increased $13.7 million, or 5.5%, from
$251.0 million for the year ended 2002 to
$264.7 million for the year ended 2003. This increase was
largely attributable to the continued growth of installation
services ($8.4 million increase in sales of services).
40
Management's discussion and analysis of
financial condition and results of operations
Gross Margin.
Gross margin increased $28.7 million, or 8.3%, from
$344.6 million for the year ended 2002 to
$373.4 million for the year ended 2003. Gross margin on
Prefabricated Components increased $13.6 million, and
expressed, as a percentage of sales, increased 0.7% as a result
of value-added engineering and raw material substitution
reducing the raw material costs of the finished product. The
overall gross margin percentage for 2003 decreased to 22.3%
compared to 23.0% in 2002. Gross margin on Lumber &
Lumber Sheet Goods increased $2.3 million but, expressed as
a percentage of sales, fell 2.0% from 18.6% in 2002 to 16.6% in
2003. This decrease was primarily due to the rapid increase in
procurement costs in 2003, and our limited ability to pass along
these increases due to existing customer commitments.
Selling, General and Administrative
Expenses.
Selling, general and
administrative expenses increased $19.1 million, or 6.2%,
from $307.3 million in 2002 to $326.4 million in 2003.
Salaries and benefits expense increased $14.1 million in
2003 due to higher commissions and increased variable costs
associated with the strong sales performance. In addition, fuel
costs and third party delivery charges increased
$2.9 million in 2003 due to the increase in number of
deliveries. Selling, general and administrative expenses
expressed as a percentage of sales decreased from 20.5% in 2002
to 19.5% in 2003. The largest improvement was in the salaries
and benefits percentage, which decreased 0.6% due to improved
labor efficiencies and the leveraging of fixed management and
supervisory payroll costs.
Interest Expense.
Interest expense totaled
$11.1 million for 2003 compared to $12.1 million for
2002. The decrease was due to lower average debt levels in 2003.
Interest expense in 2003 and 2002 included $2.0 million and
$2.1 million of debt issue cost amortization, respectively.
Provision for Income
Taxes.
The effective tax rate was
38.3% for 2003 compared to 40.2% for 2002. Our overall effective
tax was in excess of the federal statutory rate due to state
income taxes. The effective state tax rate fell due to change in
mix of income generated in states in which we are subject to
taxation.
Loss from Discontinued Operations, Net of
Tax.
Loss from discontinued
operations, net of tax increased $0.8 million, or 28.3%, to
$3.8 million in 2003 from $3.0 million in 2002. The
increase was due to the Company announcing its intent to exit
its operations in Colorado in September 2003 based upon several
factors including unfavorable market conditions and a poor
competitive position which prevented the Company from generating
profitable results. The cessation of operations in this market
was treated as a discontinued operation as it had
distinguishable cash flow and operations that have been
eliminated from the ongoing Company and we have no further cash
flows or operations in this market. The Company completed the
exit plan prior to December 31, 2003. As a result of the
exit plan, in 2003 the Company recorded an expense of
$1.9 million in order to adjust asset balances to their
estimated net realizable value, an expense of $0.2 million
related to facility exit costs, and an impairment charge of
$1.2 million to write-off the carrying value of goodwill
pertaining to these operations. During 2002, the Company also
closed a facility related to the Colorado operations and
recorded an expense of approximately $1.2 million for the
closure of this facility primarily related to future minimum
lease payments due on the vacated facility.
Cumulative Effect of Change in Accounting
Principle, Net of Tax.
As of
January 1, 2002, we adopted SFAS 142 which eliminates
the amortization of goodwill and intangible assets with
indefinite lives and requires instead that those assets be
tested for impairment annually. The application of the
transition provisions of this new accounting standard required
us to reduce our goodwill balance by $19.5 million, net of
tax during 2002.
2002 compared with 2001
Sales.
Sales
for the year ended 2002 were $1,500.0 million, a
$13.5 million, or 0.9% decrease from sales of
$1,513.5 million for the year ended 2001. The decrease in
sales was primarily due to lower market prices associated with
Lumber & Lumber Sheet Goods, which reached their lowest
levels in recent history,
41
Management's discussion and analysis of
financial condition and results of operations
as well as the construction of smaller, lower
value homes, which typically do not provide expanded sales
opportunities due to the reduced cost of the materials. In
addition, the closure of underperforming locations reduced sales
by $47.7 million.
Gross Margin.
Gross margin decreased $18.7 million, or 5.1%, from
$363.3 million for the year ended 2001 to
$344.6 million for the year ended 2002. The gross margin
percentage for 2002 decreased to 23.0% compared to 24.0% in
2001. The shift to smaller housing packages and lower value
products in 2002 was the reason for the decline in margin
percentages.
Selling, General and Administrative
Expenses.
Selling, general and
administrative expenses decreased $16.4 million, or 5.1%,
to $307.3 million in 2002 from $323.7 million in 2001.
Salaries and benefits expense fell $6.3 million, the result
of lower sales commissions, bonuses and reductions in the
workforce due to the sales decline.
Facility Closure
Costs.
Facility closure costs
decreased approximately $7.5 million from $8.3 million
in 2001 to $0.8 million in 2002. The decrease was primarily
attributable to the closing and consolidation of various
underperforming locations in 2001 in our efforts to achieve
certain economies of scale.
Interest Expense.
Interest expense totaled
$12.1 million for 2002 compared to $20.6 million for
2001. The decrease was due to lower average debt levels in 2002.
Interest expense in both 2002 and 2001 included
$2.1 million of debt issue cost amortization.
Provision for Income
Taxes.
The effective tax rate was
40.2% for 2002 and 39.3% for 2001. Our overall effective tax was
in excess of the federal statutory rate due to state income
taxes, which increased during 2002 due to state legislative
changes. The increase in the effective tax rate was attributed
to benefits recognized related to certain state tax planning
strategies implemented during 2001 partially off-set by the
impact of the amortization of non-deductible goodwill.
Loss from Discontinued Operations, Net of
Tax.
Loss from discontinued
operations, net of tax increased to $3.0 million in 2002,
or 40.6%, from $2.1 million in 2001. The $0.9 million
increase was primarily attributed to the Company closing a
facility related to the Colorado operations in 2002 and
recording an expense of approximately $1.2 million for the
closure of this facility primarily related to future minimum
lease payments due on the vacated facility.
LIQUIDITY AND CAPITAL RESOURCES
Our primary capital requirements are to fund
working capital needs, meet required debt payments, including
debt service payments on the floating rate notes and our new
senior secured credit facility, to fund capital expenditures and
acquisitions, and to pay dividends, if any, on our common stock.
Capital resources have primarily consisted of cash flows from
operations and borrowings under our credit facility.
Consolidated cash flows
Operating
activities.
Cash flows provided by
operating activities increased to $61.3 million for the
nine-month period ended September 30, 2004 from net cash
used of $27.0 million for the nine-month period ended
September 30, 2003. The increase of $88.3 million in
cash flows provided by operating activities was primarily driven
by the overall increase in net income, net decrease in accounts
receivable and retained interest in transferred accounts
receivable of $47.1 million and increases in accounts
payable and accrued liabilities of $26.9 million. These
increases were offset in part by a $11.2 million increase
in inventory. The remaining sources were from changes in other
working capital. The increase in accounts receivable and
retained interest in transferred accounts receivable was
primarily due to our accounts receivable securitization
agreement expiring in August 2003. The increase in accrued
liabilities was due to increased compensation, including
bonuses, and sales and income tax accruals which were a direct
result of our increased performance for the nine-month period
ended September 30, 2004 as compared to the
42
Management's discussion and analysis of
financial condition and results of operations
prior year. The increase in inventory levels was
a direct result of the Company building inventory levels to
support higher sales.
Net cash used in operating activities increased
to $40.2 million for 2003 from cash flows provided by
operating activities of $48.5 million in 2002. The increase
in cash used by operating activities of $88.7 million was
primarily driven by net increases in accounts receivable and
retained interest in transferred accounts receivable of
$62.8 million, increases in cash used for inventory of
$31.5 million, and net decreases in accounts payable and
accrued liabilities of $6.2 million. These increases in
cash used were offset in part by an increase in net income
before depreciation and amortization, cumulative effect of
change in accounting principle, and non-cash gain (loss) from
discontinued operations of $8.3 million. The remaining
sources were from changes in other working capital. The increase
in accounts receivable and retained interest in transferred
accounts receivable was primarily due to our accounts receivable
securitization agreement expiring in August 2003. The net
decrease in accounts payable and accrued liabilities was
primarily due to the timing of payments off-set in part by
increased compensation and sales tax accruals which were a
direct result of the Company's increased performance from
prior year. The increase in inventory levels was a direct result
of the Company building inventory levels to support higher sales
in addition to the Company taking advantage of declining lumber
prices near the end of the year in 2003.
In 2002, cash provided from operating activities
decreased to $48.5 million from $78.0 million in 2001.
The decrease of $29.5 million was primarily driven by net
increases in accounts receivable and retained interest in
transferred accounts receivable of $44.1 million, partially
off-set by increases in cash received from inventory of
$5.1 million and net increases in accounts payable and
accrued liabilities of $15.1 million. The remaining sources
were from changes in other working capital. The increase in
accounts receivable and retained interest in transferred
accounts receivable was primarily due to a decrease in proceeds
from new securitizations. The net increase in accounts payable
and accrued liabilities was primarily due to the timing of
payments.
Investing
activities.
During the first
nine months of fiscal 2004 and fiscal 2003, cash flows used
for investing activities totaled $14.8 million and
$5.3 million, respectively. Capital expenditures increased
approximately $5.4 million to $16.4 million for the
nine month period ended September 30, 2004 from
$11.0 million for the nine month period ended
September 30, 2003 primarily due to the purchase of
machinery and equipment at our existing facilities. Proceeds
from the sale of property, plant, and equipment decreased
$4.6 million from $6.2 million for the first nine
months of 2003 to $1.6 million for the first nine months of
2004 primarily due to our undertaking a significant effort to
update our delivery and warehouse fleet in 2003.
During 2003, cash used in investing activities
increased approximately $2.7 million from
$10.3 million in 2002 to $13.0 million in 2003. This
increase was primarily attributable to our using
$4.6 million to acquire three companies in 2003 as compared
to only $1.7 million in 2002 relating to acquisitions. This
increase was mainly due to management initiating a concerted
effort to control capital expenditures in 2002.
During 2002, cash used in investing activities
increased from $2.2 million in 2001 to $10.3 million
in 2002. The $8.2 million increase was primarily attributed
to the Company receiving approximately $18.2 million from a
sale in 2001 of certain distribution and manufacturing
properties. We also decreased capital expenditures in 2002 from
$22.5 million in 2001 to $15.1 million in 2002 mainly
due to our concerted effort to control capital expenditures in
2002.
Financing
activities.
Net cash provided by
financing activities was $34.4 million for the first nine
months of 2003 as compared to $29.3 million used in the
first nine months of 2004. The increase in cash used in
financing activities was primarily due to our entering into a
credit agreement in February of 2004 from which we received
approximately $315.0 million of proceeds, of which
approximately
43
Management's discussion and analysis of
financial condition and results of operations
$139.6 million was used to pay a dividend
and $168.3 million was used to retire the existing debt
facility. We also made $1.2 million of scheduled principal
payments during the first nine months of 2004 on our 2004 credit
facility. We had net borrowings of $61.9 million on our
revolving line of credit and made approximately
$22.3 million of principal payments through the first nine
months of 2003. Book overdrafts decreased $24.1 million
during the first nine months of 2004 as compared to a decrease
of $3.8 million in the first nine months of 2003.
Net cash provided by financing activities was
$56.5 million in 2003 as compared to $39.3 million
used in financing activities in 2002. The increase in cash
provided by financing activities was primarily due to our
incurring net borrowings of long-term debt of $38.8 million
in 2003 as compared to us repaying $24.3 million of
long-term debt in 2002. The increased borrowings in 2003 were
attributable to our accounts receivable securitization agreement
expiring in 2003, which was a significant source of cash. Book
overdrafts increased $20.5 million during 2003 as compared
to a decrease of $13.3 million in 2002.
Net cash used in financing activities was
$39.3 million in 2002 as compared to $74.9 million
used in financing activities in 2001. We reduced long-term debt
by $69.8 million in 2001 which was significantly higher
than the $24.3 million of long-term debt repaid in 2002. In
2001, we received a significant amount of proceeds from our
accounts receivable securitization agreement and applied a
majority of the proceeds towards repaying our long-term debt.
Book overdrafts decreased $13.3 million during 2002 as
compared to a decrease of $2.7 million in 2001.
Pre-Transaction Capital Resources.
On February 25, 2004, we
entered into a $405.0 million senior secured credit
agreement (the "2004 Credit Agreement") with a
syndicate of banks. The 2004 Credit Agreement was initially
comprised of a $90.0 million long-term revolver due
February 25, 2009; a $230.0 million Tranche A
term loan due in quarterly installments beginning June 30,
2004 and ending February 25, 2010; and an
$85.0 million Tranche B term loan due on
August 25, 2010. During 2004, we permanently repaid
approximately $1.2 million under the term loan which
permanently reduced the borrowing capacity under the 2004 Credit
Agreement.
Interest rates under the credit agreement for the
revolving loans and the Tranche A term loan are based on
the prime rate in the United States or LIBOR (plus a margin, or
"LIBOR spread," based on leverage ratios, which is
currently LIBOR plus 2.75% and prime rate plus 1.75% for
revolving loans and LIBOR plus 3.25% and prime rate plus 2.25%
for the Tranche A term loan), at our option at the time of
borrowing. Interest rates under the credit agreement for the
Tranche B term loan are based on the prime rate in the
United States or LIBOR (plus a fixed margin, or "LIBOR
spread," which is LIBOR plus 8.50% and prime rate plus
7.50%), at our option at the time of borrowing provided that the
base interest rate shall in no event be less than 2.0%. The
weighted-average interest rate at September 30, 2004 for
borrowings under the 2004 Credit Agreement, was 6.2%. A variable
commitment fee based on the total leverage ratio is charged on
the unused amount of the revolver (0.50% at September 30,
2004). At September 30, 2004 the available borrowing
capacity of the revolver totaled $73.8 million after being
reduced by outstanding letters of credit of approximately
$16.2 million.
The 2004 Credit Agreement is collateralized by
substantially all tangible and intangible property and interest
in property and proceeds thereof owned by us and our
wholly-owned subsidiaries. The 2004 Credit Agreement also
contains certain restrictive covenants, which, among other
things, relate to the payment of dividends, incurrence of
indebtedness, repurchase of common stock or other distributions,
and asset sales and also require compliance with certain
financial covenants with respect to a maximum total leverage
ratio and a minimum interest coverage ratio. We could be
required to make mandatory prepayments of amounts outstanding
under the 2004 Credit Agreement based on the results of an
excess cash flow calculation that must be performed annually
under the terms of the Agreement. At September 30, 2004, we
were in compliance with all covenants under the 2004 Credit
Agreement.
44
Management's discussion and analysis of
financial condition and results of operations
Post-Transaction Capital
Resources.
On February 11,
2005, we entered into a $350.0 million senior secured
credit agreement (the "New Credit Agreement") with a
syndicate of banks. The New Credit Agreement is comprised of a
$225.0 million six-and-a-half year term loan; a
$110.0 million five-year revolver; and a pre-funded letter
of credit facility to be available at any time and from time to
time during the six and a half year term in the aggregate face
amount at any time outstanding not to exceed $15.0 million.
Interest rates under the New Credit Agreement for
the term loan, the revolving loans and the letter of credit
facility are based on the corporate base rate of UBS AG,
Stamford Branch, or LIBOR, in each case plus a margin, at our
option at the time of borrowing. In addition, the interest rate
applicable to the revolving loans under the New Credit Agreement
is subject to a pricing grid based on our leverage ratio.
The New Credit Agreement is collateralized by
(i) a pledge of the common stock of all of our subsidiaries
and (ii) a security interest in substantially all tangible
and intangible property and proceeds thereof now owned or
hereafter acquired by us and substantially all our subsidiaries.
The New Credit Agreement also contains certain restrictive
covenants that, among other things, relate to the payment of
dividends, incurrence of indebtedness, repurchase of common
stock or other distributions, and asset sales and also require
compliance with certain financial covenants with respect to a
maximum total leverage ratio and a minimum interest coverage
ratio. We can be required to make mandatory prepayments of
amounts outstanding under the New Credit Agreement based on
certain asset sales and casualty events, issuances of debt and
the results of an excess cash flow calculation that must be
performed annually under the terms of the New Credit Agreement.
On February 11, 2005, we issued
$275.0 million in aggregate principal amount of second
priority senior secured floating rate notes due 2012. Interest
accrues on the notes at a rate of LIBOR plus 4.25%. The LIBOR
rate is reset at the beginning of each quarter. The floating
rate notes are collateralized by (i) a pledge of the common
stock of all of our subsidiaries and (ii) a security
interest in substantially all tangible and intangible property
and proceeds thereof now owned or hereafter acquired by us and
substantially all our subsidiaries. The indenture governing the
floating rate notes contains covenants that limit our ability
and the ability of our restricted subsidiaries to, among other
things: incur additional indebtedness; pay dividends or make
other distributions on our capital stock or repurchase, repay or
redeem our capital stock; make certain investments; incur liens;
enter into certain types of transactions with affiliates; create
restrictions on the payment of dividends or other amounts to us
by our restricted subsidiaries; and sell all or substantially
all of our assets or merge with or into other companies.
Long-term debt consists of the following:
September 30,
December 31,
2004
2003
(in thousands)
Revolving credit facility
$
—
$
68,900
Tranche A term loan
228,850
—
Tranche B term loan
85,000
99,358
Other notes
205
275
314,055
168,533
Less current portion of long-term debt
3,575
1,731
$
310,480
$
166,802
Based on our ability to generate cash flows from
operations, our borrowing capacity under the revolver under the
New Credit Agreement and our access to capital markets, we
believe we will have sufficient capital to meet our anticipated
short-term and long-term needs, including our capital
expenditures,
45
Management's discussion and analysis of
financial condition and results of operations
acquisition strategies and our debt obligations
for the foreseeable future. Upon completion of this offering, we
expect to have total long-term debt of
$          .
Capital
Expenditures.
Capital expenditures
vary depending on prevailing business factors, including current
and anticipated market conditions. With the exception of 2003,
capital expenditures in recent years have remained at relatively
low levels in comparison to the operating cash flows generated
during corresponding periods. We believe that this trend will
continue given our existing facilities and acquisition plans,
and our product portfolio and anticipated market conditions
going forward. During the nine months ended September 30,
2004 and the same period in 2003, our capital expenditures
amounted to $16.4 million and $11.0 million,
respectively. For the years ended December 31, 2003, 2002
and 2001, capital expenditures totaled $15.6 million,
$15.1 million and $22.5 million, respectively. Market
conditions in 2002 into early 2003 led to reduced capital
expenditures during those periods. However, we increased capital
expenditures in late 2003 and early 2004 given the improvement
in business conditions. Consistent with previous spending
patterns, future capital expenditures will focus primarily on
expanding our value-added product offerings such as
Prefabricated Components.
We anticipate that cash flows from operations and
liquidity from the New Credit Agreement will be sufficient to
execute the Company's business plans and acquisition
strategies.
DISCLOSURES OF CONTRACTUAL OBLIGATIONS AND
COMMERCIAL COMMITMENTS
The following summarizes the contractual
obligations of the Company as of September 30, 2004
exclusive of the new senior secured credit facility and floating
rate notes (in thousands):
Payments Due by Period
Less
than
1 – 3
4
5
After 5
Contractual Obligations
Total
1 Year
Years
Years
Years
Years
Long-Term Debt
$
314,055
$
3,575
$
6,900
$
110,400
$
193,180
$
—
Operating Leases
176,667
34,080
59,774
16,174
10,427
56,212
Interest on Long Term Debt(1)
116,309
21,725
64,501
20,044
10,039
—
Total Contractual Cash Obligations
$
607,031
$
59,380
$
131,175
$
146,618
$
213,646
$
56,212
(1)
Interest based on LIBOR rate of 2.01% at
    September 30, 2004. Actual future interest may vary based
    on LIBOR fluctuations.
Purchase orders entered into in the ordinary
course of business are excluded from the above table. Amounts
for which we are liable under purchase orders are reflected on
our consolidated balance sheet as accounts payable and accrued
liabilities.
Other cash obligations not reflected in the
balance sheet
The amounts reflected in the table above for
operating leases represent future minimum lease payments under
noncancelable operating leases with an initial or remaining term
in excess of one year at September 30, 2004.
In accordance with GAAP, our operating leases are
not recorded in our balance sheet. In addition, we have residual
value guarantees on certain equipment leases. Under these leases
the Company has the option of (a) purchasing the equipment
at the end of the lease term at its then fair market value,
(b) arranging for the sale of the equipment to a third
party, or (c) returning the equipment to the lessor to sell
the equipment. If the sales proceeds in either case are less
than the residual value, then we are required to reimburse the
lessor for the deficiency up to a specified level as stated in
each lease agreement. The
46
Management's discussion and analysis of
financial condition and results of operations
guarantees under these leases for the residual
values of equipment at the end of the respective operating lease
periods approximated $10.9 million as of September 30,
2004.
Based upon the expectation that none of these
leased assets will have a residual value at the end of the lease
term that is materially less than the value specified in the
related operating lease agreement, we do not believe it is
probable that we will be required to fund any amounts under the
terms of these guarantee arrangements. Accordingly, no accruals
have been recognized for these guarantees.
DISCLOSURES OF CERTAIN MARKET RISKS
The Company experiences changes in interest
expense when market interest rates change. Changes in the
Company's debt could also increase these risks. The Company
has managed its exposure to market interest rate changes through
periodic refinancing of our variable-rate debt with fixed-rate
term debt obligations. Based on debt outstanding at
September 30, 2004, a 25 basis point increase in
interest rates would result in approximately $796,000 of
additional interest costs annually.
The Company does not utilize any derivative
financial instruments to hedge price movements of our materials.
However, we will begin using interest rate swap contracts to fix
long-term interest rates on a portion of our floating rate debt.
We purchase certain materials, including lumber
products, which are then sold to customers as well as used as
direct production inputs for our manufactured products which we
deliver. Short term changes in the cost of these materials, some
of which are subject to significant fluctuations, are sometimes,
but not always, passed on to our customers. Our inability to
pass on material price increases to our customers can adversely
impact operating income.
QUARTERLY RESULTS AND SEASONALITY
The Company's first and fourth quarters
historically have been, and are expected to continue to be,
adversely affected by weather patterns in some of the
Company's markets, causing reduced construction activity.
In addition, quarterly results historically have reflected, and
are expected to continue to reflect, fluctuations from period to
period arising from, among other things, (i) the volatility
of prices of lumber and wood products, (ii) the cyclical
nature of the homebuilding industry, (iii) general economic
conditions in the various local markets in which we compete,
(iv) the pricing policies of our competitors, (v) the
production schedules of our customers, and (vi) the effects
of the weather.
The composition and level of working capital
typically changes during periods of increasing sales as the
Company carries more inventory and receivables. Working capital
levels typically increase in the second and third quarters of
the year due to higher sales during the peak residential
construction season. These increases historically have resulted
in negative operating cash flows during this peak season, which
generally have been financed through our revolving credit
facility. Collection of receivables and reduction in inventory
levels following the peak of the building and construction
season have more than offset this negative cash flow in recent
years. We believe our new revolving credit facility and our
ability to generate positive cash-flows from operating
activities will continue to be sufficient to cover seasonal
working capital needs.
NEW ACCOUNTING STANDARDS
In December 2004, the FASB issued
SFAS No. 123 (Revised 2004) "Share Based
Payment" ("SFAS 123R"), which is a revision
of SFAS 123 and supersedes APB 25 and SFAS 148.
This statement requires that the cost resulting from all
share-based payment transactions be recognized in the financial
statements. This statement establishes fair value as the
measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair value
based measurement method in
47
Management's discussion and analysis of
financial condition and results of operations
accounting for share-based payment transactions
with employees except for equity instruments held by employee
share ownership plans.
SFAS 123R applies to all awards granted
after the required effective date (the beginning of the first
interim or annual reporting period that begins after
June 15, 2005) and to awards modified, repurchased, or
cancelled after that date. As of the required effective date,
all public entities that used the fair value based method for
either recognition or disclosure under Statement 123 will
apply this Statement using a modified version of prospective
application. Under that transition method, compensation cost is
recognized on or after the required effective date for the
portion of outstanding awards for which the requisite service
has not yet been rendered, based on the grant-date fair value of
those awards calculated under Statement 123 for either
recognition or pro forma disclosures. For periods before the
required effective date, those entities may elect to apply a
modified version of the retrospective application under which
financial statements for prior periods are adjusted on a basis
consistent with the pro forma disclosures required for those
periods by Statement 123. The Company previously used the
minimum value method under SFAS 123 to calculate the fair
value of its options and will apply the prospective transition
method as of the required effective date. The Company will
continue to account for the currently outstanding options under
APB 25 and will apply the provisions of SFAS 123R
prospectively to new awards and to awards modified, repurchased,
or cancelled after adoption of this statement.
In November 2004, the FASB issued
SFAS No. 151,
Inventory Costs— an amendment of
ARB No. 43, Chapter 4
("SFAS No. 151"). SFAS No. 151
amends the guidance in ARB No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). SFAS No. 151
requires that those items be recognized as current period
charges. In addition, SFAS No. 151 requires that
allocation of fixed production overhead to the costs of
inventory be based on the normal capacity of the production
facilities. This new standard is effective for inventory costs
incurred during fiscal years beginning after June  15,
2005. Earlier application is permitted for inventory costs
incurred during fiscal years beginning after November 23,
2004. The Company does not anticipate the adoption of this
statement to have a significant impact on its financial position
or results of operations.
In December 2004, the FASB issued Statement
No. 153,
Exchanges of Nonmonetary Assets
, an
amendment of APB Opinion No. 29,
Accounting for
Nonmonetary Transactions
("SFAS No. 153"). The amendments made by
SFAS No. 153 are based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value
of the assets exchanged. Further, the amendments eliminate the
narrow exception for nonmonetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of
nonmonetary assets that do not have commercial substance.
Previously, Opinion 29 required that the accounting for an
exchange of a productive asset for a similar productive asset or
an equivalent interest in the same or similar productive asset
should be based on the recorded amount of the asset
relinquished. By focusing the exception on exchanges that lack
commercial substance, the Board believes SFAS No. 153
produces financial reporting that more faithfully represents the
economics of the transactions. This statement is effective for
nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. The Company does not believe
the adoption of this new statement will have a material impact
on its financial condition or results of operations.
In September 2004, the Emerging Issues Task Force
("EITF") reached a consensus on EITF Issue
No. 04-8, "The Effect of Contingently Convertible Debt
on Diluted Earnings Per Share," which requires shares
associated with contingently convertible debt instruments with
market price triggers to be included in the computation of
diluted earnings per share ("EPS") regardless of
whether the market price trigger has been met. EITF 04-8
also requires that prior period diluted EPS amounts presented
for comparative purposes be restated. EITF 04-8 is
effective for reporting periods ending after
December  15, 2004. The Company does not believe the
adoption of this new statement will have a material impact on
its financial condition or results of operations.
48
Industry overview and trends
We compete in the professional segment ("Pro
Segment") of the U.S. residential new construction
building products supply market, which has estimated 2004 annual
sales of $117 billion. Our competitive landscape is highly
fragmented, consisting primarily of small, privately owned
companies, most of which have limited access to capital and
manufacturing capabilities, and lack the ability to provide a
full range of construction services. We serve a broad customer
base ranging from small custom homebuilders to the largest
Production Homebuilders, including publicly traded companies
that have multi-billion dollar market capitalizations such as
Centex, D.R. Horton, Hovnanian Enterprises, Pulte, and Ryland
Group. Our target market is distinctly different from that of
home center retailers, such as Home Depot and Lowe's, which
primarily serve do-it-yourself and professional remodeling
customers.
We believe the following industry conditions and
trends will benefit our business:
Large, Fragmented
Market.
The estimated
$117 billion Pro Segment of the U.S. residential new
construction building products supply market is highly
fragmented, with the top ten suppliers accounting for less than
15% of the total market, and only six generating over
$1 billion in sales. This segment consists predominantly of
small, privately owned companies, most of which have limited
access to capital and lack sophisticated information technology
systems and large-scale procurement capabilities. The
industry's fragmentation is due to the overall size of the
market, the diversity of the target customer base, and
variations in local building preferences and practices. While we
and our largest competitors have significantly grown market
share over the past several years, including through
acquisitions, the market remains extremely fragmented relative
to most other industries. We believe that the highly fragmented
nature of the Pro Segment presents substantial acquisition
opportunities as well as the opportunity to increase market
share in existing markets.
