EXHIBIT 99.2
CASE NAME: KEVCO MANAGEMENT, INC. ACCRUAL BASIS
CASE NUMBER: 401-40788-BJH-11
JUDGE: BARBARA J. HOUSER
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
-------- -----
FORT WORTH DIVISION
----------
MONTHLY OPERATING REPORT
MONTH ENDING: OCTOBER 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 NOVEMBER 21, 2001
- --------------------------------------- --------------------------------
Printed Name of Responsible Party Date
PREPARER:
/s/ Dennis S. Faulkner ACCOUNTANT FOR DEBTOR
- --------------------------------------- --------------------------------
Original Signature of Preparer Title
DENNIS S. FAULKNER NOVEMBER 21, 2001
- --------------------------------------- --------------------------------
Printed Name of Preparer Date
CASE NAME: KEVCO MANAGEMENT, INC. ACCRUAL BASIS - 1
CASE NUMBER: 401-40788-BJH-11
COMPARATIVE BALANCE SHEET
<Table>
<Caption>
SCHEDULED MONTH
ASSETS AMOUNT OCT-01 MONTH MONTH
- ------ --------- ------ ----- -----
1. Unrestricted Cash (FOOTNOTE) 6,557,974 3,592,787
2. Restricted Cash
3. Total Cash 6,557,974 3,592,787
4. Accounts Receivable (Net) (FOOTNOTE) 300,000
5. Inventory
6. Notes Receivable
7. Prepaid Expenses (FOOTNOTE) 3,450,681 438,830
8. Other (Attach List) 263,606 0
9. Total Current Assets 10,272,261 4,331,617
10. Property, Plant & Equipment 3,285,885 0
11. Less: Accumulated Depreciation/Depletion (1,753,163) 0
12. Net Property, Plant & Equipment 1,532,722 0
13. Due From Insiders
14. Other Assets - Net of Amortization (Attach List) 36,082 0
15. Other (Attach List) (FOOTNOTE) 153,399,371 39,971,438
16. Total Assets 165,240,436 44,303,055
POST PETITION LIABILITIES
17. Accounts Payable
18. Taxes Payable 11,634
19. Notes Payable
20. Professional Fees
21. Secured Debt
22. Other (Attach List) (FOOTNOTE) 1,807,702
23. Total Post Petition Liabilities 1,819,336
PRE PETITION LIABILITIES
24. Secured Debt (FOOTNOTE) 75,885,064 14,891,816
25. Priority Debt (FOOTNOTE) 200,832 0
26. Unsecured Debt 1,779,701 1,391,017
27. Other (Attach List) 242,243,558 169,562,605
28. Total Pre Petition Liabilities 320,109,155 185,845,438
29. Total Liabilities 320,109,155 187,664,774
EQUITY
30. Pre Petition Owners' Equity (154,868,719)
31. Post Petition Cumulative Profit Or (Loss) (5,347,301)
32. Direct Charges To Equity (Attach Explanation FOOTNOTE) 16,854,301
33. Total Equity (143,361,719)
34. Total Liabilities and Equity 44,303,055
</Table>
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO MANAGEMENT, INC. SUPPLEMENT TO
CASE NUMBER: 401-40788-BJH-11 ACCRUAL BASIS - 1
COMPARATIVE BALANCE SHEET
<Table>
<Caption>
SCHEDULED MONTH
ASSETS AMOUNT OCT-01 MONTH MONTH
- ------ --------- ------ ----- -----
A. Security Deposit 8,794 0
B. Cash Surrender Value: Life Ins. 254,812 0
C.
D.
E.
TOTAL OTHER ASSETS - LINE 8 263,606 0
A. Organizational Costs 36,082 0
B.
C.
D.
E.
TOTAL OTHER ASSETS NET OF
AMORTIZATION - LINE 14 36,082 0
A. Intercompany Receivables 113,743,558 0
B. Intercompany Royalties 39,655,813 39,971,438
C.
D.
E.
TOTAL OTHER ASSETS - LINE 15 153,399,371 39,971,438
POST PETITION LIABILITIES
A. Accrued Liabilities Other 453,449
B. Deferred Compensation 960,371
C. Accrued Health Claims 393,882
D.
