EXHIBIT 99.7
CASE NAME: KEVCO MANUFACTURING, LP ACCRUAL BASIS
CASE NUMBER: 401-40784-BJH-11
JUDGE: BARBARA J. HOUSER
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
-------- -----
FORT WORTH DIVISION
----------
MONTHLY OPERATING REPORT
MONTH ENDING: SEPTEMBER 30, 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 OCTOBER 29, 2001
- --------------------------------------- ---------------------------
Printed Name of Responsible Party Date
PREPARER:
/s/ Dennis S. Faulkner DEBTOR'S ACCOUNTANT
- --------------------------------------- ---------------------------
Original Signature of Preparer Title
DENNIS S. FAULKNER OCTOBER 29, 2001
- --------------------------------------- ---------------------------
Printed Name of Preparer Date
CASE NAME: KEVCO MANUFACTURING, LP ACCRUAL BASIS - 1
CASE NUMBER: 401-40784-BJH-11
COMPARATIVE BALANCE SHEET
<Table>
<Caption>
SCHEDULED MONTH MONTH MONTH
ASSETS AMOUNT JUL-01 AUG-01 SEP-01
- ------ --------- ------ ------ ------
1. Unrestricted Cash (FOOTNOTE) 41,683 153,739 150,505 150,202
2. Restricted Cash
3. Total Cash 41,683 153,739 150,505 150,202
4. Accounts Receivable (Net) (FOOTNOTE) 7,974,696 0 0 0
5. Inventory (FOOTNOTE) 14,793,828 0 0 0
6. Notes Receivable
7. Prepaid Expenses 196,584 0 0 0
8. Other (Attach List) 0 0 0 0
9. Total Current Assets 23,006,791 153,739 150,505 150,202
10. Property, Plant & Equip. (FOOTNOTE) 32,082,187 2,220,574 2,220,574 2,220,574
11. Less: Accumulated Depreciation (7,696,543) (250,320) (250,320) (250,320)
12. Net Property, Plant & Equipment 24,385,644 1,970,254 1,970,254 1,970,254
13. Due From Insiders
14. Other Assets - Net of Amortization
(Attach List) 8,369,096 0 0 0
15. Other (Attach List) 13,541,943 45,814,902 45,590,669 45,496,169
16. Total Assets 69,303,474 47,938,895 47,711,428 47,616,625
POST PETITION LIABILITIES
17. Accounts Payable
18. Taxes Payable (FOOTNOTE) 26,492 26,492 26,492
19. Notes Payable
20. Professional Fees
21. Secured Debt
22. Other (Attach List) 131,387 131,387 131,387
23. Total Post Petition Liabilities 157,879 157,879 157,879
PRE PETITION LIABILITIES
24. Secured Debt (FOOTNOTE) 75,885,064 15,071,491 14,930,296 15,365,448
25. Priority Debt (FOOTNOTE) 1,383,756
26. Unsecured Debt (FOOTNOTE) 5,139,545 2,883,206 2,883,206 2,733,206
27. Other (Attach List) 197,008,999 197,951,008 197,951,008 197,951,008
28. Total Pre Petition Liabilities 279,417,364 215,905,705 215,764,510 216,049,662
29. Total Liabilities 279,417,364 216,063,584 215,922,389 216,207,541
EQUITY
30. Pre Petition Owners' Equity (210,107,292) (210,107,292) (210,107,292)
31. Post Petition Cumulative Profit Or (Loss) (18,705,507) (18,932,974) (18,877,777)
32. Direct Charges To Equity (Attach
Explanation FOOTNOTE) 60,688,110 60,829,305 60,394,153
33. Total Equity (168,124,689) (168,210,961) (168,590,916)
34. Total Liabilities and Equity 47,938,895 47,711,428 47,616,625
</Table>
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO MANUFACTURING, LP SUPPLEMENT TO
CASE NUMBER: 401-40784-BJH-11 ACCRUAL BASIS - 1
COMPARATIVE BALANCE SHEET
<Table>
<Caption>
SCHEDULED MONTH MONTH MONTH
ASSETS AMOUNT JUL-01 AUG-01 SEP-01
- ------ --------- ------ ------ ------
A.
B.
C.
D.
E.
TOTAL OTHER ASSETS - LINE 8 0 0 0 0
A. Goodwill: Consolidated
Forest Products (FOOTNOTE) 8,369,096 0 0 0
B.
C.
D.
E.
TOTAL OTHER ASSETS NET OF
AMORTIZATION - LINE 14 8,369,096 0 0 0
A. Intercompany Receivables
(FOOTNOTE) 13,541,943 45,814,902 45,590,669 45,496,169
B.
C.
D.
E.
TOTAL OTHER ASSETS - LINE 15 13,541,943 45,814,902 45,590,669 45,496,169
POST PETITION LIABILITIES
A. Accrued Liabilities (FOOTNOTE) 131,387 131,387 131,387
B.
