Sales

Loss from continuing operations

Included in the calculation of loss from continuing operations:

Warrant fair value adjustment

Facility closure costs

Tax valuation allowance

Adjusted loss from continuing operations

Adjusted EBITDA*

Sales were $291.8 million compared to $217.2 million in the third quarter of 2011, an increase of $74.6 million, or 34.3 percent. We estimate sales increased approximately 27 percent due to increased volume and 7 percent due to price.

Gross margin percentage was 19.8 percent, down from 20.5 percent, a 0.7 percentage point decrease. Specifically, our gross margin decreased 1.5 percentage points largely due to commodity lumber inflation during the quarter relative to fixed customer pricing commitments and was offset by a 0.8 percentage point gross margin improvement due to increased sales volume. On a sequential quarter basis gross margin improved from 19.7 percent to 19.8 percent.

Selling, general and administrative (“SG&A”) expenses increased $8.5 million, or 16.8 percent. As a percentage of sales, however, SG&A expense decreased from 23.1 percent in the third quarter of 2011 to 20.1 percent in 2012. Salaries and benefits expense, excluding stock compensation expense, was $35.6 million, an increase of $6.8 million, primarily related to higher sales commissions and additional staffing needs to service the increased sales volume.

The third quarter of 2012 included $0.7 million of facility closure costs primarily related to revisions of sub-rental income estimates on two previously closed facilities in South Carolina and Tennessee. The company recorded $0.1 million of facility closure costs in the third quarter of 2011.

Interest expense was $10.6 million, an increase of $5.3 million from the third quarter of 2011. The increase was primarily due to interest associated with the company’s new term loan combined with a $0.7 million, non-cash, fair value adjustment related to stock warrants issued in connection with the term loan.

The company recorded $0.0 million of income tax expense in the third quarter of 2012, compared to $0.3 million in the third quarter of 2011. The company recorded an after-tax, non-cash tax valuation allowance of $4.6 million and $4.7 million in 2012 and 2011, respectively, related to its net deferred tax assets. Absent this valuation allowance, the effective tax rate would have been 37.6 percent and 39.2 percent in 2012 and 2011, respectively. As of the end of the current quarter, the company’s gross federal income tax net operating loss available for carryforward was $226.2 million.

Loss from continuing operations was $12.3 million, or $0.13 loss per diluted share, compared to $11.5 million, or $0.12 loss per diluted share in the third quarter of 2011. Excluding the fair value adjustment for stock warrants, facility closure costs and the tax valuation allowance, loss from continuing operations per diluted share was $0.07. For the third quarter of 2011, loss from continuing operations per diluted share was $0.07, when excluding facility closure costs and the tax valuation allowance. See reconciliation attached.

Loss from discontinued operations in the third quarter of 2012 was $1.3 million, or $0.01 loss per diluted share, compared to $0.1 million, or $0.00 loss per diluted share in the third quarter of 2011. Loss from discontinued operations in the current quarter is due primarily to revisions of sub-rental income estimates for a previously closed Ohio facility.

Net loss for the third quarter of 2012 was $13.6 million, or $0.14 loss per diluted share, compared to net loss of $11.6 million, or $0.12 loss per diluted share, in the third quarter of 2011.

Diluted weighted average shares outstanding were 95.5 million in the third quarter of 2012 compared to 95.0 million in the same quarter of 2011.

Adjusted EBITDA was $3.0 million in the third quarter of 2012, compared to a loss of $0.7 million last year. See reconciliation attached.

Liquidity at September 30, 2012 was approximately $55.7 million, representing $90.7 million of cash reduced by the $35.0 million minimum cash requirement in our term loan.

In addition to the $90.7 million of cash, the company had $12.8 million in restricted cash at September 30, 2012, of which $1.8 million was included in long-term assets. Restricted cash consists of $11.9 million used to collateralize letters of credit outstanding under the company’s letter of credit facility and $0.9 million used as collateral for other casualty insurance obligations.

Operating cash flow was negative $11.1 million compared to negative $9.2 million for the third quarter of 2011.

Capital expenditures in the third quarter of 2012 were $5.2 million, compared to $1.1 million in the third quarter of 2011. This increase is primarily due to the purchase of our Chelsea, AL location, which was previously a leased facility, and additional buyouts of expiring vehicle and equipment leases.

Sales

Cost of sales

Gross margin

Selling, general and administrative expenses (includes stock-based compensation expense of $947 and $1,665 for the three months ended in 2012 and 2011, respectively, and $2,672 and $3,645 for the nine months ended in 2012 and 2011, respectively.)

Facility closure costs

Loss from operations

Interest expense, net

Loss from continuing operations before income taxes

Income tax expense

Loss from continuing operations

Loss from discontinued operations (net of income tax expense of $0 in 2012 and 2011, respectively)

Net loss

Basic and diluted net loss per share:

Loss from continuing operations

Loss from discontinued operations

Net loss

Weighted average common shares:

Basic and diluted

Prefabricated components

Windows & doors

Lumber & lumber sheet goods

Millwork

Other building products & services

Total sales

Prefabricated components

Windows & doors

Lumber & lumber sheet goods

Millwork

Other building products & services

Total sales

ASSETS

Current assets:

Cash and cash equivalents

Restricted cash

Accounts receivable, less allowance of $2,747 and $2,138 at September 30, 2012 and December 31, 2011, respectively

Inventories

Other current assets

Total current assets

Property, plant and equipment, net

Goodwill

Other assets, net

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued liabilities

Current maturities of long-term debt

Total current liabilities

Long-term debt, net of current maturities

Other long-term liabilities

Total liabilities

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and outstanding

Common stock, $0.01 par value, 200,000 shares authorized; 96,813 and 96,806 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Cash flows from operating activities:

Net loss

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Amortization of deferred loan costs

Amortization of debt discount

Fair value adjustment of stock warrants

Deferred income taxes

Bad debt expense

Stock compensation expense

Net gain on sale of assets

Changes in assets and liabilities:

Receivables

Inventories

Other current assets

Other assets and liabilities

Accounts payable

Accrued liabilities

Net cash used in operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment

Proceeds from sale of property, plant and equipment

Decrease in restricted cash

Net cash used in investing activities

Cash flows from financing activities:

Payments of long-term debt and other loans

Deferred loan costs

Exercise of stock options

Repurchase of common stock

Net cash used in financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Detail of Interest Expense:

Term loan

Floating rate notes

Credit facility

Change in fair value of stock warrants *

Amortization of debt discount *

Amortization of deferred loan costs *

Other

Interest expense, net

Reconciliation to Adjusted EBITDA:

Net loss

Reconciling items:

Depreciation and amortization expense

Interest expense, net

Income tax expense

Loss from discontinued operations, net of tax

Facility closure costs

Stock compensation expense

Other

Adjusted EBITDA

Adjusted EBITDA as percentage of sales

Three months ended

September 30,

Reconciliation to Adjusted loss from continuing operations:

Loss from continuing operations

Reconciling items:

Facility closure costs

Warrant fair value adjustment

Tax valuation allowance

Adjusted loss from continuing operations

Weighted average diluted shares outstanding

Adjusted loss from continuing operations per diluted share