Strong Housing
Fundamentals.
Our business is
driven primarily by the new residential construction market.
According to the National Association of Homebuilders,
U.S. housing starts were 1.85 million in 2003 and are
projected to be 1.95 million in 2004 and 1.88 million
in 2005. While these levels are above the historical average of
1.62 million over the past ten years, several industry
sources expect that strong housing demand will continue to be
driven over the next decade by new household formations,
increased housing affordability, rising homeownership rates, the
size and age of the population, an aging housing stock, improved
financing options for buyers, and immigration trends. The
Homeownership Alliance, for example, predicts that these demand
drivers will lead to 1.85 million to 2.17 million new
U.S. housing starts per year through 2014. The
Homeownership Alliance further predicts that U.S. home
ownership rates, which are strongly correlated with new housing
construction, will reach 70% by 2013, an increase from 64% in
1985 and 68% in 2003.
Home Ownership
SOURCE:    U.S. Census,
Homeownership Alliance
49
Industry overview and trends
The strong levels of housing starts are being
driven in large part by an increase in household formations.
According to Fitch Ratings, the average ratio of new incremental
household formations to total housing starts from 1960-1999 was
86.6%. This ratio dipped to 80.5% in the 1990s, representing the
creation of some slack between demand and supply, but has
rebounded to 88.5% for the time period from 2000-2003, trending
above the historical average and signaling a tightening of the
supply/demand balance. Favorable demographic factors are
expected to continue to drive increased household formations.
Baby boomers have created demand that could not be accommodated
by the existing housing base. While this demand was primarily
for starter homes and apartments in the past, we expect it will
increasingly be directed toward single-family homes aimed at
move-up buyers, as well as second homes. Further, the "echo
boom", comprised of the children of baby boomers, has just
begun to impact the housing market.
The U.S. housing market is also expected to
benefit from immigration trends. According to the Joint Center
for Housing Studies at Harvard University, foreign immigration
should account for almost one third of the total
U.S. population growth through 2010. The immigrant
population is expected to be concentrated between the ages of 20
and 50, and therefore represents a more immediate stimulus to
new household formation activity than population growth due to
new births. Further, Census results show that the homeownership
rate for immigrants is highly dependent on the length of time
since their arrival in the U.S. This figure rises from 25%
for those who have resided in the U.S. for less than
10 years to 74% for those who have been in the
U.S. more than 30 years. With the immigration peak
that occurred in the 1990s, this trend portends a dramatic
increase in immigrant homeowners in the coming decades.
Immigration into the U.S.
SOURCES:
The Yearbook of Immigration Statistics, Joint
    Center for Housing Studies at Harvard University
Immigrant Home Ownership Rate by Time Since
    Arrival in the U.S.
SOURCE:
U.S. Census Bureau
Consolidation and Emergence of Large-Scale
Production Homebuilders.
The
homebuilding sector has undergone a significant change over the
past decade as evidenced by a variety of industry trends,
including the introduction of more professional management
teams, a reduction in speculative land positions, lower levels
of unsold inventory, more conservatively financed balance
sheets, geographic diversification and increased consolidation.
Substantial consolidation among residential homebuilders and
market share gains by the top Production Homebuilders since the
early 1990s have shifted our target customer base increasingly
to large volume homebuilders. The market share of the ten
largest Production Homebuilders tripled from approximately 7% in
1990 to a projected 22% in 2004, and is expected to increase to
40% by 2010.
50
Industry overview and trends
Market Share of the Top 10
Homebuilders
SOURCES:
Production Homebuilders' Public Filings;
    National Association of Realtors
While Production Homebuilders continue to
consolidate their industry, homebuilding remains a locally
oriented business even within the Production Homebuilders'
organizations, as building codes and architectural preferences
vary widely by locale. For example, building codes in coastal
areas are generally much different from codes in inland areas or
those in earthquake zones, requiring different products and
construction techniques. One of our key success factors is to
maintain the local flexibility required to meet customer demand
while maximizing the benefits of operating a large-scale,
integrated company.
Homebuilders' Increasing Demand for
Integrated Solutions.
As the
homebuilding industry continues to consolidate, our customers
are increasingly demanding an integrated solution from their
building products suppliers. We play an integral role for our
customers that encompasses the entire homebuilding process from
planning to final construction. Prior to construction, we advise
our customers on essential issues such as design and product mix
and selection, as well as cost reduction opportunities. We then
deliver a comprehensive package of structural and related
building products to the job-site, which includes products that
we manufacture individually for the given house, such as roof
and floor trusses, wall panels and stairs. On the job-site, we
provide a full range of installation, turn-key framing and shell
construction services that reduce cycle time and costs for the
homebuilder. Our sales representatives are also deployed to the
job-site throughout the homebuilding process to ensure constant
communication and rapidly resolve issues that may arise,
including on the interpretation of blueprints, additional
product and service needs, and questions regarding building code
requirements. We believe this fully integrated approach further
strengthens customer loyalty and enables us to retain an
advantage over our competitors.
Building Components
Manufacturing.
The growing use of
Prefabricated Components in the homebuilding process represents
a major trend within the new residential construction building
products supply market. This trend has already had a large
impact on the homebuilding industry, as, according to the USDA
Forest Service, roof trusses, the largest component of our
Prefabricated Components category, have replaced conventional
site-built roof framing in approximately 70% of all
single-family construction. Further, the Engineered Wood
Association reports that the use of manufactured panels in new
homes increased by over 60% from 1997 to 2003.
In accordance with this trend, we have increased
our manufacturing capacity and our ability to provide customers
with Prefabricated Components such as roof and floor trusses,
stairs, wall panels, and engineered wood. Builders value the
many benefits of using these products, including reduced cycle
time and carrying costs, increased product quality, and cost
savings from the reduction of expensive on-site labor and
material waste. Once established as a preferred supplier of
Prefabricated Components, we are typically able to cross-sell
additional products and services as our customers increasingly
seek integrated solutions. Prefabricated wood components are
also becoming increasingly common in floor and wall construction.
51
Industry overview and trends
According to the Freedonia Group, the outlook for
Prefabricated Component products is strong, with shipments of
roof trusses forecasted to rise at a 3.7% CAGR for the period
from 2001 to 2011. Smaller sub-segments such as floor trusses
and walls and partitions are expected to grow at a faster pace
over the same period, with CAGRs of 6.2% and 7.3%, respectively.
Sales growth of these products is being driven by increased
homebuilder awareness and acceptance of these products resulting
from cost and performance advantages. These products represent a
strategic focus for us going forward, as they carry higher
margins than our purely distributed product offerings.
Gross Sales of Manufactured Products
SOURCE:    The Freedonia
Group
52
Business
GENERAL
We are a leading supplier and a fast-growing
manufacturer of structural and related building products for
residential new construction in the U.S. We are one of the top
two suppliers of our product categories to Production
Homebuilders, which we define as those U.S. homebuilders
that build more than 100 homes per year. Our large scale, full
product and service offerings, and unique business model
position us to continue growing our sales to Production
Homebuilders, the fastest-growing segment of residential
homebuilders. We have operations principally in the southern and
eastern U.S. with 63 distribution centers and 42 manufacturing
facilities. For the year ended December 31, 2004, we
generated sales of
$               million,
net income of
$                million,
and EBITDA of
$                million.
We provide an integrated solution to our
customers that combines the manufacturing, supply, and
installation of a full range of structural and related building
products. Over the past several years, we have significantly
increased our sales of products that we manufacture. These
products include our factory-built roof and floor trusses, wall
panels and stairs, as well as engineered wood products that we
design and cut for each home (collectively "Prefabricated
Components"). We also manufacture custom millwork and trim
that we market under the Synboard® brand name, as well as
aluminum and vinyl windows, and we assemble interior and
exterior doors into pre-hung units. Our revenue from these
manufactured products totaled
$               million
for the year ended December 31, 2004,
representing           %
of total sales. In addition, we supply our customers with a
broad offering of professional grade building products not
manufactured by us such as dimensional lumber and lumber sheet
goods, various window, door and millwork lines, as well as
cabinets, roofing, and gypsum wallboard. Our full range of
construction-related services includes professional
installation, turn-key framing and shell construction, and spans
all our product categories.
We group our building products and services into
five principal product categories: Prefabricated Components,
Windows & Doors, Lumber & Lumber Sheet Goods, Millwork,
and Other Building Products & Services. Over the past five
years we have more than doubled the sales of our Prefabricated
Components, Windows & Doors, and Millwork product
categories, each of which includes both manufactured and
distributed products. Products in these categories typically
carry a higher margin and provide us with opportunities to
cross-sell other products and services, thereby increasing
customer penetration.
We serve a broad customer base ranging from
Production Homebuilders to small custom homebuilders and believe
that we are the number one or two building products supplier for
single-family residential new construction in approximately 75%
of the geographic markets in which we operate. According to 2003
U.S. Census data, we have operations in 20 of the top 50 U.S.
Metropolitan Statistical Areas, as ranked by single family
housing permits, and approximately 44% of U.S. housing starts
occurred in states in which we operate. Our comprehensive
product offering featuring over 250,000 SKUs company-wide and
our full range of construction services, combined with our scale
and experienced sales force, have driven market share gains,
particularly with Production Homebuilders.
OUR COMPETITIVE STRENGTHS
We believe our sales, earnings and cash flow will
be driven by our competitive strengths:
Leading Positions in Growing
Markets.
We believe that we are
the number one or two building products supplier for
single-family residential new construction in approximately 75%
of the geographic markets in which we operate. We are also the
largest supplier of our product categories to the Production
Homebuilders in our geographic markets as a whole. These leading
market positions allow us to develop and sustain strong
relationships with local customers and attain economies of scale
that enhance
53
Business
profitability and reduce the risk of losing
customers to our competitors. This in turn positions us
favorably to continue to gain market share. Our facilities are
strategically located in many of the fastest-growing markets in
the southern and eastern U.S., where we expect continued growth.
We believe that we are well positioned to grow with the
Production Homebuilders as they increase their market share in
these growing markets.
Unique Business Model.
Our unique business model allows
us to cost-effectively supply our customers and target
Production Homebuilders, the fastest-growing segment of our
customer base. We operate an integrated business model across
our network of 63 distribution centers and
42 manufacturing facilities that differentiates us from
many of our competitors who operate in a decentralized manner
with a collection of facilities. This has enabled us to achieve
an appropriate balance of maximizing the benefits of a centrally
directed, large-scale company while maintaining the flexibility
to build strong customer relationships and provide superior
customer service at the local market level. The key components
of our business model are the following:
•
We operate a highly customized, proprietary
    information technology system that drives internal efficiencies
    while allowing us to rapidly respond to our customers and reduce
    their administrative costs.
•
We tailor the size of our facilities to each
    market to meet the needs of our customers, offering large-scale,
    full-service branches in larger markets and smaller, more
    tailored facilities in secondary markets.
•
We offer our customers a "one-stop-shop
    approach" that combines a full line of manufactured
    structural building products, lumber and lumber sheet goods, and
    turn-key construction services; this integrated approach
    substantially reduces the administrative burden and cost to our
    customers of dealing with multiple suppliers.
Full Offering of Manufactured Products and
Construction Services.
Over the
past several years, we have significantly increased our sales of
manufactured products, which provide us with higher margins and
increased opportunities to cross-sell other products to our
customers. Our ability to supply our own manufactured products,
including Prefabricated Components, windows, pre-hung doors and
our branded Synboard® millwork products, strengthens our
customer relationships by helping homebuilders reduce costs and
cycle time while ensuring high quality. We also provide our
customers with a full range of services, including professional
installation, turn-key framing and shell construction, and
design. This combination of manufactured products and
construction services offers competitive advantages versus the
traditional single-product, "sell-and-deliver"
business model employed by many of our competitors.
Superior Customer
Service.
We offer our customers
superior service through our experienced sales force and
reliable delivery capabilities. Our salespeople act as trusted
advisors and on-site consultants to the homebuilder and are
involved in each important step of the construction process to
ensure constant communication and rapidly resolve any issues
that may arise. We typically deploy a salesperson to the job
site to take measurements, interpret blueprints, assist in
product selection and help oversee product installation. Drawing
on a deep base of experience and knowledge, our representatives
advise on regional aesthetic preferences and opportunities for
cost reductions. In addition, our large delivery fleet and
comprehensive inventory management system enable us to provide
"just-in-time" product delivery, ensuring a smoother
and faster production cycle for the homebuilder.
Attractive Cost and Working Capital
Position.
We have used our
position as one of the few large-scale competitors in our
industry to create an attractive cost position. We have
generated substantial savings over time by implementing
centralized corporate purchasing agreements. Approximately 80%
of our non-lumber product purchases are made pursuant to
company-wide agreements. Our distribution centers average $32.6
million of annual sales, which is higher than any of our
competitors that have annual sales in excess of $1 billion.
This scale allows us to leverage our fixed costs, including
occupancy, location
54
Business
management, supervisory labor and corporate
overhead, to lower our costs per sales dollar. We measure
location productivity at a detailed level and actively manage
efficiency and cost. We have implemented a comprehensive
efficiency measurement system in our truss and wall panel plants
and this system has enabled us to significantly improve
productivity. We aggressively manage every component of working
capital, including accounts receivable, inventory, and accounts
payable, and we have improved our working capital, expressed as
a percentage of sales, from 1999 as compared to the nine-month
period ended September 30, 2004. All of these activities
are designed to ensure that we serve our customers at the lowest
cost possible.
Experienced Management
Team.
We have a dedicated
management team with extensive experience and expertise in the
manufacturing, distribution, and marketing of building products.
Our senior management team, including our three regional group
presidents, has a total of over 175 years of industry
experience. This team has successfully led us through various
industry cycles, economic conditions and capital structures, and
has demonstrated the ability to grow manufacturing businesses,
introduce new product lines, expand into new geographic markets,
and target and integrate acquisitions, while improving
operational and working capital efficiencies. Our seasoned
operational team is led by three regional group presidents who
average over 25 years of industry experience. Local
facility management and sales representatives are knowledgeable
about homebuilding and generally have longstanding relationships
with the builders in their respective markets.
OUR STRATEGY
Our strategy is to leverage our competitive
strengths to grow sales, earnings, and cash flow and remain the
preferred supplier to the homebuilding industry.
Increase Customer Penetration Through
Incremental Sales of Manufactured Products and
Services.
We plan to organically
grow our unit volumes and revenues through further penetration
of our customer base by providing existing customers with
incremental value-added products and services. As part of this
strategy, we intend to increase sales of manufactured products,
which are higher margin and less price sensitive than lumber
products, and are growing in demand by homebuilders.
Prefabricated Components, such as trusses, wall panels, stairs
and engineered wood, are highly valued by our customers,
especially Production Homebuilders, because they reduce
builders' cycle times and carrying costs and generate cost
savings through the reduction of on-site labor and lumber waste.
Once established as a manufacturer of these products by our
customers, we are generally able to cross-sell additional
products. We also intend to grow our sales of construction
services, such as professional installation, turn-key framing
and shell construction, and design, as a complement to our
existing product offerings. Our ability to provide full product
and service solutions further strengthens customer loyalty and
enables us to retain an advantage over our competitors.
Target Production Homebuilders.
We intend to leverage our unique
business model, geographic breadth, and scale to continue to
grow our sales to the Production Homebuilders as they continue
to gain market share. The ten largest Production Homebuilders,
as measured by homes sold, tripled their market share from
approximately 7% in 1990 to a projected 22% in 2004, and are
expected to increase their market share to 40% by 2010. We have
grown our sales to this group at an even faster rate. For
example, from 2001 to 2004, the ten largest Production
Homebuilders increased their market share from approximately 18%
to a projected 22%. Over approximately the same period, we
increased our sales to this customer group by approximately 70%
from $262.9 million in 2001 to
$                million
in 2004.
Expand through New Manufacturing and
Distribution Centers in Existing and Contiguous
Markets.
We believe that several
key markets in which we currently operate require increased
manufacturing capacity or incremental distribution facilities to
reach their full sales potential. In many locations, we believe
that we can increase market penetration through the introduction
of additional distribution and
55
Business
manufacturing facilities. In addition, we have
identified several markets that we believe we can enter with a
strong market share from the onset by leveraging our existing
nearby facilities, customer relationships and local knowledge.
We will also selectively seek expansion opportunities that will
enable us to grow in the multi-family and commercial end markets
where we currently have a limited presence. We expect these
expansions can be realized with capital expenditures consistent
with historical levels.
Focus on Cost, Working Capital and
Operating Improvements.
We are
extremely focused on expenses and working capital to remain a
low cost supplier. We maintain a continuous improvement,
"best practices" operating philosophy and regularly
implement new initiatives to reduce costs, increase efficiency
and reduce working capital, thereby enhancing profitability and
cash flow. For example, we are beginning to link our computer
system to those of our customers to streamline the
administrative aspects of the quoting, invoicing and billing
processes. We are also analyzing our workforce productivity to
determine the optimal labor mix that minimizes cost, and
examining our logistics function to reduce the cost of inbound
freight. Our focus on cost controls and our strategy of shifting
the sales mix to value-added products and services have
significantly improved profitability. Selling, general and
administrative expenses have declined as a percentage of sales
from 21.4% in 2001
to                %
in 2004. We have also improved our working capital, expressed as
a percentage of sales, from 1999 as compared to the nine-month
period ended September 30, 2004.
Pursue Strategic
Acquisitions.
The highly
fragmented nature of the Pro Segment presents substantial
acquisition opportunities. Our acquisition strategy centers on
geographic expansion and continued growth of our Prefabricated
Components business. First, there are a number of attractive
homebuilding markets, including in the western and southwestern
U.S. and parts of the Midwest, where we do not currently
operate. We believe that our proven operating model can be
successfully adapted to these markets and the homebuilders in
these markets, many of whom we currently serve elsewhere, and
who value our broad product and service offering, professional
expertise, and superior customer service. When entering a new
market, our strategy is to acquire market-leading distributors
and subsequently expand their product offerings and/or add
manufacturing facilities while integrating their operations into
our centralized platform. This strategy allows us to quickly
achieve the scale required to maximize profitability and
leverage existing customer relationships in the local market.
Second, we will selectively seek to acquire companies that
manufacture Prefabricated Components such as roof and floor
trusses, wall panels, stairs, and engineered wood, as well as
other building products such as millwork. Prefabricated
Components are growing in popularity with homebuilders and
provide us with cross-selling opportunities and higher margins.
Our senior management team has the experience and ability to
identify acquisition candidates and integrate acquisitions,
having acquired and integrated 23 companies since 1998.
OUR PRODUCTS AND SERVICES
We distribute a wide variety of products and
services directly to homebuilder customers through our network
of 63 distribution centers in 11 states. In addition,
through our 42 manufacturing facilities, many of which are
located on the same premises as our distribution centers, we are
a fast-growing manufacturer of building products, including
floor and roof trusses, wall panels, stairs, millwork and
windows.
We group our full range of building products and
services into five product categories: Prefabricated Components,
Windows & Doors, Lumber & Lumber Sheet Goods,
Millwork, and Other Building
56
Business
Products & Services. The following chart
provides the sales breakdown for our five product categories for
the year ended December 31, 2004:
Sales by Product Category—Year Ended
December 31, 2004
Total
Sales—$               million
*    Includes both manufactured and distributed products
Prefabricated
Components.
We are one of the largest
manufacturers of Prefabricated Components for residential new
construction in the U.S. Prefabricated Components has been
our fastest growing product category over the past five years.
This growth has been a response to changing building practices
that utilize more manufactured products, as well as a concerted
effort to increase profitability through the sale of value-added
products. Prefabricated Components are factory-built substitutes
for job site-framing and include floor and roof trusses, wall
panels, stairs, and engineered wood that we design and cut for
each home. Our manufacturing facilities utilize the latest
technology and the highest quality materials to produce a
quality product, increase efficiency, reduce lead times, and
minimize production errors. As a result, we believe we incur
significantly lower engineering and set-up costs than do our
competitors, contributing to improved margins and customer
satisfaction. Sales of Prefabricated Components were
$                million
during the year ended December 31, 2004,
representing                %
of total sales.
Windows &
Doors.
The Windows & Doors
category comprises the manufacturing, assembly and distribution
of windows, and the assembly and distribution of interior and
exterior door units. These products typically require a high
degree of product knowledge and training to sell. As we continue
to emphasize higher margin product lines, value-added goods like
those in the Windows & Doors category are expected to
increasingly contribute to our sales and overall profitability.
Windows & Doors sales were
$                million
during the year ended December 31, 2004,
representing                %
of total sales.
Lumber & Lumber Sheet
Goods.
Lumber & Lumber Sheet
Goods include dimensional lumber, plywood and oriented strand
board ("OSB") products used in on-site house framing.
This product line has not grown at the same rate as our overall
sales over the last five years, as demonstrated by the fact
that it
represented                %
of total sales for the year ended December 31, 2004,
compared to 47.6% of total sales in 1999. This shift in product
mix has been intentional as we have sought to migrate builder
demand toward higher margin Prefabricated Components for their
framing needs. Despite this shift in product mix, we believe we
have grown our market share for Lumber & Lumber Sheet Goods
over this time period. We expect the Lumber & Lumber
Sheet Goods business to remain a stable revenue source in the
future, but to grow over the long-term at a slower rate than our
other business lines. Sales of Lumber & Lumber Sheet
Goods for the year ended December 31, 2004, were
$                million.
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Business
Millwork.
Millwork
represents a small, but profitable product category. This
category includes interior and exterior trim, columns and posts
that we distribute, as well as custom exterior features that we
manufacture under the Synboard® brand name. Millwork sales
during the year ended December 31, 2004, were
$                million,
representing                %
of total sales.
Other Building Products &
Services.
Other Building
Products & Services consists of products including
cabinets, gypsum, roofing, and insulation, and services
including turn-key framing and shell construction, design
assistance and professional installation of products which spans
all our product categories. We provide professional installation
and turn-key services as a solution for our homebuilder
customers to increase productivity and avoid project delays. We
believe these services require scale, capital and sophistication
that smaller competitors do not possess. Sales of Other Building
Products & Services were
$                million
during the year ended December 31, 2004,
representing                %
of total sales.
SALES AND MARKETING
Our marketing and sales strategy primarily seeks
to attract and retain customers through exceptional customer
service, leading product quality, a broad and complete product
and service offering, and competitive pricing. This strategy is
centered on building and maintaining strong customer
relationships rather than traditional marketing and advertising.
Homebuilders recognize the value we add: shorter lead times,
lower material costs, faster project completion and higher
quality. We expect to continue to successfully compete for
business and gain market share through superior service.
Our experienced, locally focused sales force is
at the core of our sales effort. This sales effort involves
deploying salespeople who are skilled in housing construction to
meet with a homebuilder's construction superintendent,
local purchasing agent, or local executive with the goal of
becoming the primary product supplier. If selected by the
homebuilder, the salesperson and his or her team of experts
review blueprints for the contracted homes and advise the
homebuilder in areas such as opportunities for cost reduction
and regional aesthetic preferences. Next, the team determines
the specific package of our products that are needed to complete
the project and schedules a sequence of site deliveries. Our
large delivery fleet and comprehensive inventory management
system enable us to provide "just-in-time" product
delivery, ensuring a smoother and faster production cycle for
the homebuilder. Throughout the construction process, the
salesperson makes frequent site visits to ensure timely delivery
and proper installation and to make suggestions for efficiency
improvements. Our level of service is highly valued by customers
and generates significant customer loyalty. We currently employ
over 500 outside sales representatives, who are typically
paid a commission based on gross margin dollars collected and
work with over 300 internal sales coordinators and product
specialists.
OUR CUSTOMERS
Our customer mix is a balance of large national
homebuilders, regional homebuilders, and local builders. Our
customer base is highly diversified, with the top ten customers
accounting for
approximately                %
of sales in the year ended December 31, 2004, and no single
customer accounting for more
than                %
of sales. At the same time, our top ten customers are comprised
primarily of the largest Production Homebuilders, including
publicly traded companies such as Centex, D.R. Horton,
Hovnanian Enterprises, Pulte, and Ryland Group.
We are one of the top two suppliers of our
product categories to the Production Homebuilders, the fastest
growing segment of the residential builders, and are the largest
supplier of our product categories to Production Homebuilders in
our geographic markets as a whole. In line with the growth of
this segment, we have increased our sales to the ten largest
Production Homebuilders, as measured by homes sold, by
approximately           %
from $262.9 million in 2001 to
$                million
in the year ended December 31, 2004.
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Business
In addition to the largest Production
Homebuilders, we also service and supply regional and local
custom homebuilders. Custom homebuilders require high levels of
service since our sales team must work very closely with the
designers on a day-to-day basis in order to ensure the
appropriate products are produced and delivered to the building
site. To account for these increased service costs, pricing in
the industry is generally commensurate with the level of service
provided and the volumes purchased.
MATERIALS AND SUPPLIER RELATIONSHIPS
We purchase raw materials for our manufacturing
plants and finished products for resale by our distribution
operations. The key raw materials for our Prefabricated
Components are dimensional lumber, OSB and engineered wood. We
purchase door slabs and hardware for our pre-hanging door
plants, seluca-blown PVC for our custom millwork plants, and
aluminum and vinyl extrusions and glass for our window plant.
Our distributed products include windows, doors, millwork,
lumber and lumber sheet goods. Our largest suppliers are
national lumber and wood products producers and distributors
such as Bluelinx, Boise Cascade, International Paper, and
Weyerhaeuser and building products manufacturers such as
Masonite and MW Windows. We believe there is sufficient
supply in the marketplace to competitively source most of our
requirements without reliance on any particular supplier and
that our diversity of suppliers affords us purchasing
flexibility. Due to our centralized oversight of purchasing and
our large lumber and OSB purchasing volumes, we are able to
maximize the advantages of both our and our suppliers'
national footprints and negotiate purchases in multiple markets
to achieve more favorable contracts with respect to price, terms
of sale, and supply than our regional competitors. Additionally,
for certain customers, we institute purchasing programs on raw
materials such as OSB to align portions of our procurement costs
with our pricing commitments. We purchase lumber and OSB on the
spot market as necessary to fulfill customer contracts.
We currently source products from over 5,000
suppliers in order both to reduce our dependence on any single
company and to maximize purchasing leverage. Although no
purchases from any single supplier represent more than 11% of
our cost of goods sold, we believe we are one of the largest
customers for many suppliers, and therefore have significant
purchasing leverage. We have found that using multiple suppliers
ensures a stable source of products and the best purchasing
terms as the suppliers compete to gain and maintain our business.
We maintain strong relationships with our
suppliers, and we believe opportunities exist to improve
purchasing terms in the future, including inventory storage or
"just-in-time" delivery to reduce our inventory
carrying costs. Additional procurement cost savings and
purchasing synergies are expected to further enhance our margins
and cash flow generation capability.
MANUFACTURING
We manufacture four different types of products:
Prefabricated Components, millwork, windows, and pre-hung doors.
Our Prefabricated Components allow builders to build higher
quality homes more efficiently. Roof trusses, floor trusses,
wall panels and stair units are built in an indoor,
factory-controlled environment. Engineered wood floors and beams
are cut to the required size and packaged for the given
application at many of our locations. Without Prefabricated
Components, builders construct these items on site, where
weather and variable labor quality can negatively impact
construction cost, quality and installation time. In addition,
engineered wood beams have greater structural strength than
conventional framing materials, allowing builders to frame
houses with more open space and to create a larger variety of
house designs. Engineered wood floors are stronger and
straighter than conventionally framed floors.
We manufacture custom millwork products such as
synthetic exterior trim, custom windows and box columns under
the Synboard® brand name. Our millwork is produced from
extruded PVC and offers several advantages over traditional wood
features, such as greater durability and less maintenance
requirements. We also operate an aluminum and vinyl window plant
in Houston, Texas which allows us
59
Business
to provide builders, primarily in the Texas
market, with an adequate supply of cost-competitive products.
Our pre-hung interior and exterior doors consist of a door slab
with the hinges and door jambs attached, reducing job site
installation time and providing higher quality finished door
units than those constructed on site.
Prefabricated Components— Trusses and
Wall Panels.
