EXHIBIT 99.8
CASE NAME: KEVCO DISTRIBUTION, LP ACCRUAL BASIS
CASE NUMBER: 401-40789-BJH-11
JUDGE: BARBARA J. HOUSER
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
-------- -----
FORT WORTH DIVISION
----------
MONTHLY OPERATING REPORT
MONTH ENDING: JULY 31, 2001
-------------
IN ACCORDANCE WITH TITLE 28, SECTION 1746, OF THE UNITED STATES CODE, I DECLARE
UNDER PENALTY OF PERJURY THAT I HAVE EXAMINED THE FOLLOWING MONTHLY OPERATING
REPORT (ACCRUAL BASIS - 1 THROUGH ACCRUAL BASIS - 7) AND THE ACCOMPANYING
ATTACHMENTS AND, TO THE BEST OF MY KNOWLEDGE, THESE DOCUMENTS ARE TRUE, CORRECT
AND COMPLETE. DECLARATION OF THE PREPARER (OTHER THAN RESPONSIBLE PARTY): IS
BASED ON ALL INFORMATION OF WHICH PREPARER HAS ANY KNOWLEDGE.
RESPONSIBLE PARTY:
/s/ Wilford W. Simpson TREASURER
- --------------------------------------- ------------------------------------
Original Signature of Responsible Party Title
WILFORD W. SIMPSON SEPTEMBER 24, 2001
- --------------------------------------- ------------------------------------
Printed Name of Responsible Party Date
PREPARER:
/s/ Dennis S. Faulkner DEBTOR'S ACCOUNTANT
- --------------------------------------- ------------------------------------
Original Signature of Preparer Title
DENNIS S. FAULKNER SEPTEMBER 24, 2001
- --------------------------------------- ------------------------------------
Printed Name of Preparer Date
CASE NAME: KEVCO DISTRIBUTION, LP ACCRUAL BASIS - 1
CASE NUMBER: 401-40789-BJH-11
COMPARATIVE BALANCE SHEET
<Table>
<Caption>
SCHEDULED MONTH
ASSETS AMOUNT JUL-01 MONTH MONTH
- ------ ------------ ------------ ------------ ------------
1. Unrestricted Cash (FOOTNOTE) 41,421 0
2. Restricted Cash
3. Total Cash 41,421 0
4. Accounts Receivable-Net (FOOTNOTE) 17,545,859 321,431
5. Inventory (FOOTNOTE) 27,611,039
6. Notes Receivable
7. Prepaid Rent 236,697
8. Other (Attach List) 303,392
9. Total Current Assets 45,738,408 321,431
10. Property, Plant & Equipment 22,049,500 9,739,582
11. Less: Accumulated Depreciation/Depletion (6,151,901) (844,526)
12. Net Property, Plant & Equipment (FOOTNOTE) 15,897,599 8,895,056
13. Due From Insiders
14. Other Assets - Net of Amortization (Attach List) 5,741,869 481,876
15. Other (Attach List) 100,961,429 124,276,836
16. Total Assets 168,339,305 133,975,199
POST PETITION LIABILITIES
17. Accounts Payable
18. Taxes Payable 419,121
19. Notes Payable
20. Professional Fees
21. Secured Debt
22. Other (Attach List) (FOOTNOTE) 1,766,039
23. Total Post Petition Liabilities 2,185,160
PRE PETITION LIABILITIES
24. Secured Debt (FOOTNOTE) 75,885,064 15,071,491
25. Priority Debt (FOOTNOTE) 1,412,879
26. Unsecured Debt 19,966,456 18,466,898
27. Other (Attach List) 243,205,150 244,988,081
28. Total Pre Petition Liabilities 340,469,549 278,526,470
29. Total Liabilities 340,469,549 280,711,630
EQUITY
30. Pre Petition Owners' Equity (172,130,244)
31. Post Petition Cumulative Profit Or (Loss) (33,698,923)
32. Direct Charges To Equity (FOOTNOTE) 59,092,736
33. Total Equity (146,736,431)
34. Total Liabilities and Equity 133,975,199
</Table>
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO DISTRIBUTION, LP SUPPLEMENT TO
CASE NUMBER: 401-40789-BJH-11 ACCRUAL BASIS - 1
COMPARATIVE BALANCE SHEET
<Table>
<Caption>
SCHEDULED MONTH
ASSETS AMOUNT JUL-01 MONTH MONTH
- ------ ------------ ------------ ------------ ------------
A. Inventory Vendor Deposit 130,000
B. Leased Facility Deposit 173,392
C.