C.
D.
E.
TOTAL OTHER POST PETITION
LIABILITIES - LINE 22 131,387 131,387 131,387
PRE PETITION LIABILITIES
A. Interco. Payables (FOOTNOTE) 68,508,999 69,451,008 69,451,008 69,451,008
B. 10 3/8% Senior Sub. Notes 105,000,000 105,000,000 105,000,000 105,000,000
C. Sr. Sub. Exchangeable Notes 23,500,000 23,500,000 23,500,000 23,500,000
D.
E.
TOTAL OTHER PRE PETITION
LIABILITIES - LINE 27 197,008,999 197,951,008 197,951,008 197,951,008
</Table>
CASE NAME: KEVCO MANUFACTURING, LP ACCRUAL BASIS - 2
CASE NUMBER: 401-40784-BJH-11
INCOME STATEMENT
<Table>
<Caption>
MONTH MONTH MONTH QUARTER
REVENUES JUL-01 AUG-01 SEP-01 TOTAL
- -------- ------ ------ ------ -------
1. Gross Revenues 0 0 0 0
2. Less: Returns & Discounts 0
3. Net Revenue 0 0 0 0
COST OF GOODS SOLD
4. Material 0
5. Direct Labor 0
6. Direct Overhead (393) 0 1,823 1,430
7. Total Cost of Goods Sold (393) 0 1,823 1,430
8. Gross Profit 393 0 (1,823) (1,430)
OPERATING EXPENSES
9. Officer / Insider Compensation 40,500 0 93,078 133,578
10. Selling & Marketing 0
11. General & Administrative 2,320 3,282 300 5,902
12. Rent & Lease 0 0
13. Other (Attach List) 16,267 1,148 15,939 33,354
14. Total Operating Expenses 59,087 4,430 109,317 172,834
15. Income Before Non-Operating
Income & Expense (58,694) (4,430) (111,140) (174,264)
OTHER INCOME & EXPENSES
16. Non-Operating (Income) (Att List) (197,204) (3,087) (166,337) (366,628)
17. Non-Operating Expense (Att List) 0 226,124 0 226,124
18. Interest Expense 0
19. Depreciation / Depletion 0
20. Amortization 0
21. Other (Attach List) 0
22. Net Other Income & (Expenses) 197,204 (223,037) 166,337 140,504
REORGANIZATION EXPENSES
23. Professional Fees 0
24. U.S. Trustee Fees 0
25. Other (Attach List) 0
26. Total Reorganization Expenses 0 0 0 0
27. Income Tax 0
28. Net Profit (Loss) 138,510 (227,467) 55,197 (33,760)
</Table>
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO MANUFACTURING, LP SUPPLEMENT TO
CASE NUMBER: 401-40784-BJH-11 ACCRUAL BASIS - 2
INCOME STATEMENT
<Table>
<Caption>
MONTH MONTH MONTH QUARTER
OPERATING EXPENSES JUL-01 AUG-01 SEP-01 TOTAL
- ------------------ ------ ------ ------ -------
A. Payroll & Employee Benefits 11,684 1,085 12,769
B. Insurance Expense 278 17,193 17,471
C. Utilities and Telephone 2,248 63 (1,254) 1,057
D. Taxes 2,057 2,057
E. 0
TOTAL OTHER OPERATING
EXPENSES - LINE 13 16,267 1,148 15,939 33,354
OTHER INCOME & EXPENSES
A. Income Statement Adjustments
(FOOTNOTE) (197,204) (166,337) (363,541)
B. Gain on sale of assets (2,885) (2,885)
C. Interest Income (202) (202)
TOTAL NON-OPERATING INCOME -
LINE 16 (197,204) (3,087) (166,337) (366,628)
A. Income Statement Adjustments
(FOOTNOTE) 226,124 226,124
B. 0
C. 0
D.