Truss and wall panel
production has two steps, design and fabrication. Each house
requires its own set of designed shop drawings, which vary by
builder type: non-custom versus custom builders. Non-custom
builders use prototype house plans, which may be modified for
each individual customer. The number of changes made to a given
prototype house, and the number of prototype houses in
existence, varies by builder and their construction and sales
philosophy. We maintain an electronic master file of trusses and
wall panels for each builder's prototype houses. There are
three primary benefits to master filing. First, it reduces
design cost as a designer can make minor changes to a prototype
house rather than designing the components individually. Second,
it improves design quality as the majority of the house's
design is based on a proven prototype. Third, master filing
allows us to change one file and update all related prototype
house designs automatically as we improve the design over time
or if the builder modifies the base prototype house. We do not
use a master file for custom builders who do not replicate
houses, as it is not cost-effective. For these builders, the
components are designed individually for each house.
After the shop drawings are designed for a given
house, regardless of whether or not the master file system is
used, the shop drawings are downloaded into a proprietary
software system to review the design for potential errors and to
schedule the job for production. The fabrication process begins
with the cutting of individual pieces of lumber to the lengths
required to assemble the finished component. Shop drawings are
downloaded from the design department to our computerized saws.
The cut lumber is then joined together to form the roof trusses,
floor trusses or wall panels. The finished components are stored
by house awaiting shipment to the job site.
We are able to generate fabrication time
standards for each component during the design step. We use
these standards to measure efficiency by comparing actual
production time with the calculated standard. Each plant's
performance is benchmarked by comparing efficiency across plants.
Prefabricated Components— Engineered
Wood.
As with trusses and wall panels,
engineered wood components have a design and fabrication step.
Engineered wood floors are designed using a master filing system
similar to the truss and wall panel system. Engineered wood
beams are designed to ensure the beam will be structurally sound
in the given application. After the design phase, a printed
layout is generated. This layout is used to cut the engineered
wood to the required length and assemble all of the components
into a house package. The components are then installed on the
job site. Engineered wood design and fabrication is done at the
majority of our distribution locations.
Prefabricated Components—
Stairs.
We manufacture box stairs at
several of our locations and curved stairs at our East
Brunswick, New Jersey location. After a house is framed, our
salesman takes measurements at the job site prior to
manufacturing to account for any variation between the
blueprints and the actual framed house. Box stairs can be
fabricated based on these measurements. Curved stairs are
typically a more customized product used in the entry foyer of a
home and require additional designing, which is done using a CAD
based computer program. Box stairs are manufactured by
routing 1 1/4 inch by 12 inch stringer lumber to form the
frame that holds the stair treads. The treads are then nailed
and glued into the frame. The frame for curved stairs is built
on a specially designed jig to give the stairs the desired
curvature.
Custom Millwork.
Our
manufactured custom millwork consists primarily of synthetic
exterior trim, custom windows, features and box columns we sell
under the Synboard® brand name. Synboard® requires no
ongoing maintenance as compared to wood exterior trim products
that require periodic caulking and painting. Synboard®
products are sold throughout our company and are manufactured at
three locations.
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Business
Sheets of 4 foot by 18 or 20 foot seluca-blown,
extruded PVC ("Synboard®") are sanded, cut and
shaped to produce the desired product. Exterior trim boards are
produced by cutting the Synboard® into the same
industry-standard dimensions used for wood-based exterior trim
boards. Exterior features are formed by assembling pieces of
Synboard® and other PVC-based moldings that have been cut,
heated and bent over forms to achieve the desired shape. Custom
windows are made by building the frame from Synboard® and
glazing the glass into place. Box columns are fabricated
from sections of PVC that are cut on a 45 degree angle and
mitered together.
Windows.
We
manufacture a full line of traditional aluminum and vinyl
windows at a 200,000 square foot manufacturing facility
located in Houston, Texas. The process begins with the purchase
of aluminum and vinyl lineal extrusions. These extrusions are
cut to size and joined together to form the window frame and
sash. Sheet glass is purchased and cut to size. Two pieces of
identically shaped glass are then sealed together with a sealing
compound to create a glass unit with improved insulating
capability. The sealed glass unit is then inserted and glazed
into the window frame and sash. The unit is completed when a
balance is installed to operate the window and a lock is added
to secure the window in a closed position.
Pre-hung Doors.
We
pre-hang interior and exterior doors at many of our locations.
Door slabs and pre-cut door jambs are inserted into a door
machine. The door machine bores holes into the doors for the
door hardware and applies the jambs and hinges to the door slab.
The casing that frames interior doors is then applied at a
separate station. Exterior doors do not have a casing, and
instead may have sidelights applied to the sides of the door, a
transom attached over the top of the door unit and a door sill
applied to the threshold.
COMPETITION
We compete in the professional segment ("Pro
Segment") of the U.S. residential new construction
building products supply market, which is estimated to have 2004
annual sales of $117 billion. The Pro Segment of this
market consists predominantly of small, privately owned
companies, including framing and shell construction contractors,
local and regional materials distributors, single or multi-site
lumberyards, and truss manufacturing and millwork operations,
most of which have limited access to capital and lack
sophisticated information technology systems and large-scale
procurement capabilities. The top ten Pro Segment suppliers
account for less than 15% of the total market, which remains
fragmented due to its overall size, the diversity of the target
customer market, and variations in local building preferences
and practices. There are only six building products suppliers in
the Pro Segment that generate over $1 billion in sales. Our
largest competitors in our markets are 84 Lumber (a
privately held company), Stock Building Supply (formerly known
as Carolina Holdings, a unit of U.K.-based Wolseley, plc), and
Strober (a privately held company). We focus on a distinctly
different target market than the home center retailers such as
Home Depot and Lowe's, who primarily serve do-it-yourself
and professional remodeling customers. By contrast, our
customers consist of professional homebuilders and those that
provide construction services to them, with whom we develop
strong relationships.
We believe we are the number one or two building
products supplier for single-family residential new construction
in approximately 75% of the geographic markets in which we
operate. We are also the largest supplier of our product
categories to the Production Homebuilders in our geographic
markets as a whole. Due in part to our long-standing customer
relationships, local market knowledge and competitive pricing,
we believe we have substantial competitive advantages over the
small, privately owned companies with which we primarily
compete. According to 2003 U.S. Census data, we have
operations in 20 of the top 50 U.S. Metropolitan
Statistical Areas as ranked by single family housing permits and
approximately 44% of U.S. housing starts occurred in states
in which we operate.
61
Business
EMPLOYEES
At December 31, 2004, we had approximately
6,200 employees, none of whom was represented by a union.
We believe that we have good relations with our employees.
INFORMATION TECHNOLOGY SYSTEMS
Our primary ERP system, which we use for
operations representing 70% of our revenue, is a proprietary
system that has been highly customized by our computer
programmers. The system has been designed to operate our
businesses in a highly efficient manner. The materials required
for thousands of standard builder plans are stored by the system
for rapid quoting or order entry. Hundreds of price lists are
maintained on thousands of SKUs, facilitating rapid price
changes in changing product cost environments. A customer's
order can be tracked at each stage of the process and billing
can be customized to reduce a customer's administrative
costs and speed payment. We also operate a legacy ERP system for
operations representing 30% of our revenue. This system allows
us to effectively manage the business and deliver outstanding
customer service, but lacks several of the enhancements we have
made to our primary system. Accordingly, we are in the process
of migrating our remaining operations from the legacy system to
our primary system.
We have implemented a single financial reporting
system that has been highly customized for our business. Our
Hyperion financial reporting package is used to aggregate data
from our two ERP systems. The Hyperion system effectively
consolidates the financial information of each location to allow
us to plan, track, and report performance and compensation
measures. Our state-of-the-art information technology
infrastructure affords our corporate headquarters complete
financial oversight and control over each of our locations,
allowing us to minimize errors and maximize efficiency and
reliability.
We have developed a proprietary program for use
in our component plants. This software reviews product designs
for errors, schedules the plants and provides the data used to
measure plant efficiency. In addition, we have purchased several
software products that have been integrated with our primary ERP
system. These programs assist in analyzing blueprints to
generate material lists, configure kitchen cabinet orders to
submit to manufacturers, purchase lumber products from the
lowest cost source and configure orders and schedule production
in our window plants.
FACILITIES AND PROPERTIES
We have a broad network of distribution and
manufacturing facilities in 11 states throughout the
southern and eastern U.S. We have 63 distribution
facilities and 42 manufacturing facilities, many of which are
located on the same premises as our distribution facilities. Our
manufacturing facilities produce trusses, wall panels,
engineered wood, stairs, windows, pre-hung doors, and custom
millwork. We are organized into three regional operating groups,
Atlantic, Central, and Southeast, in order to achieve operating
efficiencies while maintaining maximum capacity for growth. The
Atlantic and Central markets generally consist of larger, higher
volume builders than the Southeast markets. As a result, each
manufacturing facility in the Atlantic and Central regions
typically supplies a single distribution center, while Southeast
manufacturing facilities supply multiple distribution centers
within an economical three-hour shipping radius.
Distribution centers are generally leased and
typically include 15 to 25 acres of outside storage, a
60,000 square foot warehouse, 10,000 square feet of
office space, and 30,000 square feet of covered storage.
The outside area provides space for lumber storage and a staging
area for delivery while the warehouse stores millwork, windows,
and doors. The distribution centers are generally located in
industrial areas with low cost real estate and easy access to
freeways to maximize distribution efficiency and convenience. A
majority of the distribution centers are situated on rail lines
for efficient receipt of goods.
62
Business
Our manufacturing facilities are generally
located on the same premises as our distribution facilities.
Truss and panel manufacturing facilities vary in size from
30,000 square feet to 60,000 square feet with 8 to
10 acres of outside storage for lumber and for finished
goods. Our window manufacturing facility in Houston, Texas has
approximately 200,000 square feet.
We operate a fleet of approximately 1,500 trucks
to deliver products from our distribution and manufacturing
centers to job sites. Through our emphasis on local market
flexibility and strategically placed locations, we minimize
shipping and freight costs while maintaining a high degree of
local market expertise. Through knowledge of local homebuilder
needs, customer coordination, and rapid restocking ability, we
reduce working capital requirements and guard against
out-of-stock products. We believe that this reliability is
highly valued by our customers and reinforces customer
relationships.
LEGAL PROCEEDINGS
We are involved in various claims and lawsuits
incidental to the conduct of our business in the ordinary
course. We carry insurance coverage in such amounts in excess of
our self-insured retention as we believe to be reasonable under
the circumstances and that may or may not cover any or all of
our liabilities in respect of claims and lawsuits. We do not
believe that the ultimate resolution of these matters will have
a material adverse impact on our financial position or operating
results.
Although our business and facilities are subject
to federal, state, and local environmental regulation,
environmental regulation does not have a material impact on our
operations. We believe that our facilities are in material
compliance with such laws and regulations. As owners and lessees
of real property, we can be held liable for the investigation or
remediation of contamination on such properties, in some
circumstances without regard to whether we knew of or were
responsible for such contamination. Our current expenditures
with respect to environmental investigation and remediation at
our facilities are minimal, although no assurance can be
provided that more significant remediation may not be required
in the future as a result of spills or releases of petroleum
products or hazardous substances or the discovery of unknown
environmental conditions.
63
Management
DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to our directors and
executive officers, as of the date hereof, is set forth below:
Name
Age
Position
Floyd F. Sherman
65
Chairman of the Board and Chief Executive Officer
Kevin P. O'Meara
40
Senior Vice President and Chief Operating Officer
Charles L. Horn
44
Senior Vice President and Chief Financial Officer
Donald F. McAleenan
50
Senior Vice President and General Counsel
Frederick B. Schenkel
55
Vice President, Manufacturing
Alexander R. Castaldi
54
Director
Ramsey A. Frank
44
Director
Paul S. Levy
57
Director
Brett N. Milgrim
36
Director
Our Board of Directors consists of five members
elected annually by our stockholders. All executive officers are
chosen by the Board of Directors and serve at its pleasure.
There are no family relationships among any of the directors or
executive officers, and there is no arrangement or understanding
between any of the directors or executive officers and any other
person pursuant to which he was selected as a director or
officer. Unless otherwise indicated, each director and officer
is a citizen of the United States and the business address of
each individual is: 2001 Bryan Street, Suite 1600, Dallas,
Texas 75201.
Set forth below is a brief description of the
business experience of each of our directors, executive
officers, and our three regional group presidents.
Floyd F. Sherman,
Chairman and Chief Executive Officer. Mr. Sherman has been
a director since 2001, when he came to BFS. Prior to joining
BFS, he spent 28 years at Triangle Pacific/ Armstrong
Flooring, the last nine of which he served as Chairman and Chief
Executive Officer. Mr. Sherman has over 40 years of
experience in the building products industry. A native of
Kerhonkson, New York, and a veteran of the U.S. Army,
Mr. Sherman is a graduate of the New York State College of
Forestry at Syracuse University. He also holds an M.B.A. degree
from Georgia State University.
Kevin P.
O'Meara,
Chief Operating Officer.
Mr. O'Meara is a co-founder of BFS. At the inception
of BFS, he served as the Chief Financial Officer.
Mr. O'Meara was promoted to his current position in
May 2000. Prior to co-founding BFS, Mr. O'Meara served
as Vice President, Strategic Planning and Business Development
at Fibreboard Corporation. He worked three years in the Dallas
office of Bain & Company, a strategic management
consulting firm. He also worked six years at two private
investment firms. Mr. O'Meara is a C.P.A. and has a
B.A. (economics) and a B.B.A. (accounting) from
Southern Methodist University and an M.B.A. from Harvard
Business School.
Charles L. Horn,
Chief Financial Officer. Mr. Horn joined BFS in May 1999 as
Vice President-Finance and Controller. He was promoted to CFO in
May 2000. Prior to joining the Company, Mr. Horn served in
a variety of positions at Pier One Imports, most recently as
Vice President and Treasurer. Prior to Pier One, he served as
Vice President Finance/ Chief Financial Officer of Conquest
Industries. Mr. Horn also
64
Management
has seven years of public accounting experience
with Price Waterhouse. Mr. Horn is a C.P.A. and received
his B.B.A. degree from Abilene Christian University and M.B.A.
from The University of Texas at Austin.
Donald F. McAleenan,
Senior Vice President and General Counsel. Mr. McAleenan is
a co-founder of BFS and serves as General Counsel. Prior to
co-founding BFS, Mr. McAleenan served as Vice President and
Deputy General Counsel of Fibreboard Corporation from 1992 to
1997. Mr. McAleenan was also Assistant General Counsel of
AT&E Corporation and spent nine years as a securities
lawyer at two New York City law firms. Mr. McAleenan has a
B.S. from Georgetown University and J.D. from New York
University Law School.
Frederick B.
Schenkel,
Vice President,
Manufacturing. Mr. Schenkel joined BFS in 1998 when the
Company acquired BSL from Pulte Home Corporation. At BSL, and
later with the Company, Mr. Schenkel was a location
manager. He became Vice President of the Atlantic Group in 1999
and was promoted to Vice President, Manufacturing in 2002.
Mr. Schenkel has more than 31 years of experience
managing manufacturing facilities in the industry and, before
joining BSL, held such positions as manufacturing manager for
The Ryland Group, Inc., vice president of manufacturing for
Diversified Homes Corporation of Maryland, and plant manager for
Regional Building Systems, Inc. Mr. Schenkel holds a B.A.
in accounting from Saint Bonaventure University.
Morris E.
Tolly,
Southeast Group President.
Mr. Tolly has been with the Company since 1998 when the
Company acquired Pelican Companies, Inc. ("Pelican").
Mr. Tolly was a General Manager and Market Manager for
Pelican and later for the Company prior to being promoted in
2000 to President of the Southeast Group. Overall,
Mr. Tolly has over 40 years of experience in the
building products industry.
Douglas E.
Schweinhart,
Atlantic Group President.
Mr. Schweinhart joined BFS in 1998 when the Company
acquired Builders Supply & Lumber Co. ("BSL")
from Pulte Home Corporation. Previously, Mr. Schweinhart
was a founder and Vice President of BSL. He also spent
12 years with Lowe's Contractor Yards in various
capacities. Overall, Mr. Schweinhart has over 28 years
of experience in the building products industry.
Mr. Schweinhart received his B.S. degree in Finance from
Towson State University.
Alan K. Davenport,
Central Group President. Mr. Davenport joined BFS in 2000
as Vice President of National Sales and Marketing. In December
2002, Mr. Davenport was promoted to President of the newly
formed Central Group. Prior to joining BFS, Mr. Davenport
spent over ten years in the building products industry in
various executive positions with Wickes, Inc. and 84 Lumber.
Mr. Davenport is a graduate of the University of
Cincinnati. He holds a B.S. degree in architecture/construction
management technology.
Alexander R.
Castaldi,
Director. Mr. Castaldi
has been a director since 2004. Mr. Castaldi, a C.P.A., is
a Senior Managing Director of JLL Partners, Inc., which he
joined in 2003, and was previously a CFO of three very
successful management buyouts. He was most recently Executive
Vice President, Chief Financial and Administration Officer of
Remington Products Company. Previously, Mr. Castaldi was
Vice President and Chief Financial Officer at Uniroyal Chemical
Company. From 1990 until 1995, he was Senior Vice President and
Chief Financial Officer at Kendall International, Inc. During
the 1980s, Mr. Castaldi was also Vice President, Controller
of Duracell, Inc. and Uniroyal, Inc. Mr. Castaldi serves as
a director of several companies, including Motor Coach
Industries International, Inc., Mosaic Sales Solutions, Corp.,
PGT Industries, Inc., and C.H.I. Overhead Doors, Inc.
Ramsey A.
Frank,
Director. Mr. Frank has
been a director since 2001. Mr. Frank is a Senior Managing
Director of JLL Partners, Inc., which he joined in 1999. From
January 1993 to July 1999, Mr. Frank was a Managing
Director at Donaldson, Lufkin & Jenrette, Inc., where
he headed the restructuring group and was a senior member of the
leveraged finance group. Mr. Frank serves as a director of
several companies, including Motor Coach Industries
International, Inc., C.H.I. Overhead Doors, Inc.,
PGT Industries, Inc., and Medical Card System, Inc.
65
Management
Paul S. Levy,
Director. Mr. Levy has been a director since 1998.
Mr. Levy is a Senior Managing Director of JLL Partners,
Inc., which he founded in 1988. Mr. Levy serves as a
director of several companies, including Fairfield Manufacturing
Company, Inc., Lancer Industries, Inc., Motor Coach Industries
International, Inc., Mosaic Sales Solutions, Corp.,
PGT Industries, Inc., and C.H.I. Overhead Doors, Inc.
Brett N. Milgrim,
Director. Mr. Milgrim has been a director since 1999.
Mr. Milgrim is a director of both PGT Industries, Inc.
and C.H.I. Overhead Doors, Inc. and is a Managing Director
of JLL Partners, Inc., which he joined in 1997.
Board Composition
We intend to appoint an independent director
prior to the completion of this offering. Upon completion of
this offering, our board will consist of the new independent
director and Messrs. Sherman, Levy, Castaldi, Frank, and
Milgrim. Immediately prior to the consummation of this offering,
we will adopt our amended and restated articles of incorporation
and our amended and restated by-laws, which will provide that
our board of directors be divided into three classes, each of
whose members will serve for a staggered three-year term. We
intend to appoint one additional independent member to the board
of directors within 90 days of the consummation of this
offering, and, within one year of the consummation of this
offering, we expect to appoint that number of additional
independent members to the board of directors as are necessary
to comply with the requirements of the Sarbanes-Oxley Act of
2002 and The Nasdaq National Market.
Board Committees
Upon completion of this offering, our board of
directors intends to appoint an audit committee, the composition
of which will comply with the requirements of The Nasdaq
National Market and the Sarbanes-Oxley Act of 2002. Our board of
directors also intends to appoint such other committees as may
be required by the rules of The Nasdaq National Market.
The audit committee will select, on behalf of our
board of directors, an independent public accounting firm to be
engaged to audit our financial statements, discuss with the
independent auditors their independence, review and discuss the
audited financial statements with the independent auditors and
management, and recommend to our board of directors whether the
audited financials should be included in our Annual Reports on
Form 10-K to be filed with the SEC.
Compensation of Directors
For the year ended December 31, 2004, the
individuals serving on the board of directors did not receive
any compensation for their service as directors. We intend to
set the compensation for independent directors prior to
completion of this offering. We do not intend to pay
compensation to individuals serving on our board of directors
who are employees or affiliates of the Company for their service
as directors.
66
Executive compensation
SUMMARY OF COMPENSATION
The following summary compensation table sets
forth information concerning compensation earned in the fiscal
year ended December 31, 2004, by our chief executive
officer and our other four most highly compensated executive
officers serving at the end of the last fiscal year. We refer to
these executives as our "named executive officers"
elsewhere in this prospectus.
Summary Compensation Table
Annual Compensation
Long-Term Compensation
Securities Underlying
All Other
Year
Salary
Bonus
Options(#)
Compensation(2)
Floyd F. Sherman
2004
$
600,000
$
1,107,036
(1)
—
—
Chairman of the Board and Chief Executive
    Officer
Kevin P. O'Meara
2004
$
360,000
$
848,444
(1)
565,925
$
3,769
Senior Vice President and Chief Operating
    Officer
Charles L. Horn
2004
$
330,000
$
927,740
(1)
1,117,838
$
4,925
Senior Vice President and Chief Financial
    Officer
Donald F. McAleenan
2004
$
320,000
$
754,172
(1)
575,771
$
6,500
Senior Vice President and General
    Counsel
Frederick B. Schenkel
2004
$
232,000
$
492,097
(1)
50,000
$
6,500
Vice President, Manufacturing
(1)
Reflects bonus earned under the 2004 Builders
    FirstSource Cash Incentive Bonus Plan. This amount may be
    adjusted upon completion of the audited financials for the year
    ended December 31, 2004, to account for any difference
    between estimated and actual financial performance results used
    in the bonus calculation.
(2)
Reflects Company matching contributions under
    our 401(k) plan.
67
Executive compensation
The following table sets forth information
concerning the grant of stock options to each of our named
executive officers during the last fiscal year.
Option Grants in Last Fiscal Year
Individual Grants
Number of
Percent of total
securities
options granted
Exercise or
Grant date
underlying options
to employees
base price
present
Name
granted(1)
in fiscal year
($/Sh)
Expiration date
value($)(2)
Floyd F. Sherman
—
—
—
—
—
Kevin P. O'Meara
565,925
3.7
%
$
0.315
February 27, 2014
$
28,296
Charles L. Horn
1,117,838
7.4
%
$
0.315
February 27, 2014
$
55,892
Donald F. McAleenan
575,771
3.8
%
$
0.315
February 27, 2014
$
28,789
Frederick B. Schenkel
50,000
0.3
%
$
0.315
February 27, 2014
$
2,500
(1)
These options vest in full on
    December 31, 2011. These options have accelerated vesting
    provisions that provide that (a) one sixth of the options
    will vest on each of December 31, 2004, 2005, and 2006, if
    certain annual financial performance targets are met in the
    applicable year; (b) one half of the options will vest on
    December 31, 2006, if certain cumulative financial
    performance targets for the three calendar years ended
    December 31, 2006, are met; and (c) upon a change in
    control of the Company some or all of the previously unvested
    options will vest if certain financial targets have been
    met.
(2)
The options are valued by the minimum value
    option pricing variation of the Black-Scholes pricing model. The
    following weighted average assumptions were used for the grants:
    expected term— six years; expected volatility— 0.00%;
    expected dividend yield— 0.00%; and risk free rate—
    3.01%. No adjustment was made for non-transferability or risk of
    forfeitures.
The following table sets forth information
concerning the exercise of stock options during the last fiscal
year by each of our named executive officers and the number and
value of unexercised options held by such individuals as of the
end of the last fiscal year.
Aggregated Option Exercises in Last Fiscal
Year
and Fiscal Year-end Option Values
Value of Unexercised In-
Number of securities
the-Money Options at
underlying unexercised
Fiscal Year-End ($)
Shares acquired
Value
options at fiscal year-end(#)
Exercisable/
Name
on exercise(#)
realized($)
exercisable/unexercisable(1)
Unexercisable
Floyd F. Sherman
—
—
8,518,149/ 2,839,384
Kevin P. O'Meara
—
—
3,501,580/ 1,323,420
Charles L. Horn
—
—
1,812,927/ 1,437,073
Donald F. McAleenan
—
—
2,935,345/ 1,189,655
Frederick B. Schenkel
—
—
124,334/ 175,666
(1)
In connection with the payment of an
    extraordinary dividend to our stockholders in February 2004, the
    exercise price of most of our then-outstanding stock options,
    including all stock options held by our named executive
    officers, was adjusted to take into account the decrease in the
    fair market value of the underlying shares after the payment of
    the extraordinary dividend. With respect to our named executive
    officers, this adjustment resulted in the reduction of the
    exercise price of their options from $1.00 to $0.315 per
    share and applied to the following number of shares subject to
    options: Mr. Sherman, 11,357,533; Mr. O' Meara,
    4,259,075; Mr. Horn, 2,132,162; Mr. McAleenan,
    3,549,229; and Mr. Schenkel, 250,000.
68
Executive compensation
Employment agreements
We have entered into employment agreements with
four of our named executive officers. These employment
agreements provide for Mr. Sherman to serve as Chairman of
the Board of Directors and as our Chief Executive Officer,
Mr. O'Meara to serve as our Senior Vice President of
Operations and Chief Operating Officer, Mr. Horn to serve
as our Senior Vice President of Finance and Chief Financial
Officer, and Mr. McAleenan to serve as our Senior Vice
President and General Counsel.
Mr. Sherman's agreement
Mr. Sherman's employment agreement was
entered into on September 1, 2001, and has a two-year term,
with automatic one-year renewals commencing on the first
anniversary of the effective date of the employment agreement,
unless either party provides at least 90 days' notice
of non-renewal. In addition to providing for his annual base
salary and employee benefits, Mr. Sherman's employment
agreement provides, among other things, that he will be eligible
for an annual cash bonus of up to 133% of his base salary, as
determined by our board of directors or the compensation
committee, and for the initial grant of an option to
purchase 11,357,533 shares of our common stock. Our
board of directors may increase the amount of
Mr. Sherman's bonus if they deem such an increase
appropriate. This option vests ratably on each of the first four
anniversaries of the effective date of the employment agreement
and in full upon a "change of control" (as defined in
the employment agreement) of the Company.
Mr. Sherman's employment agreement
provides that if he is terminated by us without
"cause" (as defined in the employment agreement) he
will be entitled to payment of his annual base salary and health
and welfare benefits for the remainder of the term of the
employment agreement. His employment agreement further provides
that, during his employment with us and for one year thereafter,
he may not disclose confidential information and may not
directly or indirectly compete with the Company. In addition, he
may not solicit any employees of the Company or any of its
subsidiaries during his employment with us and for two years
thereafter.
Agreements with other named executive
officers
The employment agreements with
Messrs. O'Meara, Horn, and McAleenan were entered into
on January 15, 2004. Each of these agreements has a
one-year term, with automatic one-year renewals commencing on
the first anniversary of the effective date of the employment
agreement, unless either party provides at least
90 days' notice of non-renewal. In addition to
providing for an annual base salary and employee benefits, each
of these agreements provides, among other things, that the
executive is eligible for an annual cash bonus under our annual
cash incentive plan, which currently provides for a target bonus
percentage of 100% of the executive's base salary. Pursuant
to the employment agreements, this target bonus percentage will
not be less than 100% of the executive's base salary.
Under each of these employment agreements, in the
event that (a) the executive's employment is
terminated by us without "cause" (as defined in the
employment agreement), (b) the executive terminates his
employment because of a material adverse diminution in job title
or responsibilities or a relocation of his principal place of
employment more than 100 miles from its current location
without his consent, (c) we notify the executive of our
intent not to renew the employment agreement and the executive
delivers a "notice of resignation" (as defined in the
employment agreement) within 90 days of receipt of the
notice of non-renewal, or (d) the executive's
employment is terminated by mutual consent and the parties enter
into an agreement whereby the executive agrees to be bound by
the post-termination restrictive covenants in the agreement
(described below), the executive will be entitled to
continuation of his base salary and health benefits for one year
after the date of termination, plus payment of an amount equal
to his "average bonus compensation" (as defined in the
employment agreement). During the executive's employment
with us and for one year thereafter, the executive may not
disclose confidential information and may not directly or
indirectly compete with the Company. In addition, the executive
may
69
Executive compensation
not solicit any employees of the Company or any
of its subsidiaries during his employment with us and for two
years thereafter.