D.
E.
TOTAL OTHER ASSETS - LINE 8 303,392 0
A. Goodwill: Shepherd Products (FOOTNOTE) 5,223,119
B. Goodwill: DARCO (FOOTNOTE) 518,750
C. Capitalized Lease (FOOTNOTE) 481,876
D.
E.
TOTAL OTHER ASSETS NET OF AMORTIZATION - LINE 14 5,741,869 481,876
A. Intercompany Receivables (FOOTNOTE) 100,961,429 124,276,836
B.
C.
D.
E.
TOTAL OTHER ASSETS - LINE 15 100,961,429 124,276,836
POST PETITION LIABILITIES
A. Accrued Liabilities 648,880
B. Long Term Leases 1,107,492
C. Accrued Interest: Bank 9,667
D.
E.
TOTAL OTHER POST PETITION
LIABILITIES - LINE 22 1,766,039
PRE PETITION LIABILITIES
A. Interco. Payables (FOOTNOTE) 114,705,150 116,488,081
B. 10 3/8% Senior Sub. Notes 105,000,000 105,000,000
C. Sr. Sub. Exchangeable Notes 23,500,000 23,500,000
D.
E.
TOTAL OTHER PRE PETITION
LIABILITIES - LINE 27 243,205,150 244,988,081
</Table>
CASE NAME: KEVCO DISTRIBUTION, LP ACCRUAL BASIS - 2
CASE NUMBER: 401-40789-BJH-11
INCOME STATEMENT
<Table>
<Caption>
MONTH QUARTER
REVENUES JUL-01 MONTH MONTH TOTAL
- -------- ------ ----- ----- -------
1. Gross Revenues (FOOTNOTE) (135) (135)
2. Less: Returns & Discounts
3. Net Revenue (135) (135)
COST OF GOODS SOLD
4. Material
5. Direct Labor
6. Direct Overhead 104,436 104,436
7. Total Cost Of Goods Sold 104,436 104,436
8. Gross Profit (104,571) (104,571)
OPERATING EXPENSES
9. Officer / Insider Compensation 16,538 16,538
10. Selling & Marketing 1,011 1,011
11. General & Administrative 17,180 17,180
12. Rent & Lease 48,646 48,646
13. Other (Attach List) 394,288 394,288
14. Total Operating Expenses 477,663 477,663
15. Income Before Non-Operating
Income & Expense (582,234) (582,234)
OTHER INCOME & EXPENSES
16. Non-Operating Income (Att List)
17. Non-Operating Expense (Att List) 4,077,813 4,077,813
18. Interest Expense
19. Depreciation / Depletion 1,268 1,268
20. Amortization
21. Other (Attach List)
22. Net Other Income & Expenses (4,079,081) (4,079,081)
REORGANIZATION EXPENSES
23. Professional Fees
24. U.S. Trustee Fees
25. Other (Attach List)
26. Total Reorganization Expenses
27. Income Tax
28. Net Profit (Loss) (4,661,315) (4,661,315)
</Table>
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO DISTRIBUTION, LP SUPPLEMENT TO
CASE NUMBER: 401-40789-BJH-11 ACCRUAL BASIS - 2
INCOME STATEMENT
<Table>
<Caption>
MONTH QUARTER
OPERATING EXPENSES JUL-01 MONTH MONTH TOTAL
- ------------------ ------ ----- ----- -------
A. Payroll & Employee Benefits (FOOTNOTE) 338,412 338,412
B. Insurance 5,358 5,358
C. Utilities & Telephone 22,742 22,742
D. Taxes 27,776 27,776
E.
TOTAL OTHER OPERATING EXPENSES - LINE 13 394,288 394,288
OTHER INCOME & EXPENSES
A.
B.
C.
D.
E.
TOTAL NON-OPERATING INCOME - LINE 16
A. Loss on sale of Assets (FOOTNOTE) 4,077,813 4,077,813
B.
C.
D.
E.
TOTAL NON-OPERATING EXPENSE - LINE 17 4,077,813 4,077,813
A.
B.
C.
D.
E.
TOTAL OTHER EXPENSE - LINE 21
REORGANIZATION EXPENSES
A.
B.
C.
D.
E.