E.
F.
G.
TOTAL OTHER POST PETITION
LIABILITIES - LINE 22 1,807,702
PRE PETITION LIABILITIES
A. Intercompany Payables (FOOTNOTE) 113,743,558 41,062,605
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 27 242,243,558 169,562,605
</Table>
CASE NAME: KEVCO MANAGEMENT, INC. ACCRUAL BASIS - 2
CASE NUMBER: 401-40788-BJH-11
INCOME STATEMENT
<Table>
<Caption>
MONTH QUARTER
REVENUES OCT-01 MONTH MONTH TOTAL
- -------- ------ ----- ----- -------
1. Gross Revenues 0
2. Less: Returns & Discounts 0
3. Net Revenue 0 0
COST OF GOODS SOLD
4. Material 0
5. Direct Labor 0
6. Direct Overhead 0
7. Total Cost Of Goods Sold 0 0
8. Gross Profit 0 0
OPERATING EXPENSES
9. Officer / Insider Compensation 18,635 18,635
10. Selling & Marketing 0
11. General & Administrative 3,270 3,270
12. Rent & Lease 9,225 9,225
13. Other (Attach List) 13,993 13,993
14. Total Operating Expenses 45,123 45,123
15. Income Before Non-Operating
Income & Expense (45,123) (45,123)
OTHER INCOME & EXPENSES
16. Non-Operating Income (Att List) 4,403 4,403
17. Non-Operating Expense (Att List) 0 0
18. Interest Expense 0
19. Depreciation / Depletion 0
20. Amortization 0
21. Other (Attach List) 0
22. Net Other Income & Expenses 4,403 4,403
REORGANIZATION EXPENSES
23. Professional Fees 90,292 90,292
24. U.S. Trustee Fees 13,750 13,750
25. Other (Attach List) 0
26. Total Reorganization Expenses 104,042 104,042
27. Income Tax 0
28. Net Profit (Loss) (144,762) (144,762)
</Table>
This form does x does not have related footnotes on Footnotes Supplement.
--- ---
CASE NAME: KEVCO MANAGEMENT, INC. SUPPLEMENT TO
CASE NUMBER: 401-40788-BJH-11 ACCRUAL BASIS - 2
INCOME STATEMENT
<Table>
<Caption>
MONTH QUARTER
OPERATING EXPENSES OCT-01 MONTH MONTH TOTAL
- ------------------ ------ ----- ----- -------
A. Payroll 6,365 6,365
B. Insurance 7,000 7,000
C. Utilities & Telephone 213 213
D. Taxes 415 415
E. 0
TOTAL OTHER OPERATING EXPENSES - LINE 13 13,993 13,993
OTHER INCOME & EXPENSES
A. Interest and Misc. Income 4,403 4,403
B. Balance Sheet Adjustments (FOOTNOTE) 0
C. 0
D. 0
E. 0
TOTAL NON-OPERATING INCOME - LINE 16 4,403 4,403
A. 0
B. 0
C. 0
D. 0
E. 0
TOTAL NON-OPERATING EXPENSE - LINE 17 0 0
REORGANIZATION EXPENSES
A. 0
B. 0
C. 0
D. 0
E. 0
TOTAL OTHER REORGANIZATION EXPENSES - LINE 25 0 0
</Table>
CASE NAME: KEVCO MANAGEMENT, INC. ACCRUAL BASIS - 3
CASE NUMBER: 401-40788-BJH-11
<Table>
<Caption>
CASH RECEIPTS AND MONTH QUARTER
DISBURSEMENTS OCT-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.