1998 Stock Incentive Plan, as amended and
restated March 1, 2004
The purpose of the 1998 Stock Incentive Plan is
to provide our key employees, officers, consultants, and
advisors with an opportunity to acquire shares of our common
stock. Under this plan, our board of directors is authorized to
grant stock options and other equity based awards, such as stock
appreciation rights or restricted stock awards. In addition, the
plan provides for the sale of shares to plan participants at
prices to be determined by our board of directors. Stock options
granted under the plan may be either "incentive stock
options" within the meaning of Section 422(b) of the
Code, or non-qualified stock options. A total of
64,000,000 shares of our common stock have been reserved
for issuance under this plan. A total of 46,000,000 shares
have been made available for the issuance of options and other
equity based awards and a total of 18,000,000 shares have
been made available for the sale of common stock. The plan is
intended to comply with the requirements of Rule 701 under
the Securities Act.
The plan is administered by our board of
directors, which has the discretion to determine the persons to
whom awards will be granted, the type of awards, the number of
awards, vesting requirements, and other features and conditions
of awards under the plan, including whether the awards will
contain provisions relating to a change in control of the
Company. It is contemplated that, following an initial public
offering of the Company's common stock, the plan will be
administered by a committee of our board of directors that will
be composed solely of at least two persons who are "outside
directors" within the meaning of Section 162(m) of the
Internal Revenue Code and "non-employee directors"
within the meaning of Rule 16(b) under the Exchange Act.
In the event of any extraordinary dividend, stock
dividend, recapitalization, reclassification, merger,
acquisition, consolidation, stock split, warrant or rights
issuance, combination or exchange of shares, or other similar
transaction, our board of directors has the sole discretion to
equitably adjust the exercise price, the number and kind of
shares of common stock available for issuance under the plan,
the number and kind of shares covered by outstanding options,
and other awards under the plan to preserve the value of each
share of common stock and the value of each award.
In the event of a sale of the Company, the board
of directors, in its sole discretion, may cancel all outstanding
stock options issued under the plan and provide for a cash
payment to each holder thereof equal to (i) the excess of
the consideration received by the Company's stockholders
pursuant to the sale of the Company over the exercise price per
share of the option multiplied by (ii) the number of shares
of common stock subject to the option.
2005 Cash Incentive Plan
Our 2005 Cash Incentive Plan provides for the
payment of a cash bonus to each plan participant based on the
achievement of performance goals relating to (i) return on
net tangible assets, (ii) operating cash flow, and
(iii) operating income. These goals are based on the
performance of a given location, region, or the entire Company,
depending on the participant's position. Target bonus
percentages are set for each performance objective. Bonus payout
percentages increase as the achievement levels increase. The
plan also contains a discretionary bonus to recognize and reward
individual performance. This portion of the bonus is based on
the review of the participant's performance by the
participant's direct supervisor. All of our executive
officers participate in this plan.
70
Principal and selling stockholders
The following table sets forth certain
information regarding the beneficial ownership, as of
February 7, 2005, and as adjusted to reflect the sale of
the shares of common stock offered by us and the selling
stockholder in this offering, of: (i) our common stock by
each person known to us to hold greater than 5% of the total
number of outstanding shares; (ii) our common stock by each
current director or executive officer and of all the current
directors and executive officers as a group; and (iii) each
stockholder selling shares in this offering. The number of
shares beneficially owned by each person or group as of
February 7, 2005 includes shares of common stock that such
person or group had the right to acquire on or within
60 days after February 7, 2005, including upon the
exercise of options. All such information is estimated and
subject to change.
Ownership of our common stock is shown in terms
of "beneficial ownership." Amounts and percentages of
common stock beneficially owned are reported on the basis of
regulations of the SEC governing the determination of beneficial
ownership of securities. Under the rules of the SEC, a person is
deemed to be a "beneficial owner" of a security if
that person has or shares "voting power," which
includes the power to vote or to direct the voting of such
security, or "investment power," which includes the
power to dispose of or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of
any securities of which he has a right to acquire beneficial
ownership within 60 days. More than one person may be
considered to beneficially own the same shares. In the table
below, unless otherwise noted, a person has sole voting and
dispositive power for those shares shown as beneficially owned
by such person.
Common Stock
Shares Beneficially Owned
Shares Beneficially Owned
Before the Offering
After the Offering
Percentage of
Percentage
Ownership of
Shares
Ownership
Name and Address of
Shares of
Shares of
Offered
Shares of
of Shares of
Beneficial Owner(1)
Common Stock(4)
Common Stock(5)(6)
Hereby
Common Stock
Common Stock
JLL Building Products, LLC(3)
237,836,421
94.6
%
Floyd F. Sherman(7)
8,518,149
3.3
%
—
Kevin P. O'Meara(8)
3,944,543
1.5
%
—
Charles L. Horn(9)
1,957,927
*
—
Donald F. McAleenan(10)
3,378,308
1.3
%
—
Frederick B. Schenkel(11)
270,334
*
—
Alexander R. Castaldi(2)(3)
237,836,421
94.6
%
—
Ramsey A. Frank(2)(3)
237,836,421
94.6
%
—
Paul S. Levy(2)(3)
237,836,421
94.6
%
—
Brett N. Milgrim(2)(3)
237,836,421
94.6
%
—
Directors and executive officers of the Company
    as a group
255,905,682
95.3
%
—
*
Less than 1%.
(1)
Unless otherwise indicated, the business
    address of each person named in the table is Builders
    FirstSource, Inc., 2001 Bryan Street, Suite 1600,
    Dallas, Texas 75201.
71
Principal and selling stockholders
(2)
The business address for Messrs. Levy,
    Frank, Milgrim, and Castaldi is 450 Lexington Ave.,
    Suite 3350, New York, New York 10017.
(3)
Messrs. Levy, Frank, Milgrim, and
    Castaldi are all associated with JLL Partners Fund II, L.P.
    and JLL Partners Fund III, L.P., which, as members of JLL
    Building Products, LLC, may be deemed to beneficially own the
    shares of common stock owned by JLL Building Products, LLC. In
    addition, Mr. Levy is Managing Member of
    JLL Associates G.P. II, L.L.C., which controls
    JLL Partners Fund II, L.P., and of JLL
    Associates III, L.L.C., the general partner of JLL Partners
    Fund III, L.P., and, as a result, may be deemed to
    beneficially own all of the shares of common stock owned by JLL
    Building Products, LLC. Messrs. Frank, Milgrim, and
    Castaldi disclaim any beneficial ownership of our common
    stock.
(4)
The number of shares beneficially owned by
    each person or group as of February 7, 2005 includes shares
    of common stock that such person or group had the right to
    acquire on or within 60 days after February 7, 2005,
    including upon the exercise of options.
(5)
For each person and group included in the
    table, percentage ownership is calculated by dividing the number
    of shares beneficially owned by such person or group as
    described above by the sum of 251,482,040 shares of common
    stock outstanding on February 7, 2005 and the number of
    shares of common stock that such person or group had the right
    to acquire on or within 60 days of February 7, 2005,
    including upon the exercise of options.
(6)
Subject to dilution resulting from potential
    awards of common stock and exercise of options to acquire common
    stock under the 1998 Stock Incentive Plan, as amended.
(7)
Includes 8,518,149 shares of common stock
    issuable upon exercise of options exercisable within
    60 days of February 7, 2005 under the Company's
    1998 Stock Incentive Plan, as amended.
(8)
Includes 3,501,580 shares of common stock
    issuable upon exercise of options exercisable within
    60 days of February 7, 2005 under the Company's
    1998 Stock Incentive Plan, as amended.
(9)
Includes 1,832,927 shares of common stock
    issuable upon exercise of options exercisable within
    60 days of February 7, 2005 under the Company's
    1998 Stock Incentive Plan, as amended.
(10)
Includes 2,935,345 shares of common stock
    issuable upon exercise of options exercisable within
    60 days of February 7, 2005 under the Company's
    1998 Stock Incentive Plan, as amended.
(11)
Includes 160,334 shares of common stock
    issuable upon exercise of options exercisable within
    60 days of February 7, 2005 under the Company's
    1998 Stock Incentive Plan, as amended.
72
Certain related party transactions
In February 2005, with a portion of the net
proceeds of our offering of floating rate notes and our new
senior secured credit facility, we paid a dividend to our
stockholders and a compensation-based payment to all holders of
our outstanding stock options (including vested and unvested
options). Such payment to option holders was made in connection
with the payment of such dividend, rather than making an
adjustment to the exercise price or number of shares subject to
such options. The aggregate dividend to stockholders was
$201.2 million, and the aggregate payment to option holders
was $35.8 million, which was treated as compensation
expense.
In February 2004, we completed a recapitalization
to refinance our indebtedness and pay a dividend to our
stockholders in an aggregate amount equal to
$139.6 million. In connection with such dividend, our board
of directors exercised its discretion under the anti-dilution
provisions of our employee stock plan to adjust the exercise
price of stock options to reflect the change in the share value
on the dividend date. This adjustment was made to the stock
options held by our executive officers as well as other
employees. Approximately $0.4 million was also paid to
certain option holders whose exercise price could not be
adjusted for the dividend.
JLL Partners, affiliates of which control JLL
Building Products, LLC, the selling stockholder, is reimbursed
by us for expenses it pays or incurs on our behalf or in
connection with its investment in us. The amount reimbursed was
approximately $300,000 in each of 2004 and 2003, and
approximately $265,000 in 2002. In the ordinary course of
business, we purchase windows from PGT Industries, Inc., a
company controlled by affiliates of JLL Partners.
In connection with this offering, we will amend
our registration rights agreement with JLL Building Products,
LLC and some of our executive officers. See "Description of
Capital Stock — Registration Rights."
The Company loaned $50,000 to Mr. Horn to
purchase shares of our common stock, under our 1998 Stock
Incentive Plan, as amended, which loan, together with interest
thereon, was repaid in full on February 25, 2004.
73
Description of capital stock
The following is a summary of the material terms
of our capital stock. The following description of our capital
stock is subject to, and qualified in its entirety by reference
to, our amended and restated certificate of incorporation,
amended and restated by-laws and other agreements, copies of
which have been filed as exhibits to the registration statement
of which this prospectus is a part, and by the provisions of
applicable Delaware law.
GENERAL MATTERS
Our amended and restated certificate of
incorporation, which will be filed with the State of Delaware
and become effective immediately prior to the closing of this
offering, provides that we are authorized to
issue            shares
of common stock, par value $0.01 per share,
and            shares
of undesignated preferred stock, par value $0.01 per share.
As
of           ,
2005, we had
outstanding            shares
of common stock, held
by           stockholders
of record. As
of           ,
2005, we had outstanding options to
purchase            shares
of our common stock.
COMMON STOCK
Shares of our common stock have the following
rights, preferences and privileges:
•
Voting rights.
Each
    outstanding share of common stock entitles its holder to one
    vote on all matters submitted to a vote of our stockholders,
    including the election of directors. There are no cumulative
    voting rights. Generally, all matters to be voted on by
    stockholders must be approved by a majority of the votes
    entitled to be cast by all shares of common stock present or
    represented by proxy.
•
Dividends.
Holders
    of common stock are entitled to receive dividends as, when and
    if dividends are declared by our board of directors out of
    assets legally available for the payment of dividends.
•
Liquidation.
In the
    event of a liquidation, dissolution or winding up of our
    affairs, whether voluntary or involuntary, after payment of our
    liabilities and obligations to creditors, our remaining assets
    will be distributed ratably among the holders of shares of
    common stock on a per share basis.
•
Rights and
    preferences.
Our common stock has no
    preemptive, redemption, conversion or subscription rights. The
    rights, powers, preferences and privileges of holders of our
    common stock are subject to, and may be adversely affected by,
    the rights of the holders of shares of any series of preferred
    stock that we may designate and issue in the future.
LISTING
We intend to apply to list our common stock on
The Nasdaq National Market under the trading symbol
"BLDR".
PREFERRED STOCK
Our amended and restated certificate of
incorporation provides that the board of directors has the
authority, without action by the stockholders, to designate and
issue up
to                 shares
of preferred stock in one or more classes or series and to fix
for each class or series the powers, rights, preferences and
privileges of each series of preferred stock, including dividend
rights, conversion rights, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting
any class or series, which may be greater than the rights of the
holders of the common stock. There will be no shares of
preferred stock outstanding immediately after the closing of
this offering. Any issuance of shares of preferred stock could
adversely affect the voting power of holders of common stock,
and the likelihood
74
Description of capital stock
that the holders will receive dividend payments
and payments upon liquidation could have the effect of delaying,
deferring or preventing a change in control. We have no present
plans to issue any shares of preferred stock.
REGISTRATION RIGHTS
In connection with this offering, we will amend
our registration rights agreement with JLL Building
Products, LLC and some of our executive officers. The agreement
will provide that, upon the request of JLL Building
Products, we will register under the Securities Act the shares
of our common stock held by JLL Building Products for sale
in accordance with its intended method of disposition, and will
take other actions as are necessary to permit the sale of the
shares in various jurisdictions. In addition, if we register any
of our equity securities either for our own account or for the
account of other security holders, JLL Building Products and
such executive officers are entitled to notice of the
registration and may include their shares in the registration,
subject to certain customary underwriters'
"cut-back" provisions. All fees, costs and expenses of
underwritten registrations will be borne by us, other than
underwriting discounts and selling commissions, which will be
borne by the stockholder selling its shares. Our obligation to
register the shares and take other actions is subject to certain
restrictions on, among other things, the frequency of requested
registrations, the number of shares to be registered and the
duration of these rights.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF
OUR CERTIFICATE OF INCORPORATION AND BY-LAWS
Our amended and restated certificate of
incorporation and by-laws contain provisions that are intended
to enhance the likelihood of continuity and stability in the
composition of the board of directors and which may have the
effect of delaying, deferring or preventing a future takeover or
change in control of our company unless the takeover or change
in control is approved by our board of directors. These
provisions include the following:
Staggered Board of
Directors.
Our amended and restated
certificate of incorporation provides for a staggered board of
directors, divided into three classes, with our stockholders
electing one class each year. Between stockholders'
meetings, the board of directors will be able to appoint new
directors to fill vacancies or newly created directorships so
that no more than the number of directors in any given class
could be replaced each year and it would take three successive
annual meetings to replace all directors.
Elimination of stockholder action through
written consent.
Our amended and
restated certificate of incorporation provides that stockholder
action can be taken only at an annual or special meeting of
stockholders and cannot be taken by written consent in lieu of a
meeting.
Elimination of the ability to call special
meetings.
Our amended and restated
certificate of incorporation provides that, except as otherwise
required by law, special meetings of our stockholders can only
be called pursuant to a resolution adopted by a majority of our
board of directors or by our chief executive officer or the
chairman of our board of directors. Stockholders are not
permitted to call a special meeting or to require our board to
call a special meeting.
Advance notice procedures for stockholder
proposals.
Our by-laws establish an
advance notice procedure for stockholder proposals to be brought
before an annual meeting of our stockholders, including proposed
nominations of persons for election to our board. Stockholders
at our annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting
by or at the direction of our board or by a stockholder who was
a stockholder of record on the record date for the meeting, who
is entitled to vote at the meeting and who has given to our
secretary timely written notice, in proper form, of the
stockholder's intention to bring that business before the
meeting.
75
Description of capital stock
Removal of Directors; Board of Directors
Vacancies.
Our certificate of
incorporation and by-laws provide that members of our board of
directors may not be removed without cause. Our by-laws further
provide that only our board of directors may fill vacant
directorships, except in limited circumstances. These provisions
would prevent a stockholder from gaining control of our board of
directors by removing incumbent directors and filling the
resulting vacancies with such stockholder's own nominees.
The foregoing provisions of our amended and
restated certificate of incorporation and by-laws could
discourage potential acquisition proposals and could delay or
prevent a change in control. These provisions are intended to
enhance the likelihood of continuity and stability in the
composition of our board of directors and in the policies
formulated by our board of directors and to discourage certain
types of transactions that may involve an actual or threatened
change of control. These provisions are designed to reduce our
vulnerability to an unsolicited acquisition proposal. The
provisions also are intended to discourage certain tactics that
may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for
our shares and, as a consequence, they also may inhibit
fluctuations in the market price of the common stock that could
result from actual or rumored takeover attempts. Such provisions
also may have the effect of preventing changes in our
management. See "Risk Factors— Risks Related to the
Offering— Provisions in our charter documents and under
Delaware law could discourage a takeover that stockholders may
consider favorable."
LIMITATIONS ON LIABILITY AND INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Our amended and restated certificate of
incorporation and by-laws provide indemnification for our
directors and officers to the fullest extent permitted by the
DGCL. In addition, as permitted by Delaware law, our amended and
restated certificate of incorporation includes provisions that
eliminate the personal liability of our directors for monetary
damages resulting from breaches of certain fiduciary duties as a
director. The effect of this provision is to restrict our rights
and the rights of our stockholders in derivative suits to
recover monetary damages against a director for breach of
fiduciary duties as a director, except that a director will be
personally liable for:
•
any breach of his or her duty of loyalty to us or
    our stockholders;
•
acts or omissions not in good faith or which
    involve intentional misconduct or a knowing violation of law;
•
any transaction from which the director derived
    an improper personal benefit; or
•
improper distributions to stockholders.
These provisions may not be held to be
enforceable for violations of the federal securities laws of the
United States.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common
stock
is                     ,
and its telephone number
is                     .
76
Description of certain indebtedness
The following is a summary of the material
provisions of the agreements governing our material debt to be
in effect upon the closing of this offering. The following is
only a summary and it does not include all of the provisions of
our material debt, copies of which have been filed as exhibits
to our registration statement filed in connection with this
offering and are available as set forth under "Where You
Can Find More Information."
SENIOR SECURED CREDIT FACILITY
On February 11, 2005, we entered into a new
senior secured credit facility. with various lenders, UBS
Securities LLC and Deutsche Bank Securities Inc., as Joint
Arrangers, UBS AG, Stamford Branch, as Administrative Agent and
Deutsche Bank Securities Inc., as Syndication Agent.
Structure.
The new
senior secured credit facilities consist of:
•
a new senior secured term loan facility of
    $225.0 million (the "Term Loan Facility"),
•
a new senior secured revolving credit facility of
    $110.0 million (the "Revolving Credit
    Facility"), and
•
a new pre-funded letter of credit facility of
    $15.0 million (the "Funded LC Facility"). Funds
    in an aggregate principal amount of $15.0 million have been
    deposited (the "Credit-linked Deposit") by the lenders
    under the Funded LC Facility in an account (the
    "Credit-Linked Deposit Account") held in the name of
    the Administrative Agent.
We may borrow, repay, and reborrow from the
Revolving Credit Facility from time to time until the earlier of
the maturity date thereof and the termination of the revolving
loan commitment. The Funded LC Facility will be used solely in
connection with general corporate purposes.
Maturity, Amortization, and
Prepayment.
The Term
Loan Facility has a maturity of six and a half years and
will amortize in consecutive equal quarterly installments in an
aggregate annual amount equal to 1.0% of the original principal
amount of the Term Loan Facility, with the balance payable
on the maturity date. Unless terminated earlier, the Revolving
Credit Facility has a maturity of five years. The Funded LC
Facility has a maturity of six and a half years.
The new senior secured credit facilities are
subject to mandatory prepayment with, in general, (i) 100%
of the net proceeds of certain asset sales or other disposition
of assets, subject to a 365-day reinvestment period and with
exceptions to be agreed; (ii) 100% of the net cash proceeds
from certain issuances of debt, with exceptions to be agreed;
(iii) 100% of all casualty and condemnation proceeds in
excess of amounts applied within 365 days of receipt to
replace or restore any properties in respect of which such
proceeds are paid; and (iv) 75% of the excess cash flow,
subject to leverage-based stepdowns to be agreed. Any such
prepayment is applied first to the Term Loan Facility, then
to the Credit Linked Deposit and the proceeds thereof applied to
cash-collateralize any outstanding Funded Letters of Credit to
the extent such Funded Letters of Credit outstanding at the time
exceed the Credit-Linked Deposit, and thereafter to the
Revolving Credit Facility.
Interest and Fees.
The term loans under the Term Loan Facility bear interest,
at our option, at a rate equal to LIBOR plus 2.50% per
annum or base rate plus 1.50% per annum. The loans under
the Revolving Credit Facility initially bear interest, at our
option, at a rate equal to LIBOR plus 2.50% per annum or
base rate plus 1.50% per annum, and, beginning
September 30, 2005, may decline to as much as 1.75% for
LIBOR loans and 0.75% for base rate loans if certain leverage
ratios are met. A commitment fee equal to 0.500% to
0.375% per annum (determined by our leverage) accrues on
the undrawn portion of the Revolving Credit Facility and such
fee is payable quarterly in arrears. We pay the lenders under
the Funded LC Facility LIBOR plus 2.75% per annum minus UBS
AG, Stamford Branch's internal deposit
77
Description of certain indebtedness
rate, and such lenders will receive UBS AG,
Stamford Branch's internal deposit rate on the amounts in
the Credit-Linked Deposit Account.
Guarantees.
All of
the obligations under the new senior secured credit facilities
are guaranteed by all of our existing and future direct and
indirect subsidiaries (collectively, the
"Guarantors"), subject to exceptions for foreign
subsidiaries to the extent such guarantees would be prohibited
by applicable law or would result in adverse tax consequences.
Pledge and Security.
The new senior secured credit facilities are secured by
perfected first priority pledges of all of the equity interests
of each of the Guarantors and perfected first priority security
interests in and mortgages on all of our tangible and intangible
assets and those of the Guarantors, except, in the case of the
stock of a foreign subsidiary, to the extent such pledge would
be prohibited by applicable law or would result in materially
adverse tax consequences, and subject to such other exceptions
as are agreed.
Covenants.
The new
senior secured credit facilities contain a number of covenants
that, among other things, restrict our ability and the ability
of our subsidiaries to (i) dispose of assets;
(ii) change our business; (iii) engage in mergers or
consolidations; (iv) make certain acquisitions;
(v) pay dividends or repurchase or redeem stock;
(vi) incur indebtedness and issue preferred stock;
(vii) make investments and loans; (viii) create liens;
(ix) engage in certain transactions with affiliates;
(x) enter into sale and leaseback transactions;
(xi) issue stock or stock options; (xii) amend or
prepay other indebtedness; (xiii) modify or waive material
documents; or (xiv) change our fiscal year. In addition,
under the new senior secured credit facilities, we are required
to comply with specified financial ratios and tests, including a
minimum interest coverage ratio, a maximum leverage ratio, and
maximum capital expenditures.
Events of Default.
The new senior secured credit facilities contain customary
events of default, including (i) nonpayment of principal or
interest; (ii) false or misleading representations or
warranties; (iii) noncompliance with covenants;
(iv) insolvency and bankruptcy-related events;
(v) judgments in excess of specified amounts;
(vi) certain ERISA matters; (vii) actual or asserted
invalidity of guarantees of the new senior secured credit
facilities or impairment of security interests in collateral;
(viii) invalidity or unenforceability of certain provisions
of any loan document; and (ix) certain change of control
events.
SECOND PRIORITY SENIOR SECURED FLOATING RATE
NOTES
On February 11, 2005, we issued
approximately $275.0 million in aggregate principal amount
of our floating rate notes, all of which continue to be
outstanding.
Maturity and
Interest.
The floating rate notes
mature on February 15, 2012. Interest accrues at a rate of
LIBOR plus 4.25%. The LIBOR rate is reset at the beginning of
each quarter. Interest on the floating rate notes is payable
quarterly in arrears on each February 15, May 15,
August 15, and November 15, commencing on May 15,
2005.
Ranking.
The
floating rate notes are our senior secured obligations and rank
equally in right of payment with all of our existing and future
senior debt. The floating rate notes are effectively junior in
right of payment to any of our indebtedness that is secured by
first priority liens on the assets securing the floating rate
notes, including our new senior secured credit facility, or
secured by assets not securing the floating rate notes, and are
junior in right of payment to all indebtedness of our future
nonguarantor subsidiaries. The subsidiary guarantees are the
senior secured obligations of our subsidiary guarantors and rank
equal in right of payment with all of our subsidiary
guarantors' existing and future senior debt, but rank
effectively junior in right of payment to the subsidiary
guarantees of our new senior secured credit facility.
Guarantees.
All of
our existing subsidiaries jointly and severally guarantee the
floating rate notes. Our future significant restricted domestic
subsidiaries will also be required to guarantee the floating
rate notes.
78
Description of certain indebtedness
Pledge and Security.
The new floating rate notes are secured by perfected second
priority pledges of all of the equity interests of each of the
guarantors of the floating rate notes and perfected second
priority security interests in and mortgages on all of our
tangible and intangible assets and those of the guarantors,
except, in the case of the stock of a foreign subsidiary, to the
extent such pledge would be prohibited by applicable law or
would result in materially adverse tax consequences, and subject
to such other exceptions as are agreed.
Optional Redemption.
At any time on or after February 15, 2007, we may redeem
some or all of the floating rate notes at a redemption price
equal to 100% of the principal amount thereof, plus a premium
declining ratably to par, plus accrued and unpaid interest and
liquidated damages, if any to the redemption dates.
At any time before February 15, 2007, we may
redeem the floating rate notes, in whole or in part, at a
redemption price equal to 100% of the principal amount of the
floating rate notes redeemed, plus a make-whole premium, accrued
and unpaid interest, and liquidated damages, if any, to the
redemption date.
At any time before February 15, 2007, we may
redeem up to 35% of the aggregate principal amount of the
floating rate notes with the proceeds of certain equity
offerings, including this offering, so long as:
•
we pay holders of the floating rate notes a
    redemption price an amount equal to par plus the interest rate
    then in effect, plus accrued and unpaid interest and liquidated
    damages, if any, to the redemption date;
•
at least 65% of the aggregate principal amount of
    the floating rate notes issued under the indenture, remains
    outstanding immediately after such redemption; and
•
we redeem the floating rate notes within
    90 days of any such equity offering.
Covenants.
The
indenture governing the floating rate notes contains covenants
that limit our ability and the ability of our restricted
subsidiaries to, among other things: incur additional
indebtedness; pay dividends or make other distributions on our
capital stock or repurchase, repay or redeem our capital stock;
make certain investments; incur liens; enter into certain types
of transactions with affiliates; create restrictions on the
payment of dividends or other amounts to us by our restricted
subsidiaries; and sell all or substantially all of our assets or
merge with or into other companies. These covenants are subject
to a number of important exceptions and qualifications.
Change of Control
Offer.
If we experience a change of
control, we may be required to offer to purchase the floating
rate notes at a purchase price equal to 101% of the principal
amount, plus accrued and unpaid interest and liquidated damages,
if any, to the repurchase date.
Events of Default.
The indenture contains customary events of default, including,
but not limited to, (i) defaults in the payment of
principal or interest, (ii) defaults in the compliance with
the covenants contained in the indenture, (iii) cross
defaults on debt in excess of $20.0 million,
(iv) failure to pay more than $20.0 million of
judgments that have not been stayed by appeal or otherwise, or
(v) our bankruptcy or other insolvency events.
79
Shares eligible for future sale
Prior to this offering, there has been no public
market for our common stock, and a significant public market for
our common stock may not develop or be sustained after this
offering. Future sales of significant amounts of our common
stock, including shares of our outstanding common stock and
shares of our common stock issued upon exercise of outstanding
options, in the public market after this offering could
adversely affect the prevailing market price of our common stock
and could impair our ability to raise capital through the sale
of our equity securities.
SALE OF RESTRICTED SHARES AND LOCK-UP
AGREEMENTS
Upon the closing of this offering, we will
have                      outstanding
shares of common stock based upon our shares outstanding as
of                     ,
2005, assuming no exercise of stock options.
Of these shares, the shares of common stock sold
in this offering will be freely tradeable without restriction
under the Securities Act, unless purchased by affiliates of our
company, as that term is defined in Rule 144 under the
Securities Act.
The
remaining                      shares
of common stock were issued and sold by us in private
transactions, and are eligible for public sale if registered
under the Securities Act or sold in accordance with
Rules 144, 144(k) or 701 of the Securities Act. However, of
these remaining shares of common stock, representing an
aggregate
of           %
of our outstanding common stock after giving effect to this
offering,                     are
held by officers, directors, and existing security holders who
are subject to lock-up agreements for a period
of                      days
after the date of this prospectus under which these holders have
agreed not to sell or otherwise dispose of their shares of
common stock. The representative of the underwriters may, in its
sole discretion and at any time without notice, release all or
any portion of the securities subject to the lock-up agreements.