TOTAL OTHER REORGANIZATION
EXPENSES - LINE 25
</Table>
CASE NAME: KEVCO DISTRIBUTION, LP ACCRUAL BASIS - 3
CASE NUMBER: 401-40789-BJH-11
<Table>
<Caption>
CASH RECEIPTS AND MONTH QUARTER
DISBURSEMENTS JUL-01 MONTH MONTH TOTAL
- ----------------- ------ ----- ----- -------
1. Cash - Beginning Of Month SEE ATTACHED SUPPLEMENT AND FOOTNOTE
RECEIPTS FROM OPERATIONS
2. Cash Sales
COLLECTION OF ACCOUNTS RECEIVABLE
3. Pre Petition
4. Post Petition
5. Total Operating Receipts
NON-OPERATING RECEIPTS
6. Loans & Advances (Attach List)
7. Sale of Assets
8. Other (Attach List)
9. Total Non-Operating Receipts
10. Total Receipts
11. Total Cash Available
OPERATING DISBURSEMENTS
12. Net Payroll
13. Payroll Taxes Paid
14. Sales, Use & Other Taxes Paid
15. Secured / Rental / Leases
16. Utilities
17. Insurance
18. Inventory Purchases
19. Vehicle Expenses
20. Travel
21. Entertainment
22. Repairs & Maintenance
23. Supplies
24. Advertising
25. Other (Attach List)
26. Total Operating Disbursements
REORGANIZATION DISBURSEMENTS
27. Professional Fees
28. U.S. Trustee Fees
29. Other (Attach List)
30. Total Reorganization Expenses
31. Total Disbursements
32. Net Cash Flow
33. Cash - End of Month
</Table>
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO DISTRIBUTION LP SUPPLEMENT TO ACCRUAL BASIS -3
JULY, 2001
CASE NUMBER: 401-40789-BJH-11 CASH RECEIPTS AND DISBURSEMENTS
<Table>
<Caption>
DIST LP MFG MGMT HOLDING COMP KEVCO INC TOTAL
------- --- ---- ------- ---- --------- -----
1 CASH-BEGINNING OF MONTH -- 3,739 5,395,155 4,631 5,668 1,000 5,410,193
RECEIPTS FROM OPERATIONS
2 CASH SALES -- -- --
COLLECTION OF ACCOUNTS RECEIVABLE
3 PRE PETITION -- -- --
4 POST PETITION 47,759 -- 47,759
5 TOTAL OPERATING RECEIPTS 47,759 -- -- -- -- -- 47,759
NON OPERATING RECEIPTS
6 LOANS & ADVANCES -- --
7 SALE OF ASSETS 482,442 55,779 68,000 606,221
8 OTHER -- 50,449 95,885 -- -- -- 146,334
INTERCOMPANY TRANSFERS 88,194 121,941 (210,135) -- -- --
SALE EXPENSE REIMBURSEMENT
LIFE INSURANCE CASH VALUE
RENT
PAYROLL TAX ADVANCE RETURNED 43,264
MISC. 43,707 --
INTEREST INCOME 8,914
9 TOTAL NON OPERATING RECEIPTS 570,636 228,169 (46,250) -- -- -- 752,555
10 TOTAL RECEIPTS 618,395 228,169 (46,250) -- -- -- 800,314
11 CASH AVAILABLE 618,395 231,908 5,348,905 4,631 5,668 1,000 6,210,507
OPERATING DISBURSEMENTS
12 NET PAYROLL 342,427 9,430 282,924 634,781
13 PAYROLL TAXES PAID -- 238,878 238,878
14 SALES, USE & OTHER TAXES PAID -- --
15 SECURED/RENTAL/LEASES 15,069 3,223 40,094 58,386
16 UTILITIES 67,481 3,641 13,097 84,219
17 INSURANCE -- 137,376 137,376
18 INVENTORY PURCHASES -- --
19 VEHICLE EXPENSE -- --
20 TRAVEL 4,264 -- 4,264
21 ENTERTAINMENT -- --
22 REPAIRS & MAINTENANCE 2,954 74 5,492 8,520
23 SUPPLIES 3,873 -- 30,637 34,510
24 ADVERTISING --
25 OTHER 182,327 61,801 183,730 -- -- -- 427,858
LOAN PAYMENTS 55,779 55,779
FREIGHT 14,204 3,126 17,330
CONTRACT LABOR 846 -- 45,359 46,205
401 K PAYMENTS -- --
PAYROLL TAX ADVANCE ADP --
WAGE GARNISHMENTS 1,761 1,761
MISC. 167,277 2,896 136,610 306,783
26 TOTAL OPERATING DISBURSEMENTS 618,395 78,169 932,228 -- -- -- 1,628,792
REORGANIZATION DISBURSEMENTS
27 PROFESSIONAL FEES -- 157,275 157,275
28 US TRUSTEE FEES -- --
29 OTHER --
30 TOTAL REORGANIZATION EXPENSE -- -- 157,275 -- -- -- 157,275