TOTAL NON-OPERATING
EXPENSE - LINE 17 0 226,124 0 226,124
REORGANIZATION EXPENSES
A. 0
B. 0
C. 0
D. 0
E. 0
TOTAL OTHER REORGANIZATION
EXPENSES - LINE 25 0 0 0 0
</Table>
CASE NAME: KEVCO MANUFACTURING, LP ACCRUAL BASIS - 3
CASE NUMBER: 401-40784-BJH-11
<Table>
<Caption>
CASH RECEIPTS AND MONTH MONTH MONTH QUARTER
DISBURSEMENTS JUL-01 AUG-01 SEP-01 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>
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CASE NAME: KEVCO MANUFACTURING LP SUPPLEMENT TO ACCRUAL BASIS -3
SEPTEMBER, 2001
CASE NUMBER: 401-40784-BJH-11 CASH RECEIPTS AND DISBURSEMENTS
<Table>
<Caption>
DIST LP MFG MGMT HOLDING COMP KEVCO INC TOTAL
------- --- ---- ------- ---- --------- -----
1 CASH-BEGINNING OF MONTH -- 150,505 3,618,707 -- -- 1,000 3,770,212
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 -- --
7 SALE OF ASSETS 100,000 -- 100,000
8 OTHER 36,713 28,468 46,412 -- 23,268 -- 134,861
INTERCOMPANY TRANSFERS (127,561) 42,440 108,389 -- (23,268) --
SALE EXPENSE REIMBURSEMENT
INCOME TAX REFUND 23,268
RENT
PAYROLL TAX ADVANCE RETURNED MISC. 36,713 37,857 --
INTEREST INCOME 8,555
9 TOTAL NON OPERATING RECEIPTS 9,152 70,908 154,801 -- -- -- 234,861
10 TOTAL RECEIPTS 9,152 70,908 154,801 -- -- -- 234,861
11 CASH AVAILABLE 9,152 221,413 3,773,508 -- -- 1,000 4,005,073
OPERATING DISBURSEMENTS
12 NET PAYROLL 18,582 18,582
13 PAYROLL TAXES PAID -- 6,780 6,780
14 SALES, USE & OTHER TAXES PAID 2,870 -- 2,870
15 SECURED/RENTAL/LEASES -- 5,002 5,002
16 UTILITIES 262 -- 2,690 2,952
17 INSURANCE -- 112,200 112,200
18 INVENTORY PURCHASES -- --
19 VEHICLE EXPENSE -- --
20 TRAVEL -- --
21 ENTERTAINMENT -- --
22 REPAIRS & MAINTENANCE 2,656 -- 2,656
23 SUPPLIES -- --
24 ADVERTISING --
25 OTHER 3,364 71,211 99,384 -- -- -- 173,959
LOAN PAYMENTS -- --
FREIGHT 959 -- 1,165 2,124
CONTRACT LABOR -- 96,405 96,405
401 K PAYMENTS -- --
PAYROLL TAX ADVANCE ADP --
WAGE GARNISHMENTS --
MISC. 2,405 71,211 1,814 75,430
26 TOTAL OPERATING DISBURSEMENTS 9,152 71,211 244,638 -- -- -- 325,001
REORGANIZATION DISBURSEMENTS
27 PROFESSIONAL FEES -- 11,217 11,217
28 US TRUSTEE FEES -- --
29 OTHER --
30 TOTAL REORGANIZATION EXPENSE -- -- 11,217 -- -- -- 11,217
31 TOTAL DISBURSEMENTS 9,152 71,211 255,855 -- -- -- 336,218
32 NET CASH FLOW -- (303) (101,054) -- -- -- (101,357)
33 CASH- END OF MONTH -- 150,202 3,517,653 -- -- 1,000 3,668,855
</Table>
CASE NAME: KEVCO MANUFACTURING, LP ACCRUAL BASIS - 4
CASE NUMBER: 401-40784-BJH-11
<Table>
<Caption>
SCHEDULED MONTH MONTH MONTH
ACCOUNTS RECEIVABLE AGING AMOUNT JUL-01 AUG-01 SEP-01
- ------------------------- --------- ------ ------ ------
1. 0 - 30 0 0 0
2. 31 - 60
3. 61 - 90
4. 91 +
5. Total Accounts Receivable 7,974,696 0 0 0
6. (Amount Considered Uncollectible)
7. Accounts Receivable (Net) 7,974,696 0 0 0
</Table>
AGING OF POST PETITION MONTH: SEPTEMBER-01
TAXES AND PAYABLES ----------------
<Table>
<Caption>
0 - 30 31 - 60 61 - 90 91 +
TAXES PAYABLE DAYS DAYS DAYS DAYS TOTAL
- ------------- ------ ------- ------- ---- -----
1. Federal -
2. State 5,000 5,000
3. Local -
4. Other (See Below) 21,492 21,492
5. Total Taxes Payable 26,492 0 0 0 26,492
6. Accounts Payable 0 0
</Table>
MONTH: SEPTEMBER-01
----------------
STATUS OF POST PETITION TAXES
<Table>
<Caption>
AMOUNT
BEGINNING TAX WITHHELD AND/OR ENDING TAX
FEDERAL LIABILITY* ACCRUED (AMOUNT PAID) LIABILITY
- ------- ------------- --------------- ------------- ----------
1. Withholding ** 0
2. FICA - Employee ** 0
3. FICA - Employer ** 0
4. Unemployment 0
5. Income 0
6. Other (Attach List) 0
7. Total Federal Taxes 0 0 0 0
STATE AND LOCAL
8. Withholding 0 0
9. Sales (FOOTNOTE) 5,000 0 5,000
10. Excise 0
11. Unemployment 0 0
12. Real Property 0
13. Personal Property (FOOTNOTE) 21,492 0 21,492
14. Other (Attach List) 0
15. Total State And Local 26,492 0 0 26,492
16. Total Taxes 26,492 0 0 26,492
</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.