--- ---
CASE NAME: KEVCO MANAGEMENT, INC. SUPPLEMENT TO ACCRUAL BASIS - 3
OCTOBER, 2001
CASE NUMBER: 401-40788-BJH-11 CASH RECEIPTS AND DISBURSEMENTS
<Table>
<Caption>
DIST LP MFG MGMT HOLDING COMP KEVCO INC TOTAL
------- --- ---- ------- ---- --------- -----
1 CASH-BEGINNING OF MONTH -- 150,202 3,517,653 -- -- 1,000 3,668,855
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 460,000 460,000
8 OTHER 49,584 19,073 311,962 -- -- -- 380,619
INTERCOMPANY TRANSFERS 56,422 17,001 (73,423) -- --
SALE EXPENSE REIMBURSEMENT
INCOME TAX REFUND
RENT
PAYROLL TAX ADVANCE RETURNED 304,679
MISC. 49,584 --
INTEREST INCOME 7,283
9 TOTAL NON OPERATING RECEIPTS 106,006 496,074 238,539 -- -- -- 840,619
10 TOTAL RECEIPTS 106,006 496,074 238,539 -- -- -- 840,619
11 CASH AVAILABLE 106,006 646,276 3,756,192 -- -- 1,000 4,509,474
OPERATING DISBURSEMENTS
12 NET PAYROLL 18,582 18,582
13 PAYROLL TAXES PAID -- 6,780 6,780
14 SALES, USE & OTHER TAXES PAID -- --
15 SECURED/RENTAL/LEASES -- 9,700 9,700
16 UTILITIES 138 -- 213 351
17 INSURANCE -- 20,726 20,726
18 INVENTORY PURCHASES -- --
19 VEHICLE EXPENSE -- --
20 TRAVEL -- --
21 ENTERTAINMENT -- --
22 REPAIRS & MAINTENANCE -- --
23 SUPPLIES -- --
24 ADVERTISING --
25 OTHER 105,868 495,471 3,362 -- -- -- 604,701
LOAN PAYMENTS 100,996 468,217 -- 569,213
FREIGHT 4,600 -- 4,600
CONTRACT LABOR -- 2,746 2,746
401 K PAYMENTS -- --
PAYROLL TAX ADVANCE ADP --
WAGE GARNISHMENTS --
MISC. 272 27,254 616 28,142
26 TOTAL OPERATING DISBURSEMENTS 106,006 495,471 59,363 -- -- -- 660,840
REORGANIZATION DISBURSEMENTS
27 PROFESSIONAL FEES -- 90,292 90,292
28 US TRUSTEE FEES -- 13,750 13,750
29 OTHER --
30 TOTAL REORGANIZATION EXPENSE -- -- 104,042 -- -- -- 104,042
31 TOTAL DISBURSEMENTS 106,006 495,471 163,405 -- -- -- 764,882
32 NET CASH FLOW -- 603 75,134 -- -- -- 75,737
33 CASH- END OF MONTH -- 150,805 3,592,787 -- -- 1,000 3,744,592
</Table>
CASE NAME: KEVCO MANAGEMENT, INC. ACCRUAL BASIS - 4
CASE NUMBER: 401-40788-BJH-11
<Table>
<Caption>
SCHEDULED MONTH
ACCOUNTS RECEIVABLE AGING AMOUNT OCT-01 MONTH MONTH
- ------------------------- --------- ------ ----- -----
1. 0 - 30
2. 31 - 60
3. 61 - 90
4. 91 +
5. Total Accounts Receivable 0 0
6. (Amount Considered Uncollectible)
7. Accounts Receivable (Net) (FOOTNOTE) 0 0
</Table>
AGING OF POST PETITION MONTH: OCTOBER-01
TAXES AND PAYABLES ---------------
<Table>
<Caption>
0 - 30 31 - 60 61 - 90 91 +
TAXES PAYABLE DAYS DAYS DAYS DAYS TOTAL
- ------------- ------ ------- ------- ---- -----
1. Federal 0
2. State 6,412 6,412
3. Local 0
4. Other (See below) 5,222 5,222
5. Total Taxes Payable 11,634 0 0 0 11,634
6. Accounts Payable 0
</Table>
MONTH: OCTOBER-01
----------------
STATUS OF POST PETITION TAXES
<Table>
<Caption>
BEGINNING TAX AMOUNT WITHHELD ENDING TAX
FEDERAL LIABILITY* AND/OR ACCRUED (AMOUNT PAID) LIABILITY
- ------- ------------- --------------- ------------- -----------
1. Withholding ** 6,055 (6,055) 0
2. FICA - Employee ** 362 (362) 0
3. FICA - Employer ** 363 (363) 0
4. Unemployment 0 0
5. Income 0
6. Other (Attach List)
7. Total Federal Taxes 0 6,780 (6,780) 0
STATE AND LOCAL
8. Withholding 0 0
9. Sales (FOOTNOTE) 6,412 6,412
10. Excise 0
11. Unemployment 0 0
12. Real Property (FOOTNOTE) 0
13. Personal Property 5,222 5,222
14. Other (Attach List) 0
15. Total State And Local 11,634 0 0 11,634
16. Total Taxes 11,634 6,780 (6,780) 11,634
</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.