31 TOTAL DISBURSEMENTS 618,395 78,169 1,089,503 -- -- -- 1,786,067
32 NET CASH FLOW -- 150,000 (1,135,753) -- -- -- (985,753)
33 CASH- END OF MONTH -- 153,739 4,259,402 4,631 5,668 1,000 4,424,440
</Table>
CASE NAME: KEVCO DISTRIBUTION, LP ACCRUAL BASIS - 4
CASE NUMBER: 401-40789-BJH-11
<Table>
<Caption>
SCHEDULED MONTH
ACCOUNTS RECEIVABLE AGING AMOUNT JUL-01 MONTH MONTH
- ------------------------- --------- ------ ----- -----
1. 0 - 30
2. 31 - 60
3. 61 - 90 321,431
4. 91 +
5. Total Accounts Receivable 17,545,859 321,431
6. (Amount Considered Uncollectible)
7. Accounts Receivable (Net) (FOOTNOTE) 17,545,859 321,431
</Table>
AGING OF POST PETITION MONTH: JULY-01
TAXES AND PAYABLES ----------------
<Table>
<Caption>
0 - 30 31 - 60 61 - 90 91 +
TAXES PAYABLE DAYS DAYS DAYS DAYS TOTAL
- ------------- ------ ------- ------- ---- -----
1. Federal
2. State 5,541 5,541
3. Local
4. Other (See Below) 413,580 413,580
5. Total Taxes Payable 419,121 419,121
6. Accounts Payable
</Table>
MONTH: JULY-01
----------------
STATUS OF POST PETITION TAXES
<Table>
<Caption>
BEGINNING TAX AMOUNT WITHHELD
FEDERAL LIABILITY* AND/OR ACCRUED (AMOUNT PAID) ENDING TAX LIABILITY
- ------- ------------- --------------- ------------- --------------------
1. Withholding ** 75,187 (75,187)
2. FICA - Employee ** 27,031 (27,031)
3. FICA - Employer ** 27,031 (27,031)
4. Unemployment
5. Income
6. Other (Attach List)
7. Total Federal Taxes 129,249 (129,249)
STATE AND LOCAL
8. Withholding 13,179 (13,179)
9. Sales (FOOTNOTE) 5,541 5,541
10. Excise
11. Unemployment 188 (188)
12. Real Property (FOOTNOTE) 413,580 413,580
13. Personal Property
14. Other (Attach List)
15. Total State And Local 419,121 13,367 (13,367) 419,121
16. Total Taxes 419,121 142,616 (142,616) 419,121
</Table>
* The beginning tax liability should represent the liability from the prior
month or, if this is the first operating report, the amount should be zero.
** Attach photocopies of IRS Form 6123 or your FTD coupon and payment receipt
to verify payment of deposit.
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO DISTRIBUTION, LP ACCRUAL BASIS - 5
CASE NUMBER: 401-40789-BJH-11
The debtor in possession must complete the reconciliation below for each bank
account, including all general, payroll and tax accounts, as well as all savings
and investment accounts, money market accounts, certificates of deposit,
government obligations, etc. Accounts with restricted funds should be identified
by placing an asterisk next to the account number. Attach additional sheets if
necessary.
MONTH: JULY-01
---------------------
<Table>
<Caption>
BANK RECONCILIATIONS Account # 1 Account # 2
- -------------------- ----------- -----------
A. BANK:
B. ACCOUNT NUMBER: Other Accounts
C. PURPOSE (TYPE): (Attach List) TOTAL
1. Balance Per Bank Statement
2. Add: Total Deposits Not Credited
3. Subtract: Outstanding Checks
4. Other Reconciling Items
5. Month End Balance Per Books
6. Number of Last Check Written
</Table>
INVESTMENT ACCOUNTS
<Table>
<Caption>
DATE OF TYPE OF
BANK, ACCOUNT NAME & NUMBER PURCHASE INSTRUMENT PURCHASE PRICE CURRENT VALUE
- --------------------------- -------- ---------- -------------- -------------
7.
8.
9.