As of the date of this prospectus, up
to                     of
the remaining shares may be eligible for sale in the public
market. Beginning 90 days after the date of this
prospectus,                     of
these remaining shares will be eligible for sale in the public
market, although all
but                      shares
will be subject to certain volume limitations under
Rule 144. As soon as practicable after the closing of this
offering, we intend to file a registration statement on
Form S-8 under the Securities Act covering shares of our
common stock issued or reserved for issuance under our 1998
Stock Incentive Plan and agreements with our employees.
Accordingly, shares of our common stock registered under such
registration statement will be available for sale in the open
market.
RULE 144
In general, Rule 144 allows a stockholder
(or stockholders where shares are aggregated) who has
beneficially owned shares of our common stock for at least one
year and who files a Form 144 with the SEC to sell within
any three month period commencing 90 days after the date of
this prospectus a number of those shares that does not exceed
the greater of:
•
1% of the number of shares of common stock then
    outstanding, which will equal
    approximately                      shares
    immediately after this offering; or
•
the average weekly trading volume of the common
    stock during the four calendar weeks preceding the filing of the
    Form 144 with respect to such sale.
Sales under Rule 144, however, are subject
to specific manner of sale provisions, notice requirements, and
the availability of current public information about our
company. We cannot estimate the number of shares of common stock
our existing stockholders will sell under Rule 144, as this
will depend on the market price for our common stock, the
personal circumstances of the stockholders, and other factors.
80
Shares eligible for future sale
RULE 144(k)
Under Rule 144(k), in general, a stockholder
who has beneficially owned shares of our common stock for at
least two years and who is not deemed to have been an affiliate
of our company at any time during the immediately preceding
90 days may sell shares without complying with the manner
of sale provisions, notice requirements, public information
requirements, or volume limitations of Rule 144. Affiliates
of our company, however, must always sell pursuant to
Rule 144, even after the otherwise applicable
Rule 144(k) holding periods have been satisfied.
RULE 701
Rule 701 generally allows a stockholder who
purchased shares of our common stock pursuant to a written
compensatory plan or contract and who is not deemed to have been
an affiliate of our company during the immediately preceding
90 days to sell these shares in reliance upon
Rule 144, but without being required to comply with the
public information, holding period, volume limitation, or notice
provisions of Rule 144. Our 1998 Stock Incentive Plan
provided for the issuance
of                      shares
pursuant to Rule 701. Rule 701 also permits affiliates
of our company to sell their Rule 701 shares under
Rule 144 without complying with the holding period
requirements of Rule 144. All holders of
Rule 701 shares, however, are required to wait until
90 days after the date of this prospectus before selling
such shares pursuant to Rule 701. In addition, holders of
Rule 701 shares who are subject to the lock-up agreements
described in "— Sale of Restricted Shares and
Lock-up Agreements" have agreed not to sell their shares
for a period of       days after
the date of this prospectus.
As
of                     ,
2005,                      shares
of our outstanding common stock have been issued in reliance on
Rule 701, including as a result of exercises of stock
options, and an
additional           shares
are issuable upon exercise of outstanding stock options issued
under our 1998 Stock Incentive Plan.
REGISTRATION RIGHTS
After the closing of this offering, JLL Building
Products, LLC, which will hold
approximately                      shares
of our common stock, has the right, subject to various
conditions and limitations, to cause us to register shares of
our common stock held by it and to include its shares in
registration statements relating to our securities. By
exercising its registration rights and causing a large number of
shares to be registered and sold in the public market, it could
cause the price of the common stock to fall. In addition, any
demand to include such shares in our registration statements
could have a material adverse effect on our ability to raise
needed capital. See "Description of Capital
Stock—Registration Rights."
OPTIONS
In addition to the shares of common stock
outstanding immediately after this offering, as
of                     ,
2005, there were outstanding options to
purchase                      shares
of our common stock. As soon as practicable after the closing of
this offering, we intend to file a registration statement on
Form S-8 under the Securities Act covering shares of our
common stock issued or reserved for issuance under our 1998
Stock Incentive Plan and agreements with our employees.
Accordingly, shares of our common stock registered under such
registration statement will be available for sale in the open
market upon exercise by the holders, subject to vesting
restrictions with us, contractual lock-up restrictions, and/or
market stand-off provisions applicable to each option agreement
that prohibit the sale or other disposition of the shares of
common stock underlying the options for a period
of            days
after the date of this prospectus without the prior written
consent from us or our underwriters.
81
Material United States federal income tax
considerations for non-U.S. holders
The following is a summary of the anticipated
material United States federal income and estate tax
consequences to a Non-U.S. Holder (as defined below) of the
acquisition, ownership and disposition of our common stock under
current United States federal tax law. This discussion does not
address specific tax consequences that may be relevant to
particular persons in light of their individual circumstances
(including, for example, pass-through entities (e.g.,
partnerships) or persons who hold our common stock through
pass-through entities, banks or financial institutions,
broker-dealers, insurance companies, tax-exempt entities, common
trust funds, pension plans, controlled foreign corporations,
passive foreign investment companies, owners of more than 5% of
our common stock, United States expatriates, dealers in
securities or currencies, persons that have a functional
currency other than the United States dollar and persons in
special situations, such as those who hold our common stock as
part of a straddle, hedge, conversion transaction, or other
integrated investment), all of whom may be subject to tax rules
that differ significantly from those summarized below. Unless
otherwise stated, this discussion is limited to the tax
consequences to those Non-U.S. Holders who are the original
beneficial owners of our common stock and who hold such common
stock as "capital assets" (generally, property held
for investment) under the United States Internal Revenue Code of
1986, as amended (the "Code"). In addition, this
discussion does not describe any tax consequences arising under
the tax laws of any state, local or non-United States
jurisdiction. This discussion is based upon the Code, the
Treasury Department regulations (the "Treasury
Regulations") promulgated thereunder and administrative and
judicial interpretations thereof, all as of the date hereof and
all of which are subject to change, possibly with retroactive
effect.
Prospective purchasers of our common stock are
urged to consult their tax advisors concerning the United States
federal tax consequences to them of acquiring, owning and
disposing of our common stock, as well as the application of
state, local and non-United States tax laws.
As used herein, a "U.S. Person" is
(i) an individual who is a citizen or resident of the
United States, (ii) a corporation, partnership or other
entity taxable as a corporation or partnership created or
organized under the laws of the United States, any state thereof
or the District of Columbia, (iii) an estate that is
subject to United States federal income taxation without regard
to the source of its income or (iv) a trust (a) the
administration of which is subject to the primary supervision of
a United States court and which has one or more United States
persons who have the authority to control all substantial
decisions of the trust or (b) that was in existence on
August 20, 1996, was properly treated as a United States
person under the Code on the previous day, and elected to
continue to be so treated. A "Non-U.S. Holder" is a
holder of our common stock who is not a U.S. Person.
If a partnership, or other entity or arrangement
treated as a partnership for United States federal income tax
purposes, holds our common stock, the tax treatment of each
partner will generally depend upon the status of the partner and
the activities of the partnership. Partners in a partnership
that is a prospective investor should consult their tax advisors
as to the particular United States federal tax consequences
applicable to them.
Dividends
Dividends paid to a Non-U.S. Holder will
generally be subject to withholding of United States federal
income tax at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty. Dividends that are
effectively connected with the conduct of a trade or business by
the Non-U.S. Holder within the United States and, where an
income tax treaty applies, are attributable to a United States
permanent establishment of the Non-U.S. Holder, are not,
however, subject to the withholding tax, but are instead subject
to United States federal income tax on a net income basis at
applicable graduated
82
Material United States federal income tax
considerations for non-U.S. holders
individual or corporate rates. Certain
certification and disclosure requirements must be satisfied for
effectively connected income to be exempt from withholding. Any
such effectively connected dividends received by a foreign
corporation may be subject to an additional "branch profits
tax" at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty. A Non-U.S. Holder who wishes
to claim the benefit of an applicable income tax treaty rate
(and avoid backup withholding as discussed below) for dividends,
will be required to (a) complete Internal Revenue Service
("IRS") Form W-8BEN (or other applicable form)
and certify under penalties of perjury that such holder is not a
U.S. person or (b) if the common stock is held through
certain foreign intermediaries, satisfy the relevant
certification requirements of applicable Treasury Regulations.
Special certification and other requirements apply to certain
Non-U.S. Holders that are entities rather than individuals.
A Non-U.S. Holder eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the IRS.
Gain on Disposition of Common Stock
A Non-U.S. Holder will generally not be subject
to United States federal income tax with respect to gain
recognized on a sale or other disposition of our common stock
unless (i) the gain is effectively connected with a trade
or business of the Non-U.S. Holder in the United States, and,
where an income tax treaty applies, is attributable to a United
States permanent establishment of the Non-U.S. Holder,
(ii) in the case of a Non-U.S. Holder who is an individual
and holds the common stock as a capital asset, such holder is
present in the United States for 183 or more days in the taxable
year of the sale or other disposition and certain other
conditions are met, or (iii) we either are or have been a
"United States real property holding corporation" (a
"USRPHC") for United States federal income tax
purposes at any time during the shorter of the five-year period
preceding such sale or other disposition or the period that such
Non-U.S. Holder held our common shares (the "Applicable
Period").
An individual Non-U.S. Holder described in clause
(i) above will be subject to tax on the net gain derived
from the sale under regular graduated United States federal
income tax rates. An individual Non-U.S. Holder described in
clause (ii) above will be subject to a flat 30% tax on the
gain derived from the sale, which may be offset by United States
source capital losses (even though the individual is not
considered a resident of the United States). If a Non-U.S.
Holder that is a foreign corporation is described in clause
(i) above, it will be subject to tax on its gain under
regular graduated United States federal income tax rates and, in
addition, may be subject to the branch profits tax equal to 30%
of its effectively connected earnings and profits or at such
lower rate as may be specified by an applicable income tax
treaty.
We do not believe that we have been, are
currently or are likely to be a USRPHC. If we were to become a
USRPHC, so long as our common stock is regularly traded on an
established securities market and continues to be traded, you
would be subject to federal income tax on any gain from the sale
or other disposition of shares of common stock only if you
actually or constructively owned, during the Applicable Period,
more than 5% of the class of stock that includes such shares.
Federal Estate Tax
Common stock held by an individual Non-U.S.
Holder at the time of death will generally be included in such
holder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides
otherwise.
Information Reporting and Backup
Withholding
We must report annually to the IRS and to each
Non-U.S. Holder the amount of dividends paid to such holder and
the tax withheld with respect to such dividends, regardless of
whether withholding was
83
Material United States federal income tax
considerations for non-U.S. holders
required. Copies of the information returns
reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the
Non-U.S. Holder resides under the provisions of an applicable
income tax treaty. A Non-U.S. Holder will be subject to backup
withholding on dividends paid to such holder unless applicable
certification requirements are met.
If common stock is sold by a Non-U.S. Holder
outside the United States and conducted through a non-United
States related financial institution or broker, backup
withholding and information reporting generally would not apply.
Information reporting and, depending on the circumstances,
backup withholding, generally would apply to the proceeds of a
sale of common stock within the United States or conducted
through a United States related financial institution or broker
unless the beneficial owner certifies under penalties of perjury
that it is not a U.S. Person (and the payer does not have
actual knowledge or reason to know that the beneficial owner is
a U.S. Person) or the owner otherwise establishes an
exemption.
Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against a Non-U.S.
Holder's United States federal income tax liability
provided the required information is furnished to the IRS.
84
Underwriting
We and the selling stockholder are offering the
shares of our common stock described in this prospectus through
the underwriters named below. UBS Securities LLC and Deutsche
Bank Securities Inc. are the representatives of the
underwriters. UBS Securities LLC and Deutsche Bank Securities
Inc. are the joint book-running managers of this offering. We
and the selling stockholder have entered into an underwriting
agreement with the representatives. Subject to the terms and
conditions of the underwriting agreement, each underwriter has
severally agreed to purchase the number of shares of common
stock listed next to its name in the following table.
Underwriters
Number of shares
UBS Securities LLC
Deutsche Bank Securities Inc.
Total
The underwriting agreement provides that the
underwriters must buy all of the shares if they buy any of them.
However, the underwriters are not required to take or pay for
the shares covered by the underwriters' over-allotment
option described below.
Our common stock and the common stock of the
selling stockholder is offered subject to a number of
conditions, including:
•
receipt and acceptance of our common stock by the
    underwriters; and
•
the underwriters' right to reject orders in
    whole or in part.
In connection with this offering, certain of the
underwriters or securities dealers may distribute prospectuses
electronically.
OVER-ALLOTMENT OPTION
We and the selling stockholder have granted the
underwriters an option to buy up to an aggregate
of                     additional
shares of our common stock. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if
any, made in connection with this offering. The underwriters
have 30 days from the date of this prospectus to exercise
this option. If the underwriters exercise this option, they will
each purchase additional shares approximately in proportion to
the amounts specified in the table above.
COMMISSIONS AND DISCOUNTS
Shares sold by the underwriters to the public
will initially be offered at the initial public offering price
set forth on the cover of this prospectus. Any shares sold by
the underwriters to securities dealers may be sold at a discount
of up to
$          per
share from the initial public offering price. Any of these
securities dealers may resell any shares purchased from the
underwriters to other brokers or dealers at a discount of up to
$          per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms. Sales of shares made outside of the United States
may be made by affiliates of the underwriters. Upon execution of
the underwriting agreement, the underwriters will be obligated
to purchase the shares at the prices and upon the terms stated
therein, and, as a result, will thereafter bear any risk
associated with changing the offering price to the public or
other selling terms. The underwriters have informed us that they
do not expect discretionary sales to exceed 5% of the shares of
common stock to be offered.
85
Underwriting
We have agreed to pay the offering expenses of
the selling stockholder. The selling stockholder will pay the
underwriting discounts and commissions applicable to the shares
that they sell. The following table shows the per share and
total underwriting discounts and commissions we will pay to the
underwriters. These amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase
up to an
additional                      shares
from us and an
additional                      shares
from the selling stockholder.
Paid by us
Paid by selling stockholder
Total
No exercise
Full exercise
No exercise
Full exercise
No exercise
Full exercise
Per Share
$
$
$
$
$
$
Total
$
$
$
$
$
$
We estimate that the total expenses of this
offering payable by us, not including underwriting discounts and
commissions, will be approximately
$          .
NO SALES OF SIMILAR SECURITIES
We and each of our directors, executive officers
and the selling stockholder have entered into lock-up agreements
with the underwriters. Under these lock-up agreements, subject
to certain exceptions, we and each of these persons may not,
without the prior written consent of UBS Securities LLC, sell,
offer to sell, contract or agree to sell, hypothecate, hedge,
pledge, grant any option to purchase or otherwise dispose of or
agree to dispose of, directly or indirectly, any of our common
stock or any securities convertible into or exercisable or
exchangeable for our common stock, or warrants or other rights
to purchase our common stock. These restrictions will be in
effect for a period of       days
after the date of this prospectus. At any time and without
public notice, UBS Securities LLC may, in its sole discretion,
release some or all of the affected securities from these
lock-up agreements.
In the event that we issue an earnings release or
a material news event relating to us occurs 15 calendar days
plus three business days prior to or within 15 days after
the expiration of the      -day period,
the restrictions imposed on us, our executive officers,
directors and the selling stockholder will continue to apply for
15 calendar days plus three business days after such earnings
release is issued or such material news event occurs.
We and the selling stockholder have agreed to
indemnify the underwriters against certain liabilities,
including certain liabilities under the Securities Act. If we
are unable to provide this indemnification, we have agreed to
contribute to payments the underwriters may be required to make
in respect of those liabilities.
NASDAQ NATIONAL MARKET QUOTATION
We intend to apply to have our shares of common
stock approved for quotation on The Nasdaq National Market under
the symbol "BLDR."
PRICE STABILIZATION, SHORT POSITIONS
In connection with this offering, the
underwriters may engage in activities that stabilize, maintain
or otherwise affect the price of our common stock, including:
•
stabilizing transactions;
•
short sales;
•
purchases to cover positions created by short
    sales;
86
Underwriting
•
imposition of penalty bids; and
•
syndicate covering transactions.
Stabilizing transactions consist of bids or
purchases made for the purpose of preventing or retarding a
decline in the market price of our common stock while this
offering is in progress. These transactions may also include
making short sales of our common stock, which involve the sale
by the underwriters of a greater number of shares of common
stock than they are required to purchase in this offering and
purchasing shares of common stock on the open market to cover
positions created by short sales. Short sales may be
"covered short sales," which are short positions in an
amount not greater than the underwriters' over-allotment
option referred to above, or may be "naked short
sales," which are short positions in excess of that amount.
The underwriters may close out any covered short
position by either exercising their over-allotment option, in
whole or in part, or by purchasing shares in the open market. In
making this determination, the underwriters will consider, among
other things, the price of shares available for purchase in the
open market as compared to the price at which they may purchase
shares through the over-allotment option.
Naked short sales are in excess of the
over-allotment option. The underwriters must close out any naked
short position by purchasing shares in the open market. A naked
short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price
of the common stock in the open market that could adversely
affect investors who purchased in this offering.
The underwriters also may impose a penalty bid.
This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by
it because the representatives have repurchased shares sold by
or for the account of that underwriter in stabilizing or short
covering transactions.
As a result of these activities, the price of our
common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced,
they may be discontinued by the underwriters at any time. The
underwriters may carry out these transactions on The Nasdaq
National Market, in the over-the-counter market or otherwise.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public
market for our common stock. The initial public offering price
will be determined by negotiation by us and the representatives
of the underwriters. The principal factors to be considered in
determining the initial public offering price include:
•
the information set forth in this prospectus and
    otherwise available to the representatives;
•
our history and prospects and the history and the
    prospects for the industry in which we compete;
•
our past and present financial performance and an
    assessment of our management;
•
our prospects for future earnings and the present
    state of our development;
•
the general condition of the securities markets
    at the time of this offering;
•
the recent market prices of, and the demand for,
    public traded common stock of generally comparable companies; and
•
other factors deemed relevant by the underwriters
    and us.
87
Underwriting
AFFILIATIONS
Certain of the underwriters and their affiliates
in the past have provided and may provide from time to time
certain commercial banking, financial advisory, investment
banking and other services for us for which they will be
entitled to receive separate fees. The underwriters and their
affiliates may from time to time in the future engage in
transactions with us and perform services for us in the ordinary
course of their business. Each underwriter, or one of its
affiliates, is a lender under our $110.0 million revolving
credit facility and our $225.0 million term loan. At the
date of this prospectus, the aggregate commitments of the
underwriters and underwriters' affiliates, as applicable,
totaled approximately
$
million, or
%, of the revolving credit
facility commitments and approximately
$
million, or
%, of the term loan
commitments. The Company intends to use a portion of the net
proceeds of this offering to repay outstanding indebtedness,
which may include a portion of the outstanding principal,
together with accrued and unpaid interest, under the term loan
facility. The entire $225.0 million principal amount of the
term loan is currently outstanding and is expected to be
outstanding immediately prior to payment with the proceeds of
this offering. At the date of this prospectus, there were
$
of outstanding borrowings under the revolving credit facility.
The lenders under these credit facilities may transfer their
commitments, subject to certain conditions, so the individual
and aggregate commitments at the time of payoff could also vary
from the amounts set forth above. On February 8, 2005, UBS
Securities LLC and Deutsche Bank Securities Inc. acted as
initial purchasers in connection with the issuance of
$275.0 million of our second priority senior secured
floating rate notes due 2012.
88
Legal matters
The validity of the common stock offered hereby
and certain legal matters in connection with this offering will
be passed upon for us by Skadden, Arps, Slate,
Meagher & Flom LLP. Certain legal matters in connection
with the offering will be passed upon for the initial purchasers
by Latham & Watkins LLP, Los Angeles, California.
Experts
The financial statements as of December 31,
2003 and 2002, and for each of the three years in the period
ended December 31, 2003, included in this prospectus, have
been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
Where you can find more information
We have filed with the SEC a registration
statement on Form S-1 with respect to the common stock
being sold in this offering. This prospectus, which forms part
of the registration statement, does not contain all of the
information included in that registration statement. For further
information about us and the common stock being sold in this
offering, you should refer to the registration statement and its
exhibits. Statements contained in this prospectus as to the
contents of any agreement, or other document to which we make
reference are not necessarily complete. In each instance, we
refer you to the copy of such agreement, or other document filed
as an exhibit to the registration statement, each such statement
being qualified in all respects by the more complete description
of the matter involved.
Upon completion of this offering, we will become
subject to the reporting and information requirements of the
Securities and Exchange Act of 1934, as amended, and, as a
result, we will file periodic and current reports, proxy
statements, and other information with the SEC. You may read and
copy any document we file with the SEC at the SEC's Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of these reports and information may be obtained at
prescribed rates from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. In addition, the SEC maintains a
web site that contains reports and other information regarding
registrants, such as us, that file electronically with the SEC.
The address of this web site is
http://www.sec.gov.
The
other information we file with the SEC is not part of the
registration statement of which this prospectus forms a part.
89
Index to consolidated financial statements
Consolidated Financial Statements
Report of Independent Registered Public
    Accounting Firm
F-2
Consolidated Statements of Operations for the
    years ended December 31, 2003,
2002, and 2001
F-3
Consolidated Balance Sheets at December 31,
    2003 and 2002
F-4
Consolidated Statements of Cash Flows for the
    years ended December 31, 2003,
2002, and 2001
F-5
Consolidated Statements of Changes in
    Shareholders' Equity for the years ended
December 31, 2003, 2002, and 2001
F-6
Notes to Consolidated Financial Statements
F-7
Interim Condensed Consolidated Financial
    Statements (Unaudited)
Unaudited Condensed Consolidated Statements of
    Operations for the Nine-Months Ended
September 30, 2004 and 2003
F-29
Unaudited Condensed Consolidated Balance Sheets
    as of September 30, 2004 and December 31, 2003
F-30
Unaudited Condensed Consolidated Statements of
    Cash Flows for the Nine-Months Ended
September 30, 2004 and 2003
F-31
Unaudited Condensed Consolidated Statements of
    Changes in Shareholders' Equity for the
Nine-Months Ended September 30, 2004
F-32
Notes to Condensed Consolidated Financial
    Statements
F-33
F- 1
Report of Independent Registered Public
Accounting Firm
To the Shareholders of Builders FirstSource, Inc.:
In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of
Builders FirstSource, Inc. and its subsidiaries (the
"Company") at December 31, 2003 and 2002, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in the
United States of America. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
As discussed in Notes 2 and 4 to the
consolidated financial statements, the Company adopted the
provisions of Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets,"
in 2002.
/s/ PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
March 30, 2004, except for Note 19,
as to which the date is February 8, 2005
F- 2
Builders FirstSource, Inc. and
Subsidiaries
CONSOLIDATED STATEMENTS OF
OPERATIONS
Year ended December 31,
2003
2002
2001
(in thousands, except per share amounts)
Sales
$
1,675,093
$
1,500,006
$
1,513,545
Cost of sales
1,301,728
1,155,369
1,150,233
Gross margin
373,365
344,637
363,312
Selling, general and administrative expenses
326,419
307,317
323,741
Facility closure costs
1,171
750
8,288
Income from operations
45,775
36,570
31,283
Other expense, net
620
2,220
4,067
Interest expense
11,124
12,055
20,581
Income from continuing operations before income
    taxes
34,031
22,295
6,635
Income tax expense
13,048
8,955
2,609
Income from continuing operations
20,983
13,340
4,026
Loss from discontinued operations (net of income
    tax benefit of $2,058, $1,605 and $1,331 in 2003, 2002 and 2001,
    respectively)
(3,822
)
(2,980
)
(2,120
)
Cumulative effect of change in accounting
    principle
(net of income tax benefit of $3,556)
—
(19,504
)
—
Net income (loss)
$
17,161
$
(9,144
)
$
1,906
Basic and diluted net income (loss) per
    share
Income from continuing operations
$
0.08
$
0.05
$
0.02
Loss from discontinued operations
(0.01
)
(0.01
)
(0.01
)
Cumulative effect of change in accounting
    principle
—
(0.08
)
—
Net income (loss)
$
0.07
$
(0.04
)
$
0.01
Weighted average common shares
    outstanding
Basic
252,040
253,629
255,320
Diluted
252,519
254,108
256,816
The accompanying notes are an integral part of
these consolidated financial statements.
F- 3
Builders FirstSource, Inc. and
Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
2003
2002
(in thousands, except
per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
$
5,585
$
2,248
Accounts receivable
214,855
72,291
Retained interest in transferred receivables
—
63,397
Inventories
125,152
108,289
Other current assets
8,261
8,761
Deferred income taxes
13,820
11,002
Total current assets
367,673
265,988
Property, plant and equipment, net
89,399
102,741
Goodwill
163,030
162,080
Other intangible assets, net
214
795
Other assets, net
5,845
3,581
Total assets
$
626,161
$
535,185
LIABILITIES AND SHAREHOLDERS'
    EQUITY
Current liabilities:
Accounts payable
$
65,778
$
63,590
Accrued liabilities
47,850
40,405
Book overdrafts
24,800
4,316
Current maturities of long-term debt
1,731
29,486
Total current liabilities
140,159
137,797
Long-term debt, net of current maturities
166,802
100,220
Deferred income taxes
9,369
3,698
Other long-term liabilities
8,200
7,568
324,530
249,283
Commitments and contingencies (Note 16)
Shareholders' equity:
Common stock, $.01 par value,
    300,000 shares authorized; 251,558 and 253,004 issued and
    outstanding at December 31, 2003 and 2002, respectively
2,516
2,530
Additional paid-in capital
249,765
251,196
Stock purchase loans receivable
(196
)
(209
)
Retained earnings
49,546
32,385
Total shareholders' equity
301,631
285,902
Total liabilities and shareholders' equity
$
626,161
$
535,185
The accompanying notes are an integral part of
these consolidated financial statements.
F- 4
Builders FirstSource, Inc. and
Subsidiaries
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Year ended December 31,
2003
2002
2001
(in thousands)
Cash flows from operating activities:
Net income (loss)
$
17,161
$
(9,144
)
$
1,906
Adjustments to reconcile net income (loss) to net
    cash (used in) provided by operating activities:
Depreciation and amortization
19,579
20,002
24,543
Amortization of deferred loan costs
1,954
2,065
2,071
Non-cash facility closure costs
871
—
8,146
Deferred income taxes
2,853
425
(7,437
)
Cumulative effect of change in accounting
    principle, net of tax
—
19,504
—
Bad debt expense
2,361
2,032
2,491
Non-cash loss from discontinued operations
3,598
1,661
1,750
Net gain on sales of assets
(975
)
(1,609
)
(187
)
Changes in assets and liabilities, net of effects
    from acquired companies:
Accounts receivable
(143,630
)
16,964
2,672
Retained interest in transferred accounts
    receivable
63,397
(34,409
)
23,981
Inventories
(16,639
)
14,830
9,757
Other current assets
628
68
9,114
Other assets and liabilities
492
1,789
(18
)
Accounts payable
1,109
10,515
2,355
Accrued liabilities
7,079
3,837
(3,105
)
Net cash (used in) provided by operating
    activities
(40,162
)
48,530
78,039
Cash flows from investing activities:
Purchases of property, plant and equipment
(15,592
)
(15,061
)
(22,491
)
Proceeds from sale of property, plant and
    equipment
7,115
6,401
15,952
Proceeds from sale of discontinued operation
—
—
5,593
Acquisitions, net of cash acquired
(4,563
)
(1,651
)
(1,212
)
Net cash used in investing activities
(13,040
)
(10,311
)
(2,158
)
Cash flows from financing activities:
Net borrowings (payments) under revolving
    credit facilities
61,400
(9,800
)
17,300
Payments on long-term debt and other loans
(22,573
)
(14,504
)
(87,119
)
Deferred loan costs
(1,340
)
—
—
Issuance of common stock
—
—
222
Exercise of stock options
6
10
1
Repurchase of common stock
(1,451
)
(1,805
)
(2,677
)
Collection of stock purchase loans
13
98
31
Book overdrafts
20,484
(13,279
)
(2,676
)
Net cash provided by (used in) financing
    activities
56,539
(39,280
)
(74,918
)
Net (decrease) increase in cash and cash
    equivalents
3,337
(1,061
)
963
Cash and cash equivalents at beginning of period
2,248
3,309
2,346
Cash and cash equivalents at end of period
$
5,585
$
2,248
$
3,309
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest
$
9,445
$
11,644
$
17,596
Income taxes
$
9,941
$
6,268
$
5,225
The accompanying notes are an integral part of
these consolidated financial statements.