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CASE NAME: KEVCO MANUFACTURING, LP ACCRUAL BASIS - 5
CASE NUMBER: 401-40784-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,
MONTH: SEPTEMBER-01
----------------
<Table>
<Caption>
BANK RECONCILIATIONS Account # 1 Account # 2
- -------------------- ----------- -----------
A. BANK: Summit Bank Summit Bank Other Accounts
B. ACCOUNT NUMBER: 1-0138099 1-0137836 (Attach List) TOTAL
C. PURPOSE (TYPE): Depository Depository
1. Balance Per Bank Statement 5,000 145,505 -- 150,505
2. Add: Total Deposits Not Credited
3. Subtract: Outstanding Checks --
4. Other Reconciling Items (303) (303)
5. Month End Balance Per Books 5,000 145,202 -- 150,202
6. Number of Last Check Written N/A N/A
</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
Reclass to Accounts Payable
13. Total Cash - End of Month 150,202
</Table>
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CASE NAME: KEVCO MANUFACTURING, LP ACCRUAL BASIS - 6
CASE NUMBER: 401-40784-BJH-11
MONTH: SEPTEMBER-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. Lee Denham Payroll/severance 134,620
2. Lee Denham Expense Reimb. 254
3. Jim Connors Consulting fees and expenses 12,078 114,975
4. Jim Connors Division Sale Bonuses 81,000 112,500
5. (Attach List)
6. Total Payments To Insiders 93,078 362,349
</Table>
PROFESSIONALS
<Table>
<Caption>
DATE OF
COURT ORDER TOTAL
AUTHORIZING AMOUNT AMOUNT TOTAL PAID INCURRED
NAME PAYMENT APPROVED PAID TO DATE & UNPAID*
---- ----------- -------- ------ ---------- ----------
1. Gordion Group 03/20/01 301,398 301,398
2.
3.
4.
5. (Attach List)
6. Total Payments To Professionals 301,398 0 301,398 0
</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
MONTHLY PAID TOTAL
PAYMENTS DURING UNPAID POST
NAME OF CREDITOR DUE MONTH PETITION
---------------- --------- -------- -----------
1. Bank of America N/A $ 15,365,448
2. Status of Leases Payable None
3.
4.
5. (Attach List)
6. TOTAL $ -- $ -- $ 15,365,448
</Table>
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CASE NAME: KEVCO MANUFACTURING, LP ACCRUAL BASIS - 7
CASE NUMBER: 401-40784-BJH-11 MONTH: SEPTEMBER-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>
PAYMENT AMOUNT &
TYPE OF POLICY CARRIER PERIOD COVERED 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 MANUFACTURING, LP FOOTNOTES SUPPLEMENT
CASE NUMBER: 401-40784-BJH-11 ACCRUAL BASIS
MONTH: SEPTEMBER 30, 2001
----------------------
<Table>
<Caption>
DUAL
BASIS
FORM
NUMBER LINE NUMBER FOOTNOTE/EXPLANATION
- ------ ----------- --------------------
1 1 Pursuant to the February 12, 2001 Order (1) Authorizing Continued
3 1 Use of Existing Forms 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.
1 4,5 Pursuant to Asset Purchase Agreements approved by the Court (see prior
1 10,14A Monthly Operating Reports for details), Debtor has sold most of its assets.
1 15A Intercompany receivables/payables are from/to co-debtors Kevco Management Co.
1 27A (Case No. 401-40788-BJH-11), Kevco Distribution, LP (Case No. 401-40789-BJH-11),
7 3 Kevco Holding, 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 18 Sales and property tax owing are accruals only and not yet due.
4 9, 13
1 22A The Debtor records on its books accruals for certain liabilities based on
historical estimates. While the 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 25 Pursuant to Order dated February 12, 2001 and Supplemental Order dated March 14,
2001, debtors were authorized to pay pre-petition taxes, 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.
1 24 The direct charges to equity are due to secured debt reductions pursuant to
1 32 asset sales by Debtor and its co-debtors as well as direct cash payments. The
secured debt owed to Bank of America by Kevco, Inc. (Case No. 401-40783-BJH-11)
has been guaranteed by all of its co-debtors (see Footnote 1,15A); 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.
1 24 In September, Liberty Mutual, Debtor's Workman's Compensation carrier, drew
$300,000 on a letter of credit issued during 2000 as reflected on the financial
statements of Kevco Management, Inc.
2 16A, 17A During this quarter, expense accruals made at the beginning of the year were
reversed as the liabilities will not be incurred as estimated. The Income
Statement adjustments were made in order to more accurately reflect Debtor's
expenses.
</Table>