10. (Attach List)
11. Total Investments
CASH
12. Currency On Hand
13. Total Cash - End of Month 0
</Table>
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CASE NAME: KEVCO DISTRIBUTION, LP ACCRUAL BASIS - 6
CASE NUMBER: 401-40789-BJH-11
MONTH: JULY-01
-------------------
PAYMENTS TO INSIDERS AND PROFESSIONALS
Of the Total Disbursements shown for the month, list the amount paid to Insiders
(as defined in Section 101 (31) (A) - (F) of the U.S. Bankruptcy Code) and to
Professionals. Also, for payments to Insiders, identify the type of compensation
paid (e.g. salary, bonus, commissions, insurance, housing allowance, travel, car
allowance, etc.). Attach additional sheets if necessary.
INSIDERS
<Table>
<Caption>
TYPE OF AMOUNT TOTAL PAID
NAME PAYMENT PAID TO DATE
---- ------- ------ ----------
1. Martin, Steve Payroll 16,538 99,229
2. Martin, Steve Exp. Reimb. 1,390
3.
4.
5. (Attach List)
6. Total Payments To Insiders 16,538 100,619
</Table>
PROFESSIONALS
<Table>
<Caption>
DATE OF
COURT ORDER TOTAL
AUTHORIZING AUTHORIZING AMOUNT TOTAL PAID INCURRED
NAME PAYMENT APPROVED PAID TO DATE & UNPAID*
---- ------- -------- ---- ------- ---------
1.
2.
3.
4.
5. (Attach List)
6. Total Payments To Professionals
</Table>
* Include all fees incurred, both approved and unapproved
POST PETITION STATUS OF SECURED NOTES, LEASES PAYABLE
AND ADEQUATE PROTECTION PAYMENTS
<Table>
<Caption>
SCHEDULED AMOUNTS TOTAL
MONTHLY PAID UNPAID
PAYMENTS DURING POST
NAME OF CREDITOR DUE MONTH PETITION
---------------- -------- ------- --------
1. Bank of America (FOOTNOTE) 15,071,491
2. Leases Payable (FOOTNOTE) Not Available
3.
4.
5. (Attach List)
6. TOTAL 15,071,491
</Table>
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CASE NAME: KEVCO DISTRIBUTION, LP ACCRUAL BASIS - 7
CASE NUMBER: 401-40789-BJH-11
MONTH: JULY-01
-------------------
QUESTIONNAIRE
<Table>
<Caption>
YES NO
--- --
1. Have any Assets been sold or transferred outside the normal course of
business this reporting period? X
2. Have any funds been disbursed from any account other than a debtor in
possession account? X
3. Are any Post Petition Receivables (accounts, notes, or loans) due from
related parties? X
4. Have any payments been made on Pre Petition Liabilities this reporting
period? X
5. Have any Post Petition Loans been received by the debtor from any
party? X
6. Are any Post Petition Payroll Taxes past due? X
7. Are any Post Petition State or Federal Income Taxes past due? X
8. Are any Post Petition Real Estate Taxes past due? X
9. Are any other Post Petition Taxes past due? X
10. Are any amounts owed to Post Petition creditors delinquent? X
11. Have any Pre Petition Taxes been paid during the reporting period? X
12. Are any wage payments past due? X
</Table>
If the answer to any of the above questions is "Yes", provide a detailed
explanation of each item. Attach additional sheets if necessary.
(SEE FOOTNOTE)
INSURANCE
<Table>
<Caption>
YES NO
--- --
1. Are Worker's Compensation, General Liability and other necessary
insurance coverages in effect? X
2. Are all premium payments paid current? X
3. Please itemize policies below.
</Table>
If the answer to any of the above questions is "No", or if any policies have
been canceled or not renewed during this reporting period, provide an
explanation below. Attach additional sheets if necessary.
INSTALLMENT PAYMENTS
<Table>
<Caption>
TYPE OF POLICY CARRIER PERIOD COVERED PAYMENT AMOUNT & FREQUENCY
-------------- ------- -------------- --------------------------
Property Lexington, Allianz 5/29/00-3/1/02 Semi-Annual $26,485
Group Health Blue Cross/Blue Shield Terminated 8/1/01 N/A
Auto Liberty Mutual 9/1/00-3/1/02 Semi-Annual $3,333
General Liability Liberty Mutual 9/1/00-3/1/02 Semi-Annual $64,657
</Table>
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CASE NAME: KEVCO DISTRIBUTION, LP
CASE NUMBER: 401-40789-BJH-11
MONTH: JULY 31, 2001
-----------------------
FOOTNOTES SUPPLEMENT ACCRUAL BASIS
<Table>
<Caption>
ACCRUAL
BASIS
FORM
NUMBER LINE NUMBER FOOTNOTE/EXPLANATION
- ------ ----------- --------------------
1 1 Pursuant to the February 12, 2001 Order (1) Authorizing Continued Use of Existing Forms
3 1 and Records; (2) Authorizing Maintenance of Existing Corporate Bank Accounts and Cash
Management System; and (3) Extending Time to Comply with 11 U.S.C. Section 345 Investment
Guidelines, funds in the Bank of America and Key Bank deposit accounts are swept daily
into Kevco's lead account number 1295026976. The Bank of America lead account is
administered by, and held in the name of, Kevco Management Co. (co-debtor, Case No.