--- ---
CASE NAME: KEVCO MANAGEMENT, INC. ACCRUAL BASIS - 5
CASE NUMBER: 401-40788-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: OCTOBER-01
-------------------
<Table>
<Caption>
BANK RECONCILIATIONS Account # 1 Account # 2
- -------------------- ----------- -----------
A. BANK: Bank of America Bank of America Other Accounts
B. ACCOUNT NUMBER: 1295026976 3751629012 (Attach List) TOTAL
DIP Disbursement
C. PURPOSE (TYPE): Operating Account Account
1. Balance Per Bank Statement 152,110 143,262 3,323,052 3,618,424
2. Add: Total Deposits Not Credited 0 0
3. Subtract: Outstanding Checks (22,681) (2,956) (25,637)
4. Other Reconciling Items 0 0
5. Month End Balance Per Books 129,429 143,262 3,320,096 3,592,787
6. Number of Last Check Written N/A N/A
</Table>
INVESTMENT ACCOUNTS
<Table>
<Caption>
DATE TYPE OF
BANK, ACCOUNT NAME & NUMBER OF PURCHASE INSTRUMENT PURCHASE PRICE CURRENT VALUE
- --------------------------- ----------- ---------- -------------- -------------
7.
8.
9.
10. (Attach List)
11. Total Investments 0 0
CASH
12. Currency On Hand 0
13. Total Cash - End of Month 3,592,787
</Table>
This form does x does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO MANAGEMENT, INC. SUPPLEMENT TO
CASE NUMBER: 401-40788-BJH-11 ACCRUAL BASIS - 5
MONTH: OCTOBER-01
-------------------
<Table>
<Caption>
BANK RECONCILIATIONS Account # 3 Account # 4 Account # 5
- -------------------- ----------- ----------- -----------
A. BANK: Bank of America/ Bank of America Bank of America TOTAL
Nations Funds OTHER BANK
B. ACCOUNT NUMBER: 846713 3751775241 3750801912 ACCOUNTS
Kevco, Inc. S-T
C. PURPOSE (TYPE): Investment Stay Pay Payroll-Mgmt
1. Balance Per Bank Statement 3,188,930 127,200 6,922 3,323,052
2. Add: Total Deposits Not Credited 0
3. Subtract: Outstanding Checks (2,956) (2,956)
4. Other Reconciling Items 0
5. Month End Balance Per Books 3,188,930 127,200 3,966 3,320,096
6. Number of Last Check Written N/A N/A N/A
</Table>
INVESTMENT ACCOUNTS
<Table>
<Caption>
DATE TYPE OF
BANK, ACCOUNT NAME & NUMBER OF PURCHASE INSTRUMENT PURCHASE PRICE CURRENT VALUE
- --------------------------- ----------- ---------- -------------- -------------
A.
B.
C.
D.