F- 5
Builders FirstSource, Inc. and
Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
Stock
Common stock
Additional
purchase
Paid-In
loans
Retained
Shares
Amount
Capital
receivable
earnings
Total
(in thousands, except share amounts)
Balance at December 31, 2000
256,204,523
$
2,562
$
254,413
$
(338
)
$
39,623
$
296,260
Issuance of common stock
221,557
2
220
—
—
222
Exercise of stock options
2,973
—
1
—
—
1
Repurchase of common stock
(2,654,611
)
(27
)
(2,650
)
—
—
(2,677
)
Collection of stock purchase loans
—
—
—
31
—
31
Net income
—
—
—
—
1,906
1,906
Balance at December 31, 2001
253,774,442
$
2,537
$
251,984
$
(307
)
$
41,529
$
295,743
Issuance of common stock
1,000,000
10
990
—
—
1,000
Exercise of stock options
34,895
1
9
—
—
10
Repurchase of common stock
(1,805,179
)
(18
)
(1,787
)
—
—
(1,805
)
Collection of stock purchase loans
—
—
—
98
—
98
Net loss
—
—
—
—
(9,144
)
(9,144
)
Balance at December 31, 2002
253,004,158
$
2,530
$
251,196
$
(209
)
$
32,385
$
285,902
Exercise of stock options
6,000
—
6
—
—
6
Repurchase of common stock
(1,451,684
)
(14
)
(1,437
)
—
—
(1,451
)
Collection of stock purchase loans
—
—
—
13
—
13
Net income
—
—
—
—
17,161
17,161
Balance at December 31, 2003
251,558,474
$
2,516
$
249,765
$
(196
)
$
49,546
$
301,631
The accompanying notes are an integral part of
these consolidated financial statements.
F- 6
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
1.
DESCRIPTION OF BUSINESS
Builders FirstSource, Inc. and subsidiaries (the
"Company") is a leading provider of manufactured
components, building materials and construction services to
professional homebuilders and contractors in the United States.
The Company was formed through an agreement between JLL
Partners, Inc. and certain members of the existing management
team. Affiliates of JLL Partners, Inc. control JLL Building
Products, LLC, which currently owns 94.6% of the Company's
outstanding common stock. The Company's manufactured
products include trusses, wall panels, custom millwork, pre-hung
doors and windows, and stairs. Construction services include
turn-key framing, product installation, and project management
for builders. At December 31, 2003, the Company had 63
distribution centers and 42 manufacturing operations generally
in co-located facilities in Florida, Georgia, Kentucky,
Maryland, North Carolina, New Jersey, Ohio, South Carolina,
Tennessee, Texas and Virginia.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES
Principles of Consolidation
The consolidated financial statements present the
results of operations, financial position, and cash flows of
Builders FirstSource, Inc. and its wholly-owned subsidiaries.
All significant intercompany transactions have been eliminated
in consolidation.
Accounting Estimates
The preparation of financial statements in
conformity with generally accepted accounting principles in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Estimates are used when accounting for items such
as revenue, vendor rebates, allowance for returns, discounts and
doubtful accounts, employee compensation programs, depreciation
and amortization periods, taxes, inventory values, insurance
programs, goodwill, other intangible assets and long-lived
assets.
Sales Recognition
The Company recognizes sales of building products
upon delivery to the customer. For contracts with service
elements, sales are generally recognized on the completed
contract method as these contracts are usually completed within
30 days. Contract costs include all direct material and
labor, equipment costs and those indirect costs related to
contract performance. Provisions for estimated losses on
uncompleted contracts are recognized in the period in which such
losses are determined. Prepayments for materials or services are
deferred until such materials have been delivered or services
have been provided.
All sales recognized are net of allowances for
discounts and estimated returns, based on historical experience.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with an original maturity date of three months or
less to be cash equivalents.
F- 7
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Financial Instruments
The Company uses financial instruments in its
normal course of business as a tool to manage its assets and
liabilities. The Company does not hold or issue financial
instruments for trading purposes.
The carrying amounts of the Company's
financial instruments, including accounts receivable and
accounts payable approximate fair value due to their short-term
nature. Based on the variability of interest rates, management
believes the carrying value of long-term debt approximates fair
value at December 31, 2003.
Accounts Receivable
The Company extends credit to qualified
professional homebuilders and contractors, generally on a
non-collateralized basis. The allowance for doubtful accounts is
based on management's assessment of the amount which may
become uncollectible in the future and is estimated using
specific review of problem accounts, overall portfolio quality,
current economic conditions that may affect the borrower's
ability to pay, and historical experience. Accounts receivable
are written off when deemed uncollectible.
The Company previously provided financing for
construction projects through a builder finance program
inherited from a company acquired in 2000. This program was
offered to a select group of customers in a single market. The
notes receivable bear interest at rates ranging from prime plus
1% to 10.5%, generally mature within one year and are secured by
a first mortgage. As of December 31, 2003 and 2002, the
outstanding balances aggregated $1.1 million and
$2.4 million, respectively, and are included in accounts
receivable in the accompanying consolidated balance sheets. This
program was discontinued during 2002. See Note 5 for a
discussion of the Company's accounts receivable
securitization agreement which expired in 2003.
Accounts receivable consist of the following at
December 31:
2003
2002
(in thousands)
Trade receivables
$
210,488
$
65,096
Other
10,105
9,445
220,593
74,541
Less allowance for returns and doubtful accounts
5,738
2,250
$
214,855
$
72,291
Inventories
Inventories consist principally of materials
purchased for resale, including lumber, sheet goods, windows,
doors and millwork, and certain manufactured products and are
stated at the lower of cost or market. Cost is determined using
the weighted average method, the use of which approximates the
first-in, first-out method. The Company accrues for shrink based
on the actual historical shrink results of the Company's
most recent physical inventories adjusted, if necessary, for
current economic conditions. These estimates are compared with
actual results as physical inventory counts are taken and
reconciled to the general ledger.
The Company's arrangements with vendors
provide for rebates of a specified amount of consideration,
payable when certain measures, generally related to a stipulated
level of purchases, have been achieved. The Company accounts for
estimated rebates as a reduction of the prices of the
vendor's inventory until the product is sold, at which
time, such rebates reduce cost of sales in the accompanying
consolidated statements of operations. Throughout the year, the
Company estimates the amount of the rebates based
F- 8
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
upon the expected level of purchases. The Company
continually revises these estimates based on actual purchase
levels.
Shipping and Handling Costs
Handling costs incurred in manufacturing
activities are included in cost of sales. All other shipping and
handling costs are included in selling, general and
administrative expenses on the accompanying consolidated
statements of operations and aggregated $73.2 million,
$65.5 million and $65.6 million in 2003, 2002 and
2001, respectively.
Income Taxes
The Company accounts for income taxes utilizing
the liability method described in Statement of Financial
Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Deferred income taxes
are recorded to reflect consequences on future years of
differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year end based on
enacted tax laws and statutory tax rates applicable to the
periods in which differences are expected to affect taxable
earnings. The Company records a valuation allowance to reduce
deferred tax assets if it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
Warranty Expense
The Company has warranty obligations with respect
to most manufactured products, however, the liability for the
warranty obligations is not significant as a result of third
party inspection and acceptance processes.
Deferred Loan Costs
Loan costs are capitalized upon the issuance of
long-term debt and amortized over the life of the related debt
using the effective interest rate method for the Company's
term notes and the straight-line method for the Company's
revolving credit facility. Amortization of deferred loan costs
is included in interest expense.
Property, Plant and Equipment
Property, plant and equipment are recorded at
cost and depreciated using the straight-line method over the
estimated useful lives of the assets. The estimated lives of the
various classes of assets are as follows:
Buildings and improvements
15 to 40 years
Machinery and equipment
3 to 10 years
Furniture and fixtures
3 to 5 years
Leasehold improvements
The lesser of the life of the lease or asset
Major additions and improvements are capitalized,
while maintenance and repairs that do not extend the useful life
of the property are charged to expense as incurred. Gains or
losses from dispositions of property, plant and equipment are
recorded in the period incurred.
The Company periodically evaluates the commercial
and strategic operation of the land and related buildings and
improvements of its facilities. In connection with these
evaluations, facilities may be consolidated, and others sold or
leased. The Company recorded net gains of $1.0 million,
$1.6 million and $0.2 million in 2003, 2002 and 2001,
respectively, principally from the sale of real estate. These
gains
F- 9
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
are recorded as a reduction of selling, general
and administrative expenses in the accompanying consolidated
statements of operations.
The Company capitalizes certain costs of computer
software developed or obtained for internal use, including
interest, provided that those costs are not research and
development, and certain other criteria are met pursuant to
Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use".
The net carrying value of internal use software costs was
$2.3 million and $2.5 million as of December 31,
2003 and 2002, respectively. These costs are included in
furniture and fixtures in Note 10 and are amortized on a
straight-line basis over a period of 3 to 5 years.
Long-Lived Assets
The Company evaluates its long-lived assets,
other than goodwill, for impairment when events or changes in
circumstances indicate, in management's judgment, that the
carrying value of such assets may not be recoverable. The
determination of whether an impairment has occurred is based on
management's estimate of undiscounted future cash flows
before interest attributable to the assets as compared to the
net carrying value of the assets. If an impairment has occurred,
the amount of the impairment recognized is determined by
estimating the fair value of the assets based on estimated
discounted future cash flows and recording a provision for loss
if the carrying value is greater than estimated fair value. The
net carrying value of assets identified to be disposed of in the
future is compared to their estimated fair value, generally the
quoted market price obtained from an independent third-party,
less the cost to sell to determine if an impairment is required.
Until the assets are disposed of, an estimate of the fair value
is redetermined when related events or circumstances change.
Insurance
The Company has established insurance programs to
cover certain insurable risks consisting primarily of physical
loss to property, business interruptions resulting from such
loss, workers' compensation, employee healthcare,
comprehensive general and auto liability. Third party insurance
coverage is obtained for exposures above predetermined
deductibles as well as those risks required to be insured by law
or contract. Provisions for losses are developed from valuations
that rely upon the Company's past claims experience, which
considers both the frequency and settlement of claims. The
Company discounts its workers' compensation liability based
upon estimated future payment streams at its risk-free rate.
Net Income (Loss) Per Common Share
Net income (loss) per common share is calculated
in accordance with SFAS No. 128, "Earnings per Share,"
which requires the presentation of basic and dilutive earnings
per share. Basic earnings per share is computed using the
weighted average number of common shares outstanding during the
period. Dilutive earnings per share is computed using the
weighted average number of common shares outstanding during the
period, plus the dilutive effect of common stock equivalents.
Weighted average shares outstanding have been adjusted for
common shares underlying options of 0.5 million,
0.5 million and 0.5 million for the periods ended
December 31, 2003, 2002 and 2001, respectively and for
contingently issuable shares of 1.0 million for the period
ended December 31, 2001. Options to purchase 29.4 million,
28.7 million and 29.0 million shares of common stock
outstanding at December 31, 2003, 2002 and 2001,
respectively, were not included in the computation of diluted
earnings per share because their effect would not be dilutive.
F- 10
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Goodwill and other intangible assets
Intangibles subject to amortization
The Company recognizes an acquired intangible
apart from goodwill whenever the intangible arises from
contractual or other legal rights, or whenever it can be
separated or divided from the acquired entity and sold,
transferred, licensed, rented, or exchanged, either individually
or in combination with a related contract, asset, or liability.
Impairment losses are recognized if the carrying value of an
intangible subject to amortization is not recoverable from
expected future cash flows and its carrying amount exceeds its
estimated fair value.
Goodwill and intangibles with indefinite
lives
The Company recognizes goodwill as the excess
cost of an acquired entity over the net amount assigned to
assets acquired and liabilities assumed. Prior to
January 1, 2002, goodwill was amortized over periods of up
to 40 years. Beginning January 1, 2002 and pursuant to
SFAS No. 142, "Goodwill and Other Intangible
Assets," goodwill is no longer amortized. Goodwill is
tested for impairment on an annual basis and between annual
tests whenever an impairment is indicated. This annual test
takes place in the fourth quarter of each year. Impairment
losses are recognized whenever the implied fair value of
goodwill is less than its carrying value. Beginning
January 1, 2002, intangibles with indefinite lives are no
longer amortized. They are tested for impairment by comparing
their carrying value to fair value annually or whenever an
impairment is indicated. Impairment losses are recognized
whenever the estimated fair value is less than the carrying
value. At December 31, 2003, the Company had no indefinite
lived intangibles.
The following reflects adjustments that would be
made to net income and earnings per share for the year ending
December 31, 2001, if the non-amortization provisions of
SFAS No. 142 had been adopted as of January 1,
2001 (in thousands, except per share amounts):
Reported net income
$
1,906
Add back: Goodwill amortization, net of tax
4,500
Adjusted net income
$
6,406
Basic and diluted earnings per share:
Reported net income
$
0.01
Goodwill amortization, net of tax
0.02
Adjusted net income
$
0.03
Stock compensation
The Company applies Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related
interpretations in accounting for employee stock-based
compensation costs related to its stock incentive plan (see
Note 14). APB 25 is an intrinsic value approach for
measuring stock-based compensation costs.
SFAS No. 123, "Accounting for Stock-Based
Compensation," is a fair value approach for measuring
stock-based compensation costs.
F- 11
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Had the compensation cost for the Company's
stock-based compensation been determined in accordance with
SFAS No. 123, the Company's net income (loss) and
net income (loss) per share for 2003, 2002 and 2001 would
approximate the pro forma amounts below:
2003
2002
2001
(in thousands, except per share amounts)
Reported net income (loss)
$
17,161
$
(9,144
)
$
1,906
Deduct: Total stock-based employee compensation
    expense determined under minimum value methods for all awards,
    net of related tax effects
(877
)
(872
)
(854
)
Pro forma net income (loss)
$
16,284
$
(10,016
)
$
1,052
Basic and diluted earnings per share— as
    reported
$
0.07
$
(0.04
)
$
0.01
Basic and diluted earnings per share— pro
    forma
$
0.06
$
(0.04
)
$
0.00
The effects of applying SFAS No. 123 in
this pro forma disclosure may not be indicative of future
results.
Recently issued accounting
pronouncements
In October 2001, the FASB issued
SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144
provides new guidance on the recognition of impairment losses on
long-lived assets to be held and used or to be disposed of and
also broadens the definition of what constitutes a discontinued
operation and how the results of a discontinued operation are to
be measured and presented. The Company early adopted the
provisions of this statement effective January 1, 2001.
In November 2002, the FASB issued FASB
Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." FIN 45 requires that guarantors recognize, at
the inception of the guarantee, a liability for the fair value
of the guarantee. In addition, FIN 45 clarifies the
disclosures required of guarantors for certain guarantees that
it has issued. The recognition and measurement criteria of this
interpretation are to be applied prospectively to guarantees
issued or modified after December 31, 2002. The adoption of
FIN 45 did not have a material impact on the Company's
financial position, results of operations or cash flows.
In January 2003, the FASB issued FASB
Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities," an
interpretation of Accounting Research Bulletin No. 51,
which was further revised in December 2003. FIN 46 requires
certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46
also requires disclosure of significant variable interests in
variable interest entities for which a company is not the
primary beneficiary. The Company is required to apply the
revised provisions of FIN 46 beginning in fiscal 2004 for
interests in an entity subject to this Interpretation created
after December 31, 2003, and in 2005 for interests in all
entities subject to this Interpretation. The application of the
revised Interpretation is not expected to have a material impact
on the Company's financial position, results of operations
or cash flows.
In March 2003, the consensus of Emerging Issues
Task Force ("EITF") Issue No. 02-16,
"Accounting by a Customer (including a Reseller) for
Certain Consideration Received from a Vendor," was
published. EITF Issue No. 02-16 addresses how a reseller of
a vendor's products should account for cash consideration
received from a vendor. The provisions of EITF Issue
No. 02-16 were effective for new arrangements transacted
after December 31, 2002. The Company's adoption of
EITF No. 02-16 did not have a material impact on the
Company's financial position, results of operations or cash
flows.
F- 12
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
In March 2003, the consensus of EITF Issue
No. 00-21, "Accounting for Revenue Arrangements with
Multiple Deliverables," was published. EITF Issue
No. 00-21 addresses certain aspects of the accounting by a
vendor for arrangements under which it will perform multiple
revenue-generating activities. Specifically, EITF Issue
No. 00-21 addresses how to determine whether an arrangement
involving multiple deliverables contains more than one unit of
accounting. The provisions of EITF Issue No. 00-21 are
effective for fiscal periods beginning after June 15, 2003.
The Company's adoption of EITF Issue No. 00-21 is not
expected to have a material impact on the Company's
financial position, results of operations or cash flows.
In May 2003, the FASB issued
SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and
Equity." This statement establishes standards for how an
issuer classifies and measures certain financial arrangements
with characteristics of both liabilities and equity. It requires
that an issuer classify a financial arrangement that is within
its scope as a liability (or an asset in some circumstances).
The provisions of this statement were effective for financial
arrangements entered into or modified after May 31, 2003,
and otherwise were effective at the beginning of the first
interim period beginning after June 15, 2003. Certain
provisions of this statement have been deferred for an
indefinite period. The Company continues to monitor FASB
deliberations on SFAS No. 150 to determine the
ultimate impact on the Company's financial position,
results of operations and cash flows.
Reclassifications
Prior year amounts have been reclassified to
conform to the current year presentation.
3.
GOODWILL AND COVENANTS NOT TO
    COMPETE
Goodwill
The changes in the net carrying amount of
goodwill for the years ended December 31, 2003 and 2002 are
as follows (in thousands):
Balance at January 1, 2002
$
182,489
Acquisitions and other purchase price adjustments
1,651
Contingent consideration adjustments(3)
1,000
Impairment losses(1)
(23,060
)
Balance at December 31, 2002
162,080
Acquisitions and other purchase price adjustments
2,131
Impairment on discontinued operations(2)
(1,181
)
Balance at December 31, 2003
$
163,030
(1)
See Note 4 related to the transitional
    impairment analysis.
(2)
See Note 9 related to discontinued
    operations.
(3)
See Note 8 related to
    acquisitions.
Covenants not to Compete
Intangible assets subject to amortization consist
of covenants not to compete which are amortized over the life of
the non-compete agreement, which is generally three years. The
changes in the net carrying amount
F- 13
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
of covenants not to compete for the years ended
December 31, 2003 and 2002 are as follows (in thousands):
Net
Carrying
Accumulated
carrying
amount
amortization
amount
Balance at January 1, 2002
$
5,030
$
(2,995
)
$
2,035
Covenants Not to Compete
332
—
332
Amortization
—
(1,572
)
(1,572
)
Balance at December 31, 2002
5,362
(4,567
)
795
Covenants Not to Compete
237
—
237
Amortization
—
(818
)
(818
)
Balance at December 31, 2003
$
5,599
$
(5,385
)
$
214
Estimated intangible amortization expense is
$0.1 million for both 2004 and 2005.
4.
CHANGE IN ACCOUNTING PRINCIPLE
The Company adopted SFAS No. 142 in
January 2002. This standard required the Company to complete a
transitional impairment analysis of its recorded goodwill and
indefinite lived intangible assets and to record any impairment
charge as a change in accounting principle. This analysis is a
two-step process. The first step requires a comparison of the
book value of net assets to the fair value of the related
operations. If the book value exceeds the fair value, the second
step of the test is performed. The second step requires that the
Company determine an estimate of the implied fair value of
goodwill and compare the estimated implied fair value to the
book value of the related goodwill. The amount of goodwill
impairment, if any, would be the difference between the book
value and the estimated implied fair value of the related
goodwill, as determined by the application of the second step of
the impairment test.
The impairment analysis of goodwill is performed
on a market-by-market basis. The Company performed its
transitional impairment analysis as of January 1, 2002. As
a result of the required change in methodology used to evaluate
goodwill for impairment and performing the two-step test
required by SFAS No. 142, the Company determined that
its goodwill balance for certain reporting units was impaired
resulting in a charge of $23.1 million. The impairment
charge has been recorded as a cumulative effect of a change in
accounting principle, net of tax, in the Company's
consolidated statements of operations for 2002.
The Company's reporting units that were
determined to be impaired generated cash flows that have not met
Company expectations and management does not anticipate cash
flows in the future that would support an implied fair value of
goodwill greater than its adjusted carrying value. Possible
reasons for the short-falls include increased competition, a
reduction in residential home building within the geographic
markets that these reporting units serve, or management issues.
In the case of each reporting unit, fair value was estimated
using the expected present value of future cash flows.
5.
SECURITIZATION OF TRADE RECEIVABLES
Prior to September 2003, the Company and certain
of its subsidiaries sold on a non-recourse basis a pool of trade
receivables to a wholly owned bankruptcy-remote special purpose
funding subsidiary (the "Funding Subsidiary") of the
Company. The Funding Subsidiary, in turn, sold the trade
receivables to a securitization company. The agreement with the
securitization company expired August 28, 2003 (the
F- 14
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
"Expiration Date") and the Funding
Subsidiary was dissolved. Prior to the Expiration Date, trade
receivables sold to the securitization company were not
reflected on the Company's consolidated balance sheets and
any receivables not sold to the securitization company were
recorded as retained interest in the receivables portfolio of
the Funding Subsidiary. The net carrying value of the retained
interest as of December 31, 2002 approximated fair value
and is classified as a current asset.
The Company recognized losses on the accounts
receivable sold to the securitization company based on the fair
value of the receivables sold. The fair value of the retained
interest was determined after considering such factors as loss
history, payment discounts, weighted average life and product
returns. From the inception of the securitization to the
Expiration Date, there were no substantive changes in the
Company's key measurement and valuation assumptions.
Pre-tax losses on these sales, net of servicing fee, totaled
$0.6 million, $2.2 million and $4.1 million in
2003, 2002 and 2001, respectively, and were recorded in other
expense, net in the accompanying consolidated statements of
operations.
During the tenure of the securitization, the
Company received an annual servicing fee of 0.5% of the
securitized account receivables, which amount is recorded in
other expense, net in the accompanying consolidated statements
of operations. The Company recognized no servicing asset or
liability because the servicing fee represented adequate
compensation for the services performed.
The following table summarizes certain cash flows
received from the securitization vehicle during the years ended
December 31:
Cash flow information:
2003
2002
2001
(in thousands)
Proceeds from new securitizations
$
69,000
$
49,000
$
70,000
Cash flows received on retained interests
332,738
419,126
349,562
Proceeds from collections reinvested in revolving
    securitizations
534,927
958,667
982,050
Managed Portfolio Data:
The table below presents information about
year-end securitized receivables and other financial assets
managed together with them. In addition, the table below
summarizes information regarding delinquencies at the end of the
period and net credit losses during 2002.
December 31,
2002
(in thousands)
Securitized balances
$
35,000
Retained interest in transferred accounts
    receivable
63,397
Owned receivables, net
62,846
Managed receivables
$
161,243
For the year ended
As of
December 31,
December 31,
2003
2002
2001
2003
2002
(in thousands)
Net charge-offs of managed receivables
$
1,905
$
4,361
$
2,339
n/a
n/a
Delinquency rate at year end
n/a
n/a
n/a
5.7
%
6.0
%
F- 15
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6.
SALE-LEASEBACK OF REAL ESTATE
During 2001, the Company sold certain
distribution and manufacturing properties for
$12.6 million. These properties were leased back from an
unaffiliated third party for a period of 15 years, with two
ten-year option renewal periods at fair market value. The
resulting lease, which does not contain any purchase options or
residual value guarantees, is being accounted for as an
operating lease. The Company incurred a $108,000 loss as a
result of the transaction, which was recognized in selling,
general and administrative expenses in the accompanying
consolidated statements of operations. Future minimum lease
commitments of these operating leases are included in the
summary of the Company's operating leases in Note 16.
7.
FACILITY CLOSURE COSTS
During 2003, the Company developed and executed a
plan to close a facility in Texas and one in South Carolina due
to the locations being unable to sustain a consistent level of
profitability. In conjunction with the plan, the Company began
disposing of assets, severing employees, and pursuing sale of
the related real estate. The Company completed the exit plan
prior to December 31, 2003. During 2003, the Company
recognized approximately $0.5 million in expenses related
to the facility closure, including termination benefits to
severed employees and adjustments to reflect certain asset
balances at net realizable value. The Company also recorded an
impairment charge of approximately $0.6 million to adjust
the carrying value of the real estate related to these
operations to its estimated fair value, less reasonable direct
selling costs. The estimated fair value was determined based on
a quoted market price as estimated by an independent third
party. At December 31, 2003, the Company classified the
carrying value of the real estate of $1.4 million as held
for sale and is included as a component of other assets, net in
the accompanying consolidated balance sheets.
During 2001, the Company developed and executed a
plan to close various facilities in Texas, South Carolina, North
Carolina, and Tennessee. The facility closures were partially
due to the Company consolidating locations from separate
acquisitions within certain markets in an attempt to achieve
economies of scale. The facility closures were also due to
certain locations not being able to achieve the desired levels
of profitability. In conjunction with the plan, the Company
began disposing of assets, severing employees, and exiting the
facilities. The Company completed the exit plan on three
facilities prior to December 31, 2001. The exit plans for
the remaining three facilities were completed by
December 31, 2002. During 2001, the Company recognized
approximately $4.5 million in expenses related to the
facility closure, including the present value of future minimum
rental payments, termination benefits to severed employees, and
adjustments to reflect certain asset balances at net realizable
value. The Company also recognized an impairment charge of
$3.7 million to adjust the carrying value of goodwill
pertaining to these operations. During 2002, the Company
recorded $0.8 million in expenses related to the final
stages of the exit plan.
F- 16
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Facility closure costs on the accompanying
consolidated statements of operations, consisted of the
following:
For the year ended
2003
2002
2001
(in thousands)
Facility and other exit costs, net of estimated
    sub-lease rental income
$
43
$
491
$
2,683
Employee severance and termination benefits
193
135
387
Write-down of assets to net realizable value
899
73
1,254
Goodwill impairment
—
—
3,747
Other
36
51
217
Total costs related to facility closures
$
1,171
$
750
$
8,288
An analysis of the Company's facility
closure reserves for the periods reflected is as follows:
December 31,
December 31,
December 31,
2001
Additions
Payments
2002
Additions
Payments
2003
(in thousands)
Facility and other exit costs, net of estimated
    sub-lease rental income
$
4,496
$
491
$
(1,203
)
$
3,784
$
43
$
(562
)
$
3,265
Employee severance and termination benefits
259
135
(394
)
—
193
(126
)
67
Other
486
124
(309
)
301
36
(337
)
—
Total facility closure reserve
$
5,241
$
750
$
(1,906
)
$
4,085
$
272
$
(1,025
)
$
3,332
The facility and other exit cost reserves of
$3.3 million at December 31, 2003, of which
$2.3 million is recorded as other long-term liabilities,
are primarily related to future minimum lease payments on
vacated facilities.
8.
ACQUISITIONS
During 2003, 2002, and 2001, the Company acquired
various businesses that provide building materials and services
primarily to professional contractors and residential builders
in the United States. The aggregate purchase price (including
final working capital adjustments), consisting of cash
consideration, for these businesses approximated
$4.6 million, $1.7 million, and $1.2 million in
2003, 2002, and 2001, respectively. Of these amounts,
$2.1 million and $1.7 million were allocated to
goodwill and intangible assets in 2003 and 2002, respectively,
based on the preliminary allocation of the purchase price.
During 2002, the Company also paid approximately
$1.0 million of contingent consideration related to a prior
acquisition. The contingent consideration was based on the
achievement of specified earnings targets by the acquired
business as stipulated in the original purchase agreement and
was paid through the issuance of the Company's common
stock. The amount paid was recorded as goodwill as it was
considered to be additional costs of the acquired business.
These acquisitions have been accounted for by the
purchase method, and accordingly the results of operations of
each have been included in the Company's consolidated
financial statements from the respective dates of acquisition.
Under this method, the consideration was allocated to the assets
acquired and liabilities assumed based on the estimated fair
values at the date of acquisition. Any excess of the purchase
price over the estimated fair value of the net assets acquired
and liabilities assumed was recorded
F- 17
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
as goodwill. Pro forma results of operations have
not been presented due to the immateriality of the acquisitions.
9.
DISCONTINUED OPERATIONS
Colorado Operations
During 2002 and 2001, the Company closed two
facilities in Colorado as part of a location consolidation in
attempt to achieve certain economies of scale, including reduced
operating costs. The Company recorded $1.2 million and
$0.1 million in expenses in 2002 and 2001, respectively,
for the closure of these facilities primarily related to future
minimum lease payments due on the vacated facilities. These
amounts are included in loss from discontinued operations in the
accompanying consolidated statements of operations for 2002 and
2001.