401-40788-BJH-11). Accordingly, all cash receipts and disbursements flow through Kevco
Management's Bank of America DIP account. A schedule allocating receipts and disbursements
among Kevco, Inc. and its subsidiaries is included in this report as a Supplement to
Accrual Basis -3. Debtor as of the end of May closed all of its bank accounts.
1 4 As of July, the remaining accounts receivable are for commissions earned for the sale of
4 7 consigned inventory. Although collection is uncertain, Debtor will maintain these
receivables on the balance sheet until such time as collection can be determined more
accurately.
1 5 During July, Debtor adjusted its books and records to more accurately reflect its
1 12 remaining fixed assets and inventory. In addition, certain expense accruals made at the
2 17A beginning of the year were reversed because the liabilities will not be incurred as
estimated. The gains and losses from these adjustments were netted and classified as Loss
on Sale of Assets.
1 5, 12 Pursuant to Asset Purchase Agreements approved by the Court (see prior Monthly Operating
1 14A,B Reports for details), the Kevco Debtors have sold most of their assets except for certain
1 24 items of real property currently being marketed.
6 1
1 22 The Debtor records on its books accruals for certain liabilities based on historical
estimates. While known creditors were listed on the Debtor's Schedules, the estimated
amounts were not. Accordingly, for purposes of this report, the accrued liabilities are
reflected as post-petition "Accrued Liabilities."
1 15A Intercompany receivables/payables are from/to co-debtors Kevco Management Co. (Case No.
1 27A 401-40788-BJH-11), Kevco Manufacturing, LP (Case No. 401-40784-BJH-11), Kevco Holding,
7 3 Inc. (Case No. 401-40785-BJH-11), DCM Delaware, Inc. (Case No. 401-40787-BJH-11), Kevco
GP, Inc. (Case No. 401-40786-BJH-11), Kevco Components, Inc. (Case No. 401-40790-BJH-11),
and Kevco, Inc. (Case No. 401-40783-BJH-11).
1 25 Pursuant to Order dated February 12, 2001 and Supplemental Order dated March 14, 2001,
debtors were authorized to pay pre-petition salaries and wages up to a maximum of $4,300
per employee. Debtors were also (a) allowed to pay accrued vacation to terminated
employees and (b) permitted to continue allowing employees to use vacation time as
scheduled.
</Table>
<Table>
<Caption>
ACCRUAL
BASIS
FORM
NUMBER LINE NUMBER FOOTNOTE/EXPLANATION
- ------ ----------- --------------------
1 32 The direct charges to equity are due to secured debt reductions pursuant to sales of Kevco
Manufacturing, LP's operating divisions, the asset sale of the South Region of Kevco
Distribution, as well as direct cash payments of $25 million. The secured debt owed to
Bank of America by Kevco, Inc. (Case No. 401-40783-BJH) has been guaranteed by all of its
co-debtors (see Footnote 1,27A); therefore, the secured debt is reflected as a liability
on all of the Kevco entities. The charge to equity is simply an adjustment to the balance
sheet.
2 13A During July, all Debtor's employees were terminated. In accordance with a March 14, 2001
Order Granting Motion to Approve Management and Employee Retention Plan by Kevco, Inc.,
stay bonuses were paid to participating employees.
4 9 Sales tax owing is an accrual only and not yet due. Some of the property taxes payable may
4 12 be pre-petition. Once they are identified, the monthly operating report will be adjusted.
6 2 The Debtor is the lessee on hundreds of real and personal property leases, the vast
majority of which have been rejected. The Debtor does not isolate monthly payments due or
paid on account of such leases. Instead, all lease payments are reflected in the Debtor's
accounts payable system. To separately identify monthly accruals and payments on leases
would require an enormous outlay of the Debtor's accounting personnel and professionals.
The Debtor simply does not have available to it the resources that would be required to
provide the detail requested. If any party-in-interest desires specific information about
any specific lease, the Debtor will provide such information upon request.
</Table>