TOTAL OTHER INVESTMENT
ACCOUNTS - LINE 10 0 0
</Table>
CASE NAME: KEVCO MANAGEMENT, INC. ACCRUAL BASIS - 6
CASE NUMBER: 401-40788-BJH-11
MONTH: OCTOBER-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. Sharon Romere Expense Reimb. 891
2. Joe Tomczak Expense Reimb. 626
3. John Wittig Expense Reimb. 263
4. Sharon Romere Payroll 5,913 108,940
5. Joe Tomczak Payroll 177,884
6. John Wittig Payroll 144,039
7. Will Simpson Payroll 12,670 167,678
Other (see attached) 52 132,034
8. Total Payments To Insiders 18,635 732,355
</Table>
PROFESSIONALS
<Table>
<Caption>
DATE OF
COURT ORDER TOTAL
AUTHORIZING AMOUNT AMOUNT TOTAL PAID INCURRED &
NAME PAYMENT APPROVED PAID TO DATE UNPAID*
---- ----------- -------- ------ ---------- ----------
1. Haynes and Boone 3/20/01 1,088,886 1,088,886 220,942
2. Lain, Faulkner & Co., P.C. 3/20/01 267,241 38,128 267,241 60,300
3. Baker & McKenzie 3/20/01 233,779 52,164 233,779
4. Gordion Group 3/20/01 17,438 17,438
5. (Attach List) 1,013 0 1,013
6. Total Payments To Professionals 1,608,357 90,292 1,608,357 281,242
</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 N/A 0 14,891,816
2. Leases Payable none
3.
4.
5. (Attach List)
6. TOTAL 0 0 14,891,816
</Table>
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO MANAGEMENT, INC. SUPPLEMENT TO
CASE NUMBER: 401-40788-BJH-11 ACCRUAL BASIS - 6
MONTH: OCTOBER-01
PAYMENTS TO INSIDERS AND PROFESSIONALS -----------------
INSIDERS
<Table>
<Caption>
TYPE OF AMOUNT TOTAL PAID
NAME PAYMENT PAID TO DATE
---- ------- ------ ----------
A. Bill Estes Director's Fees 13,000
B. Peter McKee Director's Fees 12,000
C. Richard Nevins Director's Fees 13,000
D. Wingate Partners Management Fee 89,390
E. Wingate Partners Expense Reimb. 52 3,785
F. Will Simpson Expense Reimb. 859
G.
H.
TOTAL OTHER PAYMENTS
TO INSIDERS - LINE 5 52 132,034
</Table>
PROFESSIONALS
<Table>
<Caption>
DATE OF
COURT ORDER TOTAL
AUTHORIZING AMOUNT AMOUNT TOTAL PAID INCURRED &
NAME PAYMENT APPROVED PAID TO DATE UNPAID*
---- ----------- -------- ------ ---------- ----------
A. Ernst & Young 3/20/01 1,013 1,013
B.
C.
D.
E.
F.
G.
H.
TOTAL OTHER PAYMENTS
TO PROFESSIONALS-LINE 1,013 1,013
</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
---------------- --------- -------- --------
A.
B.
C.
D.
E.
STATUS OF OTHER CREDITORS - LINE 5
</Table>
CASE NAME: KEVCO MANAGEMENT, INC. ACCRUAL BASIS - 7
CASE NUMBER: 401-40788-BJH-11
MONTH: OCTOBER-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 Lexingon, Allianz 5/29/00-3/1/02 Semi-Annual $26,485
Group Health Blue Cross Blue Shield Terminated 08/01/01 N/A
Auto Liberty Mutual 9/1/00-3/1/02 Semi-Annual $ 3,333
D&O Liability Great American Insurance 10/31/98-10/31/01 Annual $64,657
</Table>
This form x does does not have related footnotes on Footnotes Supplement.
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CASE NAME: KEVCO MANAGEMENT, INC. FOOTNOTES SUPPLEMENT
CASE NUMBER: 401-40788-BJH-11 ACCRUAL BASIS
MONTH: OCTOBER-01
-------------------
<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
3 1 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. 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 In September, Liberty Mutual, Debtor's Workman's Compensation carrier, drew $300,000
on a letter of credit issued during 2000. Debtor believes, after a final audit of its
Workman's Compensation account, that the amount drawn will be refunded in full.
1 7 Prepaid Expenses consist primarily of professional fee retainers.
1 15 Intercompany receivables/payables are from/to co-debtors Kevco Manufacturing, LP
1 27A (Case No. 401-40784-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). Changes in
intercompany have not been reflected as post-petition assets and liabilities.
1 22 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 24 Adjustments to equity are due to secured debt reductions pursuant to the sales of
1 32 Kevco Manufacturing, LP's operating divisions, the asset sale of the South Region of
Kevco Distribution, 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 1,15); 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 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.
4 9,12 Sales/ property tax liabilities represent accruals of tax and are not yet due.
</Table>