In September 2003, based upon several factors
including unfavorable market conditions and a poor competitive
position which prevented the Company from generating profitable
results, the Company announced its intent to exit its operations
in Colorado. The cessation of operations in this market has been
treated as a discontinued operation as it had distinguishable
cash flow and operations that have been eliminated from the
ongoing Company, and the Company currently has no further cash
flows or operations in this market. The Company completed the
exit plan prior to December 31, 2003.
As a result of the exit plan, in 2003 the Company
recorded an expense of $1.5 million in order to adjust
asset balances to net realizable value, an expense of
$0.2 million related to facility exit costs, and an
impairment charge of $1.2 million to write-off the carrying
value of goodwill pertaining to these operations. The Company
also recorded an impairment charge of approximately
$0.4 million to adjust the carrying value of the real
estate and equipment related to these operations to estimated
fair value, less reasonable direct selling costs. The estimated
fair value was determined based on a quoted market price as
estimated by an independent third party. These amounts are
included in loss from discontinued operations in the
accompanying consolidated statements of operations for 2003. As
of December 31, 2003, the Company classified the carrying
value of the real estate and equipment of $1.6 million as
held for sale and is included as a component of other assets,
net in the accompanying consolidated balance sheets.
Sales and losses attributable to the Colorado
operations, which are reported as discontinued operations, are
as follows:
Year ended December 31,
2003
2002
2001
(in thousands)
Sales, net
$
25,600
$
32,943
$
47,870
Pre-tax loss
5,880
4,585
2,340
F- 18
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The major classes of assets and liabilities of
the discontinued Colorado operations in the consolidated balance
sheets as of December 31, 2003 are as follows (in
thousands):
December 31,
2003
Cash
$
206
Accounts receivable, net
678
Other current assets
45
Other assets, net
1,629
Total assets
2,558
Other current liabilities
1,021
Other long-term liabilities
559
Total liabilities
1,580
Net assets
$
978
An analysis of the Company's reserves
related to the Colorado discontinued operations for the periods
reflected is as follows:
December 31,
December 31,
December 31,
2001
Additions
Payments
2002
Additions
Payments
2003
(in thousands)
Facility and other exit costs, net of estimated
    sub-lease rental income
$
131
$
1,155
$
(392
)
$
894
$
128
$
(301
)
$
721
Employee severance and termination benefits
—
—
—
—
55
—
55
Other
—
—
—
—
36
—
36
Total facility closure reserve
$
131
$
1,155
$
(392
)
$
894
$
219
$
(301
)
$
812
The total reserves of $0.8 million at
December 31, 2003, of which $0.6 million is recorded
as other long-term liabilities, are primarily related to future
minimum lease payments on vacated facilities.
Indiana Operations
During 2001, management determined that
integration issues at the Indiana operation, largely a result of
its remote location, rendered it incompatible with the
Company's operating strategies. As a result, on
June 8, 2001, the Company sold all of the assets of its
Indiana operations for $5.6 million in cash consideration.
In addition, the purchaser assumed substantially all of the
liabilities connected to the operation.
The sale of the operation has been treated as a
discontinued operation as it had distinguishable cash flow and
operations that have been eliminated from the on-going Company
and the Company will have no further involvement in the Indiana
operations. The Company recognized a non-cash loss of $627,000
F- 19
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
related to the sale. Sales and losses
attributable to the Indiana operation, which are reported as
discontinued operations, are as follows:
Year ended
December 31,
2001
)
(in
thousands
Sales, net
$
5,729
Pre-tax loss
1,111
10. PROPERTY, PLANT AND
EQUIPMENT
Property, plant and equipment consist of the
following:
December 31,
2003
2002
(in thousands)
Land
$
11,326
$
14,166
Buildings and improvements
42,232
43,312
Machinery and equipment
85,349
82,764
Furniture and fixtures
23,225
24,542
Construction in progress
1,042
275
163,174
165,059
Less accumulated depreciation
73,775
62,318
$
89,399
$
102,741
Depreciation expense relating to continuing
operations approximated $18.8 million, $18.5 million
and $17.6 million for 2003, 2002 and 2001, respectively.
11.     ACCRUED
LIABILITIES
Accrued liabilities consist of the following:
December 31,
2003
2002
(in thousands)
Accrued payroll and other employee related
    expenses
$
21,759
$
15,890
Accrued property, sales and other taxes
10,927
7,750
Accrued facility closure costs
1,245
1,188
Insurance self-retention reserves
8,047
7,079
Advances from customers
1,186
2,461
Accrued federal and state income taxes
930
1,801
Other
3,756
4,236
$
47,850
$
40,405
F- 20
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
12.     LONG-TERM
DEBT
Long-term debt consists of the following:
December 31,
2003
2002
(in thousands)
Revolving credit facility
$
68,900
$
7,500
Tranche A term loan
—
6,292
Tranche B term loan
99,358
115,252
Other notes
275
662
168,533
129,706
Less current portion of long-term debt
1,731
29,486
$
166,802
$
100,220
During November of 2003, the Company modified and
extended its credit agreement due to expire in part on
December 30, 2003. The extended credit agreement changes
the expiration date of the revolving credit facility
("Revolver") to December 31, 2004 and increases
its borrowing availability to $175 million from
$150 million. The maturity date for the Tranche B term
loan remained December 30, 2005. In connection with the
extension of the credit agreement, deferred loan costs of
$1.3 million were incurred. These costs are included as a
component of other assets, net on the accompanying consolidated
balance sheets as of December 31, 2003.
At December 31, 2003, the Company had
Revolver availability of $90.5 million, net of
$15.6 million in outstanding letters of credit. Revolver
borrowings can be limited to a borrowing base equal to 60% of
inventory plus 85% of trade accounts receivable. The borrowing
base is calculated monthly and was $131.9 million at
December 31, 2003, thereby limiting availability under the
Revolver to a maximum of $47.4 million. The Company pays a
commitment fee ranging from 0.325% to 0.50% on the unused amount
of the Revolver. Borrowings under the Revolver bear interest at
a rate based on either the Bank of America base rate or LIBOR
plus an additional spread based upon performance. Currently, the
Revolver rates are Bank of America base rate plus 1.5% and LIBOR
plus 2.5%. The interest rate on the Tranche B term loan is
based on either the Bank of America base rate plus 2.75% or
LIBOR plus 3.75%. The weighted average interest rates during
2003 on the Revolver, Tranche A term loan and
Tranche B term loan were 5.65%, 4.11% and 4.99%,
respectively.
The credit agreement is collateralized by all
tangible and intangible property and interest in property and
proceeds thereof now owned or hereafter acquired by the Company
and its wholly-owned subsidiaries. The agreement contains
covenants providing for the maintenance of certain financial
ratios and conditions including: consolidated net worth; a
coverage ratio that includes earnings before interest, taxes,
depreciation and amortization; a ratio of net funded debt to
earnings before interest, taxes, depreciation and amortization;
and limitations on capital expenditures, among certain other
restrictions. At December 31, 2003, management believes it
was in compliance with these covenants and conditions.
The Company also has other notes aggregating
$0.3 million and $0.7 million at December 31,
2003 and 2002, respectively, due at various times through 2010.
Subsequent to December 31, 2003, the Company
entered into a new long-term credit agreement. Accordingly,
borrowings under the Revolver have been reclassified to
long-term consistent with the terms of the new agreement. See
Note 20.
F- 21
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Future maturities of long-term debt as of
December 31, 2003 are as follows (in thousands):
Year ending December 31,
2004
$
1,731
2005
2,300
2006
2,300
2007
2,300
2008
2,300
Thereafter
157,602
$
168,533
Theses future maturities reflect the refinancing
of the Company's credit agreement as discussed in
Note 20.
13.
INCOME TAXES
The components of income tax expense from
continuing operations are as follows:
2003
2002
2001
(in thousands)
Current:
Federal
$
12,151
$
7,795
$
9,303
State
968
749
562
$
13,119
8,544
9,865
Deferred:
Federal
(323
)
459
(6,612
)
State
252
(48
)
(644
)
(71
)
411
(7,256
)
Income tax expense
$
13,048
$
8,955
$
2,609
F- 22
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Temporary differences, which give rise to
deferred tax assets and liabilities, are as follows:
December 31,
2003
2002
(in thousands)
Deferred tax assets related to:
Accrued expenses
$
8,832
$
6,946
Accounts receivable
1,437
726
Inventories
3,532
3,112
Operating loss carryforwards
1,206
937
15,007
11,721
Valuation allowance
(1,187
)
(719
)
Total deferred tax assets
13,820
11,002
Deferred tax liabilities related to:
Goodwill
6,013
1,247
Property, plant and equipment
3,356
2,451
Total deferred tax liabilities
9,369
3,698
Net deferred tax asset
$
4,451
$
7,304
A reconciliation of the statutory federal income
tax rate to the Company's effective rate is provided below:
2003
2002
2001
Statutory federal income tax rate
35.0
%
35.0
%
35.0
%
State income taxes, net of federal income tax
    benefit
2.5
%
2.7
%
(8.0
%)
Non-deductible goodwill and other
0.8
%
2.5
%
12.3
%
38.3
%
40.2
%
39.3
%
The Company has $26.4 million of state
operating loss carryforwards expiring at various dates through
2023.
In assessing the realizability of deferred tax
assets, the Company considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. The Company considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. The Company
concluded that it was appropriate to maintain a valuation
allowance for state net operating losses in certain
jurisdictions where it is more likely than not that the deferred
tax asset will not be realized. The valuation allowance
increased by $0.5 million during 2003 to reflect state net
operating losses not benefited in the prior year.
14.
EMPLOYEE STOCK BASED COMPENSATION
During 1998, the Company implemented the Builders
FirstSource, Inc. 1998 Stock Incentive Plan ("the
Plan"), a stock-based incentive compensation plan. Under
the Plan, the Company is authorized to issue shares of common
stock pursuant to "Awards" granted in various forms,
including incentive stock
F- 23
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
options (intended to qualify under
Section 422 of the Internal Revenue Code of 1986 (as
amended)), non-qualified stock options and other stock-based
awards. The Plan also authorizes the sale of common stock on
terms determined by the Company's Board of Directors.
The Company has notes receivable from employees
aggregating $196,000 and $209,000 at December 31, 2003 and
2002, respectively, in connection with the issuance of common
stock under the Plan. As of December 31, 2003, there were
51.9 million shares authorized and 12.5 million shares
available for issuance.
Options to purchase shares of common stock
generally cliff vest after nine years subject to acceleration at
20% per year if certain return on net assets targets are
met. The expiration date is generally ten years subsequent to
date of issuance. To date, these targets have generally been met.
A summary of the status of the Company's
stock options as of December 31, 2003, 2002 and 2001 and
the changes during the periods is presented below:
Weighted
Number of shares
average
underlying options
exercise price
(in thousands)
Outstanding at December 31, 2000
8,680
$
0.91
Granted
22,185
$
1.00
Exercised
(3
)
$
0.25
Cancelled
(748
)
$
1.00
Outstanding at December 31, 2001
30,114
$
0.97
Granted
685
$
1.00
Exercised
(35
)
$
0.25
Cancelled
(998
)
$
1.00
Outstanding at December 31, 2002
29,766
$
0.97
Granted
1,595
$
1.00
Exercised
(6
)
$
1.00
Cancelled
(879
)
$
1.00
Outstanding at December 31, 2003
30,476
$
0.97
Weighted-average fair value of options granted
2001
$
0.24
2002
$
0.23
2003
$
0.18
The minimum value of each stock option granted is
estimated on the date of grant using a Black-Scholes
option-pricing model. The following weighted-average assumptions
were used for grants during 2003, 2002 and 2001: expected
term— six years; expected volatility— 0.00%; expected
dividend yield— 0.00%; and risk-free rate— 3.12%,
4.37% and 4.50%, respectively. No adjustment was made for
non-transferability or risk of forfeitures.
F- 24
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following table summarizes information about
employee stock options outstanding at December 31, 2003
(options are in thousands):
Options Outstanding
Options Exercisable
Weighted Average
Weighted
Outstanding at
Remaining
Exercisable at
Average
December 31,
Exercise
Contractual
December 31,
Exercise
Range of Exercise Prices
2003
Price
Life
2003
Price
$0.25
1,029
$
0.25
5.00
1,029
$
0.25
$1.00
29,447
$
1.00
7.55
14,490
$
1.00
$0.25 - $1.00
30,476
$
0.97
7.47
15,519
$
0.95
15.
EMPLOYEE BENEFIT PLANS
The Company maintains one active defined
contribution 401(k) plan as discussed below:
Employees of the Company are eligible after
completing six months of employment to participate in the
Builders FirstSource, Inc. 401(k) Plan. Participants can
contribute up to 15% of their annual compensation, subject to
federally mandated maximums. The Company will match 50% of
employee contributions up to 6% of employee contributions. The
Company's matching contributions are subject to a pro-rata
five-year vesting schedule.
The Company recognized expense of
$3.0 million, $3.2 million and $3.3 million in
2003, 2002, and 2001, respectively, for contributions to the
plan.
16.
COMMITMENTS AND CONTINGENCIES
The Company leases certain land, buildings and
equipment used in operations. These leases are accounted for as
operating leases with terms ranging from one to twenty years and
generally contain renewal options. Certain operating leases are
subject to contingent rentals based on various measures. Total
rent expense under operating leases was approximately
$25.9 million, $25.3 million and $22.2 million
for the years ended December 31, 2003, 2002 and 2001,
respectively.
In addition, the Company has residual value
guarantees on certain equipment leases. Under these leases the
Company has the option of (a) purchasing the equipment at
the end of the lease term at its then fair market value,
(b) arranging for the sale of the equipment to a third
party, or (c) returning the equipment to the lessor to sell
the equipment. If the sales proceeds in either case are less
than the residual value, the Company is required to reimburse
the lessor for the deficiency up to a specified level as stated
in each lease agreement. If the sales proceeds exceed the
residual value, the Company is entitled to all of such excess
amounts. The guarantees under these leases for the residual
values of equipment at the end of the respective operating lease
periods approximated $7.2 million as of December 31,
2003. Based upon the expectation that none of these leased
assets will have a residual value at the end of the lease term
that is materially less than the value specified in the related
operating lease agreement or that the Company will purchase the
equipment at the end of the lease term, the Company does not
believe it is probable that it will be required to fund any
amounts under the terms of these guarantee arrangements.
Accordingly, no accruals have been recognized for these
guarantees.
F- 25
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Future minimum commitments for noncancelable
operating leases with initial or remaining lease terms in excess
of one year are as follows:
Related party
Total*
(in thousands
Year ending December 31,
2004
$
3,111
$
21,059
2005
3,071
19,257
2006
2,768
15,565
2007
2,369
13,966
2008
2,355
12,428
Thereafter
7,311
61,310
$
20,985
$
143,585
*
Includes related party future minimum
    commitments for noncancelable operating leases.
The Company is a party to various legal
proceedings in the ordinary course of business. Although the
ultimate disposition of these proceedings cannot be predicted
with certainty, management believes the outcome of any claim
that is pending or threatened, either individually or on a
combined basis, will not have a materially adverse effect on the
consolidated financial position, cash flows or operations of the
Company. However, there can be no assurances that future costs
would not be material to the results of operations or liquidity
of the Company for a particular period.
In July 1995, Pelican Companies, Inc., which was
acquired by the Company in December 1998, voluntarily entered
into a consent agreement with the South Carolina Department of
Health and Environmental Control ("SCDHEC") to address
the impact of wood treatment operations at a site owned by the
Company in Homewood, South Carolina. Extensive environmental
investigation has been conducted at the site, and the Company
has entered into an agreement with the SCDHEC regarding
appropriate remedial measures. The Company does not anticipate
that remaining remedial activities, if any, will have a
significant impact on the consolidated financial position, cash
flows or operations of the Company.
The Company has an agreement with an unrelated
third party to provide an interim financing program (the
"Program") to its customers in certain markets. Under
this agreement, the Company provides a partial Guaranty
("Guaranty") on each loan to a builder pursuant to the
Program. The Guaranty is an amount equal to 10% of the funded
construction loan amount per occurrence, per loan. The maximum
amount of all guarantees is limited to $400,000 in any
twelve-month period. As of December 31, 2003, the maximum
amount of all guarantees was $200,000 and the Company had not
paid or been assessed any amounts under the Guaranty. The term
of the Program is through January 4, 2004.
During 2001, the Company entered into a
termination agreement (the "Agreement") with a former
senior executive (the "Executive"). As part of the
Agreement, the Company agreed to repurchase from the Executive
approximately 2.1 million shares of Company common stock at
estimated fair market value of $2.1 million. The Agreement
provided for 770,000 shares to be repurchased upon
execution of the Agreement with the remaining shares to be
repurchased ratably over a 24-month period. At December 31,
2003, all obligations under the Agreement had been fulfilled by
the Company.
F- 26
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
17.
RELATED PARTY TRANSACTIONS
In 2003, 2002 and 2001, the Company paid
approximately $3.3 million, $3.2 million and
$3.4 million, respectively, in rental expense to
shareholders of the Company for leases of land and buildings.
In 2003 and 2002, the Company paid
JLL Partners approximately $0.3 million for certain
out-of-pocket expenses incurred. These amounts are recorded in
selling, general, and administrative expenses.
In May 2001, the Company paid approximately
$225,000 to acquire certain assets, consisting primarily of
inventory, from a former owner of an acquired company who is
also a shareholder of the Company.
18.
CONCENTRATIONS
The Company maintains cash at financial
institutions in excess of federally insured limits. Accounts
receivable potentially expose the Company to concentrations of
credit risk. The Company provides credit in its normal course of
business to customers in the residential construction industry.
The Company performs ongoing credit evaluations of its customers
and maintains allowances for potential credit losses.
Because customers are dispersed among the
Company's various markets, its credit risk to any one
customer or state economy is not significant.
19.
SALES BY PRODUCT CATEGORY
Sales by product category for the years ended
December 31, 2003 and 2002 were as follows (in thousands):
2003
2002
Lumber & Lumber Sheet Goods
$
593,693
$
515,387
Windows & Doors
354,584
325,170
Prefabricated Components
303,449
257,349
Millwork
158,680
151,148
Other Building Products and Services
264,687
250,952
$
1,675,093
$
1,500,006
Sales by product category is not available for
2001.
20.
SUBSEQUENT EVENT
On February 25, 2004, the Company entered
into a Credit Agreement that provides for a $90 million
revolving credit facility maturing February 25, 2009, a
$230 million Tranche A term loan due February 25,
2010, and a $85 million Tranche B term loan due
August 25, 2010. The Credit Agreement provides for a letter
of credit subfacility of $25 million maturing
February 25, 2009. The Credit Agreement contains certain
restrictive covenants, which, among other things, relate to the
payment of dividends, incurrence of indebtedness, repurchase of
common stock or other distributions, and asset sales and also
requires compliance with certain financial covenants with
respect to a maximum total leverage ratio and a minimum interest
coverage ratio. The Company can be required to make mandatory
prepayments of amounts outstanding under the Credit Agreement
based on the results of an excess cash flow calculation that
must be performed annually under the terms of the Agreement.
Proceeds from the new Credit Agreement were used
to retire the Company's existing debt facility and to pay a
dividend of approximately $139.6 million to shareholders
and approximately $0.4 million to certain option holders of
record as of February 25, 2004. The cash payment to option
holders will be
F- 27
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
recorded as compensation expense. In addition, in
fiscal 2004 the Company will expense $2.2 million in
deferred loan costs in 2004 due to the early retirement of the
debt facility.
Future maturities of long-term debt for the new
Credit Agreement are as follows (in thousands):
Year ending December 31,
2004
$
1,725
2005
2,300
2006
2,300
2007
2,300
2008
2,300
Thereafter
304,075
$
315,000
F- 28
Builders FirstSource, Inc. and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
Nine Months Ended September 30,
2004
2003
(unaudited)
(unaudited)
(in thousands, except
per share amounts)
Sales
$
1,552,453
$
1,213,460
Cost of sales
1,201,004
940,953
Gross margin
351,449
272,507
Selling, general and administrative expenses
275,551
240,893
Facility closure costs
—
1,051
Income from operations
75,898
30,563
Other expense, net
—
901
Interest expense
18,687
7,935
Income from continuing operations before income
    taxes
57,211
21,727
Income tax expense
22,026
8,330
Income from continuing operations
35,185
13,397
Income (loss) from discontinued operations (net
    of income tax (expense) benefit of ($56) and $1,422 in 2004 and
    2003, respectively)
103
(2,641
)
Net income
$
35,288
$
10,756
Basic net income per share
Income from continuing operations
$
0.14
$
0.05
Income (loss) from discontinued operations
—
(0.01
)
Net income
$
0.14
$
0.04
Diluted net income per share
Income from continuing operations
$
0.13
$
0.05
Income (loss) from discontinued operations
—
(0.01
)
Net income
$
0.13
$
0.04
Weighted average common shares
    outstanding
Basic
251,321
252,215
Diluted
264,738
252,701
The accompanying notes are an integral part of
these condensed consolidated financial statements.
F- 29
Builders FirstSource, Inc. and
Subsidiaries
CONDENSED CONSOLIDATED BALANCE
SHEETS
September 30,
2004
December 31,
(unaudited)
2003
(in thousands, except
per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
$
22,799
$
5,585
Accounts receivable, net
266,438
214,855
Inventories
156,378
125,152
Other current assets
21,545
22,081
Total current assets
467,160
367,673
Property, plant and equipment, net
91,006
89,399
Goodwill
163,059
163,030
Other assets, net
13,684
6,059
Total assets
$
734,909
$
626,161
LIABILITIES AND SHAREHOLDERS'
    EQUITY
Current liabilities:
Accounts payable
$
120,827
$
65,778
Accrued liabilities
85,002
47,850
Book overdrafts
708
24,800
Current maturities of long-term debt
3,575
1,731
Total current liabilities
210,112
140,159
Long-term debt, net of current maturities
310,480
166,802
Other long-term liabilities
17,131
17,569
537,723
324,530
Commitments and contingencies (Note 6)
Shareholders' equity:
Common stock, $.01 par value,
    300,000 shares authorized; 251,339 and 251,558 issued and
    outstanding, at September 30, 2004 and December 31,
    2003, respectively
2,513
2,516
Additional paid-in capital
160,514
249,765
Stock purchase loans receivable
—
(196
)
Retained earnings
34,159
49,546
Total shareholders' equity
197,186
301,631
Total liabilities and shareholders' equity
$
734,909
$
626,161
The accompanying notes are an integral part of
these condensed consolidated financial statements.
F- 30
Builders FirstSource, Inc. and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
Nine Months Ended
September 30,
2004
2003
(unaudited)
(unaudited)
(in thousands)
Cash flows from operating activities:
Net income
$
35,288
$
10,756
Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
Depreciation and amortization
13,998
14,942
Amortization of deferred loan costs
3,498
1,579
Bad debt expense
2,387
1,722
Non-cash (gain) loss from discontinued
    operations
(159
)
3,187
Net gain on sale of assets
(264
)
(993
)
Non-cash facility closure costs
—
871
Changes in assets and liabilities, net of effects
    from acquired companies:
Accounts receivable
(53,924
)
(164,393
)
Retained interest in transferred accounts
    receivable
—
63,397
Inventories
(31,226
)
(20,025
)
Other current assets
440
(3,488
)
Other assets and liabilities
(324
)
730
Accounts payable
55,049
53,816
Accrued liabilities
36,566
10,892
Net cash (used in) provided by operating
    activities
61,329
(27,007
)
Cash flows from investing activities:
Purchases of property, plant and equipment
(16,394
)
(11,019
)
Proceeds from sale of property, plant and
    equipment
1,571
6,216
Acquisitions, net of cash acquired
—
(504
)
Net cash used in investing activities
(14,823
)
(5,307
)
Cash flows from financing activities:
Net borrowings (payments) under revolving
    credit facilities
(68,900
)
61,900
Proceeds from long-term debt
315,000
—
Payments on long-term debt and other notes
(100,578
)
(22,317
)
Deferred loan costs
(10,989
)
—
Payment of dividend
(139,592
)
—
Exercise of stock options
14
—
Repurchase of common stock
(351
)
(1,402
)
Collection of stock purchase loans
196
13
Book overdrafts
(24,092
)
(3,819
)
Net cash provided by (used in) financing
    activities
(29,292
)
34,375
Net increase in cash and cash equivalents
17,214
2,061
Cash and cash equivalents at beginning of period
5,585
2,248
Cash and cash equivalents at end of period
$
22,799
$
4,309
The accompanying notes are an integral part of
these condensed consolidated financial statements.
F- 31
Builders FirstSource, Inc. and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
Stock
Common Stock
Additional
purchase
paid-in
loans
Retained
Shares
Amount
Capital
receivable
earnings
Total
(unaudited)
(in thousands, except share amounts)
Balance at December 31, 2003
251,558,474
$
2,516
$
249,765
$
(196
)
$
49,546
$
301,631
Exercise of stock options
131,118
1
13
—
—
14
Repurchase of common stock
(350,154
)
(4
)
(347
)
—
—
(351
)
Cash dividend
—
—
(88,917
)
—
(50,675
)
(139,592
)
Collection of stock purchase loans
—
—
—
196
—
196
Net income
—
—
—
—
35,288
35,288
Balance at September 30, 2004
251,339,438
$
2,513
$
160,514
$
—
$
34,159
$
197,186
The accompanying notes are an integral part of
these condensed consolidated financial statements.
F- 32
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited)
1.
BASIS OF PRESENTATION
Builders FirstSource, Inc. and subsidiaries (the
"Company") is a leading provider of manufactured
components, building materials and construction services to
professional homebuilders and contractors in the United States.
In the opinion of management, the accompanying
unaudited condensed consolidated financial statements include
all recurring adjustments and normal accruals necessary for a
fair statement of the Company's financial position and its
results of operations and cash flows for the dates and periods
presented. Results for interim periods are not necessarily
indicative of the results to be expected during the remainder of
the current year or for any future period. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
These unaudited condensed consolidated financial
statements should be read in conjunction with the more detailed
audited consolidated financial statements for the years ended
December 31, 2003, 2002, and 2001 presented herein.
Accounting policies used in the preparation of these unaudited
condensed consolidated financial statements are consistent in
all material respects with the accounting policies described in
the Notes to Consolidated Financial Statements included in the
audited consolidated financial statements.
Accounting estimates
The preparation of financial statements in
conformity with generally accepted accounting principles in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Estimates are used when accounting for items such
as revenue, vendor rebates, allowance for returns, discounts and
doubtful accounts, employee compensation programs, depreciation
and amortization periods, taxes, inventory values, insurance
programs, goodwill, other intangible assets and long-lived
assets.
Accounts Receivable
The Company extends credit to qualified
professional homebuilders and contractors, generally on a
non-collateralized basis. The allowance for doubtful accounts is
based on management's assessment of the amount which may
become uncollectible in the future and is estimated using
specific review of problem accounts, overall portfolio quality,
current economic conditions that may affect the borrower's
ability to pay, and historical experience.
Accounts receivable consist of the following:
September 30,
December 31,
2004
2003
(in thousands)
Trade receivables
$
263,732
$
210,488
Other
9,136
10,105
272,868
220,593
Less allowance for returns and doubtful accounts
6,430
5,738
$
266,438
$
214,855
F- 33
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)
Net Income Per Common Share
Net income per common share is calculated in
accordance with SFAS No. 128, "Earnings per
Share," which requires the presentation of basic and
dilutive earnings per share. Basic earnings per share is
computed using the weighted average number of common shares
outstanding during the period. Dilutive earnings per share is
computed using the weighted average number of common shares
outstanding during the period, plus the dilutive effect of
common stock equivalents. Weighted average shares outstanding
have been adjusted for common shares underlying options of
13.4 million and 0.5 million for the nine month
periods ended September 30, 2004 and 2003, respectively.
Options to purchase 29.7 million shares of common
stock outstanding at September 30, 2003 were not included
in the computation of diluted earnings per share.
Stock Compensation
The Company applies Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related
interpretations in accounting for employee stock-based
compensation costs related to its stock incentive plan.
APB 25 is an intrinsic value approach for measuring
stock-based compensation costs. SFAS No. 123,
"Accounting for Stock-Based Compensation," is a fair
value approach for measuring stock-based compensation costs.
Had the compensation cost for the Company's
stock-based compensation been determined in accordance with
SFAS No. 123, the Company's net income and net
income per share for the nine month periods ended
September 30, 2004 and 2003 would approximate the pro forma
amounts below:
Nine Months Ended
September 30,
2004
2003
(in
thousands,
except per
share amounts)
Reported net income
$
35,288
$
10,756
Deduct: Total stock-based employee compensation
    expense determined under minimum value methods for all awards,
    net of related tax effects
(639
)
(665
)
Pro forma net income
$
34,649
$
10,091
Basic earnings per share—as reported
$
0.14
$
0.04
Basic earnings per share—pro forma
$
0.14
$
0.04
Diluted earnings per share—as reported
$
0.13
$
0.04
Diluted earnings per share—pro forma
$
0.13
$
0.04
The effects of applying SFAS No. 123 in
this pro forma disclosure may not be indicative of future
results.
Recently Issued Accounting
Pronouncements
In December 2004, the FASB issued
SFAS No. 123 (Revised 2004) "Share Based
Payment" ("SFAS 123R"), which is a revision
of SFAS 123 and supersedes APB 25 and SFAS 148.
This statement requires that the cost resulting from all
share-based payment transactions be recognized in the financial
statements. This statement establishes fair value as the
measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair value
based measurement method in accounting for share-based payment
transactions with employees except for equity instruments held
by employee share ownership plans.
F- 34
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)
SFAS 123R applies to all awards granted
after the required effective date (the beginning of the first
interim or annual reporting period that begins after
June 15, 2005) and to awards modified, repurchased, or
cancelled after that date. As of the required effective date,
all public entities that used the fair value based method for
either recognition or disclosure under Statement 123 will
apply this Statement using a modified version of prospective
application. Under that transition method, compensation cost is
recognized on or after the required effective date for the
portion of outstanding awards for which the requisite service
has not yet been rendered, based on the grant-date fair value of
those awards calculated under Statement 123 for either
recognition or pro forma disclosures. For periods before the
required effective date, those entities may elect to apply a
modified version of the retrospective application under which
financial statements for prior periods are adjusted on a basis
consistent with the pro forma disclosures required for those
periods by Statement 123. The Company previously used the
minimum value method under SFAS 123 to calculate the value
of its options and will apply the prospective transition method
as of the required effective date. The Company will continue to
account for the currently outstanding options under APB 25
and will apply the provisions of SFAS 123R prospectively to
new awards and to awards modified, repurchased, or cancelled
after adoption of this statement.
In November 2004, the FASB issued
SFAS No. 151,
Inventory Costs— an amendment of
ARB No. 43, Chapter 4
("SFAS No. 151"). SFAS No. 151
amends the guidance in ARB No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). SFAS No. 151
requires that those items be recognized as current period
charges. In addition, SFAS No. 151 requires that
allocation of fixed production overhead to the costs of
inventory be based on the normal capacity of the production
facilities. This new standard is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005.
Earlier application is permitted for inventory costs incurred
during fiscal years beginning after November 23, 2004. The
Company does not anticipate the adoption of this statement to
have a significant impact on its financial position or results
of operations.
In December 2004, the FASB issued Statement
No. 153,
Exchanges of Nonmonetary Assets
, an
amendment of APB Opinion No. 29,
Accounting for
Nonmonetary Transactions
("SFAS No. 153"). The amendments made by
SFAS No. 153 are based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value
of the assets exchanged. Further, the amendments eliminate the
narrow exception for nonmonetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of
nonmonetary assets that do not have commercial substance.
Previously, APB Opinion No. 29 required that the accounting
for an exchange of a productive asset for a similar productive
asset or an equivalent interest in the same or similar
productive asset should be based on the recorded amount of the
asset relinquished. By focusing the exception on exchanges that
lack commercial substance, the Board believes
SFAS No. 153 produces financial reporting that more
faithfully represents the economics of the transactions. This
statement is effective for nonmonetary asset exchanges occurring
in fiscal periods beginning after June 15, 2005. The
Company does not believe the adoption of this new statement will
have a material impact on its financial condition or results of
operations.
In September 2004, the Emerging Issues Task Force
("EITF") reached a consensus on EITF Issue
No. 04-8, "The Effect of Contingently Convertible Debt
on Diluted Earnings Per Share," which requires shares
associated with contingently convertible debt instruments with
market price triggers to be included in the computation of
diluted earnings per share ("EPS") regardless of
whether the market price trigger has been met. EITF 04-8
also requires that prior period diluted EPS amounts presented
for comparative purposes be restated. EITF 04-8 is
effective for reporting periods ending after
December  15, 2004. The Company does
F- 35
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)
not believe the adoption of this new statement
will have a material impact on its financial condition or
results of operations.
Reclassifications
Prior year amounts have been reclassified to
conform to the current year presentation.
2.
LONG-TERM DEBT
Long-term debt consists of the following:
September 30,
December 31,
2004
2003
(in thousands)
Revolving credit facility
$
—
$
68,900
Tranche A term loan
228,850
—
Tranche B term loan
85,000
99,358
Other notes
205
275
314,055
168,533
Less current portion of long-term debt
3,575
1,731
$
310,480
$
166,802
On February 25, 2004, the Company entered
into a $405.0 million senior secured credit agreement (the
"Credit Agreement") with a syndicate of banks. The
Credit Agreement was initially comprised of a $90.0 million
long-term revolver due February 25, 2009; a
$230.0 million Tranche A term loan due in quarterly
installments of $0.6 million beginning June 30, 2004
and ending March 31, 2009 and quarterly installments of
$54.6 million beginning June 30, 2009 and ending
February 25, 2010; and an $85.0 million Tranche B
term loan due on August 25, 2010. During 2004, the Company
paid down approximately $1.2 million under the term loan
which permanently reduced the borrowing capacity under the
Credit Agreement.
Interest rates under the credit agreement for the
revolving loans and the Tranche A term loan are based on
the prime rate in the United States or LIBOR (plus a margin, or
"LIBOR spread," based on leverage ratios, which is
currently 1.75% for revolving loans and 3.25% for the
Tranche A term loan), at the Company's option at the
time of borrowing. Interest rates under the credit agreement for
the Tranche B term loan are based on the prime rate in the
United States or LIBOR (plus a fixed margin, or "LIBOR
spread," which is 8.50%), at our option at the time of
borrowing provided that the base interest rate shall in no event
be less than 2.0%. The weighted-average interest rate at
September 30, 2004 for borrowings under the Credit
Agreement, was 6.2%. A variable commitment fee based on the
total leverage ratio is charged on the unused amount of the
revolver (0.50% at September 30, 2004). At
September 30, 2004 the available borrowing capacity of the
revolver totaled $73.8 million after being reduced by
outstanding letters of credit of approximately
$16.2 million.
The Credit Agreement is collateralized by all
tangible and intangible property and interest in property and
proceeds thereof now owned or hereafter acquired by the Company
and its wholly-owned subsidiaries. The Credit Agreement also
contains certain restrictive covenants, which, among other
things, relate to the payment of dividends, incurrence of
indebtedness, repurchase of common stock or other distributions,
and asset sales and also require compliance with certain
financial covenants with respect to a maximum total leverage
ratio and a minimum interest coverage ratio. At
September 30, 2004, management believes they
F- 36
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)
were in compliance with all covenants under the
Credit Agreement. The Company can be required to make mandatory
prepayments of amounts outstanding under the Credit Agreement
based on the results of an excess cash flow calculation that
must be performed annually under the terms of the Agreement. At
September 30, 2004, the Company estimates that it will be
required to permanently retire approximately $3.0 million
of the Tranche A term loan during the first quarter of 2005
in accordance with the excess cash flow provision. Accordingly,
this amount has been reclassified to current on the accompanying
condensed consolidated balance sheets as of September 30,
2004.
Proceeds from the new Credit Agreement were used
to retire the Company's existing debt facility and to pay a
cash dividend, as discussed in Note 3. In connection with
the refinancing, the Company incurred fees and expenses
aggregating $11.0 million, which are included as a
component of other assets, net on the condensed consolidated
balance sheets at September 30, 2004 and are being
amortized over the term of the Credit Agreement. In addition,
the Company expensed $2.2 million in deferred loan costs in
2004 due to the early retirement of the prior debt facility.
This amount is included in interest expense in the accompanying
condensed statements of operations for the nine month period
ended September 30, 2004.
At December 31, 2003, the Company had a
revolving credit facility of $175.0 million (the
"Revolver") which was scheduled to expire on
December 31, 2004. The availability under the Revolver was
$90.5 million, net of $15.6 million in outstanding
letters of credit. Revolver borrowings were limited to a
borrowing base equal to 60% of inventory plus 85% of trade
accounts receivable. The borrowing base was calculated monthly
and was $131.9 million at December 31, 2003, thereby
limiting availability under the Revolver to a maximum of
$47.4 million. The Company paid a commitment fee ranging
from 0.325% to 0.50% on the unused amount of the Revolver.
Borrowings under the Revolver bore interest at a rate based on
either the Bank of America base rate or LIBOR plus an additional
spread based upon performance. At December 31, 2003, the
Revolver rates were Bank of America base rate plus 1.5% and
LIBOR plus 2.5%. At December 31, 2003, the Company also had
$99.4 million Tranche B Term loan outstanding which
was scheduled to expire on December 30, 2005. The interest
rate on the Tranche B term loan was based on either the
Bank of America base rate plus 2.75% or LIBOR plus 3.75%.
The Company also has other notes aggregating
$0.2 million and $0.3 million at September 30,
2004 and December 31, 2003, respectively, due at various
times through 2010.
3.
EMPLOYEE STOCK BASED COMPENSATION
On February 25, 2004, the Company's
Board of Directors declared a special cash dividend of
$0.56 per common share, or $139.6 million to
shareholders of record as of February 25, 2004. The Company
fully reduced retained earnings by $50.7 million and
reduced additional paid-in capital by $88.9 million for the
remainder of the dividend. As a result of the special dividend,
the Board of Directors exercised its discretion under the
anti-dilution provisions of the employee stock plan to adjust
the exercise price of stock options to reflect the change in the
share value on the dividend date. The Company did not record any
expense related to adjustment of the exercise price as the
modification did not increase the aggregate
F- 37
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)
intrinsic value of any award and the ratio of the
exercise price per share to the market value per share was not
reduced. The effect of this anti-dilution adjustment is
presented below:
As of dividend date
As of
Prior to
After
December 31,
adjustment
adjustment
2003
(in thousands, except per share
amounts)
Options outstanding
30,456
30,456
30,476
Options exercisable
16,170
16,170
15,519
Weighted average exercise price:
Options outstanding
$
0.97
$
0.31
$
0.97
Options exercisable
$
0.95
$
0.30
$
0.95
Approximately $0.4 million was also paid to
certain option holders whose exercise price could not be
adjusted for the dividend. The cash payment to these option
holders was expensed and is included in selling, general, and
administrative expenses in the accompanying condensed
consolidated statements of operations for the nine month period
ended September 30, 2004. The Company also granted
approximately 15.1 million stock options to various
employees during the nine month period ended September 30,
2004. These options were granted with an exercise price equal to
the estimated fair market value of the Company's stock on
the grant dates.
4.
FACILITY CLOSURE COSTS
During 2003, the Company developed and executed a
plan to close a facility in Texas due to the location being
unable to sustain a consistent level of profitability. In
conjunction with the plan, the Company began disposing of
assets, severing employees, and pursuing sale of the related
real estate. The Company completed the exit plan prior to
December 31, 2003. During the nine month period ended
September 30, 2003, the Company recognized approximately
$0.4 million in expenses related to the facility closure,
including termination benefits to severed employees and
adjustments to reflect certain asset balances at net realizable
value. The Company also recorded an impairment charge of
approximately $0.6 million to adjust the carrying value of
the real estate related to these operations to its estimated
fair value, less reasonable direct selling costs. The estimated
fair value was determined based on a quoted market price as
estimated by an independent third party. At September 30,
2004 and December 31, 2003, the Company classified the
carrying value of the real estate of $1.4 million as held
for sale and is included as a component of other assets, net in
the accompanying condensed consolidated balance sheets.
5.
DISCONTINUED OPERATIONS
In September 2003, based upon several factors
including unfavorable market conditions and a poor competitive
position which prevented the Company from generating profitable
results, the Company announced its intent to exit its operations
in Colorado. The cessation of operations in this market has been
treated as a discontinued operation as it had distinguishable
cash flow and operations that have been eliminated from the
on-going Company and the Company will have no further cash flows
or operations in this market. The Company completed the exit
plan prior to December 31, 2003.
As a result of the exit plan, in September 2003
the Company recorded an expense of $1.2 million in order to
adjust asset balances, primarily inventory, to net realizable
value and an impairment charge of $1.2 million to write-off
the carrying value of goodwill pertaining to these operations.
The Company also recorded an impairment charge of approximately
$0.4 million to adjust the carrying value of the real
F- 38
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)
estate and equipment related to these operations
to its estimated fair value, less reasonable direct selling
costs. The estimated fair value was determined based on a quoted
market price as estimated by an independent third party. These
amounts are included in income (loss) from discontinued
operations in the accompanying condensed consolidated statements
of operations for the nine month period ended September 30,
2003. As of December 31, 2003, the Company classified the
carrying value of the real estate and equipment of
$1.6 million as held for sale and is included as a
component of other assets, net in the accompanying condensed
consolidated balance sheets.
During 2004, the Company received an updated
estimated market price from an independent third party for the
real estate and based on the revised estimate, recorded an
additional impairment of approximately $0.2 million based
on the results of the valuation. The Company also favorably
settled an outstanding lease obligation and collected several
customer balances that were previously written-off. The Company
reduced expenses by approximately $0.4 million related to
these items. These amounts are included in income (loss) from
discontinued operations in the accompanying condensed
consolidated statements of operations for the nine month period
ended September 30, 2004. As of September 30, 2004,
the Company classified the carrying value of the real estate of
$1.0 million as held for sale and is included as a
component of other assets, net in the accompanying condensed
consolidated balance sheets.
Sales and pre-tax losses attributable to the
Colorado operations were $23.2 million and
$4.1 million, respectively for the nine month period ended
September 30, 2003. For the nine month period ended
September 30, 2004, the Company recorded no sales and
recognized $0.2 million in pre-tax income due to the items
discussed above.
The major classes of assets and liabilities of
the discontinued Colorado operations in the condensed
consolidated balance sheets as of September 30, 2004 and
December 31, 2003 are as follows:
September 30,
December 31,
2004
2003
(in thousands)
Cash
$
—
$
206
Accounts receivable, net
126
678
Other current assets
23
45
Other assets, net
1,023
1,629
Total assets
1,172
2,558
Other current liabilities
422
1,021
Other long-term liabilities
—
559
Total liabilities
422
1,580
Net assets
$
750
$
978
6.
COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal
proceedings in the ordinary course of business. Although the
ultimate disposition of these proceedings cannot be predicted
with certainty, management believes the outcome of any claim
that is pending or threatened, either individually or on a
combined basis, will not have a materially adverse effect on the
consolidated financial position, cash flows or operations of the
Company. However, there can be no assurances that future costs
would not be material to the results of operations or liquidity
of the Company for a particular period.
F- 39
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)
In July 1995, Pelican Companies, Inc., which was
acquired by the Company in December 1998, voluntarily entered
into a consent agreement with the South Carolina Department of
Health and Environmental Control ("SCDHEC") to address
the impact of wood treatment operations at a site owned by the
company in Homewood, South Carolina. Extensive environmental
investigation has been conducted at the site, and the Company
has entered into an agreement with the SCDHEC regarding
appropriate remedial measures. The Company does not anticipate
that remaining remedial activities, if any, will have a
significant impact on the consolidated financial position, cash
flows or operations of the Company.
7.
RELATED PARTY TRANSACTIONS
For the nine month periods ended
September 30, 2004 and 2003, the Company paid approximately
$1.8 million and $2.4 million, respectively, in rental
expense for leases of land and buildings to shareholders of the
Company.
For the nine month periods ended
September 30, 2004 and 2003, the Company paid
JLL Partners approximately $0.2 million for certain
out-of-pocket expenses incurred. These amounts are recorded in
selling, general, and administrative expenses.
8.
SALES BY PRODUCT CATEGORY
Sales by product category for the nine-months
ended September 30, 2004 and 2003 were as follows:
2004
2003
(in thousands)
Lumber & Lumber Sheet Goods
$
624,473
$
414,446
Windows & Doors
291,634
260,339
Prefabricated Components
287,286
223,825
Millwork
130,667
117,296
Other Building Products and Services
218,393
197,554
$
1,552,453
$
1,213,460
9.
SUBSEQUENT EVENT
On February 11, 2005, the Company entered
into a $350.0 million senior secured credit facility with a
syndicate of banks. The senior secured credit facility is
comprised of a $110.0 million long-term revolver due
February 11, 2010; a $225.0 million term loan due in
quarterly installments of $0.6 million beginning
June 30, 2005 and ending June 30, 2011 and a final
payment of $210.9 million on August 11, 2011; and a
$15.0 million prefunded letter of credit facility due
August 11, 2011.
The senior secured credit facility is
collateralized by all tangible and intangible property and
interest in property and proceeds thereof now owned or hereafter
acquired by the Company and its wholly-owned subsidiaries. The
credit facility also contains certain restrictive covenants,
which, among other things, relate to the payment of dividends,
incurrence of indebtedness, repurchase of common stock or other
distributions, and asset sales and also require compliance with
certain financial covenants with respect to a maximum total
leverage ratio and a minimum interest coverage ratio. The
Company can be required to make mandatory prepayments of amounts
outstanding under the agreement based on the results of an
excess cash flow calculation that must be performed annually
under the terms of the facility.
F- 40
Builders FirstSource, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) (continued)
On February 11, 2005, the Company also
issued $275.0 million in aggregate principal amount of
floating rate notes. The floating rate notes mature on
February 15, 2012. Interest accrues at a rate of LIBOR plus
4.25%. LIBOR is reset at the beginning of each quarter. Interest
on the floating rate notes is payable quarterly in arrears
beginning May 15, 2005. At any time on or after
February 15, 2007, the Company can redeem some or all of
the notes at a redemption price equal to par plus a specified
premium that declines ratably to par. At any time before
February 15, 2007, the Company can redeem the notes, in
whole or in part, at a redemption price equal to par, plus a
make whole premium. The Company may also redeem up to 35% of the
aggregate principal amount of the notes with the proceeds of
certain equity offerings any time before February 15, 2007.
In the event of a change in control, the Company may be required
to offer to purchase the notes at a purchase price equal to 101%
of the principal, plus accrued and unpaid interest.
The notes are secured by a second priority lien
on all tangible and intangible property and interest in property
and proceeds thereof now owned or hereafter acquired by the
Company and its wholly-owned subsidiaries. The indenture
covering the notes contains certain restrictive covenants,
which, among other things, relate to the payment of dividends,
incurrence of indebtedness, repurchase of common stock or other
distributions, asset sales and investments.
Proceeds from the new senior secured credit
agreement and the issuance of the floating rate notes were used
to retire the Company's existing debt facility, pay a cash
dividend to shareholders of $201.2 million, and make a cash
payment of approximately $35.8 million to stock option
holders in-lieu of adjusting the exercise price. In connection
with the refinancing, the Company incurred estimated fees and
expenses aggregating $20.7 million. In addition, the
Company paid a $1.7 million early termination penalty and
the Company had approximately $7.8 million in unamortized
deferred loan costs remaining at the refinancing date related to
the prior debt facility. Costs that will be expensed in the
first quarter of 2005 will include $35.8 million cash paid
to option holders as well as a portion of the remaining
unamortized deferred loan costs related to the prior debt
facility, fees and expenses related to the new credit facility
and floating rate notes, and the early termination penalties. A
portion of these fees will be capitalized over the term of the
new credit facility and floating rate notes. The final syndicate
of banks has not been determined and therefore, the estimated
amount of financing costs that will be deferred or expensed is
subject to change upon final allocation and participation of the
applicable banks.
Future maturities of long-term debt are as
follows (in thousands):
Year ending December 31,
2005
$
1,688
2006
2,250
2007
2,250
2008
2,250
2009
2,250
Thereafter
489,312
$
500,000
F- 41
LOGO
Builders FirstSource, Inc.
Common Stock
,
2005
PART II
INFORMATION NOT REQUIRED IN THE
PROSPECTUS
Item 13.     Other
Expenses of Issuance and Distribution
The following table sets forth the costs and
expenses, other than underwriting discounts and commissions,
payable by the Registrant in connection with the sale of common
stock being registered.
SEC Registration Fee
$
NASD Fee
Nasdaq National Market Listing Fee
Printing and Engraving Expenses
Legal Fees and Expenses
Accounting Fees and Expenses
Blue Sky Fees and Expenses
Transfer Agent and Registrar Fees and Expenses
Miscellaneous
Total
$
The registrant will bear all of the expenses
shown above.
Item 14. Indemnification of Officers and
Directors
Section 145 of the Delaware General
Corporation Law (the "DGCL") provides, in summary,
that directors and officers of Delaware corporations are
entitled, under certain circumstances, to be indemnified against
all expenses and liabilities (including attorneys' fees)
incurred by them as a result of suits brought against them in
their capacity as directors or officers, if they acted in good
faith and in a manner they reasonably believed to be in or not
opposed to our best interests, and, with respect to any criminal
action or proceeding, if they had no reasonable cause to believe
their conduct was unlawful; provided that no indemnification may
be made against expenses in respect of any claim, issue, or
matter as to which they shall have been adjudged to be liable to
us, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, they are fairly and reasonably
entitled to indemnity for such expenses as the court shall deem
proper. Any such indemnification may be made by us only as
authorized in each specific case upon a determination by the
stockholders, disinterested directors or independent legal
counsel that indemnification is proper because the indemnitee
has met the applicable standard of conduct.
Section 102(b)(7) of the DGCL permits a
corporation to provide in its certificate of incorporation that
a director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for
any breach of the director's duty of loyalty to the
corporation or its stockholders, for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, for unlawful payments of dividends or unlawful
stock repurchases, redemptions or other distributions, or for
any transaction from which the director derived an improper
personal benefit.
Our amended and restated certificate of
incorporation and amended and restated by-laws provide that we
shall indemnify our directors and officers to the fullest extent
permitted by law and that no director shall be liable for
monetary damages to us or our stockholders for any breach of
fiduciary duty, except to the extent provided by applicable law.
We currently maintain liability insurance for our directors and
officers.
II- 1
ITEM 15.     Recent
Sales of Unregistered Securities
In the three years preceding the filing of this
Registration Statement, the Registrant has issued the following
securities that were not registered under the Securities Act:
On February 11, 2005, we issued
$275.0 million aggregate principal amount of second
priority senior secured floating rate notes due 2012. These
securities were issued only to qualified institutional buyers in
accordance with Rule 144A and to non-U.S. persons outside
the U.S. in accordance with Regulation S under the
Securities Act. The securities were issued to UBS Securities LLC
and Deutsche Bank Securities Inc. as initial purchasers. We and
the guarantors have agreed to use all commercially reasonable
efforts to file a registration statement enabling holders of
these floating rate notes to exchange their privately placed
floating rate notes for publicly registered notes with
substantially identical terms as the floating rate notes; cause
the registration statement to be declared effective by the SEC
on or prior to 240 days after the issue date; and complete
the exchange offer within 30 business days after the date on
which the registration statement is declared effective, subject
to certain exceptions. In addition, in certain circumstances, we
will agree to file a "shelf registration statement"
that would allow some or all of the floating rate notes to be
offered to the public and to use all commercially reasonable
efforts to cause such a shelf registration statement to be
declared effective by the SEC.
In the past three calendar years, the Company has
granted stock options to employees under its 1998 Stock
Incentive Plan, as amended, covering an aggregate of 17,637,034
shares. Of these options, 2,512,000 were issued at an exercise
price of $1.00 per share, and 15,125,034 options were issued at
an exercise price of $0.315 per share. All of the options
were issued pursuant to the Company's stock incentive plan
in reliance on Rule 701 of the Securities Act.
On February 25, 2004, the Company's
board of directors declared a special cash dividend of $0.56 per
common share, or an aggregate of $139.6 million, to
shareholders of record as of February 25, 2004. As a result
of the special dividend, the board of directors exercised its
discretion under the anti-dilution provisions of the employee
stock plan to adjust the exercise price of stock options from
$1.00 per common share to $0.315 per share and to
adjust certain other options from $0.25 per common share to
$0.1125 per common share to reflect the change in the share
value on the dividend date. Approximately $0.4 million was
also paid to certain option holders whose exercise price could
not be adjusted for the dividend.
ITEM
16.     Exhibits
1
.1*
Form of Underwriting Agreement
3
.1*
Form of Amended and Restated Certificate of
    Incorporation of Builders FirstSource, Inc.
3
.2*
Form of Amended and Restated By-Laws of Builders
    FirstSource, Inc.
4
.1*
Indenture, dated as of February 11, 2005,
    among Builders FirstSource, Inc., the Subsidiary Guarantors
    thereto, and The Wilmington Trust Corporation, as Trustee
4
.2*
Form of Specimen Certificate
4
.3*
Registration Rights Agreement, dated as of
    February 8, 2005, among Builders FirstSource, Inc., the
    Guarantors named therein, and UBS Securities LLC and Deutsche
    Bank Securities Inc.
5
.1*
Opinion of Skadden, Arps, Slate, Meagher &
    Flom LLP, regarding the legality of the common stock being issued
8
.1*
Opinion of Skadden, Arps, Slate, Meagher &
    Flom LLP, regarding certain tax matters
10
.1*
Credit Agreement, dated as of February 11,
    2005, among Builders FirstSource, Inc., as borrower, JLL
    Building Products, LLC, and the guarantors party thereto, the
    lenders party thereto, UBS Securities LLC, as joint arranger and
    joint book runner, UBS AG, Stamford Branch, as issuing bank,
    administrative agent, and collateral trustee for the secured
    parties, UBS Loan Finance LLC as swingline lender, and
    Deutsche Bank Securities Inc. as joint arranger, joint
    book-runner, and syndication agent
10
.2*
Builders FirstSource, Inc. 1998 Stock Incentive
    Plan, as amended
II- 2
10
.3*
Form of Builders FirstSource, Inc. 1998 Stock
    Incentive Plan Nonqualified Stock Option Agreement
10
.4*
Builders FirstSource, Inc. 2005 Cash Incentive
    Bonus Plan
10
.5*
Builders FirstSource, Inc. 2004 Cash Incentive
    Bonus Plan
10
.6*
Employment Agreement, dated September 1,
    2001, between Builders FirstSource and Floyd F. Sherman
10
.7*
Employment Agreement, dated January 15,
    2004, between Builders FirstSource and Kevin P. O'Meara
10
.8*
Employment Agreement, dated January 15,
    2004, between Builders FirstSource and Charles L. Horn
10
.9*
Employment Agreement, dated January 15,
    2004, between Builders FirstSource and Donald F. McAleenan
23
.1†
Consent of PricewaterhouseCoopers LLP
24
.1†
Powers of Attorney
†
Filed herewith.
*
To be filed by amendment.
ITEM
17.     Undertakings
The undersigned registrant hereby undertakes to
provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and
registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful
defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any
    liability under the Securities Act of 1933, the information
    omitted from the form of prospectus filed as part of this
    registration statement in reliance upon Rule 430A and
    contained in a form of prospectus filed by the registrant
    pursuant to Rule 424(b)(1) or (4)or 497(h) under the
    Securities Act shall be deemed to be part of this registration
    statement as of the time it was declared effective.
(2) For the purpose of determining any
    liability under the Securities Act of 1933, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.
II- 3
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the Builders FirstSource, Inc. has duly caused this
registration statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Dallas, State of Texas, on February 14, 2005.
BUILDERS FIRSTSOURCE, INC.
By:
/s/ FLOYD F. SHERMAN
Floyd F. Sherman,
Chairman, President, and Chief Executive
    Officer
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ FLOYD F. SHERMAN
Floyd F. Sherman
Chairman, President, and Chief Executive
    Officer
(Principal Executive Officer and Director)
February 14, 2005
/s/ CHARLES L. HORN
Charles L. Horn
Senior Vice President—Finance and Chief
    Financial Officer
(Principal Financial Officer)
February 14, 2005
/s/ M. CHAD CROW
M. Chad Crow
Vice President—Finance and Controller
(Controller)
February 14, 2005
/s/ ALEXANDER R. CASTALDI
Alexander R. Castaldi
Director
February 14, 2005
/s/ RAMSEY A. FRANK
Ramsey A. Frank
Director
February 14, 2005
/s/ PAUL S. LEVY
Paul S. Levy
Director
February 14, 2005
/s/ BRETT N. MILGRIM
Brett N. Milgrim
Director
February 14, 2005
II- 4